Inventory Management

CHAPTER I

INTRODUCTION

The study entitled “Inventory Management” was done with an aim of studying the

store keeping system at GVG Paper Mills Private Limited and to find the key areas of

investment in inventory along with computation of Economic Order Quantity. This

chapter provides an introduction to

Paper industry

GVG Paper Mills Private Limited

Inventory Management

1.1 THE PAPER INDUSTRY

The paper industry has an important social role to play for any country. Use of

paper is considered as an index of cultural growth. Key social objectives of the

government like eradicating illiteracy, making primary education compulsory etc. are

very much related to the paper industry. The paper industry is also contributing towards

fulfillment of various requirements of the industry as a whole like information

dissemination, publicity etc. which in turn stimulates the industrial growth of the country.

The paper industry has, thus, a catalytic role to play not only for the overall growth of the

industry but also for the living standards of the people.

History

Paper, to be briefly technical, is an aqueous deposit of any vegetable fiber in sheet

form. The name, as most people know, comes from the Latin word “papyrus”. Flattened

stalks of papyrus reeds were used by the Egyptians as a writing surface. But paper, as we

know it today, has its origin in China.

The ancient Indian history provides ample evidence to establish that the Aryans

used Tamrapatra (copper plates), Todapatra (palm leaves), Lohapatra (iron sheets),

Bhojpatra (beech palm) for preserving their experience in literacy. Later they used metals

such as lead, copper and bronze for purpose of written communication. The record shows

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that before the advent of machine-made paper a suitable hand-made paper industry

flourished in India. Paper was observed to be common use all over India at the close of

Akbar’s reign.

Indian Paper Industry

The paper industry in India is more than a century old and machine-made paper

was first manufactured in India in 1812 with the first mill being commissioned in 1832.

Before independence there was no much development in the paper industry in our

country. Only during the various five year plans the industry has recorded a steady

growth.

Today the Indian Paper Industry is among the top 15 global players today, with an

output of more than 6 millions tones annually with an estimated turnover of Rs. 150,000

millions. (Approximately USD 3400 million). The Indian paper industry accounts for

about 1.6% of the world’s production of paper and paperboard and is riding on a strong

demand and on an expanding mood to meet the projected demand of 8 million tones by

2010 & 13 million tones by 2020. It is estimated that the paper industry would be

growing at the present rate of 7-8% of compounded rate and would require 9.5-10 million

MT by the end of the decade. Indian market is today growing three times the rate of the

global average. Its contribution to the exchequer is around Rs. 2918 crore (USD 0.69

billion). The industry provides employment to more than 0.12 million people directly and

0.34 million people indirectly.

Production and Raw material

At present there are over 600 paper mills manufacturing a wide variety of items

required by the consumers. These paper mills are manufacturing industrial grades,

cultural grades and other specialty papers. Most of the paper mills are in existence for a

long time and hence present technologies fall in a wide spectrum ranging from oldest to

the most modern.

The paper industry in India could be classified into 3 categories according to the raw

material consumed.

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Wood based

Agro based &

Waste paper based

While the number of wood based mills is around 20 and balance 580 mills are based on

non-conventional raw materials. The geographical spread of the industry as well as

market is mainly responsible for regional balance of production and consumption.

Government policies

Government has completely delicensed the paper industry with effect from17th

July, 1997. The entrepreneurs are now required to file an Industrial Entrepreneur

Memorandum with the Secretariat for Industrial Assistance for setting up a new paper

mill or substantial expansion of the existing mill in permissible locations.

The industry is a priority industry for foreign collaboration and foreign equity

participation upto 51% receives automatic approval by Reserve Bank of India. Foreign

investment even upto 100% is approved by FIPB on case to case basis. Several fiscal

incentives have also been provided to the paper industry, particularly to those mills which

are based on non-conventional raw material. The paper industry in India is looking for

state-of-art technologies to reduce its production cost and to upgrade the technology to

meet the international standards.

Import

The country is almost self-sufficient in manufacture of most varieties of paper and

paperboards. Import, however, is confined only to certain specialty papers. To meet part

of its raw material needs, the industry has to rely on imported wood pulp and waste

paper. The import of pulp & paper products is likely to show a growing trend.

Consumption

Paper industry is of cyclical nature and the global paper industry being on come

back trail, the Indian paper Industry has also started looking up. India’s per capita

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consumption of paper is around 4.00 kg, which is one of the lowest in the world. With the

expected increase in literacy rate and growth of the economy, an increase in the per capita

consumption of paper is expected. The demand for upstream market of paper products

like tissue paper, tea bags, filter paper, light weight online coated paper, medical grade

coated paper, etc. , is growing up. These developments are expected to give fillip to the

industry.

Paper Industry in Tamil Nadu

Tamil Nadu accounts for about 12 per cent of India’s paper production. At Present

there are 74 paper mills in operation in Tamil Nadu. Government of Tamil Nadu has set

up Tamil Nadu Newsprint and Papers Limited (TNPL) in 1979 as a Public Sector

Company under the Companies Act, 1956 and is the largest paper mill in India with an

installed capacity of 230,000 TPA. As the Country’s forest cover is much below the

desired level, the Government of Tamil Nadu established TNPL to manufacture

newsprint and paper using bagasse (sugarcane waste) as the primary raw material. Tamil

Nadu contributes 40 per cent to south India’s production of paper.

Limitations

The performance of the industry has been constrained due to high cost of

production caused by inadequate availability and high cost of raw materials, power cost

and concentration of mills in one particular area. Several policy measures have been

initiated in recent years to remove the bottlenecks of availability of raw materials and

infrastructure development. To bridge the gap due to short supply of raw materials, duty

on pulp, waste paper, wood logs and wood chips has been reduced. Several policy

measures have been initiated in recent years.

Indian paper industry needs the following for being globally more competitive.

Sustained availability of good quality of forest based raw materials and bulk

import of waste paper to supplement the availability of raw materials.

Adequate modernization of the manufacturing assets.

Improvement of the infrastructure.

Quality improvements and reduction in cost of production

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Import policy conducive for import of material, equipment, instruments, raw

materials & technologies which are bearing of the quality and environment.

The new millennium is going to be the millennium of the knowledge. So demand for

paper would go on increasing in times to come. Due to the paper industry’s strategic role

for the society and also for the overall industrial growth, the researcher was interested in

taking up the project in the paper industry.

1.2 GVG PAPER MILLS PRIVATE LIMITED

GVG PAPER MILLS PRIVATE LIMITED was incorporated in the year 1985 as

a private limited company with an installed capacity of 3000 MT per annum of printing

and writing paper. Company produces News print, Kraft, Printing and Stationery varieties

of paper in their 3 machines.

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Capacity

The company commenced its production in the year 1986 with the capacity of 10

MT per day and within a span of 5 years, the production was increased to 20 MT per day

with the installation of few types of equipment and increased drying capacity.

In the year 1991, the company went in for MG machine to produce Kraft varieties

of paper with a capacity of 15 MT per day. This has enabled the company to have a wide

range of products in its manufacturing range. This MG machine was converted as a

dedicated Newsprint making machine which produces around 60 MT of Newsprint.

During the year 1995-96, the company put up the third machine (MG) to

manufacture special varieties of paper. The present capacity of the mill is 140 MT per

day and the turnover is around 120 Crores per annum and imports around Rs.15 Crores

per annum.

GVG group has two paper mills and 3 textile mills with a combined turnover of

Rs.275 Crores per annum. The production Capacity of these two paper mills is 200 MT

per day and the installed capacity of Textile mills is 65000 spindles.

The company has put up 10 wind mills supplied by various manufactures in

Attukinathupatti village, Coimbatore and Kongalnagaram with the financial assistance of

M/s .ICICI Ltd and own generation. Presently there is no term loan outstanding with any

institution.

Board of Directors

Managing Director : Shri.Amarnath

Directors : Shri.M.Velusamy

Smt.A.Padma

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Shri.V.Vivek

Work force

The company has work force of 250 direct workers and nearly 500 indirect

workers in the factory. The monthly wage bill works out to Rs.25 lakhs .

Taxes

The company pays an amount of Rs.3.5 Crores per annum by the way of excise

duty, Rs.3.00 Crores by the way of Sales tax and Rs.2 Crores by the way of Income tax

every year and has paid an Advance Tax of Rs.2 Crores this year. The company’s

Turnover has crossed Rs.100 Crores by the end of March 2008.

Quality Policy

To produce and market papers of acceptable quality in domestic and international

market

Decisive improvement in the international market through continuous

improvement of quality management system and by achieving economic quality.

Departments

Following are the departments present in the company

Production

Finance & Accounts

Purchase

Marketing

Human Resource

Sales

Finishing

Stores

Significant Accounting Policies

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The financial statement of the company are prepared under the historical cost

convention on accrual basis of accounting

Fixed assets are stated at historical cost which includes all expenditure of capital

nature less CENVAT and TNVAT where availed

Assets acquired under hire purchase agreements are capitalized to the extent of

principal value while interest on hire charges are expensed.

Finance and Accounts

G.V.G Paper Mills Private limited maintains a separate department for accounting

records. The company follows the computerized form of accounting. Accounts are

maintained in FOXPRO. The company follows code system for the record of accounts.

The company has master file and it is classified into 2 ledger accounts.

General ledger

Sales ledger

General Ledger

General ledger deals with the expenses. It is recorded in the numerical coding

systems.

Sales Ledger

Sales ledger deals with the parties and payments and it is maintained in the Alpha

coding systems with the character of six digits.

C1 - Creditor for Capital

- Share Holders

- Dealers Deposits

C2 - Raw Material

C3 - Stores

C4 - Other Miscellaneous

C5 - Finance

D1 - Debtors Payment to be received

Company’s Banker

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The Banker of the company is Lakshmi Vilas Bank, Udumalpet. All transactions

are carried with the Lakshmi Vilas Bank only. The company has working capital limits

with the same bank with a fund based limit of 12 Crores and Non-fund limit of 3.5

Crores. Payments are all made only in cheques and to the suppliers and other parties.

Receipts are received in cash, Cheque and in pay orders.

Bank Facility

50 Lakh Cheque discount limit

Bill Discount limit 7 Crore

Cash Credit 2.5 Crore

LC (Letter of Credit)Limit 3.5 Crore

Bill Discount is Used to Discounting of Export bills & News print Supplier.

Reputed Customers

The reputed customers of the company are

Dhanalaxmi Paper Emporium – Madurai

Palaniappa & Co - Chennai

Premchand Lallubhai & Co-Mumbai

Ketees Paper Mart- Ernakulam

Sheshay Paper – Erode

Muthu – Vijayawada

The company’s newsprint are supplied to

Dinakaran

Dina Malar

Indian Express

Dinamani

Import and Export

The company exports to countries like Sri Lanka, Egypt and South Africa. The

raw materials are imported from the countries like USA, Australia, Sri Lanka,

Singapore and Dubai. The company has earned a foreign exchange of approximately

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Rs.14 Crores for the past financial year.

The efficient performance of the company over the past several years induced the

researcher to take up the project in GVG Paper Mills Private Limited.

1.3 INVENTORY MANAGEMENT

In financial parlance, inventory is defined as the sum of the value of raw

materials, fuels and lubricants, spare parts, maintenance consumables, semi-processed

materials and finished goods stock at any given point of time. The operational definition

of inventory would be: the amount of raw materials, fuel and lubricants, spare parts and

semi-processed material to be stocked for the smooth running of the plant. Since these

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resources are idle when kept in stores, inventory is defined as an idle resource of any

kind having an economic value.

Inventory management is concerned with keeping enough product on hand to

avoid running out while at the same time maintaining a small enough inventory balance

to allow for a reasonable return on investment. Proper inventory management is

important to the financial health of the corporation. Being out of stock forces customers

to turn to competitors or results in a loss of sales. Excessive level of inventory, however,

results in large inventory carrying costs, including the cost of the capital tied up in

inventory warehouse fees, insurance etc. A major problem with managing inventory is

that the demand for a corporation's product is to a degree uncertain. The supply of the

raw materials used in its production process is also somewhat uncertain. In addition, the

corporation's own production contains some degree of uncertainty due to possible

equipment breakdowns and labour difficulties. Inventory management acts as a shock

absorber between product demand and product supply.

Objectives of Inventory Management

Inventories are maintained basically for the operational smoothness, which they

can affect by uncoupling successive stages of production, whereas the monetary value of

inventory serves as a guide to indicate the size of the investment made to achieve this

operational convenience. The materials management department is expected to provide

this operational convenience with a minimum possible investment in inventories. The

materials department is accused of both stock outs as well as large investment in

inventories. The solution lies in exercising a selective inventory control and application

of inventory control techniques.

Inventory Terminologies

Inventory or stock is referred to in a variety of ways

A Stock-Keeping Unit (SKU) is a separately identifiable class of item, which is

complete in the sense that a customer in that form can utilize it.

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Manufacturing, wholesale and retail inventory depends on the type of firm

holding the inventory. These could be held in different forms for the same

material. For example, wholesale in bulk form, and retail in packaged form.

During manufacturing, input inventory is raw material; an inventory in-between

processing stage is referred to as work-in-process; and after the completion of

manufacturing is called as finished goods inventory.

Seasonal stock refers to the material, which is purchased or manufactured in

anticipation of seasonal demand. Promotional stock is the additional stock kept

ready for the increase in demand due to market promotions of products.

Speculative stock is the additional stock purchased as a hedge against the

possibility of future increase in price of the material.

Dead stock is unused and / or obsolete stock, which cannot be sold.

Classification of Inventories

(i) Production Inventories

They represent raw materials, parts and components that are used in the process of

production. Production inventories include

Standard industrial items purchased from outside (also called bought outs)

Non standard items

Special items manufactured in the factory itself (also called works made parts or

pieced parts)

(ii) MRO inventories

They refer to the maintenance, repairs and operation supplies, which are

consumed during process of manufacture but do not become a part of the product.

(iii) In-process inventories

They represent items in the semi-finished condition i.e., items in the partially

completed stage.

(iv) Goods-In-Transit

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They represent such materials, which have been paid for but have not yet been

received by the stores.

Inventory Costs

Inventory management becomes important due to the various cost associated with

the inventory. Basically, there are five types of costs.

i. Cost of the item.

ii. Cost of procuring the item.

iii. Cost of carrying the item in inventory.

iv. Cost associated with being out of stock when units are demanded but are

unavailable (stock outs).

v. Cost associated with data gathering and control procedures for the inventory

system.

