Chapter - I

INTRODUCTION
1.1 Introduction
Inventory Management or control refers to maintaining an adequate supply of material to meet an expected demand pattern. It thus deals with determination of optimal policies and procedures for procurement. Management of inventory is a risk return trade-off exercise by mangers. Inventory is expressed in terms of both quantity and monetary value. In terms of quantity, it can be expressed as the number of units of an item in stock where as in monetary terms it is the sum total of the monetary value of all its items of inventory.. Inventory refers to those idle resources which have economic value and thus it may be defined as usable but idle resources that have economic value. Inventory is a stock of direct or indirect material, from raw material to finished goods stocked in order to meet an unexpected future demand. In other words inventory is a physical stock of goods kept for the future purposes. of business. hus the functions of inventory are to" #rotect against unpredictable fluctuations in demand and supply ake the advantage of price discounts through bulk purchases ake the advantage of batches and longer production run #rovide flexibility to allow changes in production plans in view of changes in demands etc. $acilitate uninterrupted production hough Inventory is a blocked capital, in the sense that it is not being used in the present, it plays a distinct role in the life of any organi!ation for a smooth and efficient running

he basic function of inventory is thus to insulate the production process from changes in the external factors not in control of management.. It decouples various interlinked functions and thus enables each function to conduct itself independently like #urchasing, #roduction, and Marketing etc 1

1.% &'()* I+),

he main ob-ective of the present study is to evaluate the performance of ./ile ltd0 in respect of inventory management. he specific sub-ob-ectives of the study are given below. 1. *ategori!ing the inventory in 1'* for analysis in /ile ltd and to assess the manage2ial level control on the vital items, in the inventory holding. %. 3. 2. 4. 5. o study the method of ma-or raw material controls being used in the /ile ltd. o study the inventory management process in /ile ltd. o evaluate the economic order quantity and lead time consumption of /ile ltd. o evaluate reorder level, maximum stock level of /ile ltd. o study which item is having the high percentage of usage in the processing of finished goods. 6. o access the performance of inventory management of /ile ltd by selected accounting ratios.

1.3 7IMI 1 I&/,

1. $inancial policies of the organi!ation are sensitive in nature8 the same could not be acquired easily.

%.

ime constraint is another limitation to make the study more qualitative.

3. 1nother limitation of the study is collecting of data from finance department and warehouse superiors. It is very difficult8 as they are they are too busy in discharging their own duties.

2.

he study is limited to the 9lass lining division of /ile 7td.

1.2 #resent ,tudy

$or the purpose of the study data has been selected covering from %::6-%::; to %:1:-%:11. Most of the data is based on the secondary data, personal discussions were held with employees of stores department and finance department of /ile ltd. he secondary data is the annual reports, other inventory valuation and quantity reports. he data collected from the secondary source is processed and analy!ed for drawing inferences by applying simple statistical methods like percentage, average, etc.,. economic order quantity and 1'* analysis have been studies. $inally conclusions are drawn based on the study and suitable suggestions are made for improving the performance of /ile ltd. he technical analysis like

*hapter < II

=),)1=*> METHODOLOGY
For the purpose of the study data has been selected covering from !!"# !!$ to !%!# !%%& Most of the data is based on the secondary data' personal discussions (ere held (ith employees of stores department and finance department of )ile ltd& The secondary data is the annual reports' other inventory valuation and *uantity reports& The data collected from the secondary source is processed and analy+ed for dra(ing inferences by applying simple statistical methods li,e percentage' average' etc&'& The technical analysis li,e economic order *uantity and -./ analysis have been studies& Finally conclusions are dra(n based on the study and suitable suggestions are made for improving the performance of )ile ltd&

*hapter < III

>)&=I I*17 $=1M)?&=@

3.1 Inventory Management in /ile 7td
Materials constitute the most significant part of the current assets of a large ma-ority of companies in India. &n an average, materials are approximately 5: percent of current assets in public limited companies in India. 'ecause of large si!e of materials maintained by firms, a considerable amount of funds is required to be committed to them. It is, therefore, absolutely imperative to manage all aspects of material efficiently and effectively in order to avoid unnecessary investment. 1 firm neglecting the management of material will be -eopardi!ing its long-run profitability and many fail ultimately. It is possible for a company to reduce its level of material to a considerable degree, e.g., 1: to %: percent, without any adverse effect production and sales, by using simple material planning and control techniques. he reduction in AexcessiveB stocking material carries a favorable impact on a companyBs profitability. Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock by a business. In accounting inventory is considered an asset. In business management, inventory consists of a list of goods and materials held available in stock. Inventory management is primarily about specifying the si!e and placement of stocked goods. Inventory management is required at different locations within a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods. he scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting. 'alancing these competing requirements leads to optimal inventory levels, which is an on-going process as the business needs shift and react to the wider environment 5

,ystems and processes that identify inventory requirements, set targets, provide replenishment techniques and report actual and pro-ected inventory status. >andles all functions related to the tracking and management of material. his would include the monitoring of material moved into and out of stockroom locations and the reconciling of the inventory balances. 1lso may include ABC Analysis, lot tracking, cycle counting support etc. Management of the inventories, with the primary ob-ective of determiningCcontrolling stock levels within the physical distribution function to balance the need for product availability against the need for minimi!ing stock holding and handling costs. The reasons for keeping stock here are three basic reasons for keeping an inventory" 1. ime - he time lags present in the supply chain, from supplier to user at every stage, requires that you maintain certain amount of inventory to use in this Dlead timeD. %. Encertainty - Inventories are maintained as buffers to meet uncertainties in demand, supply and movements of goods. 3. )conomies of scale - Ideal condition of Done unit at a time at a place where user needs it, when he needs itD principle tends to incur lots of costs in terms of logistics. ,o bulk buying, movement and storing brings in economies of scale, thus inventory.

3.% *lassification of Inventory

Inventory is idle resources that have future economic value. It indicates that it may be available in different forms depending upon the production cycle stage it is in. *lassification of inventory is done on this basis and thus the different classifications of inventory are as follows =aw materials - =aw materials are input goods intended for combination andCor conversion through the manufacturing process into semi-finished or finished goods. hey change their form and become part of the finished product.

*omponents and #arts - (ust as raw materials are converted to finished goods in a manufacturing operation, components and parts are assembled into finished goods in an assembly operation.

Maintenance, repair and operating Inventories FM=&G support of operations.

hese include parts, supplies, and

materials used in or consumed by routine maintenance and repair of operating equipment, or in

In-process goods -

hese are goods in the process of manufacturing and only partially

completed. hey are usually measured for accounting purposes in between significant conversion phases. In-process inventories provide the flexibility necessary to deal with variations in demand between different phases of manufacturing.

$inished goods -

hese represent the completed conversion of raw materials into the final

product. hey are goods ready for sale and shipment.

