Koya Inventory Management

8/12/2019 Koya Inventory Management

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PART-A

GENERAL INTRODUCTION

There are four important components for running an industrial organization i.e.,

Men, machine, material and money.All these four components have to be employed in

an industry in order to make the manufacturing process to extract the finished products

and marketing it properly to get sales realization with profit.

Profit making is an important goal or an object of any industrial organization. To

attain the maximum profitability utilizing the above set ourMsto the optimum level.

!oney is used for procurement of the material which is re"uired for the production.

#uring the time of procurement the re"uirement of the proper material has to be

identified and re"uired "uality and "uality of material has to be decided in advance.

This is nothing but a process of material procurement planning. The very purpose

of planning of procurement of material is to purchase the good "uality material for a most

competitive lowest price. This will help the organization to undertake manufacturing

process most effectively with minimum or nil wastage.

!any times in an industry organization$s improper planning in material

procurement leads to filing up material stock in the form of raw%materials& semi%finished

goods ' (%)%P* unsold finished goods.

The aim of such stock is called inventory.

Any unwanted stock leads to debt capital which cannot be appreciated as good

financial management. +ence, material and money are playing a vital role in the efficient

financial management.

This project is select to have detailed study about the Financial Planning and

forecasting which is the one of the importantactivity in any industrial organization to

reach the organization goal with out much effort. -ecause, inventory management has to


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be definitely considered for the increase of profitability and reduce the unwanted

working capital investment in the process of manufacturing.


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INDUSTRIAL PROFILE

The invention of pper

(ritten communication has been the center of civilization for centuries. !ost of

our important records are on paper. Although written has been around for a long time,

paper hasn$t. infact, putting thoughts down in written form wasn$t easy or partical.

arlier people discovered that they could make simple drawing on the walls of caves

which was a great place for recording thoughts, but wasn$t portable.

)magine spending hours scratching a massage into a heavy clay table and then

having to transport it, that$s exactly what the /umerians did around 0111 -2. Although

this form of written communication was not portable, is still wasn$t practical because of

its weight.

or centuries people tried to discover better surface on which to records their

thoughts. Almost everything imaginable was tried. (ood, stone, ceramics, cloth, bark,

mettle, silk, bamboo, and tree leaves were all used as a writing surface at one time or

another.

The word 3paper$ is derive from the word papyrus4 which is plant found in

gypt along the lower 5ile 6iver. About 7111 years ago, gyptians created sheets4 of

papyrus by harvesting, peeling and slicing the plant into strips. The strips were then

layered, pounded together and smoothened to make a flat, uniform sheet.

The person credited with inventing paper is 2hinese man named Ts$ai 8un. +e

took the inner bark of a mulberry tree and bamboo fibers, mixed them with water, and

pounded them with a wooden tool. +e then poured this mixer on to a flat piece of

coarsely woven cloth and the water drain though, leaving only the fibers on the cloth.

-y the tenth century Arabians were substituting lines fiber for wood and bamboo,

creating a finer sheet of paper. Although paper was of fairly high "uality now, the only

way to reproduce written work was by hand, painstaking process.

-y 9:th century paper making reached urope. )n 900;,


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documents could now be reproduced "uickly. This method of printing in large "uantities

led to a rapid increase in the demand for paper.

Some of the important development in recent decades is as follows:

9. !ulti%stage bleaching of >raft%paper, lending to availability of fully bleached

>raft% pulp.

:. ?se of chloride%di%oxide for pulp for pulp bleaching permitting higher rightness

with the retention of strength.

@. 2oating of paper, while passing through the paper machine dryer section. =reatly

expanding use of coated paper for printing.

0. ?se of soluble bases for sulfite pulping permitting pulping of more species wood

by the sulfite process.

7. -leaching of high yield pulp, ground%wood and semi%chemicals.

. (et strength paper use of synthetic resins for economic production of wide

variety of paper that are strong when wet.

B. !ulti%stage sulfites pulping permitting greater variety of pulp properties.

;. 2ontinues cooking of >raft and semi%chemicals pulp making is possible,

reduction in capital and operating cost.

C. +igh yields pulpingD combined chemical and mechanical action to produce pulp

from wood in high yield.

The !eo!rphi"# spre$ of the in$ustr% is !iven in the fo##o&in! t'#e(

Stte No of Mi##s

Andhra Pradesh @CAssam :

-ihar B

2hathisghad C

=ujarat C9

+aryana 9B

+imachal Pradesh B

ashmir 9


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arnataka 9C

>erala 9@

!adhya Pradesh :B

!aharashtra C1

5agaland 9Erissa

Pond 2heri B

Punjab B@

6ajasthan B1

Tamil 5adu @0

?ttar Pradesh C0

?ttaranchal 9

(est -engal :

Tot# )*+

In$in pper in$ustri# s"enrio(

The paper industry is cyclical in natureD its demand is linked to the level of

economic activity and the supply is influenced by domestic production and as well as

international trade in pulp and paper.

?/A ' over @1F *, (estern urope 'around :1F*, and


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Stru"ture of pper in$ustr%,

The industry can be classified on the basis of size, the type of raw materials

consumed and the end product manufactured.

The )ndian paper industry comprises of nearly 11 mills with a total capacity of

around @.; ! TPA. !ore than :11 mills have capacities of less then :1111 TPA. There

are 9: companies with a capacity of 71,111 TPA and only : with 9,11,111 TPA and

above.

-ased on the raw material used, the mills can be classified as wood%based ' hard

wood or bamboo *, agro residue based ' baggase and rice G wheat straw * and news paper

based ' imported waste paper and pulp *.

Stru"ture of pper in$ustr% 'se$ on en$ pro$u"t pro$u"e$

Paper and paper board 5ews

print

Stru"ture of pper in$ustr% 'se$ on R& .teri#s re/uire$ for .0in! pper

(ood Agro based /econdary (aste

Paper

'+ard (ood H 6aw%materials H )mported

pulp

-amboo* '-aggase, /traive =lasses,


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/trong demand from packaging segment willdrivedemand growth for industrial

paper. stablishment of new business area such as telecom and power will lead to

increasing literacy levels, thus improving low per capital consumption of paper '@.: kgs

p.a*. -esides rapid growth in population, enhanced literacy levels, growing "uality

consciousness and changing consumer preferences will drive paper demand.

)n view high capital costs, expansion of existing units and revivals of sick units

remain the practical option for capacity addition. Also, paper mills in )ndia have to look

for ways to cut down costs to compete with imports.

)nternational paper prices are not expected to prices are not expected to price

substantially over the short medium term. #omestic paper companies will thus continue

to reel under the pressure of reduced margins. +owever, a depreciating rupee will

marginally protect domestic companies from imports. #ue to increased supply, some of

the companies have put their expansion plans on hold or have reduced their investment

opting for lesser capacity expansions.

1ISTORICAL PAPER INDUSTR2 DE3ELOPMENT IN INDIA

)ndian paper industry is classified broadly into two categories into two categories

paper and paper bonds then newsprint. The paper and paperboard segment constitutes of

cultural paper, industrial paper and special paper.

Paper industry in )ndia has a long history with the first mill being commissioned

in 9;@:. The initial development and growth of paper industry till the early nineteenth

century was affected by the shortage of wood 'soft wood* in the country. -ut in 9C90, in

development of a process based on bamboo lead rapid growth of domestic industry. -y

the end of sixties, the capacity for paper production lagged, demand and imports

increased to approximately 91F of the domestic demand. !ost of the domestic

production was concentrated in the hands of a few large mills. -y the late sixties, bamboo

as an input to paper industry came under short supply. Taking this into account, the

government of )ndia started encouraging small units based on an agro residue and waste


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paper in the seventies. iscal incentives were also offered. This lead to spurt in the

number of mills with small capacities.

-ut from the late eighties industry started facing an oversupply situation lower

price realization and plant closures. The downtrend continued till 9CC:, when demand

supply situation improved.

rom 9CC@, step with the easing of the worldwide recession in the industry,

investments stated increasing. A booming capital market also helped in raising money for

new capacities. The industry was in a jolly mood up to 9CC.

The increase in supply coupled with a worldwide recession has pushed the )ndian

paper industry back into down trend. The global cycle was further affected by the Asian

crises, which has reduced demand considerably.

/ince 9CC1 the paper industry in )ndia, is following global cycle with periods of

over capacity leading to drop in paper prices, lower capacity utilization and slow down

in investmentsGcapacity addition, followed by closure of mill, decreased in demand

supply gap and then back full circle to an increase in paper prices.

