A STUDY

On
INVENTORY MANAGEMENT,
At
KESORAM CEMENTS LTD.
Report Submitted In Partial Fulfillment of the Requirements for the
Award
Of
MASTER OF BUSINESS ADMINISTRATION
SUBMITTED
BY
CH.Trinath
H.T. NO, 4122-09-672-021
Under The Esteemed Guidance Of
Mr .N.R.B.CHARYULU

M.B.A

FACULTY OF FINANCE.

Osmania University
MADHIRA INSTITUTE OF TECHNOLOGY & SCIENCES
Kodad, Nalgonda (DiST) Osmania University

(2009-11)

CERTIFICATE

This is to certify that CH.TRINATH bearing Hall Ticket

No.4122-09-672-021 is student of our college. Studying MBA Final
year

has

successfully

completed

his

project

work

entitled

INVENTORY MANAGEMENT in KESORAM CEMENTS Ltd.,

XXXXXXXXX.

This project is submitted in partial fulfillment for the

requirement of the award of the degree of MASTER OF BUSINESS
ADMINISTRATION.

HEAD OF THE DEPARTMENT

EXTERNAL GUIDE

PRINCIPAL

DECLARATION

I hereby declare that this training undergone in the

INVENTORY

MANAGEMENT in the finance and Accounts

Department of KESORAM CEMENTS LTD. Nalgonda. Had been

undertaken and presented by me during the year 2010 in the
partial fulfillment of the master degree in Business Administration.

I also declare that this report and its content are original
work and are based in the information collected by me during the
training period.

DATE:
PLACE:

CH.TRINATH

ACKNOWLEDGEMENT

The preparation of this project has mauled services of many

executives of the company. I whole heart is thank to one and all
who helped me a lot in getting this project work done successfully
completed.

First I express my gratitude to the management of KESORAM

CEMENTS LTD., for their consent to under go my project work.

I also express my sense of gratitude to our project guide

Mr. N.R.B.CHARYULU Lecturer in MITS College Who helped a lot
during the course of project report.

Lastly I should thanks to my friends and family members in

getting my project work successfully.

CH.TRINATH

CONTENTS
CHAPTER I

Page Nos

INTRODUCTION

1-4

NEED FOR THE STUDY

OBJECTIVES
SCOPE OF THE STUDY
RESEARCH METHODOLOGY
LIMITATIONS
CHAPTER II

5-28
INDUSTRY PROFILE
&
COMPANY PROFLE

CHAPTER III

29-46
THEORTICAL FRAME WORK

CHAPTER IV

47-66
DATA ANALYSIS & INTERPRETATION

CHAPTER V

67-69
FINDINGS & SUGGESTIONS
BIBILIOGRAPHY

CHAPTER-I
INTRODUCTION

INTRODUCTION
Inventory management is concern with the determination of optimum level of
investment for each components of inventory and the efficient use of
components and the operation of components and the operation of an effective
control and review of mechanism. The main objectives management is
operational and financial.
The operational objective mean the materials and the spares should be
available in sufficient quantity so that work is not disrupted for want of
inventory.
The financial objectives mean that the material and spares should be available
in sufficient quantity so that work is not disrupted for want of inventory. The
objective of this project is to learn the importance of Inventory Management
in todays business scenario.

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, workin-progress and stores etc.
Definition:Material management is the flow of materials into an organization to the point
where those materials are converted into the firms end product(s). Bailey &
Farmer.

NEED & IMPORTANCE OF STUDY:

This project is very important as well as it is the need for studying
BMS. This project helps us in understanding the basic concepts of how the
inventory management plays vital to minimize the costs and maximize the
profits. It also gives us the experience of how to make a good project
report with collecting all the data and sorting it out.
SIGNIFICANCE:
This project signifies the importance of the Inventory Management to
minimize the costs and maximize the profits. It is the final word or the
final report of the study or research done on the Project.
Objectives of the study: To examine the organization structure of inventory management
in the stores of KESORAM CEMENTS Ltd.
To discuss pattern, levels and trends of inventories in KCL.
To understand the various inventory control techniques followed
by stores in KCL.
To access the performance of inventory management of the KCL
by selected accounting ratios.
To know the inventory control techniques of KCL.

METHODOLOGY OF THE STUDY

Sampling techniques

There are two basis alternative approaches to sample selection

namely.