=esale goods -

hese are goods acquired for resale. ,uch goods may be purchased by a

wholesaler for resale to distributors, or by distributors for resale to consumers, etc. *apital goods - hese are items Fsuch as equipmentG that are not used up or consumed during a single operating period, but have extended useful lives and must be expensed over multiple operating periods. ax laws require that such an item be capitali!ed, and a predetermined percentage of its cost be recogni!ed as an expense each operating period, over a predetermined time frame, according to equipment classes.

*onstruction materials - hese are raw materials and components for construction pro-ects such as a building, bridge, etc.

>ard goodsCsoft goods - ?hat one identifies as hard goods and soft goods will vary depending on the industry involved. $or example, in data processing, hard goods include apparatus such as computers and terminals, while soft goods include software, data storage media, and the like.

3.3 Inventory *ontrol ,ystems

Inventory control is concerned with minimi!ing the total cost of inventory. factors in inventory control decision making process are" he cost of holding the stock Fe.g., based on the interest rateG. he cost of placing an order Fe.g., for row material stocksG or the set-up cost of production. he cost of shortage, i.e., what is lost if the stock is insufficient to meet all demand. he three main

he third element is the most difficult to measure and is often handled by establishing a Dservice levelD policy, e. g, certain percentage of demand will be met from stock without delay.

3.2 /ature of Material

Materials are stock of the products a company is manufacturing for sale and components that make up the products. Most manufacturing organi!ations usually divide their Dgoods for saleD inventory into" =aw Materials- materials and components scheduled for use in making a product. ?ork in process, ?I# - materials and components that have begun their transformation to finished goods. $inished goods - goods which are ready for sale to customers. 9oods for resale - returned goods that are saleable.

3.4 =aw Materials

=aw materials are those basic inputs that are converted into finished products through the manufacturing process. =aw materials are those units which have been purchased and stored for future production. hey are required to carry out production activities uninterruptedly. he quantity of raw materials required will be determined by the rate of the consumption and the time required for replacing the supplies. he factors like the availability of raw materials and government regulations, etc., too affect the stock of raw materials.

=aw material turnover ratio indicates the number of time materials is replaced during the year. o -udge whether the ratio of a firm is satisfactory or not, it should be compared over a period of time of the basis or trend analysis. In general, a high material turnover is better than a low ratio. Iet a very high ratio calls for a careful analysis. It indicates of under investment in very low level of inventory has serious implications. It is also likely that the firm may be following a policy of replenishing it stock in too many small si!es. ,imilarly, a very low material turnover ratio is dangerous. It signified excessive material or over investment. *arrying excessive inventory involves the cost in terms of interest of funds of rentals space and so on. hus a firm should have neither too high nor low material turnover.

o avoid .stock out list0 associated with a high ratio and the cost of carrying the excessive material8 there should be reasonable level for mixed ratio. maintain a close watch on the trend of ratio. Inventory turnover ratio can be calculated as follows" he firm would well advise to

Inventory urnover =atio J *ost of 9oods sold or urnover 1verage Inventory

1:

3.5 ?ork in #rocess

?ork in process is called as stock in process. It refers to goods in the intermediate stage of production. hese are semi finished product for sale. hey represent products that need more he work in process is that stage of stock he raw materials enter the process of he quantum of work work before they become finished product for sale.

which is in between raw materials and finished goods.

manufacturing but they are yet to attain the final shape of finished goods. in process.

in process depends up on the time taken in manufacturing8 the more will be the amount of work

3.6 $inished 9oods

he finished goods materials are those completely manufactured products which are ready for sale. ,tocks of raw materials and work in process facility production, while stock of finished goods is required for smooth marketing operations. consumers. hese are goods, which are ready for he stocks of finished goods provide buffer between the production and market.

he purpose of maintaining material is to ensured proper supply of goods to the customers. In some concerns the production is undertaking on order basis. In these concerns there will not be a need for finished goods inventory. orders. he need for finished

goods stock will be more when production is under taken in general without waiting for specific hose, inventory serve as the link between the production and consumption of goods.

he levels of three kinds of inventories for a firm depend on the nature of its business. 1 manufacturing firm will have substantially high levels of three kinds of materials, while retail or wholesale firms will have a very high level of finished goods in material and work in process stock. ?ith in manufacturing firms there will be differences. 7arge heavy engineering companies produce long production cycles products8 therefore, they carry large materials. &n the other hand, materials of consumer #roduct *ompany will not be large because of short production cycle and fast turnover.

11

1 fourth kind of materials, supplies is also maintained by firms. enter production, but are necessary for production process.

hese materials do not directly

Esually these supplies are small part of total material and do not involve significant investment. herefore, a sophisticated system of inventory control may not be maintained for them.

3.; ,pares
he stock policies of spares differ from industry to industry. ,ome industries like transport will require more spares than the other concerns. he costly spares parts like engines, maintenance spares etc., are not discarded after use, rather they are kept in ready position for further use. 1ll decisions about spares are based on the financial cost of inventory on such spares and the cost that may arise due to their non-availability

3.H /eed to >old Materials

he question of managing materials arises only when the company holds the material. for manufacturing end products for sale. ,tocking of Materials involves blocking up the companyBs resources in currency, storage and handling costs. If it is expensive to maintain materials, why do companies holds materialsK here are three resources which generally motivate for holding materials. =1/,1* I&/ M& I+)" )very firm tends to maintain some level of inventory to meet the day to day requirements of sales, production process and customers demand etc. in this8 raw materials are stored for smooth production process of the firm. #=)*1E I&/1=I M& I+)"

1%

1 firm should keep some inventory for unforeseen circumstances also like loss due to natural calamities in a particular area, strikes, layouts etc. ,o the firm must have some finished goods as well as raw-materials to meet circumstances. ,#)*E71 I+) M& I+)" Influences the decision to increase or reduce material level to take advantage of price fluctuation. 1 company should maintain adequate stock of materials for a continuous supply to the factory for an uninterrupted production. It is not possible for a company to procure raw materials whenever it needed. 1 time lag exists between demand and supply. 1lso, there exists herefore, uncertainly in procuring raw materials in time on many occasions. he procurement of materials

may be delayed because of such factors as strike, transport disruption or short supply. production.

the firm should maintain sufficient stock of raw materials at a given time to streamline &ther factors which may necessitate purchasing and holding of raw material inventories are quantities of raw materials than needed for the desired production and sales level to obtain quantity discounts of bulk purchasing. 1t time, the firm would like to accumulate raw materials in anticipation of price rise. ?ork in process material builds up because of the production cycle. #roduction cycle is time span between introduction of raw material into production and emergence of finished product at the completion of production cycle. improving their production techniques. ,tock of finished goods has to be held because production sales are not instantaneous. 1 firm cannot produce immediately when goods are demanded by customers. herefore, to supply finished goods on a regular basis, their stock has to be maintained. ,tock of finished goods has also to be maintained for sudden demands from customers. In case the firmBs sales are seasonal in nature, substantial finished goods material should be kept to meet the peak demand. $ailure to supply products to customers, when demanded, would mean loss of the firmBs sales to competitors. he level of finished goods materials would depends upon coordination between sales and production as well as on production time. 13 ill production cycle completes, stock of work in process has to be maintained. )fficient firm constantly try to make production cycle smaller by