4ASIC PRO4LEMS FACED 42 T1E NE5SPRINT IN INDIA

The economic liberalization policies initiated by the Nrsi.h Rocommittee

government in 9CC9 have been carried through vigor in successive years. As a result

industry is on the road to globalization and its getting even more inter wined with the

overseas market

The sharp rise is pricing during 9CB@%B0 created a paper crisis in the county.

1IG1 COST OF PRODUCTION

9. The international price of capital e"uipment needed by the news print industry has

been souring. Ever cost too have been rising "uite fast.

:. Power and coal both supplied by the public sector units have risen by 011F in the

last decade.

@. /imilarly chemical materials have also risen by similar percentage& royalties on

bamboo and hard wood have been increased by 911F to B11F in the last years

in some states.


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0. The acute shortage of local timber and heavy excise duties has burdened the

newsprint industry, which has been struggling all along out and above all these

problems there is services power cut, especially in south )ndia.

Future Prospe"ts of pper in$ustr%(

stablishment of new business area such as telecom and power will lead to

increasing literacy levels, thus improving the low per capita consumption of paper

'@.: >=/ per annum*. -esides rapid growth in population, enhanced literacy

levels, growing "uality consciousness and changing consumer preferences will

drive paper demand.

)n view of the high capital costs, expansion of existing units and revival of sick

units remain the practical option for capacity additions. Also, paper mills in )ndia

have to look for ways to cut down costs to compete with imports.

)nternational paper prices are not expected to rise substantially over the short%

medium term. #omestic paper companies will thus continue to reel under the

pressure of reduced margins. +owever, a depreciating rupee will marginally

protect domestic companies from imports. #ue to increased supply, some of the

companies have put their expansion plans on hold or have reduced their

investment opting for lesser capacity expansions.

COMPAN2 PROFILE

4"0!roun$ n$ in"eption of the "o.pn%

The !P! situated on the bank of river -hadra at -jadravathi, /himoga #ist.,

>arnataka state, was incorporated in the year 9C@ as a joint sector company. The

foundation stone was laid by the then !aharaja of !ysore /ri. >rishanarajendra

(oueyar. )t was started with a small capacity of 6s.:.7 million. /ince inception, the

!P! never looked back. )t went from one threshold of progress to another expanding its

annual capacity to ;111 !T in 9C7:, then to 9;111 !T in 9C0 and to :0111 !T in

9CB:.

)n 9CB the company ventured a major expansion project by installing new

machinery to produce B7111 !T of news print per annum and increasing the capacity

from :0111 !T to @1111 !T per annum of writing and printing varieties of paper. The


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project was completed during 9C;9. )n 9C;@, a sugar mill of :711 T2# was com

vmissioned and thus !P! become the first largest, single location integrated plant in the

country manufacturing news, writing and printing paper and sugar at a single location.

The integration of sugar mill with paper mill is with the idea of utilizing the by%products

of sugar mill i.e., sugar cane baggase for paper production and avoid dependence of

forest based raw materials and avoid deforestation. (ith the commissioning of newsprint

project, the company was able to help the country to reduce imports substantially.

Gro&th6 histor% of MPM in "hrono#o!i"# or$er(

2er A"tivit%

9C@ )ncorporated as a public sector company

9C@B 2ommercial production started with 0111T per annum

9C7: irst expansionD production increased to ;111T per annum

9C0 /econd xpansionD production increased to 9;111T per annum

9CB: !odernizationD production increased to :0111T per annum

9CB !ajor expansion to manufacture B7111T per annum news print and toincrease writing H printing paper production from :0111T per annum to

@1111T per annum.

9C;9 commercial production of newsprint started with self power generation of

:7!(

9C;@ commissioning of :711 tons sugar mill

9CC@ conversion of stoker fired boilers into /6 boilers

9CC0 refitting of chemical recovery boilers

9CC; commencing of C1TG+r /6 boiler along with @

rd

extraction cum backpressure turbo generator 'T=* of 9!( capacity, thus increasing the self

power generation capacity to 09!(

:11: expansion of effluent treatment plant with increased aeration capacity and

introduction of post Aeration treatment


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2E!PA5I 6eg., 5o. D 9B@

P6E#?2T/ D PAP6 A5# /?=A6'subsidiary*

6A( !AT6)A8/ D -A!-EE, ?2A, A2A2)A, P)5nh A5# -A=A//

2APA2)TI D @1111T (6)T)5= P6)5T)5= H

/P2)A8)T PAP6 B7111T

5(/P6)5T :711T

/?=A62A5 26?/+)5=

2E6PE6AT E)2 D -A5=8E6

6=)E5A8 E)2 D #8+), !A#6A/, >E8>ATTA H

!?!-A)

9UALIT2 POLIC2

!P! shall be reputed, profitable and growth oriented company

employing skills that take pride in satisfying customer needs with superior

products and services.

AREA OF OPERATION

The regional office is situated at 16/5, Ali Asker Road, Bangalore. The

branches offices are situated at New Delhi, u!bai, "olkata and #hennai.

#$%&T'T$R(

-allarpur )ndustries 8td., !aharashtra.


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a* Iear of starting 9CCB

b* Annual 2apacity K 9.91.11 tones per year

c* =rades of paper

(riting, printing, packing and industrial paper

6ama 5ewsprint and papers 8td., =ujarat

a* Iear of starting K 9CC

b* Annual 2apacity K 9@:%11 Tones per year

c* =rade of paper%% 5ewsprint

Tamil 5adu 5ewsprint and paper 8td., Tamil 5adu

a* Iear of starting K 9C;0

b* Annual 2apacity K 9;1%11 Tonnes per year

c* =rades of paper %% 5ewsprint, printing and writing

Andrapradesh paper mills 8td., Andra Pradesh

a* Iear of starting 9C

b* Annual capacity C;.7%11 tones per year

c* =rades of Paper%%-ase paper, wedding and greeting cards

The (est coast paper mills 8td., #andeli

a* Iear of starting K 9C7;

b* Annual capacity K 97B.B71.11 metric tones per year

c* =rades of paper%%(riting and printing board including !)26 and 2opier

d* )t is a private company.

CUSTOMER OF T1E MPM

!.P.!. 5ews print is used for printing 5ewspaper in all languages in )ndia. A

few of important customer are as follows,


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nglish 5ews Paper

Times of )ndia

5ew )ndian xpress

#eccan herald

The +indu

The /tate man

The Tribhuvan

>annada 5ews Paper

Prajawani

/amyuktha >arnataka

?dayavani

>annada Prabha

Tamil Paper

#ina malar

#inakaran

Telugu 5ews Paper

nadu

Jartha

Andra -humi

!arathi 5ews Paper

/akal

!aharastra times

/amachar


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APPLICATION OF MC:ENS2S ;S MODEL

The B%/ framework was developed by the consultant at the !ckinsey 2ompany, a

very well known management consistency firm in ?/A, towards the end of 9CB1$s to

diagnose the cause of organization problem and to formulate programs for improvement

the B%/ framework.

S:ILLS(

)n !ysore paper mills 8td employees are to be recruited on the basis of their

Lualifications. Training facilities be provided to be both employees both internal and external.

There are @ types of labours based on their skills they are

9* skilled labours

:* semi%skilled labours

@* un%skilled labours

ST2LE(

The management believes in an open organization. )n !ysore paper mills 8td. They do

not involve employees for taking any decision. The management will be taking the decision itself

Structure

Shared

values

Strategy Systems

Skills Style

Staff


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may be in any area like production decision, marketing decision. !anagement itself takes all

finance decisions.

STRATEG2(The !ysore paper mill limited started on 9st April 9C@B in the remote village of

-hadravathi. There is no perfect mission statement in the !P! but the main aim of the company

will be producing good "uality of paper and sugar to the public as well as providing more number

of employment and increase the standard of living of the people.

The !ysore paper mill company$s business philosophy is based of three core values& they

are operational excellence, 2ustomer$s focus and product leadership.

The business strategy emphasizes the following

9. )ncrease their market shares.:. 6educed cost of production.

@. )ncrease company performance

0. Produce always "uality product.

7. To meet social responsibilities.

. Provide employment opportunity to the people of the area.

B. !eet the national and regional demand of paper and paperboard.

;. 6educe the import of news print from the foreign market.

C. 6educe the import of news print from the foreign market.

91. To manufacture and deal in all kinds of sugar and sugar products

99. To manufacture and deal in all kinds of sugar and sugar products

9:. To cultivate and raise grass, timber, wood eucalypt

9@. To grow niligiri plant within the premises of the company. (hich Provide raw

materials for the company at low cost.

90. 6ecycle all the wastage products.

S2STEMS(The management believes in the utilization of cutting edge technology of deliver

world class products and services. The company has made huge investments in

technological resources to ensure that products are superior and the service delivery in

terms of these products offering standard.