Probability sampling

Non-probability sampling.
The executives related to all departments were interviewed on
the basis of judgment and convenience of the interviewer which
helped the interviewer to get accurate and understand the opinion
of the officers and executives.

Source of Data
The methodology Is to study the inventory perception towards
Cement company with special reference to Sagar 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

Time Period:The study was carried in Kesoram Cements Limited for a period of 45
DAYS.
Limitations:The study has the following limitations:

The study is limited only for a period of 5 years i.e., from 2005-

06 to 2009-10.

There may be approximations.

The study is purely based on secondary data.

The time span that is 45 days which it has became difficult to

collect all the information. From the concern departments.

CHAPTER-II
INDUSTRY PROFILE
&
COMPANY PROFILE

INDUSTRY PROFILE
The Cement industry has carried out a niche significant contribution in the
industrial map of the country by its spectacular and impressive growth. The cement plays a
vital role in peoples life. The market condition for cement is more competitive as many
numbers of companies in the private sector is entering into the market It is one of the most
important construction material and it an essential product, crucial to the sectors of our
economy such as agriculture, industries, defense, constructions and households.
In 1824, an English bricklayer Joseph aspolin improved upon the verity of cement
known as Portland cement. The name Portland cement arises from the fact that it resembles
the colour of a building stone that comes from Portland England.
Cement is used for:

Concrete for laying floors, roofs and constructing lintels, beams, weather sheds,
stands pillars etc.,

Construction of important engineering structures such as bridges, culverts, dams,

tunnels, lighthouses and docks etc.,

Construction of water tanks, wells, tennis courts, septic tanks, lamp posts, roads,
telephone cables etc.,

Making joints for drains, pipes etc.,

Preparation of foundations, watertight floors, footpaths etc.,

Manufacture of recast pipes, piles garden seats artistically designed urns, flower
pots, dustbins, tensing posts etc.,

TYPES OF CEMENT

The following are the various types of cements.

1. Ordinary Portland cement (33 grade, 43 grade and 53 grade)
2. Portland Pozzolana cement
3. Portland Blast Furnace Slag cement
4. Rapid hardening cement
5. Sulphate Resisting Portland Cement
6. Oil well Cement
7. Low heat Portland cement
8. Hydropolic cement
9. White cement

CEMENT MANUFACTURING ASSOCIATION

Is the apex body of cement manufactures in India, established in 1961 with 17
members companies, now is has 57% cement companies as member having 115 cement
plants. Both the private and public sector cement units its members. It is registered under
the societys registration Act with its registered office in New Delhi and branch office
Mumbai. The following are the main objectives and services of CMA
Objectives

To promote the growth of the cement interest

To promote the customer interest

To identify newer application of cement usage

CEMENT INDUSTRY IN INDIA

The Cement industry in India has come a long way since 1914, when the first
cement plant was commissioned with a production level of 1000 tons/ annum. The first true
Portland cement was manufactured in Calcutta presently called as Kolkata. India is the
second largest cement producer in the world. As cement is a basic construction material
with virtually no substitute, it is used worldwide for all construction work. Thus the growth
in the construction industry has a direct relation with the production and consumption of
cement. India is the second largest cement producer in the world with a production level of
about 99 million tons (about 5% of world production ~ 2000 million tons). The installed
capacity is about 119 million tones and at an expected 10 % growth rate the production is
likely to grow to about 158.5 million tons at the end of 2006-2007.
Over the years, the growth of the industry has been uneven. With traditionally
cement deficit regions covering the most of the major growth centers of the country.
Cement industry in India has made tremendous strides in technological up gradation and
assimilation of latest technology. At present ninety three per cent of the total capacity in
the industry is based on modern and environment-friendly dry process technology and only
seven per cent of the capacity is based on old wet and semi-dry process technology. The
major players of Indian cement industry are Madras cements, ACC, India cements, Gujarat
Ambuja, Ultratech, Grasim, JK group, Jaypee group, Century textiles, Birla Corporation,
Lafarge.
There is tremendous scope for waste heat recovery in cement plants and thereby
reduction in emission level. Cement plants in the country have mostly changed from the
wet process to the energy efficient dry process. In India, the cement factories are localized
in the states of Tamil Nadu, Madhya Pradesh, Gujarat, Bihar, Rajasthan, Karnataka and
Andhra Pradesh.