3.1: *osts
he holding of inventories exposes the firm to certain risks. in holding are given below. Capital Cost: he holding of inventories includes cost. ,o, the firm has to arrange for hese funds may be arranged he various costs and risk involved

additional funds in order to meet the cost of inventories.

from the firmBs sources or from outsiders. In both cases, the firm has to incur a cost. Storage an !an ling Cost: >olding inventories also involves costs on storage. $or holding inventories in advance, for sufficient stock, for uninterrupted production, the business has to pay for storage costs. he storage costs include the rent of the warehouse, insurance charges etc.

he costs of holding inventories are as follows" "aterial Costs: his is the cost of purchase of goods, transportation, handling charges. Or ering Costs: his is a variable cost associated with placing an order. $ew orders mean less cost and more orders mean more cost. Carrying Costs: his basically includes expenses of storage of goods. he costs are

storage cost, insurance cost, spoilage cost, cost of funds tied up in inventory etc.

3.11 7ead ime

It is the time taken by the supplier to supply the materials. lapses between the recognition of need and its fulfillment. echnically it is the period which here is a direct relationship between he lead time can be

lead time and inventory. 1s lead time increases, inventories also increase. inspection lead time etc. 12

divided into administrative lead time, manufacturing lead time, transportation lead time,

3.1% =e-&rder #oint

It indicates when an order should be placed8 it depends upon consumption ratio and lead time. =)-&=L)= #&I/ J F7)1L IM)M 1+)=19) E,19)G

3.13 ,afety ,tock

Esing the above formula, it is difficult to predict usage and lead time accurately. delivery of the material is delayed the firm can face a problem of stock-out. he demand

for material may fluctuate from the normal lead time. If the actual usage increases or the herefore, in order to guard against the stock-out, the firm may maintain a safety stock i.e., some minimum or buffer material as cushion against expected increased usage andCor delay in delivery in time. hus the formula to determine the re-order point when the safety stock is maintained is as follows" R#-ORD#R STOC/ $OINT% &'#AD TI"#(A)#RA*# USA*#+ , SA-#T.

3.12 &rder *ycle

he time period between placements of two successive orders is referred to as an order cycle. here are two inventory management system based on which the orders may be placed. are as follows" 0-syste1" F$ixed order quantity system or re-order point systemG. $-syste1" F$ixed periodic review systemG. 14 hey

3.14 =eorder 7evel

he inventory level at which a new or fresh order is placed with the suppliers for obtaining additional items is known as reorder level. minimum stock levels. his point is fixed between the maximum stock and his depends on two factors"

he lead time between order placement and actual receipt, and he demand during the lead time. his is the quantity of the replacement order. In certain types of inventory control system, the reorder quantity is the economic order quantity.

3.15 Maximum ,tock 7evel

1 stock level selected as the maximum desirable or allowable is referred to as maximum stock. his is used as an indicator to show when stock levels have risen too high. he maximum level is the largest quantity of a particular material, which should be kept in store at any one time. he fixation of maximum level is necessary to avoid unnecessary blocking of capital in materials, losses on account of deterioration and obsolescence of materials, extra overheads and temptation to thefts. he maximum level of materials should be decided after considering the following" ,torage space 1vailability of working capital *ost of storage, insurance, interest on capital invested in stock. 15

=ules framed by government for import or procurement.

3.16 Minimum ,tock 7evel

It is also known as buffer stock or safety stock. his is the additional stock needed to allow for

delay in delivery or for any unexpected demand that may arise during the lead time.

3.1; Importance of Inventory Management to a 'usiness

Inventory Management is the planning, control, organi!ing and leading the goods and materials required by the business.

Inventory Management is very important for the business. It enables the business to meet or exceed expectations of the customer by making the product readily available. If managed properly, it can help the organi!ation reduce its costs, achieve economies of scale and prepares the organi!ation for uncertainty.

3.1H &b-ectives of Inventory Management

o maintain a optimum si!e of material for efficient and smooth production and sale operations.

o maintain a minimum investment in material to maximi!e profitability.

16

'oth excessive and inadequate materials are not desirable. which the firm should operate. and maintain optimum level material investment.

hese are two danger points within

he ob-ective of material management should be to determine he optimum level material will lie between he firm should always avoid a

the two danger points of excessive and inadequate inventories. situation of over investment or under investment in materials.

he following are the main ob-ectives of inventory management

o ensure continuous supply of materials to facilitate uninterrupted production. Maintain sufficient stocks of raw materials against slack period supplies and benefit from price changes. Maintain sufficient finished goods inventory for smooth sales operation and customer service. =educe the cost of production carrying cost and time. o minimi!e losses through wastages and damages. o ensure quality goods at reasonable prices. It controls investment in inventories and keeps it at an optimum level. o ensure uninterrupted production. o facilities furnishing of data for short-term planning and control of inventory

3.%: echniques of Inventory Management

#CONO"IC ORD#R 0UANTIT.: here are two questions relating to material management" 1. ?hat should be the si!e of the &rderK 1;

%. 1t what level should the order placedK

o answer the first question the basic economic order quantity model is helpful. If the firm is buying raw material, it has to be purchased on each replenishment. his problem is called order quantity problem and the task of the firm is to determine the optimum or )&N. he determination of the appropriate quantity to be purchased in each lot to replenish stock as a solution to the order quantity problem necessitate resolution of conflicting goals buying in large quantities implies a higher inventory level which will assure. ,mooth productionCsales operations. 7ower ordering or set up costs.

'ut it will involve higher carrying costs. &n the other hand small orders will reduce the carrying costs would increase as there is a likelihood of interruption the operations due to stock outs. 1 firm should place neither too large nor too small orders on the basis of trade off between the benefits from the availability of inventory and the cost of carrying. o take enough care to avail the concession available in purchasing materials. )nsuring that the materials of requisite specifications and quality have been received in good condition.

#O0 % 2 &3AO4I+ ?here, 1 J 1nnual otal =equirement, & J &rdering *osts, 1H

I J Inventory *arrying *osts.

