A PROJECT REPORT ON
. The greater the time lag, the higher requirements for
inventory. It also provides a cushion for future price
fluctuations.
In a complex industry like Kesoram Industries Limited it studied
clearly of how the thing are being performed and what is the real
impact of these on industry and how effectively the inventory is
utilized is interested to be known by researcher because of its
great significance in the research.
The investment in inventories constitutes the most significant
part of current assets / working capital in most of the
undertakings. Thus, it is very essential to have proper control and
management of inventories.
The purpose of inventory management is to ensure availability of
materials in sufficient quantity as and when required and also to
minimize investment in inventories.Meaning and Nature of
Inventory:
In accounting language, inventory may mean the stock of finished
goods only. In a manufacturing concern, it may include raw
materials, work- in progress and stores etc., Inventory includes
the following things:
a) Raw Material: Raw material from a major input into the
organization. They are required to carry out production activities
uninterruptedly. The quantity of raw materials required will be
determined by the rate of consumption and the time required for
replenishing the supplies. The factors like the availability of raw
materials and Government regulations etc., too affect the stock of
raw materials.b) Work in progress: The work in progress is that
stage of stocks which are in between raw materials and finished
goods. The quantum of work in progress depends upon the time taken
in the manufacturing process. The quantum of work in progress
depends upon the time taken in the manufacturing process. The
greater the time taken in manufacturing, the more will be the
amount of work in progress.c) Consumables: These are the materials
which are needed to smoother the process of production but they act
as catalysts. Consumables may be classified according to their
consumption add critically. Generally, consumable stores doe not
create any supply problem and firm a small part of production cost.
There can be instances where these materials may account for much
value than the raw materials. The fuel oil may form a substantial
part of cost.
d) Finished goods: These are the goods, which are ready for the
consumers. The stock of finished goods provides a buffer between
production and market, the purpose of maintaining inventory is to
ensure proper supply of goods to customers.
e) Spares: The stock policies of spares fifer from industry to
industry. Some industries like transport will require more spares
than the other concerns. The costly spare parts like engines,
maintenance spares etc., are not discarded after use, rather they
are kept in ready position for further use.
All decisions about spares are based on the financial cost of
inventory on such spares and the costs that may arise due to their
non availability.
BENEFITS OF HOLDING INVENTORIES
Although holding inventories involves blocking of a firms and
the costs of storage and handling, every business enterprise has to
be maintain certain level of inventories of facilitate un
interrupted production and smooth running of business. In the
absence of inventories a firm will have to make purchases as soon
as it receives orders. It will mean loss of time and delays in
execution of orders which sometimes may cause loss of customers and
business.
A firm also needs to maintain inventories to reduce ordering
cost and avail quantity discounts etc.
There are three main purpose of holding inventories.
1. The transaction motive: Which facilitates continuous
production and timely execution of sales order.
2. The precautionary motive: Which necessitates the holding of
inventories for meeting the unpredictable changes in demand and
supplies of materials.
3. The speculative motive: Which induces to keep inventories for
taking advantage of price fluctuations, saving in re ordering costs
and quantity discounts.RISK AND COSTS OF HOLDING INVENTORIES
The holding of inventories involves blocking of a firms fund and
incurrence of capital and other costs.
The various costs and risks involved in holding inventories
are:
Capital costs: Maintaining of inventories results in blocking of
the firms financial resources. The firm has therefore to arrange
for additional funds to meet the cost of inventories.
The funds may be arranged from own resources or from outsiders.
But in both the cased, the firm incurs a cost. In the former case,
there is an opportunity cost of investment while in the later case;
the firm has to pay interest to t he outsiders.
1. Storage and Handling Costs: Holding of inventories also
involves costs on storage as well as handing of materials. The
storage of costs include the rental of the godown, insurance
charges etc.
2. Risk of Price decline: There is always a risk of reduction in
the prices of inventories by the supplies, competition or general
depression in the market.
3. Risk of Obsolescence: The inventories may become absolute due
to improved technology, changes in requirements, change in customer
tastes etc.
4. Risk Determination in quality: The quality of materials may
also deteriorate while the inventories are kept.
Objects of Inventory Management:
Definition of Inventory Management: Inventory Management is
concerned with the determination of optimum level of investment for
each components of inventory and the operation of an effective
control and review of mechanism.
The main objectives of inventory management are operational and
financial.
The operational objective mean that the materials and spares
should be available in sufficient quantity so that work is not
disrupted for want of inventory.
The financial objective means that inventory should not remain
idle and minimum working capital should be locked in it.
NEED OF THE STUDY:
Every industry on average spends 70% on raw materials
(inventory). Therefore there is a need to know the raw material
cost and also there is great importance to understand the inventory
management system of this industry.
The study helps a log to various departments to take steps to
control the inventory process.In this competitive business world
each and every business organization need inventory management
system for determining what to order, when to order, where and how
much to order so that purchasing and storing costs are the lowest
possible without affecting production and sales. Thus, inventory
management control incorporates the determination of the optimum
size of the inventory-how much to be order and when after taking
into consideration the minimum inventory cost.
The over all inventory management includes design and inventory
control organization with proper accountability establishing
procedure for inventory handling disposal of scrap, simplification,
standardization and codification of inventories, determining the
size of inventory holdings, maintaining record points and safety
stocks, economic order quantity, ABC analysis and VALUE analysis
and finally framing an INVENTORY MANUAL. OBJECTIVES OF THE STUDY:1.
To examine the organization structure of inventory management in
the stores of Kesoram Cements.
2. To discuss pattern, levels and trends of inventories in
Kesoram Cements.3. To understand the various inventory control
techniques followed by studies in Kesoram Cements.
4. To access the performance of inventory management of the
Kesoram Cements by selected accounting ratios.
5. To know the inventory control techniques of Kesoram
Cements.6. To avoid both under stocking and over stocking of
inventory.
7. To eliminate duplication in ordering or replenishing stocks.
This is possible with the help of centralized purchasing.
a. To ensure continues supply of materials, spares and finished
goods so that production should not suffer and any time and
customers demand should also be met.
b. To design proper structure for inventory management. A clear
cut accountability should be fixed at various levels of the
organizations.
METHODOLOGY OF THE STUDY:
Source of Data
The methodology Is to study the inventory perception towards
Cement company with special reference to Kesoram Cement it
Contains.
Primary data
Secondary data
Primary Data
Primary data has been collected with the help of the person
questionnaires, interviews, enquiry, observations designed and
developed for this purpose. The questionnaires has been supplied to
all the Officers/ executives to edit the required information.
Interviewing technique and personal observation has been used
simultaneously to make the study exact and relevant.Secondary
Data
This data has been collected from previous published records
like Annual reports inventory reports, printed statements do the
company like wed site etc.
LIMITATIONS OF THE STUDY:The study has the following
limitations:
1. The study is purely based on secondary data.
2. The time span that is 45 days which it has became difficult
to collect all the information. From the concern departments.
3. The reliability of the study depends upon the information
furnished by the officials.
4. Due to time constraint it is difficult to go into details of
the organization.5. The limitations of ratio analysis can be
applicable of the study.INDUSTRY PROFILE Cement Industry has been
decontrolled from price and distribution on 1st March 1989 and de
licensed on 25th July 1991. However, the performance of the
industry and prices of cement are monitored regularly. Being a key
infrastructure industry.
The constraints faced by the industry are reviewed in the
Infrastructure Coordination Committee meetings held in the Cabinet
Secretariat under the Chairmanship of Secretary (Coordination). The
Committee on Infrastructure also reviews its performance. The
industry is subject to quality control order issued on 17.2.2003 to
ensure quality standards.CEMENT INDUSTRY IN INDIA
In India it came to be established during the beginning of 20th
century. In fact the cement era in India commenced with the
establishment of a small cement factory at WASHERMANPET in 1904 by
South India industry Ltd. a company that dates to 1879. The
potential capacity of this plant was only 10,000 metric tones per
annum. This was the first attempt of manufacturing Portland cement
with cat carious seashells as a principal raw material. There was
sufficient demand for that product, but because of technological
defects and inadequate supply of raw materials, the plant did not
operate economically, a later on collapsed. India is ranked forth
in the world after China, Japan, and USA in cement production. Yet
the per-capital consumption of cement in India however low at 70 to
80 kgs against the world average of around 220kgs.CEMENT INDUSTRY
IN ANDHRA PRADESH
Cement was first manufactured in America in the year 1875. In
India, in 1914 the India Cements Company Limited was established a
cement factory at Portland. Andhra Pradesh is the second largest
cement production state in India, one third of the limestone
(138crore tones) is available in A.P.I.A.P. the cement production
was started in 1936 with two factories. Of these two factories one
is Andhra Cement Company Limited and another in Krishna Cement
Factory. One is on the side of Krishna Cement Factory. One is on
the side of Krishna River and another is in between Krishna and
Guntur districts respectively.