CEMENT INDUSTRY IN ANDHRA PREADESH:

Cement industry is the most important the largest expending industry in Andhra
Pradesh. It plays a vital role in development of state. Andhrapradesh is having all the
necessary natural resources required to produce cement large quantities. The state stands
first in the country so far as limestone deposits are concerned. Out of approximate 90000
about 30000 million tones are available in Andhra Pradesh which account for 34% in the
total limestone deposits.
Andhra Pradesh cement industry started in year 1939. There were two cement
plants opened one was at Vijayawada and another was associated cement company in
Tadepally, Guntur district in 1939. As on 31st march2005, there are 8 large scale cement
units with and installed capacity of 16 million tones and 24 mini cements and grinding
units with an installed capacity of three million tones producing various types of cement in
Andhra Pradesh. In these 18 large cement plants, only two cement units under public sector
corporation I.e., cement corporation of India plants situated in Adilabad and Tandur in
Rangareddy district. The entire Andhra Pradesh cement industry concentrated in the
districts of Adilabad, Nalgonda, and Cuddappah which are having total lime stones
reserves. Andhrapradesh is having two lime stones deposits cluster viz., Yerraguntla and
Nalgonda. Ten are major and 11 mini cement plants situated in Nalgonda district.
As on 31st march, 1998 the Andhrapradesh total major cement units installed
capacity was only 12.60 million tones and this increased to 16million tones at the end of
this year because two cement major units L&T, Visakha cement plants started their
operations with installed capacities of 2 million tones and 1 million tones and the existent

market leader Raasi cement limited. Expanding their capacity with another 20 million
tones.
The mini cement plant sector also having an installed capacity of 2.5 million tones.
By the end of this year the total Andhrapradesh cement industry installed capacity has
reached to 18.5 million tones. The total production of entire Andhrapradesh cement
industry is approximate 12 million tones. In this the major cement plants contribution was
10.5 million tones where as the mini cement plants only producing the approximate 1.58
million tones. The cement consumption of Andhrapradesh is only 6 million tones. In 199798 and this figure has increased to 7 million tons by the end of 1998 because of various
development program taken up by the state government and the industrys dynamic
promotional activities.
The cement configuration in the state has been observing steady growth. In 1996-97
the cement the consumption was only 4.87 million tons and the further consumption
increased to 5.87 million tons. As far as production and consumption is concurrent,
Andhrapradesh cement industry performance increased its 5.29% and 8% respectively in
the year 1996-97. This percentage increase is very low when compared to national average
i.e 8.5% because in this no production activity from the newly erected plants as well as the
existing plants which are increased their installed capacity. One more reason for this type if
low growth rate was number of new plants and the existing plants which were increasing
their capacities started their production in various parts of our country the cement exports
in the year 1992-93, 36,200 tons exported to Bangladesh and some other countries and this
export figure increased to 1, 35,000 tons in 1993-94, there is only 10,000 tons of cement
exported to Burma from Vishakhapatnam. The following are the major contributors of
cement industry in Andhra Pradesh.
1. Madras Cements Limited
2. India Cements Limited
3. Zuari cements limited

Technology Trends:
Resin and fiber reinforcement manufacturers are refining their products to allow
fabricators to more easily process their raw materials into composites. This will allow
the industry to expand composite applications by reducing manufacturing costs.
Low shrink thermoset resin formulations are being developed to enable fabricators to
abandon some of the arcane production practices needed to compensate for current resin
characteristics.
With the exception of one or two recent developments, most of the polyester resins used
in the composites industry were developed 20 to 40 years ago. Resin manufacturers now
recognize the need to invest more fully in product innovations.
A large percentage of current off-the-shelf resin formulations will become obsolete
under practices specified in Maximum Allowable Control Technology (MACT).
Resin specific styrene suppressants are being developed that eliminate secondary
bonding problems. If the bonding issue can be addressed, the use of suppressant
technology will be far more useful to a wider segment of the industry. Styrene
suppressant additives are tremendously effective in reducing emissions. A suppressant
that works well with a specific resin may not be effective in an orthophthalic resin, or an
additive that works well with an isophthalic resin may be less effective with another
formulation.
The next generation of thermoset resins will be low emitting Hazardous Air Particulate
(HAP), and have wider handling parameters than current materials. Efforts are underway to
pull together packages of resins, suppressants, and required handling procedures from a
systems perspective for fabricators.
Epoxy resins may replace the current dominant resin (polyester) in production open
molding. Non-atomized flow applicators are perfectly capable of handling many epoxies,
and would solve the problem that epoxies dont spray well. Nanocomposites are expected
to find significant applications in stronger but lighter weight automotive parts, enhanced
gas-barrier properties in packaging, and improved flame-retardance. Gel coats are being