3.%1 1'* 1nalysis

1'* analysis is a technique of exercising selective control also known as management by exception8 over inventory items. he technique is based on the assumption that a firm should not exercise the same degree of control on items which are more costly as composed to those items which are less costly. 1ccording to this approach the inventory items are divided into three categories i.e., 1, ' and *. *ategory A1B may include more costly items, while category A'B may consists of less costly items and category A*B of the least costly items. herefore, 1'* analysis concentrates on his here is no definite procedure important items hence also known as *ontrol by Importance and )xception F*I)G. approach is also known as #roportional +alue 1nalysis F#+1G. for classifying the inventories as 1, ' and * categories. he method usually adopted is,

1. %. 3.

he quantity of each material expected to be used is estimated. he value of each of the above material is found out by multiplying quantity with price. he items are arranged in the descending order of their value irrespective of their quantities and give the ranks.

2. )xpress the value for each item as a percentage of the aggregate usage value and obtain the cumulative percentage of annual usage values. 4. &btain the percentage value for each of the items. $or n items, each item shall represent 1::Cn percent. 1lso obtain the cumulative values of the percentages. 5. #lot the curve using the cumulative computed in step 2 and step 4 on x and y axes respectively. 6. Letermine appropriate divisions for the 1, ' and * categories. %:

In general, normal inventory item possess the following distribution pattern.

1" 4- 1:O of the total number of items account for about 6:O of the total consumption value.

'" 1:-%:O of the items account for %:O of total consumption value.

*" he remaining large number of items account for the balance 1:O of the consumption value.

%1

*hapter <I+

#=&$I7) &$ /I7) 7 L.

2.1 Introduction to /I7) 7 L
/ile 7imited was originally incorporated as a private limited company with the name /avabharat Industrial 7inings and )quipment #rivate 7imited on May 1;, 1H;2 and was later converted to a public limited company with the name /avabharat Industrial 7inings and )quipment 7imited. he name of the *ompany was changed to its present name of /I7) ltd. vide a fresh certificate of incorporation dated ,eptember 15, 1HH2. /ile is a #ublic limited company and its shares are listed on the 'ombay ,tock )xchange F',)G. /ile has emerged as a leader in glass lining by achieving customer satisfaction by delivering quality products, with a fervent desire to convert every customer relationship into a prospective partnership. /ilePs 9lass 7ining and pressure vessel division is located at Industrial estate, /acharam, >yderabad with a covered area of ;6:: sq.m. he totally integrated fabrication, machining and glass lining facilities ensure timely delivery of quality products. /ilePs two /on-$errous plants are located &ne near >yderabad, and another near irupati. he combined capacity of these two plants is 3%::: tons per annum. /ileBs % M? ?ind $arm is located at =amagiri, 1nanthapur district. he state-of-the-art *1L facilities and experienced engineers not only automate the day-to-day engineering drawing requirements, but also innovate and improve the versatility of the product. In addition to standard equipment, /ile designs and manufactures equipment for specific customer applications or process performance improvement. %%

1 *ompany with a difference - setting benchmarks" /ile is an I,& H::1 certified *ompany manufacturing world class 9lass 7ined )quipment, #ressure +essels, 7ead and 7ead 1lloys.

#roduct range of the company includes" =eactors =eactors with *onical bottom =eactor with Insulation =eceivers F(acketed QEn-acketedGC ,torage anks *onical Lryer 1gitated /utsche $ilters >eat )xchangers C*ondensers *olumns 7ead products #ure 7ead HH.H6O purity 7ead 1ntimonial alloys 7ead ,elenium alloys 7ead *alcium alloys 7ead in alloys

%3

*hapter <+

L1 1 1/17I,I,
4.1 1'* 1/17I,I,
ABC ANA'.SIS -OR T!# .#AR 3565-66 In the year %:1:-%:11 the total annual value of material is =s. %:1%6;:43. he materials are divided into 1 category, ' category and * category according to annual consumption. he 1'* 1nalysis table is as follows

no 7

1aterial escription

ann8al cons81ptio n 1::% 6:% 3:1 %33 4H66: %2: 1%6 %2

cost per 8nit 22332 2231H 22%H5 2H2H5 11H %6115 2H245

ann8al val8e 2222222; 31111113 13333332 1141416; 6:;6:1; 54;2H%; 5%;1::5

1 steel platesF1%,12,1;,%:,%4Gmm % steel platesF;,15,%%,3%Gmm 3 steel platesF5,1:,35,2:,24,4:,53,54Gmm 2 rodsF;:,1::,1%%Gdia 4 *hemicals 5 mechanical sealF5:,;:,1::Gmm 6 rodsF4:,1;:,%2:,%4:Gdia

; gear boxFas-44,5:,34,==%1:L/*,11:L/*G H motorsF3,6,4,1:Ghp 1: accuators and variable frequency drive 11 mildsteel seemless pipes 1% electrodesF)6:1;G 13 forgingsFflangesG 12 =ods 14 packaging material 15 standguard and stand drive 16 mechanical sealF4:,1%4Gmm 1; >ardware 1H paints %: gearboxF1,-;:,H:$G %1 motorsF4,14,%:Ghp %% forgingsFno!!lesG %3 teflon itemsFgasketsG %2 electrodesF)6:1;-1G %4 mechanical sealF2:mmG %5 others in boughtoutFsight and light glasses,hosesG %6 abbressive materialFgritG %; imported general storesFceramic cruciblesG %H teflon itemsFdippipesCspargesG 3: castingsFvalve bodiesG others from general storesFoils, greases, hotmill -ars, 31 handgloves,nosemasks, glasses,capG 3% gearboxF==31:L/*,41:L/*G 33 motors %4hp %4

%3 %41 H; 35;: 1:615 1:% 53 1:63; ;4 ;: 1%1H23 16:23 32 ;1 64% 14%H 2%;5 1:; %6:H;4 35 %H %2: 2%4 H6%;H H: %;

%363: %1365 2H663 H44 3%: 31645 2H3H6 %;5 33262 32%H5 %: 136 563;; %6466 %;H% 1%:: 2:: 141%4 5 23::: 43352 5342 346: 14 144;1 256:2

45::%;: 4354365 2;666%2 34122:: 32%H1%: 3%3H11% 311%:11 3:61:5; %;2433H %6235;: %23;;5% %332;H1 %%H11H% %%33636 %1626;2 1;32;:3 161221; 15334:: 15%4H:; 142;::: 1426445 14%2H5: 1416%4: 124H334 12:%324 13:661%

32 stainless steel seemless pipes 34 castingsFrods and platesG 35 electrodesF)315,3157,5:13G 36 antalum

65; 33H% 3;4 %6 H4: 4212 1414 5522 65%: ;;4 4:: 135:5 1% ;1% 2: 1155 131 16 %: 3:6% 66:% 2% 326 1% 3: 2; 1:45

14%4 3%% 14:: 36415 1:2: 165 51: 1%3 H: 66: 134: 36 3;45: 4:: H4:: %4: %%%1 15%45 1:21% 45 %% 361; 234 1:114 2::: %%;2 H;