(i) Cost of Item

The cost, or value, of the item is usually its purchase price: the amount paid to the

supplier for the item. In some instances, however, transportation, receiving, or inspection

costs, for example, may be included as part of the cost of the item

(ii) Procurement Costs

Procurement costs are the placing a purchase order or the setup costs if the item is

manufactured at the facility. These costs vary directly with each purchase order placed.

Procurement costs include costs of postage, telephone calls to the vendor, labor costs in

purchasing and accounting, receiving costs, computer time for record keeping, and

purchase order supplies.

(iii) Carrying Costs

Carrying or holding costs are the costs of maintaining the inventory in

warehouse and protecting the inventoried items. Typical costs are insurance, security,

warehouse rental, heat, lights taxes, and losses due to pilferage spoilage, or breakage.

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(iv) Stock out Cost

Stock out cost, associated with demand when stocks have been, takes the form of

lost sales or backorder costs. When sales are lost because of stockouts, the firm loses both

the profit margin on unmade sale and its customer’s good will.

(v) Cost of operating the information processing system

Whether by hand or by computer, someone must update records as stock levels

change. Frequently, these operating costs are more fixed than variable over a wide

quantity range.

Importance of Proper Inventory Management

Management has to determine the type and quantity of inventory the organization

would need at the future point for maintaining the fleets of production schedule. Else it

may lead to stock out or over stocking.

Stock Out

Stock-out can be defined as a situation where an organization has insufficient material

required for production. The economic consequences of such situation are:

Machines are left idle and some of them may develop technical problem such as

rusting, corrosion etc

Workers are paid for the period of idle time so that they will remain stand-by for

commencement of production on arrival of material

Customer supply may be interrupted and they may look for alternative source

A long delay in the supply of the material may lead to complete liquidation of the

business.

Over Stocking

Overstocking is a term use to describe a situation where a business organization

maintains more than necessary materials at any given time. One of the objectives of

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materials planning is to ensure that such a situation does not arise. The economic

implication of overstocking are

Capitals are unnecessarily tied up due to the excess material

There is risk of obsolescence if material is not used up after a period of time

There is risk of deterioration, evaporation etc. partially when the material is

perishable in nature.

Cost of storage is increase

There is increase risk of theft of the materials or careless usage of the material

because of the notion by staff that materials are supply.

Techniques of inventory control

In managing inventories, the firm’s objective should be in consonance with the

shareholder wealth maximization principle. To achieve this, the firm should determine

the optimum level of inventory. Efficiently controlled inventories make the firm flexible.

Inefficient inventory control results in unbalanced inventory and inflexibility-the firm

may sometimes run out of stock and sometimes may pile up unnecessary stocks. This

increases the level of investment and makes the firm unprofitable.

To manage inventories efficiency, answers should be sought to the following two

questions

How much should be ordered?

When should it be ordered?

The first question, how much to order, relates to the problem of determining

economic order quantity (EOQ) and is answered with an analysis of costs of

maintaining certain level of inventories. The second question, when to order, arises

because of uncertainty and is a problem of determining the re-order point.

Pecularities in India

Inventory Management has a basic assumption “free availability of materials” as

and when required in any quantity. This is however not true of Indian conditions.

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Industries operate in a seller’s market for most of the materials. There is a perpetual

scarcity of key raw materials and the prices fluctuate widely. However, inventory

management should not be discarded but used judiciously as a broad guideline, keeping

in mind their limitations.

Thus it is understood that inventory management is very important for the

business. It enables the business to meet or exceed expectations of the customer by

making the product readily available. If managed properly, it can help the organization

reduce its costs, achieve economies of scale and prepares the organization for uncertainty.

Due to this great importance of inventory in a company the researcher was interested in

taking up the project in inventory management.

1.4 OBJECTIVES

To study the store keeping system in the company and identify the critical

components where the organization has made huge investments.

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To perform ABC, HML and 3D analysis to enable the company to know the level

of control to be exercised on the various categories of inventory.

To calculate Economic Order Quantity for the inventories so as to save on the

company’s working capital.

To find the number of orders to be placed for each inventory annually.

1.5 SCOPE

To the Organization

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The company at present does not follow an appropriate inventory control

technique. The study will help them to identify the key components where significant

investment has been made so as to exercise better control over such items.

To the researcher

The researcher gained practical knowledge as to how the inventories are being

maintained by the stores department and how the orders for the various items are being

placed.

1.6 LIMITATIONS

The price of materials are assumed to be constant i.e., fluctuations in price of

the materials were not considered.

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The study is restricted only to GVG Paper Mills Private Limited, Udumalpet

This study is limited for this financial year only because inventories and their

consumption do not remain constant for all financial years.

Any mistake made by the stores department in the preparation of inventory

consumption statement will affect the findings of the study.

CHAPTER II

REVIEW OF LITERATURE

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

researcher so that he can keep himself updated in his field and related areas. Without this

it will not be possible for a researcher to make a worthwhile contribution. Review of

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

in an organization.

Inventory Management is the practice of planning, directing and controlling

inventory so that it contributes to the business' profitability. Inventory management can

help business to be more profitable by lowering their cost of goods sold and by increasing

sales. Inventory management is required at different locations within a facility or within

multiple locations of a supply network to protect the regular and planned course of

production against the random disturbance of running out of materials or goods.

Ashwathappa (2008)1has stated that Inventory management involves the

development and administration of policies, systems and procedures which will minimize

total costs relative to inventory decision and related functions such as customer service

requirements, production scheduling, purchasing and traffic.

Lucey (2002)2 defined inventory management as the recording and monitoring of

stock level, forecasting future demand and deciding when and how to order.

Juhi Gonzales (1999)3 says Inventory Management is making sure that items are

available when customers call for it, but not too much stock so that inventory turnover

goals are met.

According to The Business Dictionary(2004)4 inventory management are the

policies, procedures and techniques employed in maintaining the optimum number or

amount of each inventory item. The objective of inventory management is to provide

uninterrupted production, sales, and customer-service levels at the minimum cost. Since,

for many firms, inventory is the largest item in the current assets category, inventory

problems can and do contribute to losses or even business failures. Inventory

management is also called inventory control.

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Vikas Shrotriya (2008)5 says that organizations maintain inventories to achieve

effectiveness in business operations. Though the quantum of inventories depends on the

nature of business, these engage sizeable portion of the organization's total current assets.

These two reasons compel the organizations to manage inventories effectively and

efficiently. Effective inventory management would mean management of inventories,

applying scientific techniques to reach a balancing point between dual objectives of

smooth business operations and optimum investment in inventories.

Since the resources are limited, their judicious use is unavoidable. Resources

involve cost and if the resources are inventoried limitlessly, there is increment in total

funds invested in the organization. Larger inventories cannot be justified by being

conservative in approach as there is no argument in favor of the larger sum unnecessarily

blocked in purchasing and storing the materials. Against this, there is argument of loss

due to stockout of materials. Inventory management is, thus, the art of managing

inventories such that the total cost associated with inventories is the lowest without

loosing any production hour or sales. If there is loss of production hour or sales due to

lack of materials or goods, the objective of inventory management loses its significance

and the continuity of organization is jeopardized.

Eric Morris (1995)6 made a study on the title “Inventory Management”. In that

he says that inventory management, if done properly, can bring down costs and increase

the revenue of a firm. How much one should be invested in inventory depends on the

volume and value of inventory as a percentage of the total assets of a firm. The

importance of inventory management varies according to industries. For example, an

automobile dealer has very high inventories, sometimes as high as 50 per cent of the total

assets, whereas in the hotel industry it may be as low as 2 to 5 per cent.The process of

inventory management is a continuous one and there are various kinds of solutions

available. It is advisable to employ specialized staff for inventory management.

According to Okoye (1997)7 inventory management encompasses proper

planning, for handling of inventories in the organization.

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According to him inventory constitutes a significant part of production cost

. It’s a very important factor of production, it accounts for sixty to seventy percent of the

cost of product. In view of this, effective inventory management is strategic in

manufacturing entity. The importance of inventory management lies in the facts that any

savings made on the cost of inventory will go a long way in reducing the cost of

production, thus improving the profitability of the business. Proper inventory

management is necessary from the time order for purchases of materials are placed with

suppliers until they are consumed.

Any management team that hope to succeed, must as a matter of necessity pay

special attention to material. Material management involves material planning and

control. Inventory constitutes a significant part of production cost. It’s a very important

factors of production, it accounts for sixty to seventy percent of the cost of product. In

view of this, effective inventory management is strategic in manufacturing entity.

Ske Chay (1998)8 Efficiency in effective inventory management will always give

a competitive edge to the business regardless of its nature.

According to Rieva Lesonsky (1998)9 inventory management is striking a

balance between too little and too much. Avoiding excess inventory is especially

important for owners of companies with seasonal product lines, such as clothing, home

accessories or holiday and gift items. These products have a short shelf life and are hard

to sell once they are no longer in fashion. Entrepreneurs who sell more timeless products,

such as plumbing equipment, office supplies or auto products, have more leeway because

it takes longer for these items to become obsolete.

R.Michael Donovan (2002)10 made a study on” Inventory control: Improving

the bottom line”. He says that from a financial perspective, inventory control is no small

matter. Oftentimes, inventory is the largest asset item on a manufacturer’s or

distributor’s balance sheet. As a result, there is a lot of management emphasis on keeping

inventories down so they do not consume too much cash. The objectives of inventory

reduction and minimization are more easily accomplished with modern inventory

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http://bizcovering.com/e-commerce/inventory-management/

management processes. Effective inventory control is a vital function to help insure the

success of manufacturing and distribution companies. The effectiveness of inventory

control is directly measurable by how successful a company is in providing high levels of

customer service, low inventory investment, maximum throughput and low costs.

Certainly, it is an area where management should apply a philosophy of aggressive

improvement.

Ivor Ogidefa (2008)11 in his study on “Inventory Management” says that

inventory constitutes the most important, significant part of current asset of a large

majority of manufacturing companies. Any company which neglect the management of

inventories will be jeopardizing it’s long-run profitability and may not succeed

eventually. Therefore, there is every need for an effective inventory management.

Larissa Doucette (2001)12 in his article” Making the most of inventory

management” says dealers should strive to keep inventory control in the forefront

regardless of business conditions, recognizing it as a way to strengthen margins in a

contracting economy.

Lonnie Robertson (1998)13 made a study on “Managing Inventory”.In the study

he has stated that Inventory management is necessary for owners who want to maintain a

stocking service for quick turnaround to help ensure total customer satisfaction. To be

successful in today's fast-paced, highly-competitive environment, companies need to

have the necessary parts in stock or have reliable suppliers to meet customer demands at

a moment's notice. Either way, companies must have a practical, efficient method for

managing inventory in order to stay in business and satisfy their customers. Stocking

inventory can sometimes yield the benefit of bulk discounts.

Inventory results from at least one of two conditions, says Kevin Prouty(2003)14 ,

research director at AMR Research (Boston, MA). "Ignorance equals inventory or

variability equals inventory. In the first condition, if you don't know what the guy

upstream or downstream is going to do, you keep inventory just in case. In the second

condition, you can have all the inventory in the world, yet you still might not have

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enough for optimized manufacturing because of the variability driven by demand spikes ,

by the manufacturing processes themselves, by logistical upsets or a combination

thereof” .

Prouty's states The Little Law of The Conservation of Inventory, "If you push

inventory away from one partner operation, it'll move out in either direction--either to

finished inventory or down to the suppliers." That's fine in the short term for reducing

localized costs. But in terms of lifecycle costs, the carrying costs add up and too much

instability creep into the supply chain.

Lawrence.S.Gould (2002)15 in his study “Effectively managing inventory in a

supply chain” has stated an important approach to inventory management i.e., to apply

service-parts technology to the inbound supply side, namely, "vendor managed

inventory" (VMI). For proof of concept, Dell Computer shall be stated. Dell has virtually

no inventory other than the finished product shipped to customers. The entire inbound

supply-side inventory is maintained by Dell's vendors.

Justin Berka (2009)16 who made a study on “Inventory management at

Apple”says that Companies should keep as little inventory as possible to minimize the

risk that it won't be sold, but if a company produces too few units, it gives up sales. As a

result, computer companies want to try for a fairly low inventory-on-hand ratio, which

Apple has certainly done. It turns out that the company kept an average of just five days'

worth of inventory on hand for its products during the holiday season.

Josh(2009)17 in his study “Inventory and its importance”has stated that having no

inventory or having wrong inventory can lead to many problems. Because inventory is

reflected in the company’s books, a business owner may make decisions based on the

inventory numbers he sees in the books. If the number is wrong, he might make a wrong

decision that could be costly.

The most important way to keep a good inventory is to keep every document the

company receives. Having these at hand will help the company keep inventory easier

because management will know everything that has happened in the company. Another

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thing that will make inventory keeping easier for is to keep it updated. Using the existing

inventory list, the inventory staff should actually go through to make sure each item is

there and in proper shape. By physically checking that your list and actual items match,

the company is ensured of the most honest records.

Wharton operations and information management professor Netessine and

Roumiantsev(2008)18 for their study “Inventory Management - a Way to Give it a

Guide”analyzed inventory data from 722 public companies representing eight industries:

oil and gas, consumer electronics, wholesale, retail, machinery, computer hardware, food

and beverages, and chemicals. No service businesses were included in the sample, since

inventories are less relevant for such companies. They stated in their study that there are

millions of new products appearing regularly in the market and inventory management is

as dicey as predicting what a teenager will want for her birthday next year. No one knows

what demand for these things will be. Superior earnings are associated with the speed of

change and responsiveness in inventory management. But Inventory levels alone do not

have a significant and negative relation to current or future profitability. In fact, in some

industries the more is the inventory held, more is the profit.

To establish a company's inventory responsiveness, called "elasticity" of

inventory, they measured the speed of change in inventory with respect to lead time,

sales, sales uncertainty and gross margin i.e., it shows how quickly a company can adjust

inventory relative to other environmental variables Then they looked at changes in those

factors from quarter to quarter and how inventory changes from quarter to quarter.

Finally, they looked at the impact of inventory management on a company's return on

assets (ROA), as a measure of financial performance. Results of specific industries

showed more variation. For instance, the ability to source faster had a stronger impact on

ROA in the retailing and electronics segments. Not surprisingly, the study also found that

companies in industries where demand is less certain on average are less profitable.

Jon Juneau and Eyler R. Coates (2001)19 in their “Economic Order Quantity

model for time varying demand” says that to manage inventory, the classical Economic

Order Quantity (EOQ) equation can be used to decide how much to order. The EOQ is

25

the order quantity that theoretically minimizes the total of the cost of ordering and

holding inventory and it assumes that the demand is constant, or does not vary over time.

However, when the demand for a product is entering a growth phase, the demand does

vary over time.