developed that are more tolerant of thickness variation so that low-tech brush or roller
application could be used in place of atomized spraying.
The non-atomized dispensing of gel coat will reduce environmental emissions.
Gel coat manufacturers have made some real progress in developing low monomer
products, with specialized formulations available in the 28% -33% range. Low emitting
or non-HAP gel coats will play a major role in environmental regulatory compliance.
Ciba Specialty Chemicals and Boeing developed a soft-tooling technique for the fast
fabrication of close-tolerance composite parts at a cost up to 70% less than conventional
mold making methods.
Low Cost Tooling for Composites (LCTC) utilizes seamless epoxy patties to build layup tools, The epoxy compound is oven-cured and can then be quickly CNC machined to
produce lightweight, extremely accurate, dimensionally stable tools for fabricating
prepare prototypes and short-run parts in an autoclave. Equipment manufacturers are
developing better resin spray gun and flow applicators to reduce overspray and lower
emissions.
Current equipment, including the gun, lines and force needed to pull the lines, is too
heavy. The lines are too stiff to allow the precise gun control required for high quality
application. New equipment reduces system weight and makes fluid lines more flexible.
Continued development of non-atomized fluid tip flow applicators in place of spray
technology.
Lower environmental emissions
Innovations involving the use of fluid impingement technology, dynamic mechanical
fluid tips, or the use of ultrasonic energy to reduce particle agglomeration characteristic
of multiple orifice flow nozzles Oriented Flow Chop could be the next major
advancement in open mold fabrication. One aspect of flow chopping is that the
electrostatic charge at the gun seems to be higher, and more difficult to disperse, as
compared to traditional spray application.
If the chop alignment could be enhanced, it would be possible to apply fiber oriented in
one direction.
Each ply of chop could be oriented in a specific direction, thus providing similar
mechanical properties as the fabrics used in hand lay-up. Better process monitoring
equipment is being developed to enhance product quality.
The integration of accurate flow meters in application equipment, coupled with easily
accessible bar code technology, will allow operators to apply exactly the right of
material to a variety of mold sizes and shapes. There will be a general phasing out of
high monomer resins, except in applications where they are absolutely required.

Either by regulation, or by waning customer ability to use traditional formulations, many

long time workhorse formulations will go by the wayside by 2003 2005.
National Trends:
The defense market was the first segment served by the composite industry, providing
applications for military and aerospace parts since the 1960's. Recent cutbacks in
defense spending have had a substantial impact on the composites industry, forcing
suppliers to drive costs down to compete in a variety of industrial applications.
The benefits of composite materials have fueled growth of new applications in markets
such as transportation, construction, corrosion-resistance, marine, infrastructure,
consumer products, electrical, aircraft and aerospace, appliances and business
equipment.The highest growth segment of FRPs is the construction market.
Funding for the Federal Transportation Equity Act for the 21st Century (TEA-21) for
fiscal years 1998-2004 increased 44% over its predecessor , the Intermodal
Transportation.
Efficiency Act of 1991 (ISTEA).
FRP projects were awarded $16 million in funding. This represented 70% of all
available funding for TEA-21innovative projects.
Seismic retrofit applications include several hundred bridge upgrades in California
alone. Carbon fiber/epoxy wraps around bridge columns and beams meet earthquake
resistant standards.
There are 250 composite bridges and bridge decks in the U.S., and a total of 400
composite bridges worldwide. Many mass transportation and automotive composite
applications are being legislated into reality by energy constraints, tougher
environmental laws and safety issues. Despite some initial problems with sheet molding
composites (SMCs) in the automotive industry, usage is increasing at a rate of 5%
annually. Approximately 250 million pounds of SMCs were used in automotive
applications in 1997. Structural components such as fascia supports and grille opening
reinforcements account for over 70% of 1997 car and light-truck SMC use.
The use of composite materials in marine drive shafts and couplings has gradually
increased in the shipping and boat building industries. Composite shafts offer
advantages over traditional steel shafts such as reduced weight, corrosion resistance,