1161%:: 1:H%%%2 1:%64:: 1:1%H3% H;;::: H4%;52 H%214: ;16%1% 5;4;:: 5;124: 564::: 4:32%% 25%6%: 2:5::: 3;:::: %H14:: %H:H41 %6534% %:;%2: 16%:3% 15H222 145145 14:H24 1%13;: 1%:::: 1:H53% 1:32;;

3; teflon itemsFbushesCno!!lesG 3H electrical items 2: imported chemicals 21 oxygen gas 2% flux wires 23 castingsFno!!lesG 22 teflon itemsFgasket sheetsG 24 Liesel 25 imported tantalum 26 -ob bearing 2; castingsFsleevesG 2H 'earings 4: 7#9 41 teflon itemsFspray ballG 4% ,hafts 43 teflon itemsFspacersCseperatorsG 42 teflon itemsFtapesCPoP ringsG 44 screws and rods 45 material handling 46 grinding machines 4; abbressive materialFsandG 4H grinding wheels 5: other in maintenceFlow value spares, lubricantsG %5

51 hoses and pipes 5% indegnous grind wheels and belts 53 blasting accessories 52 elements seperators 54 tool bit 55 argon gas 56 imported boughtoutFgear boxG 5; measuring tapesand scales 5H wind mill spares 6: others in toolsFspanners,lowvalue -igggs,fixturesG 61 cutting accessories

14H 1H;1 4% 5 33 51 1 1:3 2 1%%5 %;

4%3 2% 14:% 1%126 %:%4 H4: 21652 354 2536 %% 462

;3146 ;3%:% 6;1:2 6%;;% 55;%4 46H4: 21652 364H4 1;42; %5H6% 15:6%

A1B < &ccupies 6:O of 1nnual consumption, i.e., 6:O of %:1:6;:43 J 12:;H2536. A'B- &ccupies %:O of 1nnual consumption, i.e., %:O of %:1:6;:43 J 2:%4451:. A*B- &ccupies 1:O of 1nnual consumption, i.e., 1:O of %:1:6;:43 J %:1:6;:4

1'* 9=1#> $&= >) I)1= %:1:-11

%6

50000000 45000000 40000000 35000000 30000000 25000000 20000000 15000000 10000000 5000000 0 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 annual value no.

he following table shows the 1 items ann8al cons81ptio n 1::% 6:% 3:1 %33 4H66: %2: 1%6 %3 %41 H; %; cost per 8nit 22332 2231H 22%H5 2H2H5 11H %6115 2H245 %363: %1365 2H663

no7

1aterial escription 1 steel platesF1%,12,1;,%:,%4Gmm % steel platesF;,15,%%,3%Gmm steel 3 platesF5,1:,35,2:,24,4:,53,54Gmm 2 rodsF;:,1::,1%%Gdia 4 *hemicals 5 mechanical sealF5:,;:,1::Gmm 6 rodsF4:,1;:,%2:,%4:Gdia gear boxFas; 44,5:,34,==%1:L/*,11:L/*G H motorsF3,6,4,1:Ghp 1: accuators and variable frequency

ann8al val8e 2222222; 31111113 13333332 1141416; 6:;6:1; 54;2H%; 5%;1::5 45::%;: 4354365 2;666%2

drive 11 mildsteel seemless pipes 35;: H44 34122:: 13H612;:4

he following table shows the ' items ann8al cons81ptio n 1:615 1:% 53 1:63; ;4 ;: 1%1H23 16:23 32 ;1 64% 14%H 2%;5 1:; %6:H;4 35 %H %H cost per 8nit 3%: 31645 2H3H6 %;5 33262 32%H5 %: 136 563;; %6466 %;H% 1%:: 2:: 141%4 5 23::: 43352

no7

1aterial escription 1 electrodesF)6:1;G % forgingsFflangesG 3 =ods 2 packaging material 4 standguard and stand drive 5 mechanical sealF4:,1%4Gmm 6 >ardware ; paints H gearboxF1,-;:,H:$G 1: motorsF4,14,%:Ghp 11 forgingsFno!!lesG 1% teflon itemsFgasketsG 13 electrodesF)6:1;-1G 12 mechanical sealF2:mmG others in boughtoutFsight and light 14 glasses,hosesG 15 abbressive materialFgritG 16 imported general storesFceramic

ann8al val8e 32%H1%: 3%3H11% 311%:11 3:61:5; %;2433H %6235;: %23;;5% %332;H1 %%H11H% %%33636 %1626;2 1;32;:3 161221; 15334:: 15%4H:; 142;::: 1426445

cruciblesG 1; teflon itemsFdippipesCspargesG %2: 5342 2132%H21 14%2H5:

he following table shows the * items ann8al cons81ptio n 2%4 H6%;H H: %; 65; 33H% 3;4 %6 H4: 4212 1414 5522 65%: ;;4 4:: 135:5 3: cost per 8nit 346: 14 144; 1 256: 2 14%4 3%% 14:: 3641 5 1:2: 165 51: 1%3 H: 66: 134: 36

no7

1aterial escription 1 castingsFvalve bodiesG others from general storesFoils, greases, hotmill -ars, % handgloves,nosemasks, glasses,capG 3 gearboxF==31:L/*,41:L/*G 2 motors %4hp 4 stainless steel seemless pipes 5 castingsFrods and platesG 6 electrodesF)315,3157,5:13G ; antalum

ann8al val8e 1416%4: 124H334 12:%324 13:661% 1161%:: 1:H%%%2 1:%64:: 1:1%H3% H;;::: H4%;52 H%214: ;16%1% 5;4;:: 5;124: 564::: 4:32%%

H teflon itemsFbushesCno!!lesG 1: electrical items 11 imported chemicals 1% oxygen gas 13 flux wires 12 castingsFno!!lesG 14 teflon itemsFgasket sheetsG 15 Liesel

16 imported tantalum 1; -ob bearing 1H castingsFsleevesG %: 'earings %1 7#9 %% teflon itemsFspray ballG %3 ,hafts %2 teflon itemsFspacersCseperatorsG %4 teflon itemsFtapesCPoP ringsG %5 screws and rods %6 material handling %; grinding machines %H abbressive materialFsandG 3: grinding wheels 31 other in maintenceFlow value spares, lubricantsG 3% hoses and pipes 33 indegnous grind wheels and belts 32 blasting accessories 34 elements seperators 35 tool bit 36 argon gas 3; imported boughtoutFgear boxG 31

1% ;1% 2: 1155 131 16 %: 3:6% 66:% 2% 326 1% 3: 2; 1:45 14H 1H;1 4% 5 33 51 1

3;45 : 4:: H4:: %4: %%%1 15%4 5 1:21 % 45 %% 361; 234 1:11 4 2::: %%;2 H; 4%3 2% 14:% 1%12 6 %:%4 H4: 2165 2

25%6%: 2:5::: 3;:::: %H14:: %H:H41 %6534% %:;%2: 16%:3% 15H222 145145 14:H24 1%13;: 1%:::: 1:H53% 1:32;; ;3146 ;3%:% 6;1:2 6%;;% 55;%4 46H4: 21652