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The system of the !ysore paper mills limited company clearly shows the formal

processes and procedures used to manage the organization, including the control system,

performance management measurement and reward systems, planning budgeting and

information system they follow the bottom to top approach in decision making. That

means first they collect the opinion of trade unions based on that the top management

take the decision which is better for company.

STAFF(

/taff re"uirement is designed to ensure that those on board have the primary focus

as customer service with a high level of product and process knowledge and operation

excellence. )nduction and training program are designed to conduct for all employees at

regular basis to ensure that these levels are continually enhanced feed back for

continuous improvement in solicited from all understood. -eing a dynamic organization

susceptible and the changes are well understood.

-eing a dynamic organization to fre"uent change in policy so as to suit business

needs that re"uire to be a learning organization fulfilled by the systems and processes

which document all changes and feedback received. #evelopment programmes are

conducted by !P! every year only for the persons who are in the management cadder.

(hich helps them to improve their skills and knowledgesM

5OR: FLO5 MODEL(


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After documentation in proper ledger, the next process is dispatching the goods to

customers.

!"I#F #$P%&N&'ION &!O(' ')# O"*&NI+&'ION&% S'"('("# OF

MPM:

The organizational structure of enterprises would depend upon its size, product

manufactured and its fictional divisions. The organizational structure may be flexible.

The company may change its structure according to the needs and suitability.

)n !P! 8td., the -oard of directors is having the major position in the company.

The chairman is the chairman cum managing #irector '2!#* of the company. +e is held

responsible for formulating and implementing the policies, Procedures and rules with the

assistance of -oard of #irectors appointed by the =overnment and various financial

institutions. #ifferent functional department heads like production, marketing finance,

and +6# H A etc., also assists him.

The =overnment appoints the =eneral !anager of +6# H A. +e always keeps

contact with all other functional departments for routine administration. +e also keepsdirect contact with 2.!.#. ach functional department heads are assisted by the

Assistant !anagers. The #irector of Production is in charge of some divisions$ viz.,

!aterial, Paper, Pulp, /ugar, 2hemical etc., there is always co%ordination between all

functional departments through horizontal communication.

FUNCTIONAL AREAS BDEPARTMENTS OF MPM(


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FINANCE DEPARTMENT

PRODUCTION PROCESS(

Chipper 1ouse(-

2hipper house is a place where the different types of wood are cut in to homogeneous

product to heterogeneous and uniform chips.

A"tivities of Chipper 1ouse(-

Re"eipt of R& .teri#(-

6aw !aterial is received in accordance with the production re"uirement H silo stock of

chips.

#*'& $ D'RT$R

$ 'NAN#&

A))T. -&N&RA+ ANA-&R

)&N'$R 'NAN#& ANA-&R

ANA-&R $

#$NTR$+ 0

B3D-&T

ANA-&R $

'NAN#& 'N )A+&)

ANA-&R $

&)TAB+')*&NT

ANA-&R

#$R%$RAT&

'NAN#&

ANA-&R B/% ANA-&R A'N

A/# #$)T'N-


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Chippin! pro"ess(-

#ifferent chippers are run for different raw materials. There are two types of chippers

namely disc chippers H drum chipper. There are two drum chippers used for bamboo H

four disc chippers used for hard wood.

S"reenin! Conve%in!(-

+ere the accepted chips are sent to the digestion and unaccepted chips are screened and

sent for re%processing.

Stor!e of "hips issue(-

The accepted chips are stored in silo and issued to digestion process whenever re"uired.

A""ountin!(-

A record of all the above activities is kept in a systematic manner. 2hipper house issues

chips to two streams of pulp mills$

MI-IN#./S 0 S MO1#%S% : IN PROCESS OF RA5 MATERIAL

DEPARTMENT(


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9. Re"eipt (

!aterial loaded vehicle must complete the mill security formalities Enly valid

materials will be accepted4

= Inspe"tion(

!aterial type

!aterial Luality and Luantity.

> Trnsit $o"u.ents verifi"tion(

/uppliers particulars

!aterial /tatus

Jalidity of supply

+ 5ei!ht.ent(

Lualification of both received and issued material.

Prioritize the chipper re"uirement

/tore as per need, availability in separate stacks and storage potentiality.

)ssue on the basis of re"uirement of production material mix "uality and priority

of period of storage.

) 2r$ "#enin!(

2leaning to prepare the area for further storage

2leaning to ensure better utilization of the materials and minimize storage loss.

. 2r$ Sfet%(

/afety against unfairG illegal activities like theft.

Prevent material from other damages.

/afety against hazards like stacks collapse, fire etc.

; A""ountin!(

2onsolidate all the above activities and to generate production report

-udgeting

/tock assessment

2ontrolling yards loss.

6eports for finance purpose.


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S5OT ANAL2SIS OF T1E COMPAN2

/(ET analysis is a tool for auditing an organization and its environment. )t is thefirst stage of planning and helps marketers to focus and key issue. /(ET analysis it is an

effective way of analyzing the organization potential by identifying strength, weakness to

examine the opportunities and Threats which may affect the organization carrying out an

analysis using /(ET tool will be enough to reveal the changes which can be

implemented easily and gain results.

T1E S5OT ANAL2SIS OF T1E MPM IS A FOLLO5S

S'"#N*')

!arket leader in paper manufacturing.

Technical and experience manpower.

L/C111. )/EC119, )/E90119 'for pollution control* certified company.

)mproved infrastructure.

fficient communication network.

(ell planned layout.

Automated and highly sophisticated machines.

2apacity to meet higher demand.


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Additional land of B7111 acres for replanting eucalyptus trees.

=ood marketing network over all )ndia

irm is getting raw material "uickly for in time production.

irm is getting raw material cheaply for the production.

2#&-N#SS

The cost involved in completion of the product is high.

As the company is in process of decreasing the existing manpower., it may lose

opportunity of obtaining.

2reative and enthusiastic people in future development of the company.

As the customer expectations is increasing day by day it has become difficult tosatisfy them completely.

There is a fre"uent change in the top management due to political interference as

it is a public sector firm.

OPPO"'(NI'I#S

2apacity of meeting higher demand and attain optimum utilization of existing

resources.

#ue to advance in technology there is a scope for recruiting and retaining right

people on right job.

As the company has obtaining six sigma and Ls company has the capability of

achieving global standards$

orfeiture of paper industry can be directly linked increase level of literacy.

')"#&'S

Price of raw material is comparatively high.

Adopting auto motive machines may cause fear among the existing employees of

the job loss, which may morale and the productivity of employees.

A new entrant is market may dilute the market share of company.


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&N&%.SIS OF FIN&NI&% S'&'#M#N'

S(MM&". OF %&'#S' &NN(&% "#PO"':3

)t is very essential to keep written record of all the transaction in appropriate

books, which help in calculating the profit and clarifying the financial position of thecompany with paper control system one can detect the leakage extravagant and misuse of

fixed assets. The function of the accounts department is to record the various transactionof the company in financial terms apart from the "uantitative records necessary to be

maintained.

As per the balance sheet and profit and loss account of the company there is

decreasing in sales of 6s 0:0C1.B: lakhs in :11C and 6/.@@,B0:.B: lakhs in :191 and the

company is present academic year it has the loss of 6s. %B,B::.7. -ut the -alance of '%*

loss brought forward from previous year shows that the company is going under loss.

ven if we compare it to the previous year loss was 6s %@:1:.:;'9@:.C0%0;@7.::* in :11C, now it shows %91,C:0.; N'6s %BB::.7*% '%@:1:.:;*O in :191. )t showsthat the loss has been increased instead of the decreasing loss G gaining the profit for the

company.

The following statement will show the comparison between the previous years,

:11C and :191. That will base on the balance sheet and the profit H loss account for the

previous year and current year.

T1E M2SORE PAPER MILL LIMITED

PPROFIT AND LOSS ACCOUNT FOR T1E 2EAR ENDED >=

A INCOME

/ales @@,B0:.B: 0:,0C1.B:

8essD xcise #uty H cess B9.0

: >=* 9,90:.B0 ++;*

Ether )ncome 91@B.@B @9@:.7C

Jariation in stocks %:C;C.99 :7C.1;

>*@)


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4 EPENDITURE

6aw !aterial 2onsumed ;,9@C.

1B

C,:91.

B

2hemical 2onsumed @,097.

:B

0,09.

17

/tores 2onsumed B7.01

[email protected]

6epair H !aintenance B9:.

0

9,10B.

9;

Power and uel 91,971.

07

9@,;1.

B

8abor charges 9,07.

B;

9,::1.

01

mployee -enefits;,0B1.

:;B,10:.