elastic flexibility, and ease in handling and installation. Acrylic modified resins such as
Ashland Chemical's Modar product are being developed for fire resistance.
Other new inorganic formulations and hybridized formulations will address the needs
for fire resistance. The use of phenolic resins in glass and carbon fiber composites is
growing, primarily due to their low flame spread, low smoke generation, and low smoke
toxicity properties.
Applications include mass transit, construction, marine, mine ducting, and offshore
structures. These areas traditionally used other resins such as polyesters, vinylesters, and
epoxies. More stringent fire resistance requirements are driving this market. In Europe,
hand lay-up phenolics composites have been used in mass transit since 1988 after a fire
broke out at the King Cross Station, which killed thirty-one people and injured several
hundred others. Nomex honeycomb with phenolic pre-pregs are employed to
manufacture lightweight composite panels for aerospace applications. The panels are
also used in Californias Bay Area Rapid Transit (BART) project. Other phenolic
composites applications include walls, ceilings, and floors of aircraft interiors. Pre-pregs
(partially cured resin and fiber reinforcement to be fully cured later by a composite
fabricator) are the dominant method of buying raw materials for aerospace, sporting
goods, and medical device composites.
Pre-pregs are more expensive than buying the resin and reinforcement separately, but
offer significant quality advantages, including:
Better control over the resin/fiber concentrations.
Elimination of storage of wet resin and catalyst.
Reduction in the amount of styrene emission.
Elimination of the manual roller process.
Ability to lay-up the material into some shapes that would be difficult with wet systems.
Several new types of pre-pregs have been introduced which have solved many of the
problems associated with traditional pre-pregs. Most of the new resins are available on a
wide variety of reinforcementsfabric, unidirectional tape, mat, braid, and tow using
fiberglass, carbon fibers, and aramid fibers.
Advances in winding software control systems have advanced considerably so that
rather exotic parts such as 90pipe elbows, T pipe sections, paddles, and square crosssections may now be fabricated using filament winding.
Market Structure:

This industry manufactures composite raw materials and composites that are used by
customers in a wide variety of transportation, construction, industrial, and consumer
markets. Five companies supply more than 90% of the glass fiber reinforcement total
industry shipments: Owens Corning (45%), PPG (20%), Vetrotex Certainteed (15%),
Sangobain (5%) and Johns Manville (5%) resulting in a concentrated oligopoly.
There are 22 establishments listed in SIC 32293 (textile glass fiber) producing $2.0
billion in sales annually with a total of 9,134 employees. The Plastics and Resins
manufacturers (SIC 2821) tend to be very large, capital intensive companies producing
products for the composites industry and other plastics users as well.
There is not a specific SIC code for manufacturers that produce composites resins only,
and many of the plastics companies within SIC 2821 do not support the composites
industry. According to the U.S. Census figures on SIC 2821:
24% of manufacturers employ less than 20 people. Nearly half the manufacturers
employ between 20 and 100 people. 29% of the total employ 100 or more employees.
Average employment is 134 people per establishment.
Median employment is 50 people per establishment.
Market power is more evenly distributed within the plastics and resins manufacturers
compared to the glass fiber industry.
Competitive Threats:
Composite materials are still considered a new technology in many market niches, and
therefore require lengthy product approvals.
Traditional materials such as steel, aluminum, and concrete have a longer history of
materials testing data including life cycle performance. Engineers are reluctant to
specify composites for new applications where there is insufficient test data.
Engineers tend to rely on design specifications rather than performance specifications. A
design specification typically spells out the type of material to be used, whereas a
performance specification allows the engineer to choose the material to meet a specified
performance level. Composites are less likely to be included in design specifications.
A lack of qualification criteria and design standards has hindered some engineers from
using FRPs.
Technology advances in lightweight steel and aluminum, particularly in the highly
competitive automotive sector, compete with composite applications. Material recycling
requirements by the automobile industry could limit composite applications. Composites
are not economically recycled. Technologies for the clean separation of the fiber
reinforcement and the matrix have not been fully developed so that the component
materials can be reused. Oil price fluctuations are more likely to have an impact on the
cost of composite raw materials (such as resins) due to their higher petrochemical