3H measuring tapesand scales 2: wind mill spares 21 others in toolsFspanners,lowvalue -igggs,fixturesG 2% cutting accessories

1:3 2 1%%5 %;

354 2536 %% 462

364H4 1;42; %5H6% 15:6%

A B C

4.% Inventory urnover =atio

Inventory turnover ratios are calculated to indicate whether inventories have been used efficiently or not. he inventory turnover ratios also known as stock velocity is normally calculated as sales C average inventory of cost of goods soldCaverage inventory. 3%

Inventory conversion period may also be calculated to find the average time taken for clearing the stocks. ,ymbolically. *ost of goods sold Inventory turnover ratio J ------------------------------1verage inventory at cost Or /et sales % -------------------------1verage inventory

LaysCMonths in a year 1nd, inventory conversion period J ------------------------------------Inventory turnover rati

4.3 ,tatement ,howing Inventory urnover =atio

#articulars urnover 1verage Inventory Inventory urnover

%::;-:H 2%4:2%H6H %5::34631 1.53 33

%::H-1: 3H;2;2;%1 %6:22H4%6 1.26

%:1:-11 3%144;%H1 %H3H%43;1 1.:H

=atio

Interpretation
In %::;-:H stocks are converted into cashCaccounts receivable faster when compared to the years %::H-1: and %:1:-11. he turnover ratios is 1.53 in the year %::;-:H was gradually decreased to 1.:H by the year %:1:-11. his means the stock has not been sold fast and stayed on the shelf for a longer period. his ratio is decreased because of decrease in the sales and increase in average inventory. 1n efficient management of inventory lies in higher inventory turnover ratio.

Inventory Turnover Ratio

%&$ %&1 %&0 %& % !&$ !&1 !&0 !& ! !!$#!2 !!2#%! !%!#%%

Inventory >olding #eriod

355:-65 3H;2;2;%1 %6:22H4%6 33; 3565-66 3%144;%H1 %H3H%43;1 <<6

$artic8lars urnover 1verage Inventory Inventory $erio & In ays+

3559-5: 2%4:2%H6H %5::34631 !ol ing 336

32

Interpretation"
In %::;-:H the inventory holding period is less when compared to the years %::;-:H and %:1:11 respectively. In the year %::;-:H the inventory holding period was %%1 days and it was increased to %%4 days by the year %::;-:H and further it is increased to 331 days by the year %:1:-11. hese mainly because of the sales are gradually decreasing from year to year. he ratio is gradually increasing from year to year.

4.2 Inventory to *urrent 1ssets =atio

Inventory Inventory to current asset ratio % ------------------------ (655 *urrent 1ssets Iear Inventory *urrent 1ssets Inventory to C8rrent Assets Ratio %::6-:; %566H61%1 3%;4322:6 34 967;6=

%::;-:H %::H-1: %:1:-11

%4%%62321 %;;5%2613 %HH%%5:2H

3:;12H6%; 3224362%; 335546H3;

9679>= 9<7??= 99799=

Interpretation"
In the year %::6-:;, it was ;1.41O and it was increased to ;;.;;O by the year %:1:-11. hese means that the inventory is increasing from year to year but all the remaining current assets are not increasing. hese means the quick assets are decreasing from year to year as inventory is excluded from the preview of quick assets.

4.4 Inventory to otal 1ssets

Inventory Inventory to total assets J ----------------- M 1:: otal 1ssets Iear %::6-:; %::;-:H Inventory %566H61%1 %4%%62321 35 otal 1ssets 226;5%:45 2%144;;3; Inventory to Total Assets Ratio ;:7?:= ;:79@=

%::H-1: %:1:-11 Interpretation

%;;5%2613 %HH%%5:2H

24;;2465: 221;63:42

>37:5= >?7?3=

In year %::6-:; it was 4H.6HO and it is gradually increased to 4H.;2O by the year %::;-:H and further it is increased to 5%.H:O Q 56.6%O by the years %::H-1: and %::H-1: respectively. he Inventory is increasing from year to year but the other assets are not increasing as the inventory.

4.5 =aw Materials to ,ales =atio

=aw Materials =aw materials to sales ratio J --------------------------- M 1:: ,ales Iear ,ales =aw *onsumed %::6-:; 3;66%2241 1H54;:636 36 Materials RaA "aterials to

Sales Ratio ;57?5=

%::;-:H %::H-1: %:1:-11 Interpretation

2%4:2%H6H 3H;2;2;%1 3%144;%H1

1H314446H %:62;1222 15452;:55

@;7@@= ;375?= ;67;6=

In year %::6-:; the ratio is 4:.6:O and it is decreased to 24.22O in the year %::;-:H and then it is increased in the year %::H-1: to 4%.:6O and in the coming year it is slightly decreased to 41.41O. he raw materials consumption is fluctuating year to year by seeing these ratios we conclude the raw materials are blocked in the work in progress.

4.6 *losing ,tock to ,ales =atio

*losing ,tock *losing stock to sales ratio J ------------------------- M 1:: ,ales Iear Inventory ,ales 3; Closing Stock to

Sales Ratio %::6-:; %::;-:H %::H-1: %:1:-11 Interpretation In the year %::6-:; the ratio is 5H.:6O and in the year %::;-:H it was decreased to 4H.34O., in %::H-1: it was increased to 6%.23O and in the year %:1:-11 it is increased to H3.:4O. decrease the closing stock. he inventory is increasing but sales are decreasing. he company should increase the sales or else %566H61%1 %4%%62321 %;;5%2613 %HH%%5:2H 3;66%2241 2%4:2%H6H 3H;2;2;%1 3%144;%H1 >:75?= ;:7<;= ?37@<= :<75;=

Closing Stock to Sales Ratio

.ears

4.; )conomic &rder Nuantity

3H

,uppose the ordering cost per order A:B is fixed.

he order costs will be number of orders

during the year multiply by ordering cost per order. If A1B represents the annual requirements and ANB the order si!e, the number of orders will be A1CNB and the total orders costs will be

AO Total Or ering Cost % ---------------0 ?here 1 J 1nnual requirement, & J &rdering costs, N J &rder si!e, * J *arrying costs per unit. 7et us further assume that the carrying costs per unit A*B are constant. order si!e and the usage is to be steady, the average material will be. 0 Average "aterial % ----------------3 --------------------------------- &3+ he total carrying costs -------------------------- &6+

will be the product of the average materials units and the carrying costs per unit. If ANB is the

0C Average "aterial % -------------------3 2: ---------------------------------- &<+

he otal material costs, then are the sum of total carrying and ordering costs" 0C Total Cost % -----------3 AO , -----------0 ---------------------- &@+