@@

Administration and Ether xpenses 9,:::.

77

9,9@:.

;@

/elling xpenses 9,[email protected]

B;;.9B

Prior Period Adjustment 'net* ;.0;

>@>>

>*

7C.11 +=>);;

CProfit for the %er 'efore Interest

Depre"ition THtion -)>> +)>

D)nterest


29/71

T1E M2SORE PAPER MILL LIMITED

4ALANCE S1EETAS AT >=

SOURCE OF FUNDS

A S1ARE 1OLDERS FUNDS

2apital 99,;;C.

@0

99,;;C.

@0

6eserve and /urplus 770.

B


30/71

F

CURRENT ASSETS LOANS AND

AD3ANCES

)nventories

91,9C.0

C

97,;[email protected]

9

/undry #ebtors @,@C7.:

1

7,1:B.0

C

2ash and -ank -alance 9,1C1.:

;

;0.9

:

8oans and Advances :,00.@

B

:,:7.;

+

:@,@9.@;

Less( Current Li'#ities n$provisions

2urrent 8iabalities C,1@9.:

7,C9.B

9

Provisions @,C99.

:@,@B;.7

@

+=+


31/71

The above statements are shows the company current situation in the market as

well as the financial position that are all discussing belowD%

Analysis of financial statement shows that the danger of imputing companies

economics significance to accounting numbers. The financial information can be

extracted from by using various methods they are as followsD

9* financial ratio

:* #u point analysis

@* /tandardized financial statements

0* applications of financial analysis

7* =oing beyond the numbers

/ome of the few methods we taking for interpretation of financial position of the

company.

Current rtioQ current assets R current liabilities

:11C it was :.7@D9 but in the year :191 it shows that 9.@BD9 it shows that current assets is

more than current liabilities .

Gross profit .r!in rtioQgross profit R net sales

)n :11C it was @.;0D9 but in the year :191 it shows that :.:;D9 it shows that gross profit

margin may reduced to nearly @times.

Net profit .r!in rtio J net profit R net sales

)n :11C it was B.7@D9 but in the year :191 it shows that @.:@D9 it shows that company is not in a

financial sound position.


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LEARNING EPERIENCE

)n my Ten weeks of project work in !ysore Paper !ill 8td., ) studied and learnt

many things carried in the organization. This project work helped me in gaining more

knowledge about the work and production carried out in the organization.

There is a strict rules followed in +6 department and attendance was taken daily

to check the regularity we were used to stay from morning C.11 A! to evening 7.1 P!

daily and visit different departments daily accordingly to there schedule.

There was a good reaction and co%operation by the superiors and sub%ordinates in

the !ysore Paper !ill 8td., . They helped me in collection the information regarding the

different departments and production process.

) got the clear picture about the organizational work carried on and how the work

in allotted and how it is carried out and duties and responsibilities of the employees in the

organization. ) observed the work techni"ues that are studied in subject are implemented

in the organization like welfare facility, training techni"ues etc,.

inally this project work gave me the clear idea about the working condition inthe organization which will help me in future days


33/71

PART-B

1. INTRODUCTION:

In recent decades businessman have shown an increasing awareness ofthe need for recision in the fie!d of inventor" contro!.

In the ast# inventors were considered as indication of wea!th# eveninventories great!" in e$cess of the amount needed to carr" on the rocess ofroduction and distribution were considered beneficia!.

%ince the advent of modern industries# wea!th has become more identifiedwith mone". &n increased emhasis on the !i'uidit" has !ed businessman to ho!d

cash and securities in reference to inventories a!though the !ater have aninherent convertibi!it" not ossessed b" he other categories. These have beenmade a strong tendenc" towards ho!ding the means for urchase of goods ratherthan the goods themse!ves. (arge inventories are now viewed with a!arm# whereas in times no one wou!d ever have doubted that such were beneficia!.

)ver" enterrise needs inventor" for smooth running its activities. It servesas a !in* between roduction and distribution rocesses. These are genera!!"# atime !ag between the reorgani+ations of a need and its fu!fi!!ment. The grater thetime,!eg# the higher the re'uirements for inventor". The unforeseen f!uctuations

in demand and su!" of goods a!so necessitate for inventories. It a!so rovidesa cushion for future rice f!uctuations.

The investments in inventories constitute the most significant art ofcurrent assets-wor*ing caita! in most of the underta*ings. Thus# it is ver"essentia! to have roer contro! and management of inventories. The urose ofinventories contro! and management is to ensure avai!abi!it" of materia!s insignificant 'uantit" as and when re'uired and a!so to minimi+e investment ininventories.

1. /&C0ROUND O2 T3) %TUD)4:

Inventor" in genera! meaning 5stoc* of goods# or a !ist of goods# the word

5Inventor" is understood difficu!t!" b" various authors. In according !anguage itma" mean finished goods on!". In a manufacturing concern# it ma" inc!ude raw


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materia!s# wor* in rocess and stories#etc.to understand the e$act meaning of theword 5inventor" we ma" stud" it from the usage side or from the 5side oint ofentr" in the oerations. Inventor" inc!udes the fo!!owing things.

1. raw materia!s

. wor* in rogress6. finished goods7. Consumab!e stores and sares.

&. R&8 9&T)RI&(%:The are the in4uts of the final 4roducts. The are 4urchase bthe fir!

fro! others and are used in the 4roduction for conerting into finished

co!4onents. The 7uantit of raw !aterials re7uired will be deter!ined b the

rate of consu!4tion and the ti!e re7uired for re4lenishing the su44lies. The

factors like the aailabilit of raw !aterials and goern!ent regulations, etc. too

affect the stock of raw !aterials.

/. 8OR0 IN ROR)%%:This refers to the goods !"ing in the manufacturing rocess. the"

are norma!!" ractica!!" finished or semi,finished that are at various stages ofroduction in a mu!ti,stage roduction rocess. The raw materia!s enter therocess of manufacture but the" are "et to attain a fina! shae of finishedgoods. The 'uantum of wor*,in,rocess deends uon the time ta*en in themanufacturing rocess. The grater the time in manufacturing# the more wi!! bethe amount of wor*,in,rocess.

C. 2INI%3)D OOD%:These are the fina! or com!eted roducts which are read" for sa!e.

The stoc*s of finished goods rovide a buffer between roduction andmar*et. The urose of maintaining inventor" is to ensure roer su!" ofgoods to customer. In some concerns the roduction is underta*en onorder basis# in these concerns there wi!! not be a need for finished goods.The need of finished goods inventor" wi!! be more when roduction isunderta*ing in genera! without waiting for secific order. 8or* inroduction# whi!e stoc* of finished goods is re'uired for smooth mar*etingoeration. Thus inventor" serve as a !in* between roduction andconsumtion.

D. CONU9&/() %TOR)% &ND %&R)%:These are the goods he!d for consumtion b" machines in a

manufacturing concern. The" inc!ude sare arts# !ubricants# c!eaningmateria!s# oi!# cotton waste etc. the" dont enter into the fina! roduct butthe" are re'uired for maintaining and running the machines for roduction


35/71

urose.The !eve!s of the above four *inds of inventories differ deending uon

The nature of the business. 2or e$am!e,& manufacturing firm wi!! have a!!the four *inds of inventories. /ut a retai!er or who!esa!er wi!! have a high

!eve! of inventories of finished goods but the" wi!! have no inventories ofraw materia!s# sares# maintenance su!ies and stores and goods inrogress. 2urther deending uon the nature of the business# inventoriesma" be durab!e or non,durab!e# va!uab!e or ine$ensive# erishab!e ornon,erishab!e etc.

Inventor" contro! has been attracting the attention of managers inIndia for a !ong time. /ut with the credit s'uee+e measures announced b"the government of India and the consideration of the recommendations ofthe committee for inventories to management is dee!" a concern with

deve!oing suitab!e norms for inventor" contro!. In this inventor" than theother categories.

1.69)&NIN &ND D)2INITION O2 IN;)NTOR4:,The term 5Inventor" refers to the stoc* of raw,materia!s# sare arts and

finished roducts he!d b" a business firm. It is the aggregate 'uantit" of materia!resources and goods that are id!e at a given oint of time. The resources ma" beof an" t"e< for e$am!e men# materia!s# machiner"# mone"# when resourcesinvo!ved in materia!s or goods in an" stage of com!etion# inventor" referred to asstoc*. 3ence inventor" refers to the 5stoc* that a business firm *ees to meet its

future re'uirements of roduction and sa!es.%evera! authors have defined the term Inventor". The most ou!ar of

them are# =The term Inventor" inc!udes# Raw materia!s# 8or* In rogress#finished ac*aging sares and other stoc* in order to meet an une$ecteddemand or distribution in the future.>

1.7 &N&(4%I%:

Date and information co!!ected are ana!"+ed using statistica! too!s# grahsand charts.