Review of literature shows the previous studies carried out by the researchers in

this field. Through this the researcher was able to understand the importance of

maintaining optimum level of inventory in an organization.

REFERENCES

BOOKS

26

1)Aswathappa and K.Shridhara Bhat, Productions and Operations Management,

Himalaya Publishing House, Second Edition, 2008,P.535

WEBSITES

2) LuceyManaging Inventoryhttp://www.openforum.com/management/article_managinginventory.html

3)Juhi GonzalesInventory Managementhttps://www.msu.edu/course/prr/473/oldstuff/Inventory%20Management.htm#establish

4)The Business Dictionaryhttp://www.businessdictionary.com/definition/inventory-management.html

5)Vikas ShrotriyaEffective Inventoryhttp://www.iupindia.oryg/1108/AW_Effective_Inventory_9.html

6)Eric MorrisInventory Managementhttp://ezinearticles.com/?Inventory-Management&id=254707

7)OkoyeInventory Managementhttp://bizcovering.com/e-commerce/inventory-management/

8)Ske ChayInventory Management Systemhttp://www.articlesnatch.com/tag/Inventory+Management+System

9)Rieva LesonskyInventoryhttp://www.entrepreneur.com/management/operations/inventory/article21842.html

10)R.Michael Donovan Inventory control: Improving the bottom linehttp://rmdonovan.com/inventory_control.htm

11)Ivor OgidefaInventory Managementhttp://bizcovering.com/e-commerce/inventory-management/

27

12)Larissa DoucetteMaking the most of inventory managementhttp://www.allbusiness.com/company-activities-management/operations-supply-chain/7920006-1.html

13)Lonnie RobertsonManaging inventoryhttp://www.asashop.org/autoinc/july98/mech.htm

14) Kevin ProutyEffectively managing inventory in a supply chainhttp://findarticles.com/p/articles/mi_m0KJI/is_8_114/ai_90570016/

15) Lawrence.S.GouldEffectively managing inventory in a supply chainhttp://findarticles.com/p/articles/mi_m0KJI/is_8_114/ai_90570017/

16)Justin BerkaInventory management at Applehttp://arstechnica.com/apple/news/2009/03/analyst-says-apple-very-efficient-at-managing-inventory.ars

17)JoshInventory and its importancehttp://www.contractorblabblog.com/2009/03/inventory-and-its-importance/

18)Netessine and RoumiantsevhInventory Management- a Way to Give it a Guidehttp://knowledge.wharton.upenn.edu/article.cfm?articleid=1395

19)Jon Juneau and Eyler R. CoatesEconomic Order Quantity model for time varying demandhttp://www.ijme.us/issues/spring2001/articles/economicorder.htm

CHAPTER III

RESEARCH METHODOLOGY

28

Research can be defined as a careful investigation or inquiry especially through

search for new facts in any branch of knowledge. Research methodology is a way to

systematically solve the research problem. It may be understood as a science of studying

how research is done scientifically.

The study entitled “Inventory Management” was done at GVG paper Mills

Private Limited, Udumalpet. The study attempted to study the store keeping system of the

company.

Type of study

The study undertaken was of descriptive nature. Descriptive research includes fact

finding enquiries with adequate interpretation. The purpose of descriptive research is the

description of state of affairs as it exists at present. It has its focus on the particular

aspects of the problem studied. It is designed to gather descriptive information and

provides information for formulation of more sophisticated studies. The study of

inventory management system at GVG Paper Mills Private Limited is detailed descriptive

study to find the effectiveness of the existing inventory management and to suggest the

optimum level of inventory to be maintained.

Type of data

Primary data as well as secondary data was collected for the study. The primary

data required for the study was collected through inspection of stores department.

The secondary data required for conducting the study was obtained from the

inventory consumption statements to know the monthly consumption of each inventory.

Data was also collected from the purchase department, past records and files.

Tools used for analysis

The tools used for analyzing the data are ABC analysis method, HML analysis

method, 3D analysis method and Economic Order Quantity computation.

29

Period of Study

The study was undertaken for a period of 45 days during which the researcher

collected details about the overall working of the company with special emphasis to

stores department. A total of 307 items, belonging to the productions inventory category,

which were used by the company for financial year 2008-2009 were used for analysis

purpose.

CHAPTER IV

30

ANALYSIS AND INTERPRETATION

Analysis of data in a general way involves a number of closely related

operations, which are performed with the purpose of summarizing the collected data

organizing these in such a manner that they answer the research questions.

Interpretation is the device through which the factors that seem to explain

what has been observed by researcher in the course of the study can be better understood

and it also provides a theoretical conception which can serve as a guide for future

researches.

The data collected has been analyzed on three major aspects namely their

annual consumption value of inventories, their individual value of and the economic

ordering quantity of the inventories maintained by the organization the classification. The

phase helps in identifying the components of inventory held by the organization. The

phase helps in identifying the components of inventory held by the organization

The phase comprise of

ABC analysis

HML analysis

3D analysis

EOQ computation

ABC Analysis

31

ABC analysis underlines a very important principle “Vital few: trivial many”.

Statistics reveal that just a handful of items account for bulk of the annual expenditure on

materials. These few items, called ‘A’ items, therefore, hold the key to business. The

other items, known as ‘B’ and ‘C’ items, are numerous in number but their contribution is

less significant. ABC analysis thus tends to segregate all items into three categories: A,

B, and C on the basis of their annual usage. The categorization so made enables one to

pay the right amount of attention as merited by the items. Any sound stock control system

should ensure that the each item gets the right amount of attention at the right time. ABC

analysis makes this possible with considerably less efforts due to its selective approach .

A-items: Hardly 5-10% of the total items account for 70-75% of the total money spent on

the materials. These items require detailed and rigid control and need to be stocked in

smaller quantities. These items should be procured frequently, the quantity per occasion

being small.

B-items: These items are generally 10-15% of the total items and represent 10-15% of

the total expenditure on the materials. These are intermediate items. The control on these

items need not be as detailed and as rigid as applied to C items.

C-items: These items are generally 70-80% of the total items and represent 5-10% of the

total expenditure on the materials. The procurement policy of these items is exactly the

reverse of A items. C items should be procured infrequently and in sufficient quantities.

This enables the buyers to avail price discounts and reduce work load of the concerned

departments.

Abbreviations Used :

CODE - Code number of the Inventory

QTY - Quantity consumed annually

CUM.QTY - Cumulative quantity

RATE - Rate per Unit

QTY.PER - Quantity percentage

CUM.CON - Cumulative consumption

CON.PER - Consumption PercentageTable 4.1

Items in category ‘A’

32

CODE

QTY

CUM.QTY

QTY.PER RATE CONSUMPTION CUM.CON CON.PER

22046 36 36 0.0261334 458640 16511040 16511040 42.4323410046

12 48 0.0348446227880.0

7 2734560.84 19245600.84 44.38320220113 1152 1200 0.8711147 1687.11 1943550.72 21189151.56 48.86531701113 5376 6576 4.7737084 172.54 927575.04 22116726.6 51.00444210147 12 6588 4.7824195 73398.67 880784.04 22997510.64 53.0356604096 12 6600 4.7911307 68721.05 824652.6 23822163.24 54.93743102030 10200 16800 12.195605 67.05 683910 24506073.24 56.51462901107 4800 21600 15.680064 141.87 680976 25187049.24 58.0850620015 4332 25932 18.824788 155.83 675055.56 25862104.8 59.64183810338 12 25944 18.833499 54188.31 650259.72 26512364.52 61.14143301087 3552 29496 21.411998 180.89 642521.28 27154885.8 62.62318201112 696 30192 21.917245 862.73 600460.08 27755345.88 64.00793210254 60 30252 21.960801 8795.06 527703.6 28283049.48 65.22489508408 12 30264 21.969512 43178.5 518142 28801191.48 66.41980704069 12 30276 21.978223 41078.88 492946.56 29294138.04 67.55661408408 12 30288 21.986934 35825.18 429902.16 29724040.2 68.54803201115 2004 32292 23.441696 212.4 425649.6 30149689.8 69.529643

Table 4.2Items in category ‘B’

33

CODE QTY CUM.QTY QTY.PER RATE CONSUMPTION CUM.CON CON.PER10008 228 32520 23.607207 1745.4 397951.2 30547641 70.44737710321 48 32568 23.642052 8257.27 396348.96 30943989.96 71.36141703242 24 32592 23.659474 14833.67 356008.08 31299998.04 72.18242403361 12 32604 23.668185 29536 354432 31654430.04 72.99979701011 2256 34860 25.305881 154.35 348213.6 32002643.64 73.80282901096 60 34920 25.349437 5256.5 315390 32318033.64 74.53016503288 12 34932 25.358148 22893.04 274716.48 32592750.12 75.16370220068 780 35712 25.924372 343.2 267696 32860446.12 75.78104801117 600 36312 26.35993 426.36 255816 33116262.12 76.37099801101 5904 42216 30.645814 42.86 253045.44 33369307.56 76.95455801026 7188 49404 35.863791 35.04 251867.52 33621175.08 77.53540202036 1212 50616 36.743617 197.89 239842.68 33861017.76 78.08851402026 540 51156 37.135618 443.36 239414.4 34100432.16 78.64063919008 2472 53628 38.930114 95.01 234864.72 34335296.88 79.18227219014 2640 56268 40.846567 86.26 227726.4 34563023.28 79.70744319043 2520 58788 42.675907 90.21 227329.2 34790352.48 80.23169801120 5544 64332 46.700457 38.84 215328.96 35005681.44 80.72827803193 24 64356 46.717879 8321 199704 35205385.44 81.18882506038 12 64368 46.726591 16248.65 194983.8 35400369.24 81.63848619013 2745 67113 48.719265 70.97 194812.65 35595181.89 82.08775307256 24 67137 48.736688 7592 182208 35777389.89 82.50795210077 12 67149 48.745399 14698.75 176385 35953774.89 82.91472203790 24 67173 48.762821 7281.33 174751.92 36128526.81 83.31772510028 24 67197 48.780243 7279.67 174712.08 36303238.89 83.72063701009 6174 73371 53.262128 26.48 163487.52 36466726.41 84.09766420018 1224 74595 54.150665 119.91 146769.84 36613496.25 84.43613703338 72 74667 54.202932 1974.68 142176.96 36755673.21 84.76401810180 24 74691 54.220355 5688.8 136531.2 36892204.41 85.07887910302 12 74703 54.229066 11338 136056 37028260.41 85.39264401104 600 75303 54.664623 211.63 126978 37155238.41 85.68547401118 3000 78303 56.84241 41.6 124800 37280038.41 85.97328102010 720 79023 57.365078 171.21 123271.2 37403309.61 86.25756301105 600 79623 57.800636 203.7 122220 37525529.61 86.5394213100 1812 81435 59.116019 63.78 115569.36 37641098.97 86.80594116163 30 81465 59.137797 3824.91 114747.3 37755846.27 87.07056503531 24 81489 59.155219 4773.55 114565.2 37870411.47 87.33476906026 24 81513 59.172641 4745.5 113892 37984303.47 87.59742116120 84 81597 59.233619 1300.65 109254.6 38093558.07 87.84937803507 12 81609 59.242331 9100 109200 38202758.07 88.10120903273 12 81621 59.251042 8860 106320 38309078.07 88.346399

CODE QTY CUM.QTY QTY.PER RATE CONSUMTION CUM.CON CON.PER2048 372 81993 59.521087 281.5 104718 38413796 88.58789410340 12 82005 59.529798 8672 104064 38517860 88.82788111427 360 82365 59.791133 277.32 99835.2 38617695 89.058116

34

3989 96 82461 59.860822 1035 99360 38717055 89.2872553064 24 82485 59.878244 4104 98496 38815551 89.51440110219 24 82509 59.895667 3577.71 85865.04 38901416 89.7124199016 24 82533 59.913089 3507.1 84170.4 38985587 89.906528

Table 4.3Items in category ‘C’

CODE QTY CUM.QTY QTY.PER RATE CONSUMPTION CUM.CON CON.PER

35

03781 12 82545 59.9218 6883 82596 39068182.71 90.09700703121 48 82593 59.956645 1681.8 80726.4 39148909.11 90.28317419027 948 83541 60.644825 82.25 77973 39226882.11 90.46299104261 12 83553 60.653536 6439.68 77276.16 39304158.27 90.64120102002 420 83973 60.958426 180.21 75688.2 39379846.47 90.81574915525 588 84561 61.385273 127.1 74734.8 39454581.27 90.98809903312 24 84585 61.402695 3096 74304 39528885.27 91.15945503787 12 84597 61.411406 6046.61 72559.32 39601444.59 91.32678703990 48 84645 61.446251 1481.36 71105.28 39672549.87 91.49076701086 1872 86517 62.80519 37.81 70780.32 39743330.19 91.65399703058 24 86541 62.822612 2908.2 69796.8 39813126.99 91.81495812274 180 86721 62.953279 386 69480 39882606.99 91.97518903062 12 86733 62.96199 5456.56 65478.72 39948085.71 92.12619303266 24 86757 62.979413 2694.92 64678.08 40012763.79 92.2753501106 186 86943 63.114435 330.76 61521.36 40074285.15 92.41722803206 24 86967 63.131858 2524.43 60586.32 40134871.47 92.55694903525 24 86991 63.14928 2477.5 59460 40194331.47 92.69407203265 12 87003 63.157991 4918.67 59024.04 40253355.51 92.8301904037 12 87015 63.166702 4914.05 58968.6 40312324.11 92.96618110109 12 87027 63.175413 4761.42 57137.04 40369461.15 93.09794703253 12 87039 63.184124 4633.2 55598.4 40425059.55 93.22616501103 600 87639 63.619682 91.52 54912 40479971.55 93.352810258 84 87723 63.68066 650.56 54647.04 40534618.59 93.47882507353 108 87831 63.75906 492 53136 40587754.59 93.60136417042 168 87999 63.881016 313.61 52686.48 40640441.07 93.72286710286 36 88035 63.90715 1404 50544 40690985.07 93.83942914037 12 88047 63.915861 4167.55 50010.6 40740995.67 93.95476116162 12 88059 63.924572 4066.58 48798.96 40789794.63 94.06729803458 24 88083 63.941994 2022.66 48543.84 40838338.47 94.17924803804 12 88095 63.950705 3822 45864 40884202.47 94.28501719034 240 88335 64.124928 190.81 45794.4 40929996.87 94.39062513713 48 88383 64.159773 935.25 44892 40974888.87 94.49415303182 12 88395 64.168484 3595 43140 41018028.87 94.5936410324 24 88419 64.185906 1739.04 41736.96 41059765.83 94.68989210016 24 88443 64.203329 1737.75 41706 41101471.83 94.78607207254 12 88455 64.21204 3437.5 41250 41142721.83 94.88120103806 48 88503 64.246884 815.63 39150.24 41181872.07 94.97148710084 24 88527 64.264307 1625.2 39004.8 41220876.87 95.06143810337 12 88539 64.273018 3250.33 39003.96 41259880.83 95.151387