In 1995, one more factory was established at Panyam in Kurnool
Dist., named as Panyam Cement and mineral industries. At the same
time one more factory has been established at Maacherla in Guntur
district. At the end of July 1985 the total capital invested on
cement industry was Rs.427.81 lakhs and provided employment for
1262 persons and 19 factories were functioning with a production of
85lakh tones.
Capacity, Production and Exports
India today boasts 129 large plants and over 300 mini cement
plants with a capacity of 165 million tones and production of 134
million tones (2004-05).
It ranks second in the world among cement producing countries,
with per capita consumption at 118Kg compared to the world avg. Of
around 317. Per capita consumption is 366 Kg in Thailand, 626 Kg in
China, 606 Kg in Malaysia and 1216 Kg in South Korea. This
indicates a huge potential for increase in consumption.
The Cement Corporation of India, which is a central public
sector undertaking, has 10 units. Besides, there are 10 large
cement plants owned by various state Governments. Keeping in view
the past trends, a production target of 133 million tons has been
set for the year 2004 05. During the Tenth Plan, the Industry is
expected to grow at the rate of 10% per annum and is expected to
add capacity of 40 52 million tons.
Mainly through expansion of existing plants and use of more fly
ash inthe production of cement. A part from meeting the domestic
demand, the cement Industry also contributes towards exports. The
export of cement and clinker during the last three years is as
under:-
Export of Cement
(In million tons)
YearCementClinkerTotal
2005 063.473.456.92
2006 073.365.649.00
2007 083.314.828.13
Overview of the performance of the Cement Sector:
The Indian Cement Industry not only ranks second in the
production of cement in the world but also produces quality cement,
which meets global standards. However, the Industry faces a number
of constraints in terms of high cost of power.
High railway tariff; high incidence of state and central levies
and duties; lack of private and public investment in infrastructure
projects; poor quality coal and inadequate growth of related
infrastructure like sea and rail transport, ports and bulk
terminals. In order to utilize excess capacity available with the
cement Industry, the Government has identified the following thrust
areas for increasing demand for cement:
(i) Housing development programs;
(ii) Promotion of concrete highways and roads;
(iii) Use of ready mix concrete in large infrastructure
projects; Technological advancements
Indian cement industry is modern and uses latest technology.
Only a small segment of industry is using old technology based on
wet and semi-dry process. Efforts are being made to recover waste
heat and success in this area has been significant.
India is also producing different varieties of cement like
Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC),
Portland Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid
Hardening Portland Cement, Sulphate Resisting Portland Cement,
White Cement, etc. Production of these varieties of cement conforms
to the BIS Specifications. It is worth mentioning that some cement
plants have set up dedicated jetties for promoting bulk
transportation and export.Infrastructure driven demand pushThe bulk
of cement demand is from housing and commercial development of
which metros account for a significant amount. It is estimated that
Mumbai, which consumes almost six million tones, along with Pune,
accounts for 45 percent of Maharastras cement consumption,
Bangalore consumes four million tones and Chennai around 3 million
tones, these are really the growth clusters. Today bulk of the
demand is driven by housing and commercial construction and as
infrastructure picks up, for example, Bangalore international
airport, Hyderabad airport and modernization of Mumbai and Delhi
airports. Another large consumer has been the roads sector. The off
take was good when the NHDP programme was launched but there was a
lull last year. Once again new orders have been placed and in 2006,
the industry will pick up. The estimate is that from roads, sdemand
is not more than 4-5 million tones but it makes a difference in the
growth numbers.Narrowing demand-supply gap: The industry has a
capacity of 165 million tons and in Jan 2006, dispatches were at
almost 100%. On an overall basis, the industry does not do more
than 90-92% because of constraints such as transport and raw
material.
The industry has been adding capacity of 6-7 million per annum
by Brownfield expansion and de-bottlenecking which is expected to
partly cater to the requirement because it is growing by around 20
million tons per annum.Challenges before the industry:
Energy costs account for half of the cost of production of
cement. Last year saw a 15-16% increase in coal prices and then
diesel prices went up pushing up transportation costs.Freight
problems
The importance of freight for the cement industry cannot be
emphasized enough. While in the last few months railways have been
steadily losing freight to road sector they have been confined
cement to market-is around Rs.350-400 a ton or Rs.20 and bag that
could go as high a Rs.800 for long leads. This would only easy the
first level of sale and additional costs are involved to take it
further.
Another issue, which will hit the industry hard, is that of
logistics and a Supreme Court judgment on carrying capacity for
trucks. Accordingly, a state govt. has been directed to enforce the
discipline that trucks only carry a specified load. Many states and
already implementing this and there is already an increase in
freight rates and in some cases, it has gone up by 50%. Also, the
requirement for trucks to carry the same freight has nearly doubled
and in many places the industry is being forced to move to
railways.High taxes
While the railways have had capacity to meet the requirement, it
is expected that in March the commencement of peak season for the
procurement of food grains, the railways would be constrained to
provide adequate number of wagons.
So fright rates are up, railways cannot provide wagons and
trucks are unlikely to be viable so there could be a serious
dislocation of supplies going forward. According to the cement
manufactures association total taxes and duties on cement come to
around Rs.900 a ton or Rs. 45 a bag. So at a price of Rs.150 a bag
in the market, taxes and duties account for one third. Which is
high for such a basic product. This includes excise duty, sales tax
and royalty on limestone.
The importance of limestone can only be underscored as for every
ton of cement produced. 1.5tons of limestone is required. For
limestone, royalty is on a per ton basis at Rs. 40 whereas for most
minerals it is a percentage of the pithead cost. Effectively we are
paying Rs.70 a ton for limestone as royalty. VAT is at 12.5%
without any justification and it should be in 4% category, excise
is at Rs.408 per ton when it should be around Rs.200.
Export Advantages
From a modest beginning if 1.6 lacks tons in 1989-90, Indian
exports of cement/clinker have grown rapidly at about 30-40% and
this year exports will cross 10 million tons.Major cement producers
market shares:
Acc -12.8%
Abuja -10.7%
Grasim-10.4%
Ultra tech-9.5%
India cement-6.0%
Jaypee-4.1%
Lafarge-3.2%
Madras-3.2%
Overall, the industry is in a better state today than 2 years
ago. Cement prices even today are way below global levels. So
setting up Greenfield capacities is not attractive, as prices will
not give attractive returns on investment. That is a minor reason
why there is no Greenfield capacity coming up. It has to be born in
mind that one third of the prices is accounted for by taxes and
duties and nearly 20-25% by the freight component. So what produces
earn at the factory gate is among the lowest in the world.
This year 2008 has commenced on a good note and in fact,
December was a very good month wit dispatches at 12.5 million tons
and January dispatches were in excess of 13 million tons.
This means capacity utilization is in the nineties which is
healthy and will actually lead to firming up of prices. It looks
like sales could be 137 million a ton for 2007-08(125 million tons
in 2006-07) and so far growth has been 10%. There are enough
reasons to believe it will sustain.
INDUSTRY PROFILE
The 85 year old Indian cement industry is one of the cardinal
and basic infrastructure industries, which enjoys core sector
status and play a crucial role in the economic development and
growth of a country. Being a core sector is industry was subject to
price and or distribution controls almost uninterruptedly from
world war -II to 1982. When the government of India announced the
partial decontrol manufacturing cement became increasingly
attractive industry and the industry experienced substantial
expansion.As the supply in response to the 1982 partial decontrol
was significant in march, 1989. Price and distribution control were
finally dispensed with. It was one of the first major industries in
the country to be so deregulated.
DEFINATION OF CEMENT
Cement may be defined as it is a mixture of calcium silicate and
aluminates which have the property of setting and hardening under
water. The amount of silica, alumna who is present in each crust is
sufficient to combine with calcium oxide [cao] to from the
corresponding calcium silicate and aluminates.
CLASSIFICATION OF CEMENT
Cement is 3 types
i. Puzzolantic cement
ii. Natural cement
iii. Portland cement1. Puzzolantic cement:
It consists of silicates calcium and aluminum. It shows the
hydraulic, properties when it is in the form of powder and being
mixed with suitable proportion of lime. The rate of hardening is
much slower and the comprehensive strength developed is about a
half of Portland cement. It us found more resistant to the chemical
action that others.