. INTRODUCTION TO CO9&N4:

9"sore aer mi!!s (td.# was estab!ished in the "ear 1?6@ as agovernment coman" !ater on in 1?7@. This coman" has been converted in toub!ic !imited coman".


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The *ing *rishnaraAa 8ode"ar estab!ished this factor" to so!veunem!o"ment rob!em for the /adhravathians and for effective uti!i+ation ofnatura! resources.

9"sore aer mi!!s (td.# is ub!ic based manufacturing coman" whichis estab!ished at /adhravathi. The coman" roduces and su!"ing of aerssuch as news rints. &t resent the coman" is meeting the re'uirement ofgovernment deartments# rivate news rint industries and various dea!ers.

.1 IN;)NTOR4 CONTRO( %4%T)9:

Inventories are stoc* of the roduct a coman" is manufacturing for sa!eand comonents that ma*e u the roduct. The various forms in whichinventories e$ist in a manufacturing coman" are raw materia!s# wor* in

rogress# and finished goods. &n inventor" contro! s"stem is to be engineered toachieve the basic urose for which the inventories are created. Thefundamenta! obAective of a good inventor" contro! s"stem is to be ab!e todetermine# what# when# how much to order# how much to carr" in stoc*s so as togain econom" in urchasing. &n inventor" s"stem rovides the organi+ationa!rovides the organi+ationa! structure and the oerating o!icies for maintainingand contro!!ing goods to be stoc*ed.

Objectives of Scientific Inventory Control System:

The main obAective of inventor" contro! management that to be consideredb" the ana!"st whi!e designing

1. Continuit" of roductive oerations.. )ffective use of caita!.6. Reduction of administrative wor* !oad.7. %ervice to customers.B. )conom" in urchasing.. Reduction of ris* of !oss.@. ractica! s"stem.. &dministrative sim!icit".

?. To maintain a minimum investment in inventories to ma$imi+erofitabi!it".

. %T&T)9)NT O2 RO/()9:

E (ac* of new techno!ogica! information s"stem


37/71

E Inefficient hand!ing of inventor" materia!s

E )$cessive investment in inventories

E Inade'uate inventories

.6 %CO) O2 %TUD4

This stud" was main!" concentrated on inventor" management beingadoted b" the coman". The urchase rocedure fo!!owed b" the coman" andfurther actions for satisf"ing the re'uirement are ana!"+ed.

The coman"s rocedure for stores wi!! inf!uence more on the !eve! ofinventor" of the coman". %o the stud" of urchase has vita! ro!e to understandthe efficient s"stem of the coman".

.7 O/F)CTI;)% O2 T3) %TUD4

E To assess the efficienc" of inventor" management in 9"sore aer mi!!s(imited.

E To eva!uate the inventor" contro! techni'ues of 9"sore aer mi!!s!imited.

E To ana!"+e the urchase and stores rocedures fo!!owed b" thecoman".

.B 9)T3ODO(O4

.B.1 (OC&TION O2 T3) %TUD4:

The stud" had been conducted at 9"sore aer mi!!s !imited /adhravathi.

.B. %OURC)% O2 D&T&

The methodo!og" fo!!owed for co!!ecting information is based on

aG rimar" databG %econdar" data

RI9&R4 D&T&:

The method which was adoted to co!!ect the rimar" data wasersona! interview.

To co!!ect the information regarding the inventor" contro! s"stemsof the coman" direct ersona! interview and discussions was


38/71

made with the materia! manager# mar*eting manager and sa!esofficer and other staff members.

%)COND&R4 D&T&:

2or gathering secondar" data various other source were used. The" are: Different accounting records and annua! reorts and research reort of

the coman". %ublished books, !aga8ines, news 4a4ers, 9ournals, websites and 4ublished

annual re4orts of the co!4an.

Different records re!ated to inventor" were co!!ected b" storesdeartment i.e. materia! management stoc* maintenance.

. (I9IT&TION% O2 T3) %TUD4

1. The time constraint which the stud" has been conducted on!" for si$wee*s.

. The e$ected de!iver" schedu!es ma" not be ossib!e in somemonoo!" items. The average !eve! can be fi$ed after an in dethstud".

6. (eve! of accurac" of resu!ts of research restricted to the accurac" !eve!.7. The &/C c!assifications were done for materia!s and some materia!swere se!ected and studied. The stud" can be e$tended to other materia!sa!so on the same !ines.

6. R);I)8 O2 (IT)R&TUR)

%!.No

Title Findings Source

1. Inventor" contro!

ractice inHI22COG

Inventories constitute second!argest item after fi$ed assets inthe financia! statementarticu!ar!" in manufacturingorgani+ations. roer

management of the comonentsis imortant to maintain andimrove the hea!th of theorgani+ation.

Dr. %u*hdev%ingh# ;o!,71#Fu!"

/ad goods contro!in food rocessing

Inventor" contro! mechanismhave to be bui!t to a!! oints of

rof.9ousumi


39/71

units the su!" chain after a thoroughs"stem stud"# the contro! aim atmaintaining.

hosh ;o!,67# No.2ebruar"1???

6 Inventor"9anagement ofIndian Commercia!;ehic!es Industr".

The stud" concentrates on Indiancommercia! vehic!es industr" !i*e#/T(#)9( and %9( using andmaintained b" more ercentageof raw materia! where as T9(and )9( using !ess ercentageof raw materia! and moreercentage of sa!es. It indicatesthe T9( and )9( is a morestrength comare to /T(# )9(

and %9(.

. Fana*iRamudu et a!#Oct

7 Imroving foundr"erformancethrough activit"based costing

&ctivit" based costing is thecurrent cost management.

&ctivities are a owerfu! and ausefu! base for managing andenterrise.

&.N.Romans>;o!,7 4earB

B. The Reorting%"stem of 2oreign

Direct Investmentin India

2DI is an imortant driving forcefor the growth and deve!oment

of nation there is a bigcometition among the nationsin attracting 2DI. 2DI and issuesre!ating to its comutationrovides the much neededforeign e$change to he! bridgethe ba!ance of trade deficit andtechno!og"

0.Ramamoorth"

et a!# &ri! J,6

&ctivit" /asedCost and9anagement

%uccess of &/9 deends on theoutut of an &/C s"stem. &/9can he! the businessorgani+ation in stoing aninterna! war of numbers. /etterunderstanding of the businessta*ing right strategic decision in

T%at"nar"anaFu!",DecB


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the area of roduct ricing#roduct sourcing# roduct ricing#roduct sourcing# roduct mi$and mar*et segmentationcontinuous imrovement can beachieved through &/C K &/9 tosucceed in the conte$t of g!oba!cometitiveness

@ !oba!i+ation costmanagement andsu!" chainmanagement

!oba!i+ation has shifted costmanagement aradigm formmanagement of cost fromroducers view oint tomanaging costs for greatercustomer satisfaction in the

g!oba! mar*et where va!ueaddition refers to va!ue creationer unit cost as the customersees it and costs refer to cost ofcustomer retention or cost ofconversion of a customer in toc!ient

rof %h"mma!/anerAee#Cost9anagement

&ccountant#Fanuar" 6

! A"A#$SIS A"% I"T&RPR&TATIO"In t'is c'()ter t'e *'ole (n(lysis is divided in to t'ree )(rts! T'ey (re

To assess the efficienc" of inventor" management in 9"sore aermi!!s (imited.

To eva!uate the inventor" contro! techni'ues of 9"sore aer mi!!s!imited.

To ana!"+e the urchase and stores rocedures fo!!owed b" thecoman".

OB+&CTI,& TO ASS&SS T.& &FFICI&"C$ OF I",&"TOR$ /A"A0&/&"T I" /$SOR&PAP&R /I##S #T%!

Inventory /(n(gement (nd Control Tec'ni1ues


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The !iterar" meaning of the word =inventor"> is stoc* of goods. )ver" enterriseneeds inventor" for smooth running of its activities. It serves as a !in* betweenroduction and distribution rocess. The unforeseen f!uctuation in demand andsu!" of goods a!so necessitates the need for inventor". It a!so rovides acushion for future rice f!uctuations.

The urose of inventor" management is to ensure avai!abi!it" of materia!sin sufficient 'ua!it" and 'uantities as and when re'uired and a!!ow minimi+inginvestment in inventories. Thus it is ver" essentia! to have roer contro! andmanagement of inventor".