content. Foreign competition is minimal due to the high ratio of the shipping costs
compared to the product value, which is typically $1/lb for both the fiber reinforcement
and the resin matrix.
There is considerable foreign competition in carbon fiber production, where the product
value is in the range of $10 to $200/lb. Investment Issues This $3.7 billion a year
industry is considered capital intensive compared to other industries in the
manufacturing sector. For purposes of further understanding of these investment issues,
U.S. Census data from companies producing Plastics Materials and Resins (SIC 2821)
and Pressed and Blown Glass, n.e.c. (SIC 3229) were used. Composite matrix
manufacturers are typically found in SIC 2821.
Machinery and equipment assets for SIC 2821 represent nearly 70% of annual
shipments. Machinery and equipment assets for most manufacturing industries average
between 25% and 50% of annual shipments. Thus, there is $1 of machinery and
equipment assets in place for every $1.43 in shipments.
Buildings and structures assets represent only 1% of shipment value.
Approximately 5% of every dollar of shipment value for plastics materials and resins
manufacturers (SIC 2821) is reinvested in new capital expenditures each year. New
capital expenditures for textile glass fiber manufacturers (SIC 32293) represented 10%
of the value of shipments in 1992, a significant amount and the highest percentage for
any pressed and blown glass manufacturers listed in SIC 3229.
A total of $130 million was reinvested in new capital expenditures by 18 textile glass
fiber establishments with $1.3 billion in shipment value in 1992.

COMPANY PROFILE

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 198586 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 Pradesh

KESORAM GROUP OF INDUSTRIES

a)Textiles

Kesoram Industries Ltd,

42, Garden Reach Road
Calcutta-700024.

b)Rayon

Kesoram Rayon Triennia (P.O.),

Dist : Hoogly, West Bengal.

c)Spun Pipes

Kesoram 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 Relations
KIL,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%

CHAPTER - III

THEORITICAL FRAME
WORK

THEROTICAL FRAME WORK ON INVENTORY

MANAGEMENT
MEANING: Inventory is a list for goods and materials, or those goods and materials
themselves, held available in stock by a business. Inventory are held in order to manage
and hide from the customer the fact that manufacture/supply delay is longer than delivery
delay, and also to ease the effect of imperfections in the manufacturing process that lower
production efficiencies if production capacity stands idle for lack of materials.
WHAT IS INVENTORY MANAGEMENT?

The most important objective or inventory control is to determine and maintain an

optimum level of investment in the inventory. Most companies have now successfully
installed one or the other system of inventory planning and control.
Inventory Management and Inventory Control must be designed to meet the
dictates of the marketplace and support the company's strategic plan. The many
changes in market demand, new opportunities due to worldwide marketing, global sourcing
of materials, and new manufacturing technology, means many companies need to change
their Inventory Management approach and change the process for Inventory Control.
Despite the many changes that companies go through, the basic principles of
Inventory Management and Inventory Control remain the same. Some of the new
approaches and techniques are wrapped in new terminology, but the underlying principles
for accomplishing good Inventory Management and Inventory activities have not
changed.
The Inventory Management system and the Inventory Control Process provides
information to efficiently manage the flow of materials, effectively utilize people and
equipment, coordinate internal activities, and communicate with customers. Inventory
Management and the activities of Inventory Control do not make decisions or manage
operations; they provide the information to Managers who make more accurate and
timely decisions to manage their operations.
The basic building blocks for the Inventory Management system and Inventory
Control activities are:
Sales Forecasting or Demand Management
Sales and Operations Planning
Production Planning
Material Requirements Planning
Inventory Reduction

The emphases on each area will vary depending on the company and how it
operates, and what requirements are placed on it due to market demands. Each of the areas
above will need to be addressed in some form or another to have a successful program
of Inventory Management and Inventory Control.
IMPORTANCE OF INVENTORY MANAGEMENT:
Inventory management refers to the process of managing the stocks of finished
products, semi-finished products and raw materials by a firm. Inventory management, if
done properly, can bring down costs and increase the revenue of a firm.
How much one should invest in inventory management? The answer to this
question depends on the volume and value of inventory as a percentage of the total assets
of a firm. The importance of inventory management varies according to industries. For
example, an automobile dealer has very high inventories, sometimes as high as 50 per cent
of the total assets, whereas in the hotel industry it may be as low as 2 to 5 per cent.
The process of inventory management is a continuous one and there are various
kinds of solutions available. It is advisable to employ specialized staff for inventory
management.
The inventory management process begins as soon as one has started production
and ordered raw materials, semi-finished products or any other thing from a supplier. If you
are a retailer, then this process begins as soon you have placed your first order with the
wholesaler.
Once orders have been placed, there is generally a short period of time available to
a firm to put an inventory management plan in place before the supplies are delivered.
Inventory management helps a firm to decide in advance where these supplies should be
stored. If a firm is getting supplies of small-sized goods, it may not be much of a problem
to store them, but in the case of large goods, one has to be careful so that the warehousing
space is optimally utilized.
From invoices to purchase orders, there is lot of paperwork and documentation
involved in inventory management. Several software programs are available in market,
which help in inventory management.