CODE QTY CUM.QTY QTY.PER RATE CONSUMPTION CUM.CON CON.PER1060 1363 89902 65.262459 28.6 38981.8 41298863 95.2412847253 12 89914 65.27117 3136.39 37636.68 41336499 95.328083805 24 89938 65.288592 1560 37440 41373939 95.4144223374 12 89950 65.297303 3098.91 37186.92 41411126 95.50018112291 48 89998 65.332148 767.16 36823.68 41447950 95.5851025050 48 90046 65.366993 721.41 34627.68 41482578 95.6649581017 5700 95746 69.504787 5.82 33174 41515752 95.741462

36

3225 12 95758 69.513498 2740.88 32890.56 41548642 95.81731316002 24 95782 69.530921 1354.65 32511.6 41581154 95.8922891002 564 96346 69.940345 56.75 32007 41613161 95.9661023387 24 96370 69.957767 1326.52 31836.48 41644997 96.03952213200 1101 97471 70.757015 28.38 31246.38 41676244 96.1115813398 12 97483 70.765726 2520.68 30248.16 41706492 96.1813372019 168 97651 70.887682 178.88 30051.84 41736544 96.2506413712 36 97687 70.913815 832 29952 41766496 96.31971516001 60 97747 70.957371 494.8 29688 41796184 96.388185139 60 97807 71.000927 487.6 29256 41825440 96.4556493796 12 97819 71.009638 2407 28884 41854324 96.522263219 60 97879 71.053194 473.97 28438.2 41882762 96.5878421018 432 98311 71.366795 62.78 27120.96 41909883 96.6503873509 12 98323 71.375506 2251.6 27019.2 41936902 96.7126975128 48 98371 71.410351 552.54 26521.92 41963424 96.7738613346 12 98383 71.419062 2184 26208 41989632 96.834310323 12 98395 71.427773 2179.59 26155.08 42015787 96.8946183052 12 98407 71.436484 2132 25584 42041371 96.95361816118 12 98419 71.445195 2124.2 25490.4 42066861 97.0124034091 24 98443 71.462617 1061 25464 42092325 97.07112721006 2300 100743 73.132254 10.93 25139 42117464 97.1291014029 24 100767 73.149676 1040.63 24975.12 42142439 97.18669713759 24 100791 73.167099 1011.24 24269.76 42166709 97.24266720017 3769 104560 75.903124 6.3 23744.7 42190454 97.29742615301 96 104656 75.972814 247.08 23719.68 42214174 97.35212712291 24 104680 75.990236 950.1 22802.4 42236976 97.4047134079 12 104692 75.998947 1872.97 22475.64 42259452 97.4565459004 24 104716 76.016369 930.78 22338.72 42281790 97.50806120071 2419 107135 77.772391 8.92 21577.48 42303368 97.55782217023 768 107903 78.329905 28.08 21565.44 42324933 97.6075553148 36 107939 78.356038 568.65 20471.4 42345405 97.6547653426 24 107963 78.373461 832 19968 42365373 97.7008143736 12 107975 78.382172 1663.19 19958.28 42385331 97.7468418316 48 108023 78.417016 410.75 19716 42405047 97.7923093218 36 108059 78.44315 535.6 19281.6 42424329 97.836775

CODE QTY CUM.QTY QTY.PER RATE CONSUMPTION CUM.CON CON.PER5118 48 108107 78.477994 387.9 18619.2 42442948 97.8797141098 300 108407 78.695773 61.07 18321 42461269 97.92196522 1059 109466 79.464532 17.09 18098.31 42479367 97.963702

5120 36 109502 79.490665 500.33 18011.88 42497379 98.005245125 48 109550 79.52551 372.5 17880 42515259 98.04647413604 240 109790 79.699733 68.64 16473.6 42531733 98.0844651042 1146 110936 80.531647 13.47 15436.62 42547169 98.1200643313 12 110948 80.540358 1270.91 15250.92 42562420 98.15523515411 180 111128 80.671025 84.59 15226.2 42577646 98.19034910318 24 111152 80.688448 616.7 14800.8 42592447 98.2244827551 180 111332 80.819115 80 14400 42606847 98.25769

37

10307 24 111356 80.836537 599.67 14392.08 42621239 98.290887454 24 111380 80.85396 593.99 14255.76 42635495 98.32375613757 12 111392 80.862671 1181.7 14180.4 42649675 98.3564581106 2400 113792 82.6049 5.79 13896 42663571 98.38850515067 12 113804 82.613611 1123.2 13478.4 42677050 98.4195881088 6012 119816 86.977896 2.24 13466.88 42690517 98.45064411919 24 119840 86.995318 559.29 13422.96 42703940 98.481615216 120 119960 87.082429 110.24 13228.8 42717168 98.5121073328 48 120008 87.117274 274.64 13182.72 42730351 98.54250913431 492 120500 87.474431 26.04 12811.68 42743163 98.5720545134 36 120536 87.500564 354 12744 42755907 98.6014445109 24 120560 87.517987 523.76 12570.24 42768477 98.63043320204 96 120656 87.587676 125.84 12080.64 42780558 98.6582927351 48 120704 87.62252 250.28 12013.44 42792571 98.6859972041 48 120752 87.657365 244.54 11737.92 42804309 98.7130663984 48 120800 87.69221 242.5 11640 42815949 98.739913288 24 120824 87.709632 480.05 11521.2 42827470 98.766481102 414 121238 88.010166 27.51 11389.14 42838859 98.79274511709 984 122222 88.724481 11.44 11256.96 42850116 98.81870514005 240 122462 88.898703 46.8 11232 42861348 98.84460813725 48 122510 88.933548 222.35 10672.8 42872021 98.8692213400 24 122534 88.95097 444.05 10657.2 42882678 98.8937988313 84 122618 89.011948 125.85 10571.4 42893250 98.91817721277 2.34 122620.34 89.013647 4502.56 10535.99 42903786 98.9424743204 36 122656.34 89.03978 292 10512 42914298 98.9667173149 12 122668.34 89.048492 856.34 10276.08 42924574 98.99041513430 2220 124888.34 90.660054 4.62 10256.4 42934830 99.01406813307 144 125032.34 90.764588 70.73 10185.12 42945015 99.03755611597 25 125057.34 90.782736 390.05 9751.25 42954767 99.0600443366 24 125081.34 90.800158 404.6 9710.4 42964477 99.0824374076 12 125093.34 90.808869 806.65 9679.8 42974157 99.1047613705 72 125165.34 90.861136 130.78 9416.16 42983573 99.126476

CODE QTY CUM.QTY QTY.PER RATE CONSUMPTION CUM.CON CON.PER13712 12 125177.34 90.869847 780 9360 42992933 99.14806110303 12 125489.34 91.096337 754.05 9048.6 43011126 99.1900167419 12 125501.34 91.105048 727 8724 43019850 99.21013520007 4440 129941.34 94.328172 1.89 8391.6 43028241 99.22948714028 84 130025.34 94.38915 99.15 8328.6 43036570 99.24869418005 48 130073.34 94.423995 169.96 8158.08 43044728 99.2675087354 12 130085.34 94.432706 656.56 7878.72 43052607 99.28567716102 48 130133.34 94.467551 163.3 7838.4 43060445 99.3037545109 24 130157.34 94.484973 318 7632 43068077 99.3213541040 1458 131615.34 95.543377 5.13 7479.54 43075556 99.33860312054 144 131759.34 95.647911 50.96 7338.24 43082895 99.3555265047 24 131783.34 95.665333 303.5 7284 43090179 99.3723245112 48 131831.34 95.700178 147.94 7101.12 43097280 99.388715575 12 131843.34 95.708889 589 7068 43104348 99.405

38

4057 24 131867.34 95.726311 291.72 7001.28 43111349 99.42114611511 72 131939.34 95.778578 95.01 6840.72 43118190 99.4369223369 24 131963.34 95.796001 282.53 6780.72 43124971 99.45255915406 12 131975.34 95.804712 527.18 6326.16 43131297 99.4671483372 48 132023.34 95.839556 129.85 6232.8 43137530 99.4815223305 24 132047.34 95.856979 247.63 5943.12 43143473 99.49522811502 120 132167.34 95.94409 48.62 5834.4 43149307 99.5086833702 24 132191.34 95.961512 243 5832 43155139 99.5221323733 12 132203.34 95.970224 482.92 5795.04 43160934 99.53549715417 72 132275.34 96.02249 80.08 5765.76 43166700 99.5487935024 48 132323.34 96.057335 120 5760 43172460 99.56207719440 192 132515.34 96.196713 29.35 5635.2 43178095 99.5750723213 36 132551.34 96.222847 150.01 5400.36 43183495 99.58752617022 180 132731.34 96.353514 28.07 5052.6 43188548 99.5991783207 12 132743.34 96.362225 416 4992 43193540 99.61069121225 12 132755.34 96.370936 416 4992 43198532 99.62220313710 216 132971.34 96.527737 22.72 4907.52 43203440 99.633525096 36 133007.34 96.55387 134.63 4846.68 43208286 99.6446983998 12 133019.34 96.562582 400 4800 43213086 99.6557673721 12 133031.34 96.571293 395.2 4742.4 43217829 99.6667045020 24 133055.34 96.588715 194.61 4670.64 43222499 99.67747513741 24 133079.34 96.606137 191.14 4587.36 43227087 99.68805413671 192 133271.34 96.745516 23.34 4481.28 43231568 99.69838911702 168 133439.34 96.867472 24.87 4178.16 43235746 99.70802420051 24 133463.34 96.884894 170.98 4103.52 43239850 99.71748712436 60 133523.34 96.92845 67.6 4056 43243906 99.7268414024 12 133535.34 96.937161 330.89 3970.68 43247876 99.7359983406 12 133547.34 96.945872 312 3744 43251620 99.74463211356 144 133691.34 97.050406 26 3744 43255364 99.753266

CODE QTY CUM.QTY QTY.PER RATE CONSUMPTION CUM.CON CON.PER15047 12 133883.34 97.189784 301.6 3619.2 43266335 99.7785673194 24 133907.34 97.207206 148.59 3566.16 43269902 99.7867923998 12 133919.34 97.215918 295.59 3547.08 43273449 99.79497218001 24 133943.34 97.23334 144.16 3459.84 43276908 99.8029513217 12 133955.34 97.242051 286 3432 43280340 99.8108656002 12 133967.34 97.250762 282.88 3394.56 43283735 99.8186943365 12 133979.34 97.259473 271 3252 43286987 99.82619320203 60 134039.34 97.303029 54.08 3244.8 43290232 99.83367615421 60 134099.34 97.346585 53.29 3197.4 43293429 99.8410519013 60 134159.34 97.39014 50.57 3034.2 43296463 99.84804713304 60 134219.34 97.433696 50.18 3010.8 43299474 99.8549914003 12 134231.34 97.442407 238.28 2859.36 43302334 99.86158512655 24 134255.34 97.45983 117.38 2817.12 43305151 99.8680814118 24 134279.34 97.477252 105.24 2525.76 43307676 99.8739065139 36 134315.34 97.503385 62.4 2246.4 43309923 99.8790872045 6 134321.34 97.507741 355.18 2131.08 43312054 99.88400120052 36 134357.34 97.533874 56.59 2037.24 43314091 99.888699

39

15207 24 134381.34 97.551297 82.82 1987.68 43316079 99.8932833324 12 134393.34 97.560008 165.27 1983.24 43318062 99.89785720202 36 134429.34 97.586141 54.08 1946.88 43320009 99.90234715559 360 134789.34 97.847476 5.31 1911.6 43321921 99.9067553198 24 134813.34 97.864898 74.74 1793.76 43323714 99.91089215578 24 134837.34 97.88232 72.81 1747.44 43325462 99.9149224110 24 134861.34 97.899743 72.74 1745.76 43327208 99.91894818043 7.2 134868.54 97.904969 239.2 1722.24 43328930 99.92291914035 912 135780.54 98.567016 1.84 1678.08 43330608 99.92678911608 180 135960.54 98.697684 9.13 1643.4 43332251 99.93057913432 480 136440.54 99.046129 3.25 1560 43333811 99.93417711503 132 136572.54 99.141952 11.76 1552.32 43335364 99.9377573200 24 136596.54 99.159374 63.9 1533.6 43336897 99.94129312820 12 136608.54 99.168085 116.48 1397.76 43338295 99.94451711516 120 136728.54 99.255197 11.45 1374 43339669 99.94768515522 12 136740.54 99.263908 114.4 1372.8 43341042 99.9508518403 12 136752.54 99.272619 113.84 1366.08 43342408 99.9540024113 24 136776.54 99.290042 54.89 1317.36 43343725 99.957044253 12 136788.54 99.298753 108.49 1301.88 43345027 99.96004215203 60 136848.54 99.342308 20.2 1212 43346239 99.96283712423 24 136872.54 99.359731 45.86 1100.64 43347340 99.9653751044 12 136884.54 99.368442 88.5 1062 43348402 99.967825

40

CODE QTY CUM.QTY QTY.PER RATE CONSUMPTION CUM.CON CON.PER11531 72 136956.54 99.420709 14.4 1036.8 43349438 99.97021611607 60 137016.54 99.464264 16.7 1002 43350440 99.97252613306 12 137028.54 99.472976 75.75 909 43351349 99.9746234107 24 137052.54 99.490398 33.95 814.8 43352164 99.97650213325 24 137076.54 99.50782 31.54 756.96 43352921 99.97824715571 12 137088.54 99.516531 62.4 748.8 43353670 99.97997418040 60 137148.54 99.560087 11.77 706.2 43354376 99.9816034108 24 137172.54 99.577509 27.32 655.68 43355032 99.9831157257 24 137196.54 99.594932 22.58 541.92 43355574 99.9843654218 24 137220.54 99.612354 20.4 489.6 43356063 99.98549411552 36 137256.54 99.638487 12.48 449.28 43356513 99.986534213 24 137280.54 99.65591 18.7 448.8 43356962 99.9875654109 12 137292.54 99.664621 35.35 424.2 43357386 99.98854311506 36 137328.54 99.690754 11.59 417.24 43357803 99.9895054207 24 137352.54 99.708177 17.3 415.2 43358218 99.99046312830 24 137376.54 99.725599 16.87 404.88 43358623 99.9913974111 12 137388.54 99.73431 33 396 43359019 99.9923115503 24 137412.54 99.751732 16.5 396 43359415 99.99322314041 24 137436.54 99.769155 15.6 374.4 43359789 99.9940864208 24 137460.54 99.786577 13.49 323.76 43360113 99.9948333221 12 137472.54 99.795288 25.6 307.2 43360420 99.9955414219 24 137496.54 99.81271 12.37 296.88 43360717 99.99622615629 12 137508.54 99.821421 23.63 283.56 43361001 99.9968813312 24 137532.54 99.838844 10.99 263.76 43361265 99.99748811524 24 137556.54 99.856266 7.87 188.88 43361453 99.9979244210 12 137568.54 99.864977 13.45 161.4 43361615 99.9982964214 12 137580.54 99.873688 13.45 161.4 43361776 99.99866814003 12 137592.54 99.8824 11.47 137.64 43361914 99.9989863379 12 137604.54 99.891111 11.45 137.4 43362051 99.99930314008 12 137616.54 99.899822 11.44 137.28 43362189 99.99961920114 48 137664.54 99.934666 2.29 109.92 43362299 99.99987313305 12 137676.54 99.943378 3.4 40.8 43362339 99.99996719003 72 137748.54 99.995644 0.15 10.8 43362350 99.99999218055 6 137754.54 100 0.6 3.6 43362354 100

137754.54 43362354

Table 4.4

41

ABC Analysis Summary

CATEGORY NO OF ITEMS

A 17

B 47

C 243

From the above table, it is observed that 17 items of category A has been

consumed, 47 items of category B has been consumed and 243 items of category C are

consumed.