Activity R(tios or Turnover R(tios (t /ysore )()er mills ltd!!2

&ctivit" ratios are ca!cu!ated to measure the efficienc" with which theresources of a firm have been em!o"ed. These ratios are a!so ca!!ed turnover

ratios because the" indicate the seed with which assets are being turned overinto sa!es.

%ome of the turnover ratios that are used to *now the efficienc" ofinventor" management in 9"sore aer mi!!s !itL# are as fo!!ows:

Inventor" turnover ratio

Inventor" conversion eriod

Raw materia! turnover ratio

%tores and sares turnover ratio

8or*,in,rocess turnover ratio

2inished goods turnover ratio

Inventor" to wor*ing caita! ratio

2i$ed asset turnover ratio

Inventory Turnover R(tio (t /ysore P()er /ills #td

Inventor" turnover ratio measures the ve!ocit" of conversion of stoc* intosa!es. Usua!!"# a high inventor" turnover ve!ocit" indicates efficient managementof inventor" because more fre'uent!" the stoc*s are so!d< the !esser amount of


42/71

mone" is re'uired to finance the inventor". & !ow inventor" turnover rationindicates an inefficient management of inventor". & ver" high turnover ofinventor" does not necessari!" im!ies higher rofits. The rofits ma" be !ow dueto e$cessive cost incurred in re!acing stoc* in sma!! !ots# stoc*,out situations#se!!ing inventories at ver" !ow rices etc.#

T'e different com)onents of inventory (re

Raw materia!s.

8or*,in,rocess.

%tore and sares.

2inished goods.

T(ble ! Inventory Turnover R(tio 3Rs in #(4's5

$e(rs Cost of goods

sold

Avg! inventory R(tio

B 6@@?1.1 117.6 6.76

7661.1 11@7. 6.B@@@ 7.B 1?7.1B 6.61

777. 17.1BB .??

? 7B?. [email protected] .?

1 77@. 16B. 6.6?


43/71

Fig ! inventory Turnover R(tio

The inventor" turnover ratio was 6.76 in B and it is decreased to

.? in ? because inventor" consumed and roduction high but in the 1

it is increase to 6.6? it is not good comared to revious "ear and a!so cost

Hcost of goods so!dG is high.

Inventory conversion )eriod

T(ble !6 inventory conversion )eriod

3Rs in #(4's5

$e(rs %(ys in ye(r Inventory turn

over r(tio

%(ys

B 6B 6.76 1.71

6B 6.B@@ 1.7

@ 6B 6.61 1.B


44/71

6B .?? 1.11

? 6B .? 17.@7

1 6B 6.6? 1.67

Fig !6inventory conversion )eriod

It ma" a!so be of interest to see average time ta*en for c!earing

the stoc*s. This can be ossib!e b" ca!cu!ating the inventor" conversion eriod.

The conversion of stoc*s was 1.71 da"s in B but it is 17.@7da"s in ?and it is short eriod ta*en to conversion of stoc*s comared to revious "ears

that is 1.67da"s in 1 and it is good to organi+ation.

R(* m(teri(l turn over r(tio:

It is the ratio with which we can measure the efficienc" with which the firm

converts raw materia!s in to wor* in rogress. 9ateria!s consumed can be found

out as oening ba!ance of raw materia!s !us urchase minus c!osing ba!ance of

raw materia!s.

T(ble !7 R(* m(teri(l turn over r(tio: 3Rs in #(4's5

$e(rs S(les R(* m(teri(l R(tio

B 61. @B6. 7.


45/71

[email protected] ?11.B6 6.6

@ 71B1?. ?.B .

6?7B. 77?.@? .1?

? 77?. ?1.@ 7.16

1 66@76. 16?.@ 7.17

Fig !7 R(* m(teri(l turn over r(tio

This ratio indicates the re!ationshi between the sa!es and raw

materia!s. In the "ear B it was 7. and it is increase to . in @ there

is strong re!ationshi between sa!es and raw materia!s but in 1 it is decrease

to 7.17 it shows decrease the efficienc" of the firm.

Stores (nd s)(res turnover r(tio:

T(ble ! Stores (nd s)(res turnover r(tio:3Rs in #(4's5

$e(rs S(les Stores (nd

s)(res

R(tio


46/71

B 61. 6BB.1 ?.?

[email protected] 6B.1 ?.@B

@ 71B1?. [email protected]@ 11.?B@

6?7B. 6B?.6 1.?@

? 77?. 6.@ 1.?7

1 66@76. 6@?@. .

Fig !Stores (nd s)(res turnover r(tio

This ratio indicates the re!ationshi between the sa!es and stores

and sares. In the "ear B it was ?.? and it is increased to 1.?7 in the

"ear ? and it is decrease to . in 1. so this origination is not using

stores and sares roer!" so it is effect to roduction decreases.

Stoc4 in )rocess turn over r(tio:

T(ble !8 Stoc4 in )rocess turn over r(tio: 3Rs in #(4's5

ye(rs S(les Stoc4 in

)rogress

R(tio


47/71

B 61. . [email protected]?

[email protected] . 7.?B

@ 71B1?. 11.B 71.

6?7B. 167.7B ?6.

? 77?. 17.B ?.B

1 66@76. ?7.61 6B@.@

Fig !8 Stoc4 in )rocess turn over r(tio

This ratio shows the re!ationshi between the sa!es and stoc* in

rocess. It was [email protected]? in the B but it is decreased to ?.B in the "ear ?.

/ut in the 1 it is increased to 6B@.@ it is not good to organi+ation because

stoc* in rocess turn over ratio is shou!d be decrease and stoc* in rocess cou!d

be increase so it is better to origination.

Inventory to *or4ing c()it(l r(tio:

T(ble !9 Inventory to *or4ing c()it(l r(tio: 3Rs in #(4's5

$e(rs Inventory or4ing c()it(l R(tio


48/71

B 117.6 1.BB 1.7

11B77.7B 771.@ 1.@?

@ 176. 11.6 1.1

1B67.B1 17?.6B 1.7@7

? 1B?6.?1 17?1.17 1.11

1 11?.7? 7.B .

Fig !9 Inventory to *or4ing c()it(l r(tio

This ratio determines the connection between inventories to wor*ing caita!. It

was 1.7 times in B but it is decreased to1.11 times in ?.but in 1 it

is increased to . so it is good to organi+ation because the wor*ing caita!

consumtion is decreases. Hi.e da" to da" transaction cost is decreaseG so that

indicates the organi+ation is good at cost reduction.

Fi;ed (sset turnover r(tio:

T(ble !< fi;ed (sset turnover r(tio:3Rs in #(4's5

$e(rs S(les Fi;ed (ssets R(tio

B 61. 1.6 1.?@

[email protected] 1B7?.6 .@


49/71

@ 71B1?. 17.7 .6

6?7B. 16@7B.@6 .@

? 77?. 1?17.67 6.?

1 66@76. 167.7 .@

Fig !< fi;ed (sset turnover r(tio

This ratio indicates the e$tent# which the investment in fi$ed

assets contribution was 1.?@ times in the "ear B. &nd it has increased to 6.?

in ?. /ut in 1 it is sudden changes Hi.e. decreasedG In fi$ed assets turn

over ratio that is .@ because of huge changes in sa!es so the fi$ed assets turn

over ratio decreased.

OB+&CTI,&6

TO &,A#=AT& T.& I",&"TOR$ CO"TRO# T&C."I>=&S OF /$SOR&

PAP&R /I##S #I/IT&%!

ABC A"A#$SIS


50/71

(arge number of firms has to maintain severa! t"es of inventories.

It is not desirab!e to *ee the same degree of contro! on a!! the items. The firm

shou!d a" ma$imum attention to those items whose va!ue is the highest. The

firm shou!d therefore c!assif" inventories to identif" which items shou!d receive

the most effort in contro!!ing. The firm shou!d be se!ective in its aroach to

contro! investment in various t"es of inventories.

The high va!ue items are c!assified as

&,items and wou!d be under the tightest contro!.

5/ items fa!! into between these categories and re'uire reasonab!e

attention of management.

5C items reresent re!ative!" !east va!ue and wou!d be under sim!e

contro!.

&/C ana!"sis enab!es to e$ercise se!ective contro! when the materia!s manager

is confirmed with a !arge number of items. The significance of this ana!"sis isthat it sot !ights attention to be given in resect of the areas !i*e.

(oss

8astage

%cra

Mua!it"

rice variance Usage variance

Inventor" turnover etc.

It a!so he!s to determine safet" stoc*s fre'uent!" of ordering

rearing of contro! statements sources from which materia! is to be


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Of

Item

s

3)er

unit5

us(ge

3in /T5

Consum)tion

1 Caustic soda !"e 6116 @ 11@?1 1

(i'uid ch!orine B 7 666B

6 /urnt !ime B6B 6 16BB

7 3"drogen ero$ide 6617 6 17 6

B %oa stone owder ? B7 7

2erric &!um 1@B 6@B 1

@ Non 2erric &!um 1B 11? ?