2. Natural cement:
This is natural occurring material. It is obtained form cement
rocks. The cement rocks are claying lime stones containing
silicates aluminates of calcium. The selling property of this
cement is more than the Portland cement but is comprehensive
strength is half of its.
3. Portland cement:
a) Ordinary Portland cement
b) Rapid hardening Portland cement
c) Low heat cement
d) White or colored cement
e) Water proof Portland cement
f) Portland slag cement
g) Portland puzzo
h) Sulphate resisting cement
i) Oil well cement
INDIAN CEMENT 1NDUSTERY - PRESENT STATUS
After the deli censing of the industry in July, 1991 it reacted
positively to the policy changes. New capacities created and the
volume of the production increased. From a situation of importing
cement, the country started exporting due to high quality and cost
effectiveness. After liberalization the black market in cement also
disappeared
Currently INDIA stands second largest in the cement production
world wide after china after India, japans and USA stands. On the
other hand India's per capital consumption is only 100kgs. As
compared to the world average of 260kgs. The industry has 59
companies owing 115 plants.
In the mailer of exports, the government considers cement as
extreme focuses are& However Indian cement in the global market
is not very competitive due to high power and full costs. In order
to improve its position in the international market. Technological
up gradation is essential in terms of process up process up
gradation product diversification costs reduction quality control
and energy savings
OVERVIEW OF THE INDUSTRY
The word cement means any substance applied for sticking things
.But cement is most vital and important material for modem
construction as a binding agent .In the ancient times ,clay ,bricks
and stones have been used for construction Work.
The Romans were using a binding or a cementing material that
would harden Under water. The first systematic effort was made by
SMEATION who Under took the erection of a new lighthouse in 1756.he
observed that the production Obtained by burning limestone was the
best cementing material for work under water.
After eighty years brunch chemist produced hydraulic cement by
burning finely ground delay used in the form of paste .cement
invented by. JOSEPH ASPDIN in 1824. Since hardened Cement paste
resembled Portland stone found in England be named it a s Portland
cement A name that has ensured even Portland cement was list
manufactured in USA in 1975 In Portland cement was produced for the
rust lime in 1940. by south India industries limited Madras. This
unit had capacity of 30 tones per dayBy 1913 however three units
started their operations with a combined installed capacity of
75000 tons per annum. In 1914 indigenous production fees for short
of domestic demand necessitating an import of 1, 65,723 tones.
Shipment difficulties and foreign Trade during the first world war
acted as a catalyst for the . Development of indigenous Industry,
and by 1924 the total installed capacity grew to 5,59,800 tones per
annum.
In 1963 all the cement companies with the exception of SONE
VALLEY PORTLAND CEMENT COMPANY LIMITED merged to form the
ASSOCIATED CEMENT COMPANIES LIMITED. This has more facilitated a
cost reduction as well as uniformly in quality. By 1947 the
installed capacity of the industry raiscdto2.2miIlion tones per
annum. After partition 5 of the cement producing units in the
country went to Pakistan and total installed capacity of 18 units
that remained in India was 1.5 million tons per Annum. This is
increased to 3.8million tones by 1950-51.
In the three decades between 1950-1980 the capacity expansion
was between 7-8 million tones pe/decade the target set in respect
of additional capacity generation was released with impetus given
by the partial decontrol announced in 1982. Several units locked up
project for expansion of capacity and modernization which
contributed towards increased production.INDIAN CEMENT INDUSTRY
PRESENT STATUSAfter the dealing of the industry in July 1991 it
reacted positively to the policy changes new capacities created and
the volume of production increased from a situation of importing
cement the. country started exploring due to high quality and cost
effectiveness after liberalization the black market in cement also
disappeared currently India stands second largest in the cement
production worldwide after china on the other hand per capita
consumption in India is only books as compared To the world average
of 260kgs the industry has S9 companies owning 1 is plants in the
matters of exports. The government considers cement as a extreme
Focus area .however Indian cement in the global market is not very
competitive Due to high power and full costs. In order to improve
its position in the international market technological up gradation
is essential in terms of process Product diversification cost
reduction quality control and energy saying.
ABOUT THE INDUSTRY
These chapter examiners a profile of cement industries ltd. i.e.
.its history location organization structures etc.
LOCATION;
Kesoram cement industry is one of the leading manufacturer of
cement in India it is a day process cement plant the plant capacity
is 8.25 lakh tones per annum .it is located at basanthnagar in
Karimnagar district of Andhra pradesh Basanth nagar is 8km away
from the ramagundam railway station linking madras to newdelhi the
chairman of the company is syt.B.K.Birla
HISTORY:
The first unit at Basanthnagar with a capacity or 2,1 lakh tons
per annum incoresponding suspension-preheated system was
commissioned during the year of 1969 the second unit Was setup in
year 1971 with a capacity of 2.1 tens per annum and the third unit
with a capacity of 2.5lakh tons per annum went on stream in the
year 1978 the coal for this company is being supplied iron
singareni collories and the power is obtained from APSEB the power
demand for the factory is about 21MW kesoram has got 2DG sets of
4M"W each Installed in the year 1987.
Kesoram Cement as set up a 15kw capacity power*plant to
facilitate for unintellpted power supply for manufacturing of
cement starts at 24 august 2007 per hour 12 mw, actual power is
15mw. Birla supreme in popular brand of kesoram cement from its
prestigious plant of Basanthnagar in A.P which has outstanding
track record in performance and productivity serving the nation for
the last two and had decades It distinction by Bagging several
national awards .It also has the distinction optimum capacity
utilization. Kesoram offers a choice of top quality portioned
cement for light heavy constructions and allied applications
quality is built every fact of the operations.
The plant layout is rational to begin with the limestone is rich
in calcium carbonate a key factor that influence the quality of
final product the day process technology used in the latest
computerized monitoring overseas the manufacturing process samples
are sent regularly to the burenu of Indian standards national
council of constructions and Building material for certification of
derived quality norms
The company has vigorously undertaking different promotional
measures their product through different media which includes the
use of newspapers, magazines hoardings etc
Kesoram cement industry distinguished itself among all the
cement factories in India by bagging the national productivity
award consecutively.For two veat but the year 1985 -1987.(he
federation of Andhra Pradesh chamber of commerce and industries
also conferred an kesoram cement an award for.the best Industrial
promotion expansion efforts in the year 1981.kesoram also bagged
FAPCCl Awarded for "best family planning effort in the state " for
the year 1987-1988.
One among the industrial giants in the country today serving the
nation on the industrial front kesoram industrials Ltd has a cheque
red and eventful history dating Back to the twenties when only a
textile mill under its banner 1924 it grew from Strength to spread
and activities 10 newer fields like Rayan pulp Transport paper spun
pipes Refractivity tires and other products
Looking to the wide gap between the demand and supply of a vital
commonly cement Which plays Ul important role in national building
activity the government of India had de-licensed the cement
industry in the year 1966 with a view to attract private
entrepreneurs to augment the cement industry production kesoram
rose to the occasion And divided to setup a few cement plants in
the country Kesoram cement undertaking marketing activities
extensively in the states of Andhra Pradesh Karnataka Tamilnadu,
kerala maharastraha and gujrat in AP sales depots are located in
different areas like karimnagar warangal nizambad vijayawada and
nellore In other states it has opened around 10 depots.
THE AWARD WON ARE:Kesoram cement bagged prestigious awards like
national awards for productivity and technology and conservation
and several state awards for year 1984 kesoram cement is best
family planning effort in the federation of Andhra Pradesh chamber
of commerce And industry and also national award for two successive
years 1985-86& 1986-87.lt has also bagged the national award
for energy efficiency for the year 1989-90 for the performance
among all cement plants in India .thus award stall-by national
council For cement and building material in association with the
government of India .
Kesoram bagged the prestigious Andhra Pradesh state productivity
award in 1987-1989 also Annexed state award for industrial
management in 1988-1989.and also "Best Industrial promotion
expansion efforts " in the state and yajamanya ratna and best
efforts an industrial unit in the state to develop rural economy
was bagged for its contribution towards the year 1991.it also
bagged the "may day award" of the government of India For the best
management and the pandit jawaharlal Nehru silver rolling trophy
for the industrial productivity effort in the state of andhra
Pradesh by FAPCCI and also the Indira Gandhi memorial national
award of the government of Andhra Pradesh for the year 1993.