*alculate F2G reveals that a large quantity, ANB the carrying costs will increase, but the ordering costs will decrease. &n the other hand the carrying cost will be lower and the ordering cost will be higher with the lower order quantity. hus the total cost function represents a trade-off between the carrying cost and the ordering cost for determining the economic order quantity. o obtain formula for economic order quantity F)&NG, equation F2G is differentiated with respect to ANB and setting the derivative equal to !ero. 0C Total Cost &TC+ % ---------- , 3 AO ---------0 -------------------------- &a+

Differentiating #B8ation &a+ Aith respect to 0 D &TC+ -----------------DA , C ------------------3 AO ----------0 ---------------- &C+

Setting #B8ation &C+ to Deros: C -------AO ----------% 5 21

3 CO3 #O0 % 3AO

03

% S0RT &3AO4C+

-------------------------------- &;+

able 1 CALCULATION OF EOQ USING THIS INFORMATION

Sl7 No7 Co e "aterial Description Ann8al $rice Cons81ption&0ty+ &Rs+ val8e

6 3 < @ ; > ? 9

RNST RNBO RNRO *NOT RNCA RNTI RN-I RNS$

Steel $lates &tons+ Bo8ght O8ts&NoFs+ Ro s &tons+ *eneral Ite1s&NoFs+ Che1icals&kgs+ Teflon Ite1s &NoFs+ -orgings &NoFs+ $ipes & "ts+ an

355@E:3:755 <@@E;:@755 @3<E66@755 66>E>3;755 ;:E??5755 6@E565755 9;;755

99E999E9:? @5E>@?E?5< 35E:<>E>99 6@E;:<E<;6 ?E59?E569 ;E>@9E9@@ ;E@<?E6:3 @E>9>E?@6

-ittings ;E5>>755

: 65

RNCA *NG$

Castings &NoFs+ $acking &Set+

;E65?755

@E;@@E36@ <E5?<E@6:

"aterial 65E?<9755

66

*"OT

I1porte

*eneral ;?755 2%

3E363E@36

Stores&NoFs+ 63 *N" -"aintenance&NoFs+ @= 3E9@9755 6E5@6E396

Or ering Cost

Inventory Carrying Cost -- 637;= #O0 % S0RT &3AO4C+

*alculation of )&N using the above information

67 RNST Steel $lates: 1nnual consumption &rdering *ost Inventory carrying cost J J J =s.%::2, H%H.:: =s.344, 445 =s.11, 111,11%.13

#O0 % 2 &&3+ &355@:3:+ &<;;;;>+466E666E663+ J R 1%;,314.5:5 J 34;.%1 tons % <;9 tons7 37 RNBO Bo8ght O8ts: 1nnual consumption &rdering *ost *arrying *ost J 322,4H2.:: J =s.1;4, H:;. J =s.4, :;:,H53.

#O0 % 2 &&3+ &322,4H2.::+ &69;:59+4;595:><+ 23

% 2%4%15.6H % 6;97?9 /oBs % 6;: NoFs7 <7 RNRO Ro s: 1nnual consumption &rdering *ost *arrying *ost J 2%3112 J =s. ;3625; J =s. %516:;5

#O0 % 2 &&3+ &2%3112+&9<?@>9+43>6?59>+ % ;35 tons7 @7 *NOT *eneral Stores: 1nnual *onsumption &rdering *ost *arrying *ost J 1155%4 J =s. 4;3632 J =s. 1;%215H

#O0 % 2 &&3+ &1155%4+ &;9<?<@+4693@6>:+ % 3?< NoFs7 ;7 RNCA Che1icals: 1nnual *onsumption &rdering *ost *arrying *ost J 4H66:

J =s.%;32;1 J =s.;;4;66

#O0 % 2&&3+& ;:??5+&39<@96+499;9??+ % 6:; /gs7 >7 RNTI Teflon Ite1s: 22

1nnual *onsumption &rdering *ost *arrying *ost

12:1:

J =s.%%4H42 J =s.6:51:5

#O0 % 2 &&3+& 6@565+&33;:;@+4?5>65>+ % :@ NoFs7

?7 RN-I -orgings: 1nnual *onsumption &rdering *ost *arrying *ost J ;44

J =s.%162;; J =s.56H52H

#O0 % S0RT &&3+& 9;;+&36?@99+4>?:>@:+ % 3< NoF 97 RNS$ $ipes H -ittings: 1nnual *onsumption &rdering *ost *arrying *ost J 4:55

J =s.1;626: J =s.4;4;23

#O0 % S0RT &&3+ &;5>>+ &69?@?5+4;9;9@<+ % ;? "ts7 :7 RNCA Castings: 1nnual *onsumption J 41:6 24

&rdering *ost *arrying *ost

J =s.1;165H J =s.45;:%6

#O0 % 2 &&3+& ;65?+&696?>:+4;>953?+ % ;? NoFs7

657 *NG$ $acking "aterial: 1nnual *onsumption &rdering *ost *arrying *ost J 1:63;

J =s.1%%H36 J =s.3;2166 % 9< Sets7

#O0 % 2 &&3+& 65?<9+&633:<?+4<9@6??+ 667 *"OT I1porte *eneral Stores: 1nnual *onsumption &rdering *ost *arrying *ost J 46

J =s.;;2H6 J =s.%65443

#O0 % 2 &3+& ;?+&99@:?+43?>;;<+ % > NoFs7 637 *N" "aintenance: 1nnual *onsumption &rdering *ost *arrying *ost J %;2;

J =s.21541 J =s.13:15: % @< NoFs 25

#O0 % 2 &&3+& 39@9+&@6>;6+46<56>5+

1'7)-% , 1 )M)/ ,>&?I/9 )&N

S'7 NO COD# 1 % 3 2 4 5 =/, =/'& =/=& 9/& =/*1 =/ I "AT#RIA' D#SCRI$TION ,teel #lates 'ought &uts =ods 9eneral ,tores *hemicals eflon Items ANNUA' CONSU"$TION %::2H%H 3224H2 2%3112 1155%4 4H66: 12:1: ORD#RIN* CARR.IN* #O0 COST 344445 1;4H:; ;3625; 4;3632 %;32;1 %%4H42 COST 111111% 4:;:H53 %516:;5 1;%215H ;;4;66 6:51:5 UNITS 34; ons 14; /oBs 4%: ons %63 /oBs 1H4 @gs H2 /oBs

6 ;

=/$I =/,#

$orgings #ipes Q $ittings

;44 4:55

%162;; 1;626:

56H52H 4;4;23

%3 /oBs 46 Mts

=/*1

*astings

41:6

1;165H

45;:%6

46 /oBs

1:

9/?#

#acking Material

1:63;

1%%H36

3;2166

;3 ,ets

26

11 1%

9M& 9/M

Imported 9eneral ,tores Maintenance

46 %;2;

;;2H6 21541

%65443 13:15:

5 /oBs 23 /oBs

I/ )=#=) 1 I&/"

he *ompany will do well to follow the ) & N as far as possible to

improve the inventory turnover ratio.