%odium %i!icate 7? 16 116@ 1

? 3"droch!oric acid 711 7 1@@7 1B

1 %u!hur 111B1 1 1@71 17

11 Rosine B 1 11

1 !astic !ug HnosG .B 76 @ 16

16 Co!ors 1 @B ? 1

17 um tae HnosG B1 1 BB 1

1B 9other !i'uor 11B 77 BB

1 9 steam 1 6? 7 1@

1@ Ree! Core HnosG 7 16 B B

1 & T wi!! unn"

/ags HnosG

7B 6B @

T(ble ! Revised t(ble *it' items (rr(nged (ccording to t'eir res)ective

r(n4s


53/71

"o

Of

Item

s

Item

descri)tion

Annu(l

consum)tio

n v(lue

Cumul(tive

(nnu(l

consum)tio

n v(lue

Cumul(tive

Annu(l

consum)tio

n

Percent(ge

C(tegory

1 Caustic

soda !"e

11@?1 11@?1 B.@ &

/urnt !ime 16BB B7 1?.? &

6 3"drogen

ero$ide

17 6?1?6 1.? &

7 %oa stoneowder

B7 77B?6 .B &

B Ree! Core

HnosG

B 7?@6 .6? /

(i'uid

ch!orine

666B B6B B.6@ /

@ & T wi!!

unn" /agsHnosG

6B BB?1 7.1 /

9other

!i'uor

BB B7@ 7.11 /

? Non 2erric

&!um

11? B??B 1.? C

1 %odium

%i!icate

116@ @?6 1.@B C

11 Rosine 1 1@?6 1.B C

1 2erric &!um 6@B 16@ .B C


54/71

16 !astic !ug

HnosG

@ 766@ .7 C

17 %u!hur

1@71 17 . C

1B 3"droch!oric

acid

1@@7 @7? .@ C

1 um tae

HnosG

BB 6?? .@ C

1@ 9 steam 7 @ .@7 C1 Co!ors ? ?6 .1B C

T(ble !@ Summ(ry of ABC An(lysis of ? Items

"o of

items

of

items

R(nge of

(nnu(l

us(ge

Tot(l

(nnu(l

us(ge

Percent(g

e (nnu(l

us(ge

C(tegory

7 . &bove Rs

11

77B?6 @. &

7 . /etween

1B7

7

166 .B /

1 BB.BB /e!ow Rs

771?@ .?@ C


55/71

)CONO9IC ORD)RIN MU&NTIT4:

One of the maAor inventor" management rob!ems to be reso!ved is how

much inventor" shou!d be added when inventor" is re!enished. The )OM

shou!d be a!ied to 9"sore aer mi!!s !td for the urose of man" units shou!dbe issued for roduction deartment as er roduction schedu!e. The wi!!

invo!ves the ordering cost and carr"ing cost. 2or ana!"+ing the )OM techni'ues

coman"s "ears raw materia!s data shou!d be ta*en it shou!d be resented

and ca!cu!ated.

The )OM a!ied to 9"sore aer mi!!s !td raw materia!s for "ears. The

coman"s )O8 units wi!! be varied in "ear because of 'uantities issued to the

roduction deartment wi!! be change the "ear after "ear. If the consumtionrates wi!! increase the 'uantities of raw materia!s shou!d a!so be increased for the

roduction. The ever" item in )OM techni'ues resented in tab!e wi!! be used for

aer roduction.

In the 'uantit" shou!d be minimum units ?B6# when comare to

"ear ? is units 16. If the coman" is ordering as we!! as carr"ing cost wi!!

a!so increase ever" "ear and these cost are different for different items in the

coman".

The ordering and carr"ing cost wi!! be the main e!ements for the

aer manufacturing units. If the comanies carr"ing cost wi!! occurred b" wa" of

!oss due to i!ferages# wastages and brea*ages in the sores and the ordering

cost wi!! occur b" wa" of transortation of items from one !ace to another !ace.

)conomic Ordering and Muantit" is shown in tab!e 7.11.

T(ble ! c(lcul(tion of &conomic Ordering >u(ntity for t*o ye(rs:

"o of

Items

Items 6@@:

&O>D6AOEC

=nits 6@@:

&O>D6AOEC

=nits


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1 Caustic

soda !"e

E@E1-. 177? E@E1-.@ 17?6

(i'uid

ch!orine

E7E11-. 1@B E77E11-. 11

6 /urnt !ime E6E-1 1?1 E@E-1 @?

7 3"drogen

ero$ide

E6E1-.B ?? E6E1-.B ?1

B %oa stone

owder

E?E1-.@B 1?@ EBE11-.@B 1B@?

2erric &!um EE11-.B 7B1 E1BE1-.@B 6

@ Non 2erric

&!um

E1BE1-. @ E1E1-1 B

%odium

%i!icate

E16E1-.@B 7B EE1-.@ @

? %u!hur E1E7-1 117 EBE7B-.? 1B

1 3"droch!oric

acid

E7EB-.@B 6@ EBEB-.@B B

Tot(l @@76 8@7

,&% A"A#$SIS:

This c!assification is usua!!" a!ied for sare arts to be stoc*ed formaintenance of machines and e'uiment based on the critica!it" of the sarearts. The stoc*ing o!ic" is based on critica!it" of the items. The vita! sare


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of

Items

%escri)tion =s(ge e of

Annu(l

=s(ge

c(tegory

1 Caustic soda !"e @ 6 @ 16.? ;

(i'uid ch!orine 7 7 11 .66 ;

6 /urnt !ime 6 1 67 7B.B ;

7 3"drogen

ero$ide

6 B 6@7 .6B )

B %oa stone

owder

? 77 1@. ;

2erric &!um 7@ 1.1? D

@ Non 2erric &!um 1B 7B .?@ )

%odium %i!icate 16 @ 7? .B )

? 3"droch!oric acid 7 ? B .6 D

1 %u!hur 1 1 B6 .61 D

T(ble !7 Summ(ry of ,&% An(lysis for Ten Items

No of

items

of

items

Tota! annua! usage of annua!

usage

Categor"

7 7 76 B.@ ;

6 6 11.? )

6 6 11 .6 D


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./# A"A#$SIS:

The high# medium and !ow c!assification fo!!ows the same rocedure as if

adoted in &/C c!assification on!" difference is that in 39(# the c!assification unit

va!ue is a criteria and not the annua! consumtion va!ue.

The items are inventor" shou!d be !isted in the descending order of unit va!ue

and it is u to the management to fi$ !imits for three categories.

39( ana!"sis is usefu! for *eeing contro! or consumtion at deartmenta! !eve!s

for deciding the fre'uenc" of the h"sica! verification and for contro!!ing

urchase.

Inter)ret(tion:

It is c!ear that 3 c!ass items that is high va!ue rice items# constitute for .6

of annua! inventor" consumtion rice# and 9 c!ass item that is medium !eve!

va!ue rice that constitute 61.1? of tota! annua! rice and ( c!ass items that is

!ow rice items constitute .@ T this shows in Tab!e 7.17# Tab!e 7.1B

resective!".

T(ble ! C(lcul(tion of ./# (n(lysis

"o

of

item

s

Items

consum

)tion

Price

)er

unit

Annu(

l

us(ge

Annu(l

consum

)tion

R

(

n

4

Cumul(tiv

e (nnu(l

)rice

unit

)rice

R(n4

c(teg

ory

1 Caustic

soda !"e

611

6

@ 11@?1

6116 .6

1

3


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(i'uid

ch!orine

B 7 666B

611? @. 9

6 /urnt

!ime

B6B 6 16BB

? 6BB7 7.@6 (

7 3"droge

n

ero$ide

661

7

6 17

1 ?@ ?.1

?

3

B %oa

stone

owder

? B7

@B@ B.@ (

2erric

&!um

1@B 6@B @ 1?76 B.7 (

@ Non

2erric

&!um

1B 11?

B ?? @.1 9

%odium

%i!icate

7? 16 116@

7 ?B1? @.7 9

? 3"droch!

oric acid

711 7 1@@7 1

161 6.1 (

1 %u!hur 111B

1

1 1@71 6 116@ ?. 9

T(ble !8 Summ(ry of ./# (n(lysis for ten items

No. of items of items Tota! annua! of annua! Categor"


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rice rice

B6@ 7?.B 3

7 7 6B@6 61.77 9

7 7 1@ 1?.7 (

OB+&CTI,& 7

TO A"A#$S& T.& P=RC.AS& A"% STOR&S PROC&%=R&S FO##O&%

B$ T.& CO/PA"$

The urchasing function occuies a vita! and uni'ue oison in the

organi+ation of manufacturing industr". /ecause urchasing is one of the main

functions in success of a modern manufacturing concerns.