Inventory Management provides detailed information on Inventory Management,

Inventory Management Software, Supply Chain Inventory Management, Inventory
Management Systems and more. Inventory Management is affiliated with E-Procurement
Services.
TYPES OF INVENTORY
Four kinds of inventories may be identified:
1. Raw materials Inventory: This consists of basic materials that have not yet been
committed to production in a manufacturing firm. Raw materials that are purchased from
firms to be used in the firm's production operations range from iron ore awaiting processing
into steel to electronic components to be incorporated into stereo amplifiers. The purpose
of maintaining raw material inventory is to uncouple the production function from the
purchasing function so that delays in shipment of raw materials do not cause production
delays.
2. Stores and Spares: This category includes those products, which are accessories to the
main products produced for the purpose of sale. Examples of stores and spares items are
bolts, nuts, clamps, screws etc. These spare parts are usually bought from outside or some
times they are manufactured in the company also.
3. Work-in-Process Inventory: This category includes those materials that have been
committed to the production process but have not been completed. The more complex and
lengthy the production process, the larger will be the investment in work-in-process
inventory. Its purpose is to uncouple the various operations in the production process so
that machine failures and work stoppages in one operation will not affect the other
operations.
4. Finished Goods Inventory: These are completed products awaiting sale. The purpose of
finished goods inventory is to uncouple the productions and sales functions so that it no
longer is necessary to produce the goods before a sale can occur.
Raw materials: The purchased items or extracted materials that are transformed into
components or products.

Components: Parts or subassemblies used in building the final product.

Work-in-process (WIP): Any item that is in some stage of completion in the
manufacturing process.
Finished goods: Completed products that will be delivered to customers.
Distribution inventory: Finished goods and spare parts that are at various points in the
distribution system.
Maintenance, repair, and operational (MRO) inventory (often called supplies): Items
that are used in manufacturing but do not become part of the finished product.
COST OF CARRYING INVENTORY

Carrying material in inventory is expensive. A number of studies indicated that the annual
cost of carrying a production inventory averaged approximately 25% of the value of the
inventory. The escalating and volatile cost of money has escalated the annual inventory
carrying cost to a figure between 25% - 35% of the value of the inventory. The following
five elements make up this cost:
1) Opportunity cost (12% -20%)
2) Insurance cost (2% 4%)
3) Property taxes (1% - 3%)
4) Storage costs (1%- 3%)
5) Obsolescence and deterioration (4% - 10%)
Total carrying cost (20% - 40%)
Let us briefly look into these costs:
Opportunity cost of invested funds
When a firm uses money to buy production material and keeps it in the inventory, it simply
has this much less cash to spend for other purposes. Money invested in external securities
or in productive equipment earns a return for the company. Thus it is logical to charge all

money invested in inventory an amount equal to that it could earn elsewhere in the
company. This is the opportunity cost associated with inventory investment.
Insurance cost
Most firms insure the assets against possible losses from fire and other forms of damage.
Property taxes
This is levied on the assessed value of a firms assets, the greater the inventory value, the
greater the asset value and consequently the higher the firms tax bill.
Storage costs
The warehouse is depreciated every year over the length of its life. This cost can be
charged against the inventory occupying the space.
Obsolescence and deterioration
In most inventory operations, a certain percentage of the stock spoils, is damaged, is
pilfered, or eventually becomes obsolete. A certain number always takes place even if they
are handled with utmost care.
Generally speaking, this group of carrying costs rises and falls nearly
proportionately to the rise and fall of the inventory level.
Moreover, the inventory level is directly proportional to the quantity in which the
ordered material is delivered. Hence costs of carrying inventory vary nearly directly with
the size of the delivery quantity. This relationship is illustrated as follows:
(Carrying Cost per year) = (Average inventory value) x
(Inventory carrying cost as a % of inventory value)
ECONOMIC ORDER QUANTITY
Economic order quantity is that level of inventory that minimizes the total of inventory
holding cost and ordering cost. The framework used to determine this order quantity is also