Chart 4.1

42

Number of items in category A, B and C

ABC Analysis

1747

243

0

50

100

150

200

250

300

A B CCategory

No

of

Item

s

HML Analysis

43

H-M-L analysis is similar to ABC analysis except for the difference that instead

of ‘usage value’, ‘price’ criterion is used. The items under this analysis are classified into

three groups that are called High, Medium and Low. To classify, the items are listed in

the descending order of their unit price. The management for deciding three categories

then fixes the cut-off-lines. For example, the management may decide that all items of

unit price above Rs. 1000 will of ‘H’ category, those with unit price between Rs. 100 to

Rs.1000 will be of ‘M’ category and those having unit price below Rs. 100 will be of ‘L’

category.

HML analysis helps to -

Assess storage and security requirements

To keep control over consumption at the departmental head level

Determine the frequency of stock verification

To evolve buying policies to control purchase

To delegate authorities to different buyers to make petty cash purchase

Abbreviation Used :

CON – Annual Consumption

Table 4.5

44

Items in category ‘H’

CODE CON RATE PER UNIT22046 36 45864010046 12 227880.07

20113 1152 1687.1110147 12 73398.6704096 12 68721.0510338 12 54188.3110254 60 8795.0608408 12 43178.504069 12 41078.8808408 12 35825.18

10008 228 1745.410321 48 8257.2703242 24 14833.6703361 12 29536

10096 60 5256.503288 12 22893.0403193 24 832106038 12 16248.6507256 24 759210077 12 14698.7503790 24 7281.3310028 24 7279.67

03338 72 1974.6810180 24 5688.810302 12 11338

16163 30 3824.91

03531 24 4773.55

06026 24 4745.5

16120 84 1300.6503507 12 910003273 12 886010340 12 8672

03989 96 103503064 24 410410219 24 3577.7109016 24 3507.103781 12 6883

03121 48 1681.804261 12 6439.6803312 24 3096CODE CON RATE PER UNIT3787 12 6046.613990 48 1481.363058 24 2908.2

45

3062 12 5456.563266 24 2694.923206 24 2524.433525 24 2477.53265 12 4918.674037 12 4914.0510109 12 4761.423253 12 4633.210286 36 140414037 12 4167.5516162 12 4066.583458 24 2022.663804 12 38223182 12 359510324 24 1739.0410016 24 1737.757254 12 3437.510084 24 1625.210337 12 3250.337253 12 3136.393805 24 15603374 12 3098.913225 12 2740.8816002 24 1354.653387 24 1326.523398 12 2520.683796 12 24073509 12 2251.63346 12 218410323 12 2179.593052 12 213216118 12 2124.24091 24 10614029 24 1040.6313759 24 1011.244079 12 1872.973736 12 1663.193313 12 1270.9113757 12 1181.715067 12 1123.2

Table 4.6Items in category ‘M’

CODE CON RATE PER UNIT01113 5376 172.54

01107 4800 141.87

20015 4332 155.83

46

01087 3552 180.89

01112 696 862.73

01115 2004 212.4

01011 2256 154.35

20068 780 343.2

01117 600 426.36

02036 1212 197.89

02026 540 443.36

20018 1224 119.91

01104 600 211.63

02010 720 171.21

01105 600 203.7

02048 372 281.511427 360 277.3202002 420 180.2115525 588 127.112274 180 38601106 186 330.7610258 84 650.5607353 108 49217042 168 313.6119034 240 190.8113713 48 935.2503806 48 815.6312291 48 767.1605050 48 721.4102019 168 178.8803712 36 83216001 60 494.805139 60 487.603219 60 473.9705128 48 552.5415301 96 247.0812291 24 950.109004 24 930.7803148 36 568.6503426 24 832CODE CON RATE PER UNIT08316 48 410.7503218 36 535.605118 48 387.905120 36 500.3305125 48 372.510318 24 616.710307 24 599.6707454 24 593.9911919 24 559.29

47

15216 120 110.2403328 48 274.6405134 36 35405109 24 523.7620204 96 125.8407351 48 250.2802041 48 244.5403984 48 242.503288 24 480.0513725 48 222.3503400 24 444.0508313 84 125.8503204 36 29203149 12 856.3411597 25 390.0503366 24 404.604076 12 806.6513705 72 130.7813712 12 78010303 12 754.0507419 12 72718005 48 169.9607354 12 656.5616102 48 163.305109 24 31805047 24 303.505112 48 147.9415575 12 58904057 24 291.7203369 24 282.5315406 12 527.1803372 48 129.8503305 24 247.6303702 24 243CODE CON RATE PER UNIT03733 12 482.9205024 48 12003213 36 150.0103207 12 41621225 12 41605096 36 134.6303998 12 40003721 12 395.205020 24 194.6113741 24 191.1420051 24 170.9804024 12 330.89

48

03406 12 31205021 36 102.315047 12 301.603194 24 148.5903998 12 295.5918001 24 144.1603217 12 28606002 12 282.8803365 12 27104003 12 238.2812655 24 117.3804118 24 105.2402045 6 355.1803324 12 165.2718043 7.2 239.212820 12 116.4815522 12 114.408403 12 113.8404253 12 108.49

Table 4.7Items in category ‘L’


01101 5904 42.86

01026 7188 35.04

19008 2472 95.0119014 2640 86.26

19043 2520 90.2101120 5544 38.84

19013 2745 70.97

01009 6174 26.48

01118 3000 41.6

49

13100 1812 63.78

19027 948 82.2501086 1872 37.81

01103 600 91.5201060 1363 28.6

01017 5700 5.8201002 564 56.7513200 1101 28.38

01018 432 62.7821006 2300 10.93

20017 3769 6.3

20071 2419 8.92

17023 768 28.0801098 300 61.0720022 1059 17.09

13604 240 68.6401042 1146 13.47

15411 180 84.5907551 180 8001106 2400 5.7901088 6012 2.24

13431 492 26.0401102 414 27.5111709 984 11.4414005 240 46.813430 2220 4.6213307 144 70.7313616 300 30.4820007 4440 1.8914028 84 99.15


12054 144 50.9611511 72 95.01

11502 120 48.6215417 72 80.0819440 192 29.3517022 180 28.0713710 216 22.7213671 192 23.3411702 168 24.8712436 60 67.611356 144 2611352 144 25.4820203 60 54.0815421 60 53.2919013 60 50.57

50

13304 60 50.1805139 36 62.420052 36 56.5915207 24 82.8220202 36 54.0815559 360 5.3103198 24 74.7415578 24 72.8104110 24 72.7414035 912 1.8411608 180 9.1313432 480 3.2511503 132 11.7603200 24 63.911516 120 11.4504113 24 54.8915203 60 20.212423 24 45.8601044 12 88.511531 72 14.411607 60 16.713306 12 75.7504107 24 33.9513325 24 31.5415571 12 62.418040 60 11.77CODE CON RATE PER UNIT04108 24 27.3207257 24 22.5804218 24 20.411552 36 12.4804213 24 18.704109 12 35.3511506 36 11.5904207 24 17.312830 24 16.8704111 12 3315503 24 16.514041 24 15.604208 24 13.4903221 12 25.604219 24 12.3715629 12 23.6313312 24 10.9911524 24 7.8704210 12 13.4504214 12 13.45

51

14003 12 11.4703379 12 11.4514008 12 11.4420114 48 2.2913305 12 3.419003 72 0.1518055 6 0.6

Table 4.8

HML Analysis Summary

CATEGORY NO OF ITEMS

H 84

M 114

L 109

From the above table, it is observed that 84 items of category H has been

consumed, 104 items of category M has been consumed and 109 items of category L are

consumed.

52

Chart 2

Number of items in category H, M and L

53

HML Analysis

0

20

40

60

80

100

120

H M L

Category

No

of

Ite

ms

3D Analysis

54

The various methods of classification of inventories helps the managers to control

materials effectively. Some organizations combine two methods for deciding inventory

levels. This integrated approach is known as 3 dimensional approaches.

Table 4.9

Items in category ‘A’ and ‘ H ’

55

CODEANNUAL

CONSUMPTION RATE PER UNIT22046 36 45864010046 12 227880.07

20113 1152 1687.1110147 12 73398.674096 12 68721.0510338 12 54188.3110254 60 8795.068408 12 43178.54069 12 41078.888408 12 35825.18

Table 4.10

Items in category ‘A’ and ‘M’

56

CODEANNUAL

CONSUMPTION RATE PER UNIT1113 5376 172.54

1107 4800 141.87

20015 4332 155.83

1087 3552 180.89

1112 696 862.73

1115 2004 212.4

Table 4.11

Items in category ‘A’ and ‘ L’

57

CODEANNUAL


Table 4.12

Items in category ‘ B ’ and ‘ H ’

58

CODEANNUAL

CONSUMPTIONRATE PER UNIT

10008 228 1745.410321 48 8257.273242 24 14833.673361 12 29536

10096 60 5256.53288 12 22893.043193 24 83216038 12 16248.657256 24 759210077 12 14698.753790 24 7281.3310028 24 7279.67

3338 72 1974.6810180 24 5688.810302 12 11338

16163 30 3824.91

3531 24 4773.55

6026 24 4745.5

16120 84 1300.653507 12 91003273 12 886010340 12 8672

3989 96 1035

3064 24 4104

10219 24 3577.71

9016 24 3507.1

Table 4.13

Items in category ‘ B’ and ‘ M ’

CODEANNUAL

CONSUMPTION RATE PER UNIT

59

1011 2256 154.35

20068 780 343.2

1117 600 426.36

2036 1212 197.89

2026 540 443.36

20018 1224 119.91

1104 600 211.63

2010 720 171.21

1105 600 203.7

2048 372 281.511427 360 277.32

Table 4.14

Items in category ‘ B ’ and ‘ L’

60

CODEANNUAL


1026 7188 35.04

19008 2472 95.0119014 2640 86.26

19043 2520 90.211120 5544 38.84

19013 2745 70.97

1009 6174 26.48

1118 3000 41.6

13100 1812 63.78

Table 4.15

Items in category ‘ C ’ and ‘ H ’

CODEANNUAL

CONSUMTION RATE PER UNIT

61

3781 12 6883

3121 48 1681.84261 12 6439.683312 24 30963787 12 6046.613990 48 1481.363058 24 2908.23062 12 5456.563266 24 2694.923206 24 2524.433525 24 2477.53265 12 4918.674037 12 4914.0510109 12 4761.423253 12 4633.210286 36 14041037 12 4167.5516162 12 4066.583458 24 2022.663804 12 38223182 12 359510324 24 1739.0410016 24 1737.757254 12 3437.510084 24 1625.210337 12 3250.337253 12 3136.393805 24 15603374 12 3098.91

3225 12 2740.8816002 24 1354.653387 24 1326.523398 12 2520.683796 12 24073509 12 2251.63346 12 218410323 12 2179.593052 12 213216118 12 2124.2

CODEANNUAL

CONSUMPTION RATE PER UNIT4091 24 10614029 24 1040.6313759 24 1011.244079 12 1872.973736 12 1663.193313 12 1270.9113757 12 1181.7

62

15067 12 1123.221277 2.34 4502.56

Table 4.16

Items in category ‘ C ’ and ‘ M ’

CODEANNUAL

CONSUMPTION RATE PER UNIT2002 420 180.2115525 588 127.112274 180 3861106 186 330.76

63

10258 84 650.567353 108 49217042 168 313.6119034 240 190.8113713 48 935.253806 48 815.6312291 48 767.165050 48 721.412019 168 178.883712 36 83216001 60 494.85139 60 487.63219 60 473.975128 48 552.5415301 96 247.0812291 24 950.19004 24 930.783148 36 568.653426 24 8328316 48 410.753218 36 535.65118 48 387.95120 36 500.335125 48 372.510318 24 616.710307 24 599.677454 24 593.9911919 24 559.2915216 120 110.243328 48 274.645134 36 3545109 24 523.7620204 96 125.847351 48 250.282041 48 244.54

CODEANNUAL

CONSUMPTION RATE PER UNIT3984 48 242.53288 24 480.0513725 48 222.353400 24 444.058313 84 125.853204 36 2923149 12 856.3411597 25 390.053366 24 404.64076 12 806.6513705 72 130.78

64

13712 12 78010303 12 754.057419 12 72718005 48 169.967354 12 656.5616102 48 163.35109 24 3185047 24 303.55112 48 147.9415575 12 5894057 24 291.723369 24 282.5315406 12 527.183372 48 129.853305 24 247.633702 24 2433733 12 482.925024 48 1203213 36 150.013207 12 41621225 12 4165096 36 134.633998 12 4003721 12 395.25020 24 194.6113741 24 191.1420051 24 170.984024 12 330.893406 12 3125021 36 102.315047 12 301.6

CODEANNUAL

CONSUMPTION RATE PER UNIT3194 24 148.593998 12 295.5918001 24 144.163217 12 2866002 12 282.883365 12 2714003 12 238.2812655 24 117.384118 24 105.242045 6 355.183324 12 165.2718043 7.2 239.212820 12 116.4815522 12 114.48403 12 113.84