9ass roduction industries !i*e 9"sore aer mi!!s !td..# since the" re!a"

uon a continuous f!ow of right materia!s# demand for an efficient urchasing

division.

Under urchase rocedure ana!"sis this stud" considered on!"#

urchasing rocedure for stores# sares# comonents and raw materia!s whichconstitute inventor" in the coman". These items constitute a maAor ortion of the

tota! inventories in a coman" the" inc!ude the items needed for roer

oeration# reair and maintenance during manufacturing c"c!e.

Objectives of t'e )urc'(se %e)(rtment

The coman" urchase deartment stands for fo!!owing obAectives# in order to

achieve cometitive advantage in materia! rocurement

iG To rocure right materia!

iiG To rocure materia! in right 'uantities

iiiG To rocure materia! in right 'uantities

ivG To rocure from right and re!iab!e sources

vG To rocure materia! economica!!"# i.e. right or reasonab!e rice.


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viii! Follo*-=) (nd e;)editing t'e order&fter !acing the order# the urchase service se!ection maintainscontact with the vendor# in order to ta*e corrective actions suchas transferring some of the orders to some other su!iers.

i;! An(lying receiving re)orts (nd )rocessing discre)(ncies(nd rejectionsReceiving reorts are comared with urchase order in order tofind discreancies. Discreancies found if an" during insectionas regards the 'uantit" or 'uantit" of the received materia! shou!dbe romt!" bought to the notice of the su!ier.

;! C'ec4ing (nd ())roving vendors invoices for )(ymentInvoices shou!d be chec*ed to ensure that# the correct materia!has been su!ied# according to agreed terms and conditions.

&fter confirming the above# the a"ment is made to the vender forthe va!ue of materia!s received.

Functions of store de)(rtment!

I. To receive materia!s and e'uiments and to chec* item foridentification.

''. To record the recei4t of !aterials'''. To correct 4ositioning of all !aterials and su44lies in the store.':. To !aintain stocks safel and in good condition b taking all

4recautions to ensure that the do not suffer fro! da!age,4ilfering or deterioration.

:. To issue ite!s to the users onl on the recei4t of authori8e storere7uisitions.

:'. To record and u4date recei4ts and issues of !aterials.

;II. To !an store for otimum uti!i+ation of the cubic sace i.e.!ength# breadth and height.

:'''. To ensure that the re7uired !aterials are located easil

IP. To initiate urchase c"c!e at the aroriate time so thatthe materia!s re'uire are never out of stoc*.

To co,ordinate and co,oerate to the fu!! e$tent with the urchasing#manufacturing# insection and roduction !anning and contro!deartments.

FI"%I"0S:


64/71

Inventory control system:&s er the stud"# raw materia! hasincrease the efficienc" of the inventor" and drastica!!" has reducedthe transortation cost.

The coman" shou!d ta*e in to account of e$isting stoc* !eve!

when it changes the design or when it introduces new mode!otherwise abso!ute and non moving stoc*s wi!! increase due tofre'uent changes.

The em!o"ees are ver" rude behavior and the" do not havecourtes" to sea* with subordinates and visitors.

The em!o"ees are inefficienc" and ineffectiveness towardswor*.

The" do not have roer *now!edge to reare boo*s ofaccounts.

Im!ementation of !atest techno!ogica! s"stems entrereneurresource !anning software ac*ages as discussed wi!! cater tothe additiona! information re'uirements of the coman" which inturn wi!! imrove the efficienc" of management of inventor"contro! s"stems.

2or ma*ing &/C ana!"sis usua!!" comanies consider va!ue andconsumtion. In 9"sore aer 9i!! (td.# the" a!so consider theva!ue and consumtion of raw materia!s. This is one of the besteva!uations of &/C ana!"sis in which the coman" hasdeve!oed.

The em!o"ees are not interest to give an" information totrainees.

The co!4an is !aking o4en order for the whole ear to the su44lierand the 4lants according to !onthl schedule 4roduce the inentories.

The stores should be according to the needs of the co!4an this will

4roide effectie safe and good storage sste!.

The coman" shou!d adot !atest techno!og" to rovide acometitive roduct which can contro! inventor" and increaserofitabi!it" of the coman".

S=00&STIO"S:

&s er the stud" inventor" management and its im!ementation in

9"sore aints K varnish !td..# it was revea!ed that management of the inventories!a" strong ro!e in the success of the organi+ation.

Im!ementation of better and new information s"stem entrereneurresource !anning# software ac*ages# as discussed wi!! cater tothe additiona! information re'uirements of the coman" which inturn wi!! imrove the efficienc" of management of inventor" contro!s"stem.


65/71

2or ma*ing &/C ana!"sis usua!!" comanies consider va!ue andconsumtion. In 9"sore aer 9i!! (td..# the" a!so consider theva!ue and consumtion of the raw materia!s. This is one of thebest eva!uation of &/C ana!"sis in which the coman" hasdeve!oed.

The store should be !oderate according to the needs of the co!4an.This will 4roide effectie, safe and good storage sste!.

The co!4an is !aking o4en order for the whole ear to the su44lier andthe 4lants according to !onthl schedule 4roduce the inentories.

The co!4an should follow the first in first in first out !ethod in issuingthe !aterials to the 4roduction de4art!ent.

These materia!s issuing ractices are doing we!! and have morecontribution towards effective materia! management. It he!s a !otin achieving effective inventor" contro! over the materia!s in thecoman".

The Coman" which is give more concentrate on em!o"ees

benefit for the current "ear Hi.e. the em!o"ees benefit whichincreased comared to revious "earG that has to be reduce. The coman" which gives more cash discount on sa!es so this is

not good for organi+ation.

CO"C#=SIO":

The contro! of inventories is com!e$ of man" f!uctuation and forms.Inventor" are the resu!ts of a!! f!uctuation areas Hi.e. roduction# mar*eting#urchasing.G with in the organi+ation. The contro! of inventories reresents a

shared resonsibi!it" and viewed as such. &n" set of ro!es used for inventor"contro!s in reva!ued regu!ar!" in 9"sore aer mi!!s !td..#

In 9"sore aer mi!!s !td..# the urchase and stores deartment arehand!ing inventor" inefficient!" in the organi+ation due to the rob!em ofinade'uate techno!og" and ine$erienced em!o"ees. The" are maintainingancient method of boo*s of accounts and it carried high cost and there is noroer uti!i+ation of funds. The maAor factor which is effect the who!e organi+ationthat is conf!ict Hagenc" costG which is high.

The 99 !tdL# which is run good at roduction# aart from that theother over heads Hi.e. factor"# office and administration# and se!!ing anddistribution e$enses.G are high. %o the coman" shou!d reduce the cost whichhe!s to imrove the organi+ation.

It is government underta*ing. It is running in !oss. Due to the abovecondition. I wish this coman" a grand success in the "ears to come.


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8! A""&G=R&

Profit (nd loss (ccount (nd B(l(nce S'eet (re s'o*n belo*:

7stt'e )rofit (nd loss (ccount for t'e ye(r ended m(rc' 6@@

3Rs! In l(4's5

)(rticul(rs 2or the "earended 61,6,1

2or the "earended 61,6,?

Income 77?.@

sa!es 66@7.@ 117.@7

(ess: e$cise dut" @1.7

6?1.6 7167@.?

Other income [email protected]@ 616.B?

;ariation in stoc* ,??.11 B?.

tot(l 7@6!89


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other e$enses

%e!!ing e$enses 1776.B @.1@

rior eriodadAustment

.7 B?.

tot(l 79@77!7 @678!


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Caita! 11?.67

11?.67

Reserves and sur!us BB7.@ B?.11

6!@

6


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Inventories 11?.7?

1B?6.?1

%undr" debtors 66?B. [email protected]?

Cash and ban* ba!ances 1?. 7.1

(oans and advances 77.6@ B.

1@@7?.67

661.6

#ess: current li(bilities(nd )rovisions:

Current !iabi!ities ?61. B?1.@1

rovisions 6?11. [email protected]

1?7.

?67.7

"et current (ssets ?@9!9 6!

Tot(l 66


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8! BIB#IO0RAP.$

&BSIT&S:

www.mm.co.in

www.m"soreaermi!!.co.in

P()er mill mont'ly m(g(ines!

/P/ 1u(rterly m(g(ines!


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prof. ! As*(t'())(2

Koya Inventory Management

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