During the last 3 years the government of Andhra Pradesh has
given the following awards Best awards for the year 1994.Best
industrial relation award for 1994.TO keep the ecological balance
they have also undertaken massive tree plantation in The economy
and government of India has nominated township areas and them for
VRIKSHMITHRA award Best effort of an industrial unit in March
1996In the year March 2007 "Best management award 2007" for the
best management practices In kesoram cement presented by chief
minister.
CEMENT PRODUCTION WORLDWIDE
Country19811983198619891990World ranking
CHINA831081062102101
JAPAN88857382872
USA65617170723
INDIA21253645484
ITALY4340364415
GERMANY3028242740 '6
Today in the cement industry is producing 58.3 million tones per
annum indication surplus conditions while its demand is 56.7
million tones lies per annum Now The cement market has become
'buyer market' which was a selling market till 1970'sAnd so the
quality &brand taken an upper edge for cement marketing.
Today installed at the India cement industry is 771 lakh tones
but in India 106 Major plants are producing 583lakh tones leaving
the balance for exports.
PROFILE OF THE COMPANY
One among the industrial gains in the country today serving the
nation on the industrial front kesoram industries limited has a
tenured and extent full history dating hock to the twenties when
the industrial house of Birlas enquired it. With only a Textile
mill under its banner in 1924, it grew from strength and spread its
activities to newer fields like Rayon pulp Transparent Paper. Spun
pipes and Refectory Tyers oil mills and refinery Extraction.
Looking to the wide gap between the demand and supply of vital
commodity cement which it plays on important role in Nation
Building, the government Private entrepreneurs to argument the
cement production Kesoram rose to the occasion and decided to set
up few cement plants in the country.
Kesoram cement is one of the prestigious units in the renowned
Kesoram industries group that is one of Indias leaden industrial
conglomerates, under the leadership of Mr.B.K.Birla, the famous
personality of Indian Industry, who owes branches all over
India.
Kesoram cement Industry is one of the leading manufacturer of
cement in India Kesoram cement is a division of Kesoram Industries
limited. It is a dry process cement plant. It is located at Basant
Nagar in Karimnagar District of Andhra Pradesh with the plant
capacity is 8.26 lakhs tones per annum. It is 8Kms away from the
Ramagundam Railway Station Lining Madras to New Delhi.PLANTS
SETUP:
The first cement point of Kesoram with a capacity of 2.1 lacks
tones per annum incorporating Humboldts suspension preheated system
was committed during the year 1969.
The second unit was setup in the year 1971 with capacity of
2.1lacks tons which added to the above plant capacities.
The third plant with a capacity of 2.5lacks tons per annum,
which went on stream in the year 1978.
The coal for this company is obtained by singareni collieries
and the power is obtained from APSEB. The power demand capacity for
the factory is about 21M.W. Kesoram has got 20G sets of 4MN each
installed in the year1987. Kesoram cement belongs to the Birla
group Companies one of the industrial giants in the country.
Kesoram cement industries distinguished itself among the cement
factories in India by bagging the national productivity award for
two successive years i.e., in 1985-86 and 87. Kesoram cement also
got the FAPCCI award for best family planning effort in the state
for the year 1987-88. Kesoram also bagged NCBCNS national award for
energy conservation for the year 1989-90. The Kesoram industries
look for the welfare of the employees and it provide various
facilities which the employees and it provide various facilities
which the employee feels satisfied with in the organization and
after the work they fees satisfies the worker and works families by
providing various welfare schemes and by providing recreational
facilities of a glace. To keep the ecological balance, company has
also undertaken massive tree plantation in and around Basanth Nagar
and nearby villages there by eliminating the pollution and they
have been nominated by the government of India for VRUKSHAMITRA
AWARD but effort of an industrial unit in the state for rural
development 1994-95 presented by CM in march 1996.BRANDS:
Kesoram brands with namely Birla Supreme and Birla supreme gold
(53 grades) has made a niche with outstanding quality and commands
a premium in the market. The latest offering, Birla Shakthi is also
very well received and is the most sought offer brand
now.AWARDS:
National productivity award for 1985-86.
National productivity award for 1986-87.
National award for energy conservation for 1980-90.
National award for mines safely 1985-86, 1986-87.
Prestigious state award yajamanya ratna and but management award
for the year 1980.
Best FAPCCI award for but family planning effort in the state
1987-88.
FAPCCI award for best workers welfare 1995-96.
Best industrial productivity award of FAPCCI.
Best management award of state government 1993.
It has got Vanamitra award from the government of Andhra
PradeshKESORAM GROUP OF INDUSTRIESa)TextilesKesoram Industries
Ltd,
42, Garden Reach Road
Calcutta-700024.
b)RayonKesoram Rayon Triennia (P.O.),
Dist : Hoogly, West Bengal.
c)Spun PipesKesoram Spun pipes & Foundries,
bansberia (P.O.), Dist: Hoogly,
West Bengal.
d)Cement Kesoram Cement,
Basantnagar-505187,
Dist : Karimnagar, Andhra Pradesh
e)Cement Vasavadatta Cement,
Sedam-585222,
Dist : Gulbargah, Karnataka.
f) Tyres Birla Tyres,
Shivam Chambers,
53, Syed Amir Ali Avenue.
Calcutta-700019.
Product Profile
The main brands of cement manufactured are:
RAASI GOLD (53 Grade)
RAASI SUPER POWER
RAASI 43 Grade cement.
All the brands are known for its best quality standards.
Industrial RelationsKIL,KNR is known for its best Industrial
Relations practices in this region and won many awards from Govt.
of A.P. and Chamber of Industries.
Norms
Raw Mill Clinker Cement
Lime stone 96%
Iron ore 2.5%
Laterite 1.5%
Raw Mill 1.5 tonnes
Coal 20%
Clinker97%
Gypsum 3%
Directors of Kesoram Industries LimitedChairman Syt. B.K.
Birla
Directors
Smt. K.G. Maheshwari
Shri. Pramod Khaitan
Shri B.P. Bajoria
Shri P.K. Chokesy
Smt. Neeta Mukerji
(Nominee of I.C.I.C.I.)
Shri D.N. Mishra
(Nominee of L.I.C.)
Shri Amitabha Ghosh
(Nominee of U.T.I.)
Shri P.K. Malik
Smt. Manjushree Khaitan Secretary
Shri S.K. ParikSenior Executives Shri K.C. Jain (Manager of the
Company)
Shri J.D. Poddar
Shri O.P. Poddar
Shri P.K. Goyenka Shri D. Tandon
Auditors
Messrs Price Water house
Subsidiary Companies of Kesoram Industries
Bharat General & Textile Industries Limited
KICM Investment Limited
Assam Cotton Mills Limited
Softshree Estates LimitedTHEORETICAL FRAME WORKINVENTORY
A tangible property held finished goods, work in process, raw
material including maintenance and consumables.
Inventory management is a very important function that
determines the health of the supply chain as well as the impacts
the financial health of the balance sheet. Every organization
constantly strives to maintain optimum inventory to be able to meet
its requirements and avoid over or under inventory that can impact
the financial figures.
Inventory is a quantity or store of goods that is held for some
purpose or use (the term may also be used as a verb, meaning to
take inventory or to count all goods held in inventory). Inventory
may be kept "in-house," meaning on the premises or nearby for
immediate use; or it may be held in a distant warehouse or
distribution center for future use.Meaning of inventory
The inventory refers to the stock pile of the product a firm
offering for sale the components that make up the product. In other
words, inventory is composed of assets that will be sold in future
in the normal course of business operations. The assets which firms
stores as inventory in anticipation of need can be classified
into
Raw materials
Work in progress (semi finished goods)
Finished goods
Raw materials:
Inventory contains items are purchased by the firm from others
and are converted into finished goods through the manufacturing
process. They are important inputs for the final product.
Work in progresInventory consists of items currently being used
in the production process. They are normally partially or semi
finished goods that are at various stages of production in a
multistage production process.
Finished goods:
It represents final or completed products which are available
for sale, the inventory of such goods consists of items that have
been produced but are yet to be sold. The job of the final manager
is to reconcile the conflicting view points of the various
functional areas regarding the appropriate inventory levels in
order to fulfill the overall objectives of maximizing the owners
wealth.
Importance of inventory
Inventory plays cardinal role in every organization. The profit
of the organization mainly depends on the inventory. Inventory is
the second largest value in the organization it is the liquid asset
and the current asset of the organization, inventory storage is in
important activity in the organization.