65

4253 12 108.49

Table 4.17

Items in category ‘ C ’ and ‘ L’

CODEANNUAL

CONSUMPTION RATE PER UNIT19027 948 82.251086 1872 37.81

1103 600 91.521060 1363 28.6

1017 5700 5.821002 564 56.7513200 1101 28.38

1018 432 62.7821006 2300 10.93

20017 3769 6.3

20071 2419 8.92

66

17023 768 28.081098 300 61.0720022 1059 17.09

13604 240 68.641042 1146 13.47

15411 180 84.597551 180 801106 2400 5.791088 6012 2.24

13431 492 26.041102 414 27.5111709 984 11.4414005 240 46.813430 2220 4.6213307 144 70.7313616 300 30.4820007 4440 1.8914028 84 99.151040 1458 5.13

12054 144 50.9611511 72 95.01

11502 120 48.6215417 72 80.0819440 192 29.3517022 180 28.0713710 216 22.7213671 192 23.34

CODEANNUAL

CONSUMPTION RATE PER UNIT11702 168 24.8712436 60 67.611356 144 2611352 144 25.4820203 60 54.0815421 60 53.2919013 60 50.5713304 60 50.185139 36 62.420052 36 56.5915207 24 82.8220202 36 54.0815559 360 5.313198 24 74.7415578 24 72.814110 24 72.7414035 912 1.8411608 180 9.1313432 480 3.25

67

11503 132 11.763200 24 63.911516 120 11.454113 24 54.8915203 60 20.212423 24 45.861044 12 88.511531 72 14.411607 60 16.713306 12 75.754107 24 33.9513325 24 31.5415571 12 62.418040 60 11.774108 24 27.327257 24 22.584218 24 20.411552 36 12.484213 24 18.74109 12 35.3511506 36 11.594207 24 17.312830 24 16.87

CODEANNUAL

CONSUMPTION RATE PER UNIT4111 12 3315503 24 16.514041 24 15.64208 24 13.493221 12 25.64219 24 12.3715629 12 23.6313312 24 10.9911524 24 7.874210 12 13.454214 12 13.4514003 12 11.473379 12 11.4514008 12 11.4420114 48 2.2913305 12 3.419003 72 0.1518055 6 0.6

68

Table 4.183D Analysis Summary

Category A B C

H 10 26 48

M 6 11 97

L 1 10 98

From the above table, it is observed that out of 17 items category in A, 10 items

fall under category H, 6 items fall under category M and 1 item fall under category L.

Out of 47 items category in B, 26 items fall under category H, 11 items fall under

category M and 10 items fall under category L. Out of 243 items category in C, items 48

fall under category H, 97 items fall under category M and 98 items fall under category L.

69

Chart 4.3

Items as per 3D analysis

70

EOQ Computation

71

10

26

48

611

97

110

98

0

20

40

60

80

100

120

Category A Category B Category C

H

M

L

Economic order quantity is that level of inventory that minimizes the total of

inventory holding cost and ordering cost. The framework used to determine this order

quantity is also known as Wilson EOQ Model. The model was developed by F. W. Harris

in 1913. A decision about how much to order has great significance in inventory

management. The quantity to be purchased should neither be small nor big because the

costs of buying and carrying materials are very high. Economic order quantity is the size

of the lot to be purchased which is economically viable. This is the quantity of materials

which can be purchased at minimum costs. Generally, Economic Order Quantity is the

point at which inventory carrying costs are equal to order costs. In determining economic

order quantity it is assumed that cost of managing inventory is made up solely of two

parts i.e., ordering costs and carrying costs.

Underlying assumptions:

The ordering cost is constant.

The annual demand for the item is constant over time and it is known to the firm.

Quantity discounts doesn't exist.

The order is received immediately after placing the order.

Formula:

EOQ = ((2*Annual usage * ordering cost)/ (carrying cost * price)) n (1/2)

Safety stock = 2* (Annual usage) n (1/2)

Reorder level = Lead Time Demand + Safety Stock

Maximum level = Safety Stock + Economic Order Quantity

72

Abbreviations used :

CODE - Inventory Code Number

CONSUM - Annual Consumption

LTD - Lead Time Demand

SS - Safety Stock

ROL - Re-Order Level

EOQ - Economic Order Quantity

ORD - Number of Orders per Annum

EXITST - Existing Level of Stock

MAXLL - Maximum Level of Stock to be maintained

DIFFER - Difference between Maximum level and Existing level

SHCOST - Shortage Cost

Table 4.19EOQ ANALYSIS

C0DE CONSUM LTD SS ROL EOQ ORD PRICE EXITST MAXLL DIFFER SAVINGS SHCOST

1002 32007.00 12 357.80 369.80 47.49 674 56.75 450 405.29 44.71 2537.2925 1009 1634872.00 17 2557.24 2574.24 496.95 3290 26.48 4000 3054.19 945.81 25045.049 1011 348213.60 17 1180.19 1197.19 94.99 3666 154.35 2000 1275.18 724.82 111875.97 1017 33174.00 16 364.27 380.27 150.99 220 5.82 700 515.26 184.74 1075.1868 1018 27120.96 15 329.36 344.36 41.56 653 62.78 200 370.92 -170.92 -10730.41026 2518675.20 18 3174.06 3192.06 30.70 82042 35.04 2500 3204.76 -704.76 -24694.81040 747954.00 12 1729.68 1741.68 763.67 979 5.13 5000 2493.35 2506.65 12859.115 1042 154366.20 13 785.78 798.78 214.10 721 13.47 1200 999.88 200.12 2695.6164 1044 1062.00 12 65.17 77.17 6.92 153 88.50 100 72.09 27.91 2470.035 1046 5962713.60 11 4883.73 4894.73 2192.86 2719 4.96 800 7076.59 -6276.59 -31131.91060 3898752.00 17 3949.05 3966.05 738.43 5280 28.60 9100 4687.48 4412.52 126198.07 1086 7077124.56 16 5320.57 5336.57 865.27 8179 37.81 5000 6185.84 -1185.84 -44836.61087 642521.28 15 1603.14 1618.14 119.19 5391 180.89 9800 1722.33 8077.67 1461169.7 1088 134668.00 18 733.99 751.99 490.38 275 2.24 2500 1224.37 1275.63 2857.4112 1098 18321.00 13 270.71 283.71 34.64 529 61.07 8900 305.35 8594.65 524875.28 1101 253045.00 12 1006.07 1018.07 155.11 1631 42.07 4600 1161.18 3438.82 144671.16 1102 12214.44 14 221.03 235.03 42.14 290 27.51 700 263.17 436.83 12017.193 1103 54912.00 13 468.66 481.66 48.98 1121 91.52 300 517.64 -217.64 -19918.41104 126978.00 17 712.67 729.67 48.98 2592 211.63 215 761.65 -546.65 -1156881105 122220.00 18 699.19 717.19 115.63 1057 203.70 3200 814.82 2385.18 485861.17 1107 680976.00 16 1650.42 1666.42 138.56 4915 141.87 1500 1788.98 -288.98 -40997.61112 600460.08 15 1549.78 1564.78 16.68 35999 862.73 1650 1566.46 83.54 72072.464 1113 927575.04 17 1926.21 1943.21 146.64 6326 172.54 980 2072.85 -1092.85 -1885601115 425649.60 17 1304.83 1321.83 89.53 4754 212.40 653 1394.36 -741.36 -1574651116 61521.36 17 496.06 513.06 27.29 2254 330.30 942 523.35 418.65 138280.1

C0DE CONSUM LTD SS ROL EOQ ORD PRICE EXITST MAXLL DIFFER SAVINGS SHCOST

1117 255816.00 16 1011.56 1027.56 48.98 5223 426.36 350 1060.54 -710.54 -3029461118 124800.00 18 706.54 724.54 109.54 1139 41.60 200 816.08 -616.08 -25628.91119 13896.00 17 235.76 252.76 97.97 142 5.79 723 333.73 389.27 2253.8733 1120 2153289.60 18 4306.57 4324.57 49.39 43598 38.84 566 4355.96 -3789.96 -1472022002 75688.20 22 550.22 572.22 40.98 1847 180.21 450 591.2 -141.2 -25445.72010 123271.20 18 702.19 720.19 53.66 2297 171.21 670 755.85 -85.85 -14698.42019 30051.84 17 346.70 363.70 25.92 1159 178.88 450 372.62 77.38 13841.734 2026 239414.40 18 978.59 996.59 46.47 5152 443.36 1500 1025.06 474.94 210569.4 2030 683910.00 16 1635.97 1651.97 201.99 3386 67.05 1595 1837.96 -242.96 -16290.52036 239842.68 15 979.47 994.47 69.62 3445 197.89 1060 1049.09 10.91 2158.9799 2041 11737.92 17 216.68 233.68 13.85 848 244.54 370 230.53 139.47 34105.994 2045 2131.08 12 92.32 104.32 4.89 436 355.18 198 97.21 100.79 35798.592 2048 104718.00 10 647.20 657.20 38.57 2715 281.50 910 685.77 224.23 63120.745 3052 25584.00 15 319.89 334.89 6.92 3697 2132.00 175 326.81 -151.81 -3236593058 69796.80 13 528.37 541.37 9.79 7129 2908.20 400 538.16 -138.16 -4017973062 65478.72 12 511.77 523.77 6.92 9462 5456.56 300 518.69 -218.69 -11932953064 98506.08 16 627.71 643.71 9.79 10062 4104.42 1200 637.5 562.5 2308736.3 3121 80692.80 17 568.12 585.12 13.85 5826 1681.10 822 581.97 240.03 403514.43 3148 20460.60 15 286.08 301.08 12.00 1705 568.35 395 298.08 96.92 55084.482 3182 43147.20 18 415.43 433.43 6.92 6235 3595.60 775 422.35 352.65 1267988.3 3198 1793.76 11 84.70 95.70 9.79 183 74.74 200 94.49 105.51 7885.8174 3200 1533.60 12 78.32 90.32 9.79 157 63.90 515 88.11 426.89 27278.271 3204 10530.00 12 205.23 217.23 12.00 878 292.50 313 217.23 95.77 28012.725 3206 60586.32 10 492.28 502.28 9.79 6189 2524.43 612 502.07 109.93 277510.59 3207 4992.00 10 141.30 151.30 5.74 870 416.00 590 147.04 442.96 184271.36 3213 5400.36 12 146.97 158.97 12.00 450 150.01 300 158.97 141.03 21155.91 3217 3432.00 12 117.16 129.16 6.92 496 286.00 100 124.08 -24.08 -6886.883218 19281.60 15 277.71 292.71 14.57 1323 535.60 122 292.28 -170.28 -91202

C0DE CONSUM LTD SS ROL EOQ ORD PRICE EXITST MAXLL DIFFER SAVINGS SHCOST3219 28438.20 17 337.27 354.27 15.49 1836 473.97 485 352.76 132.24 62677.793 3221 11107.20 10 210.78 220.78 6.92 1605 925.60 292 217.7 74.3 68772.08

3225 32890.56 15 362.71 377.71 6.92 4753 2740.88 620 369.63 250.37 686234.13 3242 357208.08 16 1195.33 1211.33 9.81 36413 14883.20 1700 1205.14 494.86 7365100.4 3253 55598.40 17 471.58 488.58 6.92 8034 4633.20 720 478.5 241.5 1118917.8 3265 59024.04 18 485.89 503.89 6.92 8529 4918.67 690 492.81 197.19 969912.54 3266 64678.08 17 508.63 525.63 9.79 6607 2694.92 700 518.42 181.58 489343.57 3273 106320.00 16 652.12 668.12 6.92 15364 8860.00 680 659.04 20.96 185705.6 3288 274716.00 16 1048.26 1064.26 6.92 39699 22893.04 1322 1055.18 266.82 6108320.9 3303 11532.00 15 214.77 229.77 9.79 1178 480.50 265 224.56 40.44 19431.42 3305 5943.12 17 154.18 171.18 9.79 607 247.63 186 163.97 22.03 5455.2889 3324 1982.40 17 89.03 106.03 6.92 286 165.27 100 95.95 4.05 669.3435 3328 13182.72 18 115.37 133.37 13.85 952 274.64 90 129.22 -39.22 -10771.43338 142176.96 19 754.12 773.12 16.97 8378 1974.68 865 771.09 93.91 185442.2 3346 26208.00 17 323.77 340.77 6.92 3787 2184.00 358 330.69 27.31 59645.04 3365 3252.00 17 114.05 131.05 6.92 470 271.00 695 120.97 574.03 155562.13 3366 9710.40 15 197.08 212.08 9.77 994 406.60 150 206.85 -56.85 -23115.23369 6780.72 12 164.69 176.69 9.79 693 282.53 600 174.48 425.52 120222.17 3372 1432.80 16 75.70 91.70 6.64 216 129.85 65 82.34 -17.34 -2251.63374 37186.92 13 385.67 398.67 6.92 5374 3098.91 400 392.59 7.41 22962.923 3387 31836.48 17 356.85 373.85 9.79 3252 1326.52 513 366.64 146.36 194149.47 3400 10657.20 14 206.46 220.46 9.79 1089 444.05 289 216.25 72.75 32304.638 3406 3744.00 15 122.37 137.37 6.92 541 312.00 266 129.29 136.71 42653.52 3426 19968.00 18 282.61 300.61 9.79 2040 832.00 327 292.4 34.6 28787.2 3458 48543.84 16 440.65 456.65 9.79 4959 2022.66 350 450.44 -100.44 -2031563507 109200.00 17 660.90 677.90 6.92 15780 9100.00 527 667.82 -140.82 -12814623509 54038.40 15 464.92 479.92 9.20 5874 2551.60 680 474.12 205.88 525323.41 3525 59388.00 17 487.39 504.39 9.79 6066 2474.50 1000 497.18 502.82 1244228.1

C0DE CONSUM LTD SS ROL EOQ ORD PRICE EXITST MAXLL DIFFER SAVINGS SHCOST3531 114565.20 17 676.94 693.94 9.79 11702 4773.55 920 686.73 233.27 1113526 3702 5832.00 12 152.73 164.73 9.79 596 243.00 850 162.52 687.48 167057.64 3712 29952.00 16 346.13 362.13 18.60 1610 832.00 533 364.73 168.27 140000.64 3721 4742.40 14 137.73 151.73 6.92 685 395.20 200 144.65 55.35 21874.32