1'7)-3 , 1 )M)/ ,>&?I/9 7)1L IM) *&/,EM# I&/

Average Cons81ption % Ann8al Cons81ption4<>;7 'ea ti1e cons81ption % 'ea ti1e ( Average cons81ption per ay7 S'7 NO COD# "AT#RIA' D#SCRI$TION 1 % =M*> 9M& Imported *hemicals Imported ,tores 3 =M'& Imported outs 2 4 5 6 ; H 1: =/, =/'& =/*1 =/*> =/$I =/,# =/=& ,teel #lates 'ought &uts *astings *hemicals $orgings #ipes Q $ittings =ods H: days 64 days 5: days 24 days 5: days 3: days 24 days 2; 355@:3:4<>;%;@:37:> <@@;:@4<>;%:@@75: ;65?4<>;%6<7:: ;:??54<>;%6><7?; 9;;4<>;%37<@ ;5>>4<>;%6<799 @3<66@4<>;%66;:733 @:@<>>7@5 ?595>7?; 9<:7@5 ?<>97?; 6@57@5 @6>7@5 ;36>@7:5 'ought H: days 64<>;%5755< 573? '#AD TI"# H: days A)*7 CONSU"$TION '#AD $#R DA. 6;6;4<>;%@76; ;?4<>;%576> TI"#

CONSU"$TION <?<7;5 6@7@5

9eneral H: days

11 1%

=/ I 9/?#

eflon Items #acking Materials

14 days ; days

6@5654<>;%<97<9 65?<94<>;%3:7@3

;?;7?5 3<;7<>

1'7)-2 , 1 )M)/ ,>&?I/9 =)-&=L)= 7)+)7

Re-or er level % &'ea ti1e ( Average Usage+ , Safety stock S' NO7 1 COD# =M*> "AT#RIA' '#AD TI"# SA-#T. R#-ORD#R '#)#' ?><7;5

D#SCRI$TION CONSU"$TION STOC/ Imported 363.4: <:5755 *hemicals

9M&

Imported 9eneral ,tores

12.2:

36755

<;7@5

=M'&

Imported 'ought :.%6 outs

6755

673?

2 4 5 6 ; H 1: 11 1%

=/, =/'& =/*1 =/*> =/$I =/,# =/=& =/ I 9/?#

,teel #lates 'ought &uts *astings *hemicals $orgings #ipes Q $ittings =ods eflon Items #acking Materials

2H2355.2: 6:;:5.64 ;3H.2: 635;.64 12:.2: 215.2: 4%152.H: 464.6: %34.35

@:?@55755 ?5:55755 9@<755 ?<?5755 6@3755 @35755 ;36?5755 >65755 3@?755

::6?>>7@5 6@6?5>7?; 6>937@5 6@?<97?; 3937@5 9<>7@5 65@<<@7:5 669;7?5 @937<>

2H

1'7)-4 , 1 )M)/ ,>&?I/9 M1SIMEM , &*@ 7)+)7

"AII"U" STOC/ '#)#' % R#-ORD#R '#)#' , #O0

S' NO7 1 %

COD#

"AT#RIA' D#SCRI$TION

#O0

R#-ORD#R "AI7 STOC/ '#)#' '#)#' ?:@7;5 @67@5

=M*> 9M&

Imported *hemicals Imported 9eneral ,tores

<6 >

?><7;5 <;7@5

3 2 4 5 6 ; H 1: 11 1%

=M'& =/, =/'& =/*1 =/*> =/$I =/,# =/=& =/ I 9/?#

Imported 'ought outs ,teel #lates 'ought &uts *astings *hemicals $orgings #ipes Q $ittings =ods eflon Items #acking Materials

6 <;9 6;9 ;? 6:; 3< ;? ;35 :@ 9<

673? ::6?>>7@5 6@6?5>7?; 6>937@5 6@?<97?; 3937@5 9<>7@5 65@<<@7:5 669;7?5 @937<>

373? ::363@7@5 6@69>@7?; 6?<:7@5 6@:<<7?; <5;7@5 9:<7@5 65@9;7:5 63?:7?5 ;>;7<>

4:

*hapter -+I

*&/*7E,I&/, 1/L ,E99), I&/,

5.1 $indings and *onclusions

&ver all the inventory of /ile 7imited - glass lining division is maintained at optimal levels in the present market conditions, but a higher inventory turnover ratio above 1.53 times should be targeted to improve the profitability.

,ales are decreasing according to the study8 revenue of the company is decreased during the period %::; to %:11. his impact severely on the profitability and liquidity position of the organi!ation. 1n improvement n the inventory turnover ratio may improve the profitability

Luring the study period, the inventory to current assets ratio is gradually increasing, which indicates proportion of inventory in current assets is expanding. he requirement for productionCsales should be re assessed and an )ndeavour to reduce the inventory may improve the prospects of profitability.

he inventory turnover ratio is gradually decreasing from year to year. It is not healthy to the company as more than required inventory leads to blocking of capital. should maintain reasonable stocks with the help of inventory control. he firm

he inventory conversion period is also increasing from year to year. >uge inventory holding leads to blocking of cash, obsolescence, or deficiencies in the product line or 41

marketing effort. &ver production or early production of goods even before the customer requires them lead to poor inventory holding period.

1ccording to the 1'* 1nalysis throughout this period, 1-items i.e. top %: per cent of items constituted around H: per cent total annual consumption in value.

In the last year the closing stock is almost equal to the sales which require correction.

,E99), I&/,
4%

1.

1lways keep optimum stocks to keep production process continues without

interruption keeping in view costs of over stocking vis-T-vis the benefits of more than required stock. %. he companyBs production should be re-scheduled dynamically according to the

marketing forecast to avoid overstocking of finished goods. 3. he company should closely monitor the inventories for optimum utili!ation, so

that idle inventories can be minimi!ed. 2. #riority in managing the purchase and utili!ation should be given to materials

classified as .10 which constitutes ,teel #lates, 'ought outs and =ods. ,trict control is to be ensured for materials classified as .'0. 4. ,earch for alternate suppliers and materials to be used in production to decrease

the cost of holding huge inventory and lead time for procurement of materials. 5. he investment in raw materials should be made with close monitoring and

optimum utili!ation. 6. Investment in slow moving items may block up the funds therefore the company

may consider using $ / , L analysis. F$ast normal slow moving and dead items.G. ;. he raw material should be procured from right source at right quantity and at

right cost.

'I'7I&9=1#>I
43

S7no7 1.

Title $inancial 1ccounting

A8thor I.M.#1/L)I

%.

*ost and Management 1ccounting

,.#.(1I/ Q @.7./1=1/9

3.

*ost 1ccounting

=.#. =I+)LI

2.

Internet websites

www.nileltd.com www.google.com

42