OBJECTIVES OF INVENTORY MANAGEMENT
The objectives of the inventory management consist of two
counter balancing parts:
a) To maximize the firms investment in inventory
b) To meet a demand for the product by efficiently organizing
the firms production and sales operation.
These two conflicting objectives inventory management can also
be expressed in terms of cost and benefits associated with
inventory. An optimum level of inventory should be determined on
the basis of the tradeoff between cost and benefits associated with
the levels of inventory.
THE MAIN AIM OF INVENTORY MANAGEMENT
The main aim of inventory management they should be avoid
excessive and inadequate levels of inventories & to maintain
sufficient inventory for the smooth production & sales
operation effort be made to place an order at the right time with
the fight source to acquire the right quality at the right place
& quantity.
Ensure a continuous supply of raw materials to facilitate
uninterrupted production.
Maintain sufficient stocks of raw materials in periods of short
supply & anticipated price customer service.
Minimize the carrying and time, and
Causes of inventory:
External Causes: - Customers, suppliers etc.
Internal Causes: - Market, policy, production and SCM.
Problem with high inventory: Interest, insurance costs.
Quality deterioration.
Wear and tear.
Storage and pilferage.
Inventory turnover ratio:
ITR = cost of production / inventory
Higher ITR = low inventories
Low ITR = high inventories
High inventory reasons:
Production
More low volume products
Large cycle campaign product
Non-moving products
Marketing:-
Uncertainty of orders Deviating sales forecastSupply chain
management:
Improper planning
Excess / short RM supply.
Suggestions:-
Flexible production plans with tight monitoring.
Min & max inventory levels and their up to date
revision.
Cost benefits analysis in on carrying costs.
Review and disposal of non-moving inventory.
Reliability should improve.
Dynamic approach is essential.
Coordination with market and plants.
Adherence to commitments and time-to-time review is must.
Selection of Site:- The following are the chief consideration
which should determine the selection of a site.
(a) The site will be connected with road and rail, or if there
is river transport, with water transport.
(b) The existence of facilities for disposal of water or
effluent water is important. For this purpose sometimes it may be
possible to use existing waste land. Health authorities will
naturally have a say in the matter.
(c) The available land should be sufficient for purpose of the
unit. In addition to factory buildings, it is often necessary to
provide houses for the staff and workers.
STORES, SPARES AND PURCHASES:-1. Store keeping.
2. Store system.
3. Various stores operation.
4. Methods of pricing the material issues.
5. Receiving section and issue department.
6. Purchase department
7. Stores and spares.
8. Purchasing system.
9. Inventory.
STORK KEEPING
It is serving facility, inside of an organization responsible
for proper storage of the material and then issuing it to
respective department on proper requisition. Those items, which are
not in use for some specific duration example spare parts and the
raw materials, are called stores and the building or space where
these are kept is known is store room.
According to Maynard the duties of stock keeping are i.e., to
receive materials are to protect them while in storage from damage
and unauthorized removal, to issue the materials the right
quantities at the right time to the right place and to provide
these service promptly at least cost.
It is an establishment fact that more govt of the current assets
are invested in stores. Thus for efficient and economic utilization
of fond the importance of store cannot be ignored.
FUNCTIONS OF STORE KEEPING:
The main function of store keeping can be outlined as
i. Receiving of goods in stores against damage and
pilferage.
ii. Custodian of goods in stores against damage and
pilferage.
iii. Effective utilization of stores space.
iv. To provide service to the organization in most economic
way.
Proper identification and
OBJECTIVES OF STORE KEEPING:
a. Easy location of the items in store.
b. Proper identification of items.
c. Speed issue of material.
d. Efficient utilization of space.FACTORS OF PLANT
LOCATION.Primary factors:-
Raw material
Market
Fuel and power
Transport
Labor
Secondary Factors:
Industrial atmosphere Special advantage of a place Soil and
climate Personal factors Historical factors Political
stabilityStages in Production control:
Planning
Routing
Scheduling
Loading
Dispatching
Inspection.Advantages of Production planning and control:-
Efficient service
Avoidance of rush orders
Avoidance of bottlenecks
Inventory control
Economy in production time
Equipment utilizationTypes of layout: Product or line layout
Process of functional layout Combined layoutFactors in plant
layout:
Basis managerial policies and decisions
Nature of plant location
Type of industry and processes.
Economies in Production:
Use of automatic machinery
Division of labor
Utilization of boy-products
Timely and economical repairs and maintenance.Approach:
The importance of an integrated approach of material management
with in the frame work of the Indian environment and presents a
comprehensive coverage of all aspects of the subjects, such as the
operational details of stores system and procedures and modern
mathematical concepts also featured. Since the theory is based on
the practical experience and research projects, it fulfills the
needs for authentic literature in the field on materials
management.Purpose of Stores:-
A store plays a vital role in the operation of a company. It is
in direct touch with the user departments in its day-to-day
activities. The most important purpose served by the stores is to
providing uninterrupted service to the manufacturing divisions.
Further, stores is often equated directly with money, money is
locked up in the stores.
The function of stores can be classified as follows:-
1. To receive raw materials, tools, equipments and other items
and account for them.
2. To provide adequate and proper storage and pre salvation to
the various items.
3. To meet the demands of the consuming departments by proper
issues and account for the consumption.
4. To minimize obsolescence, surplus and scrap through proper
codification, preservation and handling.
5. To highlight stock accumulation, discrepancies and abnormal
consumption and effect control measure.
6. To ensure good housekeeping so that material handling,
materials preservation, stocking, receipt and issue can done
adequately.
In India, owing to positions, 4 to 6 months inventories are not
uncommon 77 and, in fact, for certain imported items, it could be
as high as 24 months stock. In this context, stores management
assumes greater importance.
Stores leader:-
The stores leader is very important because this facility the
calculations of the value of goods used for production purpose of
materials, finished goods. There are several methods for
calculating the issue price of the materials.FIFO:-Under this
method is first issued the earliest consignment on hand and priced
at which that consignment was placed in the stores. In other words
materials received first are issued first.This method is most
suitable in times of falling prices because the issue price of
materials to be jobs work orders will be high while the cost of
replacement of materials will be low.LIFO:-The issue under this
method are priced in the reverse order of purchase i.e., The price
of the latest available consignment is taken. This method is
sometimes known as the replacement cost method because materials
are issued at the current cost to work orders expect when purchases
were long ago.
This method is suitable in times of raising prices because
material will be issued from latest consignment at a price which is
closely related to the current price levels.
Base stock method:-Each concern always maintains a minimum
quantity of material in stock. This minimum quantity is known as
safety or base stock and this should be used when an emergency
arises. The objective of this method is to issue the material
according to the current prices.
Average method:-In this method stock is divided by the
quantity.
Market Price:-The issue is made at the market prices.
Inflated prices:This method is used for any wastage in the
materials ex.50 units are purchased at Rs. 10. In 50 units will go
for wastage. The issue price will be 500/40=12.5Location and
layout:
More often than not, in the matter of locating the stores,
materials management is rarely consulted. The normal practice is to
locate the stores near the consuming departments. This minimizes
handling and ensures timely dispatching stores layout, governing
criteria are easy movement of materials, good housekeeping, and
sufficient space for men and materials handling equipments, such as
shovels, racks, pallets and proper preservation from rain, light
and other such elements.
These problems are more important in the case of items that have
a limited shelf life.
Other important factors governing the location are the number of
users and their locations, the volume and the verity of goods to be
handled the location of the central receiving section and
accessibility to modes of transportation such as rail or road.
Since stores have to be nearest to the sugar, largest
organizations usually have stores near consuming department,
whereas receiving is done centrally.
Items of common usage are stocked in the central stores so that
inventory is kept at the planning level of layout.
In the case of warehouses stocking finished goods, factors such
as proximity to ports, railway lines, quality of roads,
availability of power, etc., become quite important. It also that
the stores are constructed with a futuristic orientation, so that
sufficient flexibility for expansion needs is inbuilt. The
activities of receiving the goods, stocking in appropriate
locations, material handling and issue must be done swiftly and
economically. The stores building have adequate facilities for
preservation of stores.
Sometimes facilities, such as cold storage, heating equipments,
air conditioning and similar facilities may be required. These
should be planned in advance. Comfortable working conditions must
be provided to the stores personnel to get maximum efficiency and
morale.
The important factors in the design of stores building can be
summarized as follows:Lighting:-
Clear and adequate lighting is a must for a work environment.