3733 5795.04 15 152.25 167.25 6.92 837 482.92 100 159.17 -59.17 -28574.43781 165192.00 18 812.87 830.87 9.79 16874 6883.00 1050 822.66 227.34 1564781.2 3786 19958.28 18 282.87 300.87 6.92 2884 1663.19 482 289.79 192.21 319681.75 3787 72559.32 17 538.73 555.73 6.92 10485 6046.61 985 545.65 439.35 2656578.1 3790 174751.92 16 836.60 852.60 9.79 17850 7281.33 1200 846.39 353.61 2574751.1 3796 28891.68 17 339.95 356.95 6.92 4175 2407.64 200 346.87 -146.87 -3536103799 37440.00 17 386.98 403.98 9.79 3824 1560.00 600 396.77 203.23 317038.8 3805 39150.24 17 395.72 412.72 13.85 2827 815.63 920 409.57 510.43 416322.02 3806 11640.00 18 215.77 233.77 25.40 458 242.50 624 241.17 382.83 92836.275 3984 67392.00 16 519.19 535.19 5.75 11720 1404.00 312 524.94 -212.94 -2989683989 99370.56 15 630.46 645.46 16.30 6096 1035.11 700 646.76 53.24 55109.256 3990 50010.60 17 447.26 464.26 6.92 7227 4167.55 900 454.18 445.82 1857977.1 3995 480.00 16 43.81 59.81 2.19 219 400.00 100 46 54 21600 3998 3547.08 18 119.11 137.11 6.92 513 295.59 140 126.03 13.97 4129.3923 4003 2859.36 15 106.94 121.94 6.92 413 238.28 412 113.86 298.14 71040.799 4024 3970.68 16 126.01 142.01 6.92 574 330.89 420 132.93 287.07 94988.592 4029 24975.12 17 316.07 333.07 9.79 2551 1040.63 300 325.86 -25.86 -26910.74037 58968.60 19 485.66 504.66 6.92 8521 4914.05 400 492.58 -92.58 -4549434057 7001.28 18 529.17 547.17 9.79 715 291.72 725 538.96 186.04 54271.589 4069 492946.56 17 1404.20 1421.20 6.92 71235 41078.88 2550 1411.12 1138.88 46783915 4072 10508.64 15 205.02 220.02 9.79 1073 437.86 870 214.81 655.19 286881.49 4076 9679.80 17 196.76 213.76 6.92 1399 806.65 512 203.68 308.32 248706.33 4079 22475.64 15 299.83 314.83 6.92 3248 1872.97 458 306.75 151.25 283286.71 4091 12737.16 16 225.71 241.71 6.92 1841 1061.43 789 232.63 556.37 590547.81

C0DE CONSUM LTD SS ROL EOQ ORD PRICE EXITST MAXLL DIFFER SAVINGS SHCOST4096 824652.60 16 1816.20 1832.20 6.92 119169 68721.05 2528 1823.12 704.88 48440094 4107 8148.00 17 180.53 197.53 30.98 263 33.95 512 211.51 300.49 10201.636 4108 655.68 18 51.18 69.18 9.79 67 27.32 50 60.97 -10.97 -299.74109 4242.00 17 130.26 147.26 21.90 194 35.35 400 152.16 247.84 8761.144 4110 1745.76 12 83.56 95.56 1.05 1663 72.74 150 84.61 65.39 4756.4686 4111 396.00 15 39.79 54.79 6.92 57 33.00 80 46.71 33.29 1098.57

4113 1317.36 18 72.59 90.59 9.79 135 54.89 120 82.38 37.62 2064.9618 4118 2525.76 17 100.49 117.49 9.79 258 105.24 45 110.28 -65.28 -6870.074207 415.20 15 40.75 55.75 9.84 42 17.30 58 50.59 7.41 128.193 4208 323.76 16 35.98 51.98 9.79 33 13.49 102 45.77 56.23 758.5427 4209 296.88 16 34.46 50.46 9.79 30 12.37 47 44.25 2.75 34.0175 4210 161.40 16 23.37 39.37 2.00 81 161.40 500 25.37 474.63 76605.282 4213 448.80 17 42.33 59.33 9.79 46 18.70 100 52.12 47.88 895.356 4214 161.40 15 25.40 40.40 6.92 23 13.45 57 32.32 24.68 331.946 4218 489.60 16 44.20 60.20 9.79 50 20.40 103 53.99 49.01 999.804 4253 1301.88 18 72.16 90.16 21.89 59 108.49 145 94.05 50.95 5527.5655 4061 77276.16 17 555.97 572.97 6.92 11167 6439.68 900 562.89 337.11 2170880.5 5002 1946.88 13 88.24 101.24 9.79 199 81.12 254 98.03 155.97 12652.286 5020 4670.64 12 136.68 148.68 9.79 477 194.61 154 146.47 7.53 1465.4133 5021 3682.80 15 121.37 136.37 11.01 334 102.30 100 132.38 -32.38 -3312.4745024 5760.00 15 151.78 166.78 13.73 420 120.00 966 165.51 800.49 96058.8 5047 7284.00 18 170.69 188.69 9.79 744 303.50 78 180.48 -102.48 -31102.685050 34627.68 19 186.08 205.08 13.85 2500 721.41 322 199.93 122.07 88062.519 5096 4846.68 18 139.23 157.23 12.00 404 134.63 98 151.23 -53.23 -7166.35495108 12570.00 17 224.23 241.23 9.79 1284 523.76 695 234.02 460.98 241442.89 5109 7632.00 17 174.72 191.72 9.79 780 318.00 471 184.51 286.49 91103.82 5112 7101.00 16 168.53 184.53 13.85 513 147.94 400 182.38 217.62 32194.703 5115 18619.00 15 272.90 287.90 13.85 1344 387.90 212 286.75 -74.75 -28995.525

C0DE CONSUM LTD SS ROL EOQ ORD PRICE EXITST MAXLL DIFFER SAVINGS SHCOST5118 18011.88 14 268.41 282.41 12.00 1501 500.33 700 280.41 419.59 209933.47 5120 8911.80 13 188.80 201.80 12.00 743 247.55 541 200.8 340.2 84216.51 5121 13410.00 14 231.60 245.60 12.79 1048 327.50 312 244.39 67.61 22142.275 5125 26521.92 15 325.71 340.71 13.85 1915 552.54 879 339.56 539.44 298062.18 5128 16992.00 17 260.70 277.70 13.85 1227 354.00 127 274.55 -147.55 -52232.75134 23404.80 17 305.97 322.97 15.83 1479 487.60 200 321.8 -121.8 -59389.685139 2246.40 17 94.79 111.79 12.00 187 62.40 478 106.79 371.21 23163.504 6001 30551.04 19 349.57 368.57 20.78 1470 282.88 420 370.35 49.65 14044.992

6002 974919.00 18 1974.75 1992.75 15.49 62939 16248.65 4000 1990.24 2009.76 32655887 6038 37642.80 12 388.03 400.03 6.92 5440 3136.39 1200 394.95 805.05 2524950.8 7253 41250.00 15 406.20 421.20 6.92 5961 3436.39 920 413.12 506.88 1741837.4 7254 91104.00 14 603.66 617.66 10.29 8854 3437.50 780 613.95 166.05 570796.88 7256 541.92 16 46.55 62.55 0.53 1022 7392.00 40 47.08 -7.08 -52335.367257 6006.72 13 155.00 168.00 32.61 184 22.58 874 187.61 686.39 15498.686 7351 12013.44 17 219.21 236.21 13.85 867 250.28 566 233.06 332.94 83328.223 7353 53234.28 19 461.45 480.45 20.78 2562 492.91 789 482.23 306.77 151210 7354 7878.72 18 177.52 195.52 6.92 1139 656.56 125 184.44 -59.44 -39025.9267419 8727.96 17 186.84 203.84 6.92 1261 727.33 112 193.76 -81.76 -59466.5017551 14255.76 18 238.79 256.79 7.66 1861 593.99 853 246.45 606.55 360284.64 8313 10571.40 15 205.63 220.63 18.33 577 125.85 987 223.96 763.04 96028.584 8316 19716.00 15 280.82 295.82 13.86 1423 410.75 785 294.68 490.32 201398.94 8403 1366.68 17 73.93 90.93 6.92 197 113.84 495 80.85 414.15 47146.836 8404 429902.16 14 1311.33 1325.33 6.92 62125 35825.18 1325 1318.25 6.75 241819.97 8408 518136.00 12 1439.60 1451.60 47.99 10797 43178.50 1300 1487.59 -187.59 -8099854.89004 22338.72 12 298.92 310.92 9.79 2282 930.78 478 308.71 169.29 157571.75 9016 84170.40 15 580.24 595.24 9.79 8598 3507.10 587 590.03 -3.03 -10626.5139026 113892.00 14 674.95 688.95 9.79 11634 4745.50 854 684.74 169.26 803223.33 10008 397955.76 14 1261.67 1275.67 30.19 13182 1745.42 1898 1291.86 606.14 1057968.9

C0DE CONSUM LTD SS ROL EOQ ORD PRICE EXITST MAXLL DIFFER SAVINGS SHCOST10016 41706.00 14 408.44 422.44 9.79 4260 1737.75 789 418.23 370.77 644305.57 10028 174696.00 14 835.93 849.93 9.79 17844 7279.67 456 845.72 -389.72 -283703310046 2734560.84 14 3307.30 3321.30 6.92 395168 227880.10 3550 3314.22 235.78 53729563 10077 176385.00 17 839.96 856.96 6.92 25489 14698.75 900 846.88 53.12 780797.6 10084 39004.80 17 394.99 411.99 9.79 3984 1625.20 502 404.78 97.22 158001.94 10096 315390.00 17 1123.19 1140.19 15.59 20230 5256.50 1005 1138.78 -133.78 -703214.5710109 57137.04 17 478.06 495.06 6.92 8257 4761.42 490 484.98 5.02 23902.328 10147 880784.04 15 5935.61 5950.61 6.92 127281 73398.67 6000 5942.53 57.47 4218221.6 10180 136057.44 16 739.00 755.00 9.79 13898 5688.80 800 748.79 51.21 291323.45 10219 85865.04 15 586.05 601.05 9.79 8771 3577.71 600 595.84 4.16 14883.274

10254 527703.60 15 1452.86 1467.86 15.49 34067 8795.06 1650 1468.35 181.65 1597622.7 10258 54647.04 15 467.53 482.53 18.33 2981 650.56 575 485.86 89.14 57990.918 10281 53328.96 17 461.86 478.86 12.00 4444 1481.36 545 473.86 71.14 105383.95 10302 136057.44 17 737.71 754.71 6.92 19661 11338.12 654 744.63 -90.63 -1027573.810303 9048.60 17 190.24 207.24 6.92 1308 754.05 324 197.16 126.84 95643.702 10307 14392.08 15 239.93 254.93 9.79 1470 599.67 455 249.72 205.28 123100.26 10318 14800.80 16 243.31 259.31 9.79 1512 616.67 389 253.1 135.9 83805.453 7454 14400.00 17 240.00 257.00 26.83 537 80.00 348 266.83 81.17 6493.6 10321 396348.96 16 1259.12 1275.12 13.85 28617 8257.27 1552 1272.97 279.03 2304026.1 10323 2179.59 18 93.37 111.37 2.00 1090 2179.59 120 95.37 24.63 53683.302 10324 41736.96 15 408.59 423.59 37.94 1100 1739.04 654 446.53 207.47 360798.63 10337 78007.92 18 558.59 576.59 9.79 7968 3250.33 987 568.38 418.62 1360653.1 10338 650259.72 17 1612.77 1629.77 6.92 93968 54188.31 2007 1619.69 387.31 20987674 10340 104064.00 16 645.17 661.17 6.92 15038 8672.00 854 652.09 201.91 1750963.5 11352 3669.12 14 121.14 135.14 24.00 153 25.48 698 145.14 552.86 14086.873 11356 3744.00 18 122.37 140.37 24.00 156 26.00 100 146.37 -46.37 -1205.62 11427 99835.20 17 631.93 648.93 37.94 2631 277.32 897 669.87 227.13 62987.692 11502 5834.40 16 152.76 168.76 21.90 266 48.62 587 174.66 412.34 20047.971

C0DE CONSUM LTD SS ROL EOQ ORD PRICE EXITST MAXLL DIFFER SAVINGS SHCOST11503 1552.32 15 24.92 39.92 22.99 68 11.66 254 47.91 206.09 2403.0094 11506 417.24 16 40.85 56.85 12.00 35 11.59 58 52.85 5.15 59.6885 11511 6840.72 17 165.41 182.41 16.97 403 95.01 125 182.38 -57.38 -5451.673811513 1010.88 17 63.58 80.58 16.97 60 14.04 128 80.55 47.45 666.198 11516 1374.00 16 74.12 90.12 21.90 63 11.45 104 96.02 7.98 91.371 11524 188.88 15 27.48 42.48 9.79 19 7.87 36 37.27 -1.27 -6664911552 449.28 17 42.39 59.39 12.00 37 12.48 58 54.39 3.61 45.0528 11597 9361.20 14 193.50 207.50 9.79 956 390.05 78 203.29 -125.29 -48869.36511607 1002.00 15 63.30 78.30 15.49 65 16.70 98 78.79 19.21 320.807 11608 1643.40 16 81.07 97.07 26.83 61 9.13 221 107.9 113.1 1032.603 11701 11256.96 14 212.19 226.19 62.73 179 11.44 356 274.92 81.08 927.5552 11702 4178.16 18 129.27 147.27 25.92 161 24.87 654 155.19 498.81 12405.405

11919 13422.96 18 231.71 249.71 9.79 1371 559.29 458 241.5 216.5 121086.29 12054 7338.24 17 171.32 188.32 24.00 306 50.96 358 195.32 162.68 8290.1728 12274 69480.00 17 527.18 544.18 26.82 2591 386.00 784 554 230 88780 12291 36823.68 13 383.18 396.18 13.85 2659 767.16 574 397.03 176.97 135764.31 12292 22802.40 15 302.00 317.00 9.79 2329 950.10 245 311.79 -66.79 -63457.17912423 1100.64 18 66.33 84.33 9.79 112 45.86 179 76.12 102.88 4718.0768 12436 4056.00 17 127.30 144.30 15.49 262 67.60 587 142.79 444.21 30028.596 12655 2817.12 19 106.15 125.15 31.46 90 11.38 417 137.61 279.39 3179.4582 12826 1397.76 17 74.77 91.77 6.92 202 116.48 87 81.69 5.31 618.5088 12830 404.80 18 40.23 58.23 9.79 41 16.87 96 50.02 45.98 775.6826 13100 1155.69 15 67.99 82.99 8.51 136 63.78 87 76.5 10.5 669.69 13200 312634.08 12 1118.27 1130.27 209.90 1489 28.38 1458 1328.17 129.83 3684.5754 13304 3010.80 15 54.87 69.87 15.49 194 50.18 93 70.36 22.64 1136.0752 13305 40.80 14 12.77 26.77 6.92 6 3.40 42 19.69 22.31 75.854 13306 909.00 14 60.29 74.29 6.92 131 75.75 98 67.21 30.79 2332.3425 13307 10185.12 14 201.84 215.84 24.00 424 70.73 315 225.84 89.16 6306.2868