Lighting effects can be accentuated through a judicious choice of
colors for the walls. For stores personnel who work day in and day
out in the stores receiving, checking, stocking, handling and
issuing goods, a pleasing environment goes a long way in reducing
monotony. Any attempt to reduce these facilities will prove false
in economizing in the long run.
Safety:-This factor is perhaps the most important aspects. In
stores a large volume of goods are handled every day. Accidents
considerably reduce the morale and effectiveness of the system. The
following measures are necessary if accidents are to be checked:
Safety consciousness should be instilled in the minds of stores,
personnel through training programmers, visual aids and
literature.
Safety appliances, such as goggles, hand gloves, etc.., must be
provided and their use must be encouraged.
Good housekeeping is essential. This means that gangways must be
clean, adequately wide so that movement of forklifts, trolleys and
industrial tractors is smooth. Stocking must be appropriate
locations sot that handling is minimum.
All stores equipment must be kept in good order. This includes
adequate maintenance practice with regard to forklifts, overhead
cranes, trolleys, conveyors, etc. operation must be trained in
safety so that safety precautions are not over looker.
Healthy competition can be stimulated by installing safety
awards and cash prizes which bring recognition to the concerned
stores personnel for safety practices. This also motivates other to
practice safety.
Provision of fire fighting facilities is necessary especially
where inflammable materials are stored and handled. In fact large
organizations have a well maintained the fighting equipment.
Keep the stores in preparedness. This has in the run reduced
losses and reduced insurance expenses, fire extinguisher, fire
escapes, alarms and sprinklers must be available the personnel
should be familiar in handling them. Other factors which merit
attention include provision of toilets, routine maintenance
equipments, safe electrical warnings, etc..,Cost aspects and
productivity:-
It is covered that every cubic meter of space must be utilized
by stocks for high efficiency. Very often such stocking may
drastically cut the speed of materials movements and create
bottlenecks apart from affecting overall safety.
Costs involved in stores can be analyzed under two heads, viz..,
fixed and variable. Fixed costs are to be incurred irrespective of
the utilization of space stores; they include money spent on land
buildings, rent interest, repairs, maintenance, insurance, etc.
Variable costs vary with the volume through output. They consist
of handling cost, damages, deterioration, obsolescence, etc.
Obviously when the throughout or the volume goods handled is high,
the total cost per tone is low. This should be the aim of the
stores manager in order to optimize the costs in stores.
Problems and development:-
It is an unfortunate fact that stores management has been
regulated as a critical function. In the gamut of material
management, a store is considered as the least glamorous and it
never attracts talent. It is forgotten that the stores manager is
probably the custodian of the single largest group of current
assets and plays a pivotal role in ensuring smooth production
besides assisting purchase activities through timely support. This
is the major problem and challenge that faces stores manager
today.
Many decisions in stores management, such as selection of
tracks, bins, handling equipment, safety practices, codification,
training personnel and accounting, call for considerable, sick and
an ability to coordinate with other departments as well as with
outsides agencies. These aspects should be highlighted and
appreciated so that the stores function is given due to importance.
Other areas in stores, such as records keeping movement analysis to
reduce obsolescence, surplus and damage are critical to the
profitable operation of the firm and the stores manager faces
challenges in the areas as well.
In many organizations the scrap yard also comes under control of
the stores manager. This is an entirely new responsibility calling
for the ability to maximize returns on the disposal of scrap. The
chief stores officer has under him separate officers for the
functions of receipt, issue, kardex and sub-stores.
Besides coming into contact with the production, purchase
maintenance, inspection and finance departments within his
organization, he has to come into contact with the outsiders like
suppliers, transport carriers and bankers. In order to meet such
challenges the important of the stores function should gradually
gain momentum and qualified engineers should be posted as chief
stores officers reporting to the materials manager.ROLE OF FINANCE
MANAGER IN INVENTORYMANAGEMENT
Optimum level of inventory and finding ensures to the problems
of EOQ are the recorder point and the safety stock. These
techniques are very essential to economize the use of minimizing
the total inventory cost. The techniques of inventory management
are very useful in data mining. The cases the board frame works for
managing inventories.
To the majority of the companies, inventory represents a
substantial investment. Thus the goal of wealth maximization is
related to the financial manager has an important role to play in
the management of inventory.
Although it is not his operating responsibility to control
inventory. The financial should see that only an optimum amount is
invested in inventory. He should be familiar with in inventory
control techniques and ensure that inventory is managed well.
Effect would be reduce inventory investment and increase the firms
prospects of making profits.INVENTORY CONTROL:-
Inventory control renders to the process whereby the investment
in materials and parts carried in stock is regulated within
predefined limits set in accordance with the inventory policy
established by the management. The inventory control is activity
oriented process whereas inventory control is the management
process and the later is the firms setup to be followed by the
former.
Inventory control refers to a planned method of purchasing and
storing the material at lowest possible cost without affecting the
sales scheduled. Inventory control therefore, is a scientific
method of determining what, when and how much to purchase and how
much to stock for a given period of time.The needs for of inventory
control:-
The rewards of inventory control system cannot be over looked in
the Indian context the idea behind this is,
Conserving valuable foreign exchanges.
Release of capital
Reduction in cost
The primary object of inventory control is :-
To minimize the idle time caused by shortage of inventory and
inventory availability of inventory.
To keep down capital investment in inventories. Inventory
carrying cost and obsolescence losses.
INVENTORY CONTROL TECHNIQUES
Selective inventory control
Inventory management Techniques
1. ABC analysis
1. EOQ (economic order Quantity) 2. XYZ analysis
A. Ordering cost
2. FNS Classification
B. Carrying cost
3. SOS classification
2. System of Re-ordering
4. SOS classification
5. S-D-E Analysis
6. HML analysis
7. Vet classification
ECONOMIC ORDER QUANTITY:-
One of the inventory management problems to be resolved is how
much inventory should be added when inventory is replenished. If
the firm is buying raw materials, it has to decide lots to in which
it has to be purchased on cash replenishment.
If the firm is planning production as per schedule. These
problems are called order quantity problem and task of the firm is
to determine optimum inventory level involves two type of costs:1.
Ordering cost.
2. Carrying cost.
The economic order quantity is that inventory level, which
minimizes the total of ordering and carrying costs.Ordering
costs:-
The term ordering cost is used in case of raw materials (or
supplies) and includes the entire costs of acquiring raw materials.
They include costs incurred in the following activities.
Requisitioning, purchase ordering, transport receiving, inspecting
and storing (store placement), ordering cost increase in proportion
to the number of orders placed the critical and staff costs,
however, dont vary in proportion to the number orders placed, and
one view is that so long as they are committed cost they need not
to be revoked in computing ordering cost.Carrying costs:
Cost incurred for maintaining a given level of inventory are
called carrying cost, they include storage, insurance, taxes,
deterioration and obsolescences.
_________________________
2* Quantity required*ordering cost
EOQ (economic order quantity) =
---------------------------------------------
Carrying cost
ABC Analysis:-
ABC analysis is one of widely used inventory control tool. Under
this we have to classify materials according to their importance
and concentrate more on critical items. Importance of any item
arises due to the two factors namely, consumption values and
critically in use. Classification of materials according to
importance has its basis on the promise vital few and trivial
many.
The classification based on consumption value is called ABC
analysis and the classification based on the critically of the
items is called VED analysis (vital essential and desirable).
Periodical consumption values are used as the basis for VED
analysis. ABC is said to denote always better control, the method
of classification of material is also known as selective method
control. The basis of analyzing the annual consumption cost (or
usage cost) goes after the principle vital few and trivial
many.
Items held in the stores can grouped into class A,B and C
respectively based on their annual consumption values. It has been
found in a large number of organizations that about 20% of the
items contribute to 70% of the annual consumption value, 30% of the
number of the number of items contributes about 20% of the annual
consumption value and the remaining 50% of the items contribute 10%
of the annual consumption value.
Hence consumption value need to be controlled at the highest
level and these are the A items. The control of bottom 50% of the
items that contribute only 20% of the annual consumption value,
that are denoted as C items can be delegated to the lowest decision
making levels while, the middle B items can be controlled by the
middle levels of personnel.
The following figures bring out clearly the concept of ABC
analysis.
Category value
items10%
% of annual Consumption
A item
20
70
B item`
30
20
C item
70
10The advantage of ABC method of inventory control is
follows.