C0DE CONSUM LTD SS ROL EOQ ORD PRICE EXITST MAXLL DIFFER SAVINGS SHCOST13325 756.96 15 55.02 70.02 35.94 21 31.54 180 90.96 89.04 2808.3216 13430 10256.40 16 202.54 218.54 66.63 154 4.62 456 269.17 186.83 863.1546 13431 12811.68 17 226.37 243.37 44.36 289 26.04 370 270.73 99.27 2584.9908 13432 1560.00 17 78.99 95.99 43.80 36 3.25 587 122.79 464.21 1508.6825 13604 16377.60 16 255.94 271.94 30.89 530 68.64 124 286.83 -162.83 -11176.65113616 9240.00 13 192.24 205.24 34.64 267 30.80 352 226.88 125.12 3853.696 13671 4481.28 18 133.88 151.88 27.71 162 23.34 158 161.59 -3.59 -83.790613705 9416.16 18 194.07 212.07 16.97 555 130.78 789 211.04 577.96 75585.609 13710 4907.52 19 140.10 159.10 29.39 167 22.72 211 169.49 41.51 943.1072 13712 9360.00 17 193.49 210.49 6.92 1353 780.00 332 200.41 131.59 102640.2 13713 44890.56 15 423.74 438.74 13.85 3241 935.22 524 437.59 86.41 80812.36 13725 10672.80 18 206.61 224.61 13.85 771 222.35 320 220.46 99.54 22132.719 13741 4587.36 17 135.46 152.46 9.74 471 191.14 277 145.2 131.8 25192.252 13757 14180.40 13 238.16 251.16 6.92 2049 1181.70 564 245.08 318.92 376867.76

13759 24269.76 12 311.57 323.57 9.79 2479 1011.24 464 321.36 142.64 144243.27 14003 137.28 15 23.46 38.46 6.92 20 11.47 40 30.38 9.62 110.3414 14005 11232.00 15 211.96 226.96 31.22 360 46.08 157 243.18 -86.18 -3971.174414008 137.28 18 23.43 41.43 6.92 20 11.44 60 30.35 29.65 339.196 14013 3034.20 13 110.16 123.16 15.49 196 50.57 245 125.65 119.35 6035.5295 14028 8328.60 17 182.52 199.52 18.33 454 99.15 365 200.85 164.15 16275.473 14035 1678.08 18 81.92 99.92 60.39 28 1.84 254 142.31 111.69 205.5096 14041 374.40 16 38.69 54.69 9.79 38 15.60 92 48.48 43.52 678.912 15057 3619.20 17 120.31 137.31 6.92 523 301.60 150 127.23 22.77 6867.432 15203 1212.00 18 69.62 87.62 15.49 78 20.20 95 85.11 9.89 199.778 15207 1987.68 16 89.16 105.16 9.79 203 82.82 102 98.95 3.05 252.601 15216 13228.80 18 230.03 248.03 21.90 604 110.24 350 251.93 98.07 10811.237 15301 23719.68 14 308.02 322.02 19.59 1211 247.08 481 327.61 153.39 37899.601 15406 6326.16 17 159.07 176.07 6.92 914 527.18 242 165.99 76.01 40070.952

C0DE CONSUM LTD SS ROL EOQ ORD PRICE EXITST MAXLL DIFFER SAVINGS SHCOST15411 15226.20 16 246.78 262.78 26.83 568 84.59 482 273.61 208.39 17627.71 15417 5765.76 18 151.86 169.86 16.97 340 80.08 150 168.83 -18.83 -1507.906415421 3197.40 19 113.09 132.09 15.49 206 53.29 170 128.58 41.42 2207.2718 15503 396.00 17 36.66 53.66 9.79 40 16.50 92 46.45 45.55 751.575 15515 7068.00 14 168.14 182.14 6.92 1021 589.00 256 175.06 80.94 47673.66 15522 1372.80 15 74.10 89.10 6.92 198 114.40 120 81.02 38.98 4459.312 15523 101808.00 12 638.14 650.14 84.85 1200 56.56 850 722.99 127.01 7183.6856 15525 74734.80 15 546.75 561.75 358.10 209 127.10 1222 904.85 317.15 40309.765 15559 1911.60 15 87.44 102.44 38.60 50 5.31 230 126.04 103.96 552.0276 15571 748.80 17 54.69 71.69 6.92 108 62.40 450 61.61 388.39 24235.536 15578 1747.20 16 83.59 99.59 9.79 178 72.80 120 93.38 26.62 1937.936 15629 283.56 18 33.67 51.67 6.92 41 23.63 30 40.59 -10.59 250.241716001 29688.00 12 344.60 356.60 15.49 1917 494.80 487 360.09 126.91 62795.068 16002 32511.60 15 360.60 375.60 6.92 4698 1354.65 432 367.52 64.48 87347.832 16102 7838.40 14 177.06 191.06 13.85 566 163.30 146 190.91 -44.91 -7333.80316118 25490.40 18 319.31 337.31 6.92 3684 2124.20 462 326.23 135.77 288402.63

16120 109254.60 17 661.07 678.07 18.30 5970 1300.65 726 679.37 46.63 60649.31 16162 48798.96 18 441.80 459.80 6.92 7052 4066.58 505 448.72 56.28 228867.12 17022 5052.60 18 142.16 160.16 26.83 188 28.07 178 168.99 9.01 252.9107 17023 21565.44 17 293.70 310.70 55.42 389 28.08 562 349.12 212.88 5977.6704 17042 52686.48 18 459.07 477.07 25.92 2033 313.61 410 484.99 -74.99 -23517.61418001 3459.84 17 58.82 75.82 97.97 35 144.16 104 156.79 -52.79 -7610.206418005 8158.08 14 180.64 194.64 13.85 589 169.96 298 194.49 103.51 17592.56 18040 706.20 14 53.14 67.14 15.49 46 11.77 278 68.63 209.37 2464.2849 18043 1722.24 15 82.99 97.99 5.36 321 239.20 158 88.35 69.65 16660.28 18055 36.00 16 12.00 28.00 4.80 8 6.00 25 16.8 8.2 49.2 19003 1080.00 15 65.72 80.72 16.97 64 15.00 255 82.69 172.31 2584.65 19008 234864.72 12 968.42 980.42 9.94 23628 95.01 1322 978.36 343.64 32649.236

C0DE CONSUM LTD SS ROL EOQ ORD PRICE EXITST MAXLL DIFFER SAVINGS SHCOST19013 1948552.32 15 2791.81 2806.81 331.39 5880 70.97 3545 3123.2 421.8 29935.146 19014 227726.40 17 954.41 971.41 102.76 2216 86.26 1244 1057.17 186.83 16115.956 19017 122305.92 17 699.44 716.44 32.49 3764 463.28 855 731.93 123.07 57015.87 19027 77973.00 17 558.47 575.47 61.57 1266 82.25 750 620.04 129.96 10689.21 19031 409920.00 17 1280.49 1297.49 202.46 2025 85.40 1896 1482.95 413.05 35274.47 19034 45794.40 17 427.97 444.97 30.98 1478 190.81 875 458.95 416.05 79386.501 19440 5635.20 18 150.13 168.13 27.71 203 29.35 216 177.84 38.16 1119.996 20001 441246.96 12 1328.52 1340.52 205.75 2145 41.69 1786 1534.27 251.73 10494.624 20004 120000.00 12 692.82 704.82 1549.19 77 0.20 3564 2242.01 1321.99 264.398 20007 83916.00 15 579.36 594.36 421.42 199 1.89 1354 1000.78 353.22 667.5858 20015 675055.56 14 1643.23 1657.23 131.63 5128 155.83 1905 1774.86 130.14 20279.716 20017 2374596.00 16 3081.94 3097.94 1227.80 1934 6.30 5200 4309.74 890.26 5608.638 20018 146769.84 16 766.21 782.21 69.97 2098 119.91 2542 836.18 1705.82 204544.88 20022 1809831.00 18 2640.59 2658.59 650.84 2781 17.09 4500 3291.43 1208.57 20654.461 20051 4103.52 18 128.10 146.10 9.79 419 170.98 562 137.89 424.11 72514.328 20052 2037.24 18 90.27 108.27 12.00 170 56.59 201 102.27 98.73 5587.1307 20068 267696.00 19 326.77 345.77 2.00 133848 343.20 498 328.77 169.23 58079.736 20071 215792.64 19 929.06 948.06 311.07 694 8.92 1352 1240.13 111.87 997.8804

20113 1943550.72 17 2788.22 2805.22 67.88 28632 1687.11 3569 2856.1 712.9 1202740.7 20114 109.92 16 20.96 36.96 13.85 8 2.29 40 34.81 5.19 11.8851 20202 1946.88 15 88.24 103.24 12.00 162 54.08 241 100.24 140.76 7612.3008 20203 3244.80 15 113.92 128.92 15.49 209 54.08 112 129.41 -17.41 -941.532820204 12080.64 18 219.82 237.82 19.59 617 125.84 369 239.41 129.59 16307.606 21006 251827.20 15 1003.64 1018.64 303.57 830 10.93 1455 1307.21 147.79 1615.3447 21225 4992.00 17 141.30 158.30 6.92 721 416.00 255 148.22 106.78 44420.48 21227 10535.99 17 205.28 222.28 3.50 3010 4502.56 482 208.78 273.22 1230189.4 22046 458640.00 17 1354.45 1371.45 12.00 38220 12740.00 1685 1366.45 318.55 4058327 3361 354432.00 16 595.34 611.34 6.95 50997 29536.00 780 602.29 177.71 5248842.6

C0DE CONSUM LTD SS ROL EOQ ORD PRICE EXITST MAXLL DIFFER SAVINGS SHCOST3313 15250.00 15 123.49 138.49 6.92 2204 1270.92 420 130.41 289.59 368045.72 16163 114726.30 17 328.71 345.71 10.95 10477 3824.21 510 339.66 170.34 651415.93 19043 227329.20 15 953.58 968.58 100.34 2266 90.21 1452 1053.92 398.08 35910.797

284823041 -19125655.7

The EOQ analysis determines the amount locked up in the company as inventory. From the EOQ,the number of orders

to be placed for each item annually is also determined.The savings has been Rs. 28,48,23,041. Amount of Rs.1, 91,25,655.7 is

shortage cost. The revenue is Rs.26, 56,97,385.30

FINDINGS

From ABC analysis it is found that there are 17 items in category A, 47 items in

category B and 243 items in category C.

HML analysis reveals that there are 84 items in category H, 104 items in category

M and 109 items in category L.

From 3D analysis it is found that the company uses 98 low valued items which

also occupies more store space.

From 3D analysis it is also found that the company has 10 items which occupies

the least space and has the highest value among all inventories.

Through EOQ computation it is found that the company’s savings is Rs.

28,48,23,041 which is more than the shortage cost Rs. 1,91,25,655.7 thus resulting

in a total revenue of Rs.26,56,97,385.3

For 37 items out of 307 items, less than hundred orders are sufficient annually.

SUGGESTIONS

Strict control should be exercised on the 10 items falling under the category

‘A’ and ‘L’ as they form the major part of the company’s inventory

investment.

The management should pay least attention in monitoring the 98 items falling

under category ‘C’ and ‘L’ since they form a meager part of the company’s

investment in inventory.

Minimum stock level should be maintained as safety stock.

Stock records should be updated before any issue of inventory for production

so as to avoid unnecessary orders of inventory.

CONCLUSION

The study on ‘Inventory management’ at GVG Paper Mills Private Limited

reveals that proper inventory management through appropriate selection of inventory

control technique helps the management to identify the key areas that had to be vigilantly

monitored to ensure smooth flow of production and timely delivery of products to

customers. Inventory if properly managed helps to exceed the expectations of the

customers which in turn helps the organization achieve its goals. If the company takes the

study’s suggestions into consideration then the company can definitely save on its

working capital.

BIBLIOGRAPHY

BOOKS

Sudhindra Bhat, Financial Management – Principles and practice, Excel Book

publisher, Second Edition 2008.

M.Y.Khan, P.K Jain, Cost Accounting, Tata McGraw Hill Publishing company

ltd, Third Edition 2005

C.R. Kothari, Research Methodology, Methods and Techniques, New Age

International Limited, New Delhi (2008), pp : 1-95.

Aswathappa and K.Shridhara Bhat, Productions and Operations Management,

Himalaya Publishing House, Second Edition, 2008, pp : 543 - 552

S.P.Jain and K.L.Narang, Cost Accounting ,Kalyani Publishers, Seventeenth

Edition, 2002, pp : II-6 – 15

JOURNALS

Sarker, B.R. and Coates, E.R. (1997), "Manufacturing setup cost reduction," International Journal of Production Economics, 49 (1997), pp: 237-247.

Sarker, B.R. and Parija, G.R, "Optimal Batch Size and Raw Material Ordering Policy," European Journal of Operational Research, 89 (1996), pp: 593-608.

WEBSITES

Inventory Management Tilakhttp://www.mbaguys.net/t1130/

The Benefits of ABC analysis for Inventory ReductionBruce D. Caldwelhttp://www.capminc.org/abcanalysis.htm

Managing inventory for profitability

Ellen DePasquale http://www.openforum.com/management/article_managinginventory.html

Workings and Importance of Inventory Management

Premanjali Guptahttp://knowledge.wharton.upenn.edu/article.cfm?articleid=13956

Indian Pulp and Paper Industry-Challenges and InnovationsProf. N.J. Raohttp://www.cseindia.org/misc/presentations/njrao_Presentation.pdf

Why Is Inventory Turnover Important?

Jon Schreibfederhttp://www.effectiveinventory.com/article2.html

Managing Spare Parts

Sheila Kennedyhttp://www.mt-online.com/component/content/article/128-november2002/718-managing-spare-parts.html?directory=90

http://www.paperex-india.com/paperscene.htm

http://tnenvis.nic.in/major_indus.htm

http://www.economywatch.com/business-and-economy/paper-industry.html

http://stationery.indiabizclub.com/info/properties_of_paper/properties_of_paper_industry_in_india

http://www.mpc2.com/history.htm

Inventory Management

Documents

history paper

new paper

varieties of paper

indian paper industry

worlds production of

priority industry

advent of machinemade

agro based waste paper