It becomes possible to concentrate all efforts in areas which
need genuine efforts. This method produces better results and
involves minimum control. In the case of an items careful attention
is paid at every stage i.e., estimates of requirements, purchasing
safety stocks, receipts, inspection and issues.
A close watch on high consumption items and their progress of
replenishment etc, maintained. In the case items which are numbers
and at the same in expensive are loosely controlled.
The items fall under B category may be dispensed within the
record keeping system. This will help in saving time, money and
labor without endangering production schedule, it is most effective
and economical method as it is based on the selective method.
It helps in placing the orders, deciding the quantity of
purchasing safety stocks etc. Thus saving the organization from the
unnecessary stocks outs or surpluses.VED Analysis:-
VED analysis represents classification of items based on
critically the analysis classifies the items into 3 groups called
vital, desirable vital category encompasses those items for want of
which production would come to halt. Essential group includes items
whose stock out is very desirable group comprises of items which do
not cause any immediate loss of production or their stock out
entail nominal expenditure and causes minor disruption for a short
duration.HML analysis:
HML analysis is the price based analysis. This analysis is
generally used for control of spares. The items m under this
analysis are classified into 3 groups which are called high,
medium, low. To classify, items are listed in t he descending order
of their unit price.
Ex:- the management may decide that all items of unit price
above Rs 1000 will be of H category. Those with unit price between
Rs 100 to Rs 1000 will be of Mcategory and those having unit price
below Rs 100 will be of L category.F-S-N ANALYSIS:-
F-S-N analysis is based on the consumption figure of the items.
The items under this analysis are classified into 3 groups.
F-fast moving
S-slow moving
N-non moving
To conduct the analysis the last date of receipt or the date of
issue whichever is later taken into account and the period, usually
in terms of number of months that has elapsed since the last
movement is recorded.X-Y-Z ANALYSIS:-
X-Y-Z analysis is based on value stock on hand. Items whose
inventory values are high are called X items those inventory values
are low are called Z items and Y items are which have moderate
inventory stocks.
Usually X-Y-Z analysis is used in conjunction with either ABC
analysis or HML analysis.S-OS ANALYSIS:-
S-OS analysis is based on seasonality of the items and it
classified the items into 2 groups.
S-seasonal
OS-off seasonalS-D-E ANALYSIS:-
S-D-E analysis is based on problems of procurement namely,
Non availability
Security
Longer lead time
Geographical location of suppliers&
Reliability of suppliers etc
S-D-E analysis classifies the items into 3 groups called scare,
difficult, and easy. The information so developed is then used to
decide purchasing strategies. Scare classification comprises of
items which are in short supply imported through government
agencies. Difficult classification includes those items which are
available indigenously but are not easy to produce. Easy
classification covers those items which are readily available.LEVEL
SETTING:-
In order to have proper control on materials the following
levels are set:
Re-order level
Ordering level
Minimum level
Maximum level
Average stock level
Danger level
Safety stock levelRe-order level:-
It is the point at which if stock of a particular material in
store approaches the storekeeper should initiate the purchase
requisition for fresh suppliers of the material. This level is
fixed somewhere between the maximum and minimum levels in such a
way that the difference of the quantity of the material between the
re-ordering level and the minimum level will be sufficient to meet
the requirements of production up to the time fresh supply of the
material is received.Reorder level can be calculated be applying
the following formula:-
Ordering level=minimum level consumption during the time
required to get fresh delivery.
Another formula given by Weldon in his book cost accounting is
follows:
Reordering level=maximum consumption X maximum reorder level
period.Ordering level:-
This is the quantity of stock fixed between the maximum and
minimum level of stock. When this level is reached, it becomes the
duty of the store-in-charge to replenish the stock within
reasonable time. This level is usually a little higher than the
minimum level. In order to be prepared for such emergencies as
abnormal consumption delay in delivery of new supplies etc., while
fixing this level following points are taken into
consideration:-
Time required for obtained fresh suppliers.
Possible unexpected requirements which cannot be avoided.
Possible unexpected delays in getting fresh suppliers because of
rains war, about unrest etc.Minimum level:-
Formula level represents the level beyond, which the stock in
hand is not allowed to exceed. This is because:
If the exceeds this level, it will
Involves more investment
Requires more space for storages
Amount to more wastage because of handling, spoilage,
obsolescence
Involves more carrying cost
Excess stock will increase the cost of storage, thereby
increasingly selling cost. Excess stock will involve unnecessary
blockade of working capital and prevent its availability for a more
profitable use. Stock in excess will prevent the management from
taking advantages of price fluctuation and favorable market
condition.The fixation of maximum level depends on the following
factors:-
Rate of consumption of the material
Money available
Time required to obtain deliveries
Storage space available
Economic order quantity
Market conditions, seasonality and price fluctuation
Possibility of loss due to deterioration
T he following for the calculation of maximum stock level given
by Weldon is as follows:-
Maximum stock level = Re-ordering+ Re-ordering-quality
(Minimum consumption X minimum re-ordering period)Average stock
level:-
The average stock is calculated by the following formula.
Average stock level=minimum stock level+ of reorder quantity of
minimum stock level+ maximum stock levelDanger level:-
This means levels at which normal issues are made only under
specific instructions. The purchases officer will make special
arrangements to get the materials which reach at their danger level
so that the production may not stop due to storage of material
danger level = Average consumption X maximum re-order period for
emergency purchase.Safety stock level:-
This level is below the minimum level and represents the stage
at which emergency and immediately steps have to be taken for
getting the stock replenished. The inventory plays a vital role in
the efficient operation of a company. Particularly; it is in direct
touch with manufacturing departments, material departments and
marketing department in its day to day activities. In all most an
industries, about 60 percentage of the working capital in the
materials. Efficient inventory managements can help to achieve
better utilization of this investment with considerable degree of
success. Providing all the required raw materials, consumable
stores, components etc., to the manufacturing units at the right
time and place, at the lowest possible cost and adopting inventory
control measures, using good material handling practices are the
principle objectives of stores management. In their words reducing
the cost in all spheres of the manufacturing activities will help
in increase the profits of the company. The efficient with whom the
inventory is managed will invariable determine the efficiency of
the producing and levels of profits of the enterprises. Hence
inventory management has attained significant status in the present
day business and industrial management. The increasing
specialization in industry, widening range of technical equipment,
fast development in science and technological field here forced the
inventory management also to innovate and improve its performance
and contribute to efficiency and economy in production.TABLE -
5.1.1
LEVEL OF INVENTORYANALYSIS PART-1
RATIO ANALYSIS
(INVENTORY)S.NoParticulars2007-082008-092009-102010-112011-12
1Raw materials
Lime stone
(stacker 60 Per cent)
Iron ore
(stacker 25 Per cent)
Clay ash
(stacker 15 Per cent)3330.80
1387.83
832.705169.86
2154.11
1292.478392.21
3496.76
2098.0511109.76
4629.10
2777.4411265.50
4693.96
2816.40
TOTAL(clinker)5551.338616.4413937.0218516.2618775.86
2Work in process5386.488451.7413822.0218351.4618611.09
3Finished goods6251.559316.5914522.3219216.5419416.11
Total17189.3626384.7742331.3656084.2656803.06
The inventory level was found to be increased trend from
2007-2008 to 2011-2012. The overall inventory level position for
the five years is satisfactory.CHART - 5.1.1
LEVEL OF INVENTORY
INVENTORY TURNOVER RARIO
. The inventory turnover ratio measures the number of times a
company sells its inventory during the year.
TABLE - 5.1.2
INVENTORY TURNOVER RARIO
S.NoYearCost of goods sold (` in lakhs)Average stock (in
tones)Inventory turnover ratio
12007-0826630284874285.46 per cent
22008-0928444945031845.65 per cent
32009-103094850819401.53.78 per cent
42010-114010580945491.54.24 per cent
52011-124521886822538.55.50 per cent
Source: Annual reports of Kesoram Cements LimitedThe inventory
turnover ratio was high in the year 2007-08 after that 2008-09 the
inventory turnover ratio was decreased. The present value of
inventory turnover ratio is good.
CHART - 5.1.2
INVENTORY TURNOVER RATIO
INVENTORY CONVERSION PERIOD
The inventory conversion period is the time required to obtain
materials for a product, manufactured it, sell it.
TABLE 5.1.3
INVENTORY CONVERSION PERIOD
S.NoYearNo. of daysInventory turnover ratioInventory conversion
period (in days)
12007-083655.46 per cent66
22008-093665.65 per cent64
32009-103653.78 per cent96
42010-113654.24 per cent86
52011-123655.50 per cent65
Source: Annual reports of Kesoram Cements Limited
The inventory conversion period is normally indicates the wealth
of the company. The company wants to concentrates with its
inventory conversion period.
CHART 5.1.3
INVENTORY CONVERSION PERIOD
ANALYSIS PART-2
EOQ ANALYSIS
TABLE-5.2.1
EOQ ANALYSIS FOR THE YEAR 2007-08ItemAnnual
requirementOCPEOQTotal investment with EOQTotal investment without
EOQSaving inventory cost
Iron Ore31500361.56512308179413861556821
Lime Stones15000401.251449801423451452252880
Clay Ash1400042214476711198213591523933
Sulphur1300034.51.7515371611080113392723136
Gypsum13500351.251448691262231306884465
Bauxite1150036.51.51507481133221161732851
Source: Annual report of Kesoram CementsLimited
The companys annual requirement for the year 2007-08 is 101000
tons of raw materials. They using investment with EOQ spent `
787168. When the same in without investing EOQ is ` 882551. So the
company saved ` 169432 in the year 2007-08.
CHART-5.2.1
EOQ ANALYSIS FOR THE YEAR 2007-08
TABLE-5.2.2
EOQ ANALYSIS FOR THE YEAR 2008-09ItemAnnual
requirementOCPEOQTotal investment with EOQTotal investment without
EOQSaving inventory cost
Iron Ore33500351.57512509562616967574049
Lime Stones1350041215474411606414011524051
Clay Ash16500551.5515411001710501710500
Sulphur14000351.516380813291615330420388
Gypsum1250036215467110467615330420388
Bauxite11000372.51605719278711875225965
Source: Annual report of Kesoram CementsLimited
The companys annual requirement for the year 2008-09 is 103700
tons of raw materials. They using investment with EOQ spent `
590000. When the same in without investing EOQ is ` 921215. So the
company saved ` 195739 in the year 2008-09.
CHART-5.2.3
EOQ ANALYSIS FOR THE YEAR 2008-09
TABLE-5.2.3
EOQ ANALYSIS FOR THE YEAR 2009-10ItemAnnual
requirementOCPEOQTotal investment with EOQTotal investment without
EOQSaving inventory cost
Iron Ore13500341.5651260837891539057046
Lime Stones13500361.516780513564215151515873
Clay Ash15000381.7516580713456716644513878
Sulphur14000371.7516476912746215438426922
Gypsum15000352.516564810854016677558235
Bauxite1120036.51.7517068411747612819110715
Source: Annual report of Kesoram CementsLimited
The companys annual requirement for the year 2009-10 is 98500
tons of raw materials. They using investment with EOQ spent `
68646. When the same in without investing EOQ is ` 800543. So the
company saved ` 114076 in the year 2009-10.
CHART-5.2.3
EOQ ANALYSIS FOR THE YEAR 2009-10
TABLE-5.2.4
EOQ ANALYSIS FOR THE YEAR 2010-11ItemAnnual
requirementOCPEOQTotal investment with EOQTotal investment without
EOQSaving inventory cost
Iron Ore34000361.595127112323121760594374
Lime Stones12500371.7517472712777014622618456
Clay Ash14000401.517586415249616457512079
Sulphur16000381.7517483414657518716140586
Gypsum18000362.7517568612193821219090252
Bauxite1700037118011222030822050621980
Source: Annual report of Kesoram Cements LimitedThe companys
annual requirement for the year 2010-11 is 111500 tons of raw
materials. They using investment with EOQ spent `875092. When the
same in without investing EOQ is `1132819. So the company saved
`2577276 in the year 2010-11.
CHART-5.2.4
EOQ ANALYSIS FOR THE YEAR 2010-11
TABLE-5.2.5
EOQ ANALYSIS FOR THE YEAR 2011-12ItemAnnual
requirementOCPEOQTotal investment with EOQTotal investment without
EOQSaving inventory cost
Iron Ore38000371.751051268135358268736133378
Lime Stones13500351.251858691618521675885736
Clay Ash1200038319555110909915777048671
Sulphur15000403.2518560811445518722572770
Gypsum17000401.25194104320364622111017464
Bauxite18000392.7520071514496524223597270
Source: Annual report of Kesoram CementsLimitedThe companys
annual requirement for the year 2011-12 is 113500 tons of raw
materials. They using investment with EOQ spent ` 869375. When the
same in without investing EOQ is ` 1244664. So the company saved `
375289 in the year 2011-12.CHART-5.2.5
EOQ ANALYSIS FOR THE YEAR 2011-12
FINDINGS
RATIO ANALYSIS (INVENTORY)
In inventory level of the company, the in inventory level has
been increased year by yea. There is no problem in the inventory
level of the Kesoram Cements Limited. In inventory turnover ratio
the ratios of the year has been fined as low in the years of
2009-10 and 2010-11. After those periods the inventory turnover
ratio has slightly increased in the year 2010-11. Even though that
level is quite low when compare with 2008-09. In inventory
conversion period is funded as good level. Even though they wants
to keep the inventory conversion period as low.EOQ ANALYSIS
In EOQ analysis for the year 2007-08 to 2011-12 is good. For
this year they followed EOQ with investment for purchase of goods.
In EOQ analysis for the year 2008-09 to 2011-12 is good. For this
year they followed EOQ with investment for purchase of goods. In
EOQ analysis for the year 2009-10 to 2011-12 is good. For this year
they followed EOQ with investment for purchase of goods. In EOQ
analysis for the year 2010-11 to 2011-12 is good. In this year the
EOQ with investment and EOQ without investment are same. In EOQ
analysis for the year 2011-12 is good. All years of EOQ is followed
only investment with EOQ. SUGGESTION
RATIO ANALYSIS (INVENTORY)
In inventory level of the company shows the increase of the raw
materials, work-in-process and finished goods. The inventory level
of Kesoram CementsLimited is well.
In inventory turnover ratio finded some problems. They want sell
their product to outside also. Now they use their cement which are
produced in Kesoram CementsLimited for their own purpose. They want
to sell that to others also then only the ratio will be
increased.
Kesoram CementsLimited sells the 25 per cent of the cements
produced, remaining they used for own purpose. For sales to others
they allowed more days as credit to their agents.
EOQ ANALYSIS
In EOQ analysis there is no problems finded in findings for the
Kesoram Cements Limited. Even though they want to keep that
situation in upcoming years also. Then only they can retain
position. In EOQ analysis there is no problems finded in findings
for the Kesoram Cements Limited. Even though they want to keep that
situation in upcoming years also. Then only they can retain
position. In EOQ analysis there is no problems finded in findings
for the Kesoram Cements Limited. Even though they want to keep that
situation in upcoming years also. Then only they can retain
position. In EOQ analysis there is no problems finded in findings
for the Kesoram Cements Limited. The EOQ was finded as same in the
concept of EOQ with investment and EOQ without investment, even
though they followed EOQ with investment. In EOQ analysis there is
no problems finded in findings for the Kesoram Cements Limited.
Even though they want to keep that situation in upcoming years
also. Then only they can retain position.CONCLUSIONThe study covers
the inventory management for effective inventory control. I have
used a technique Economic Order Quantity Analysis named as EOQ
Analysis for find out the rate with EOQ and without EOQ investment
for purchasing of good in the manufacturing the cement in Kesoram
Cements Limited. Hence the inventory management of the organization
quite good. During the year 2007-2011 from this study I concluded
that organization would be effective inventory management. The
study will be use for Kesoram Cements Limited in various ways.
BIBLIOGRAPHY
BOOKS
Asohok Banerjee - Financial Accounting A Managerial Emphasis
Excel Books 2005
Collis Business Accounting Palgrave Macmillan 2007
Khan MY Jain P.K Management Accounting : Text, problems and
cases 4th Edition Tata McGraw Hill 2007
Pandikumar Management Accounting Excel Books 2007
Ramachandran N Kakani Kumar Ram Financial Acccounting For
Management Tata McGraw Hill 2006
Robert N.Anthony David F.Hawkins Kenneth A.Merchant Accounting
Text and Cases Tata McGraw Hill 2007
S.K Bhattacharyya Jhon Dearden Costing for Management Vikas
Publishing 2002
S.N Maheswari S.K Maheswari Accounting for Management Vikas
Publishing 2006WEBSITES
www.google.com www.inventoryquzz.com
Source: Annual report of Kesoram Cement Corporation Limited
PAGE 20