known as Wilson EOQ Model. The model was developed by F. W. Harris in 1913. But still
R. H. Wilson is given credit for his early in-depth analysis of the model.
Underlying assumptions
1. The ordering cost is constant.
2. The annual (or monthly or whatever periodicity you desire, here we will use annual)
demand for the item is constant over time and it is known to the firm.
3. Quantity discounts doesn't exist.
4. The order is received immediately after placing the order.
Variables

Q = order quantity

Q * = optimal order quantity

D = annual demand quantity of the product

P = purchase cost per unit

C = fixed cost per order (not per unit, in addition to unit cost)

H = annual holding cost per unit (also known as carrying cost) (warehouse space,
refrigeration, insurance, etc. usually not related to the unit cost)

The Total Cost function

The single-item EOQ formula finds the minimum point of the following cost function:
Total Cost = purchase cost + ordering cost + holding cost
- Purchase cost: This is the variable cost of goods: purchase unit price annual demand
quantity. This is PD
- Ordering cost: This is the cost of placing orders: each order has a fixed cost C, and we
need to order D/Q times per year. This is C D/Q
- Holding cost: the average quantity in stock (between fully replenished and empty) is Q/2,
so this cost is H Q/2

In order to determine the minimum point of the total cost curve, set its derivative equal to
zero:

The result of this derivation is:

Solving for Q gives Q* (the optimal order quantity):

Therefore:

Note that interestingly, Q* is independent of P, it is a function of only C, D, H.

Features of inventory management system

In inventory management, different theories have been developed to support the different
methods of inventory management. These methods have been based on various features
that can be adopted in inventory management. These features include;
i.

Get Your (Ware) House in Order

ii.

Replenishment, Order Point and the Line Point

iii.

Lead time

iv.

The Economic Order Quantity

v.

Balancing, inventory and costs

i.

Get Your (Ware) House in Order

This is where proprietor(s) of the business should ask themselves why they are in business.
This helps them to focus on the aims and goals of their business hence are able to
predetermine profits and anticipate losses when times are harsh. Under getting the (ware)
house in order, a theory on inventory management was developed called the triangle of
cooperation.
The Triangle of Cooperation
The triangle of cooperation, developed by Jon Schreibfeder (2008), illustrates that most
companies want to achieve the goal of effective inventory management:
Effective Inventory Management allows a company to meet or exceed customers'
expectations of product availability with the amount of each item that will maximize net
profits or minimize costs. But whose responsibility is it to accomplish this goal? Often it is
left to one person or department but it has found that effective inventory management takes
support and acceptance of responsibility by sales, purchasing/replenishment, and
warehouse personnel. He - (Jon Schreibfeder) referred to this as the "triangle of
cooperation":

Without the active participation of each of the triangle's sides, achieving effective inventory
management is impossible. Here is a brief outline of specific responsibilities for
salespeople, purchasing or replenishment, and warehouse people necessary to achieve this
goal.
Salespeople

Determine what products should be stocked in each branch or warehouse;

salespeople should be in almost constant communications with customers. They are
probably in the best position to determine what must be in inventory to meet
customers' expectations. It means that the customers' impression towards inventory
is that it should meet their needs than the stock of your competitors.

Help develop the forecast of future sales of each product. The salespeople are also
in the best position to observe customers' changing needs over time. They should
help determine why there was a large discrepancy between a forecast and what was
actually sold in a specific week or month. For example, why did a customer buy an
unusually large quantity of an item? Will this be a new ongoing requirement or was
it a one-time only sale? Studying unusual sales activity can provide salespeople
with valuable information for increasing future sales!

Help keep inventory records accurate. Salespeople are usually very empathetic with
their customers. They often will go to great lengths to meet a customer's needs.
However, they must follow the established rules for properly recording all material
disbursements. For example, salespeople should not take material out of a
warehouse without properly recording it in your computer system.

Purchasing or Replenishment People

Make sure that inventory is available to meet the sales or usage forecast. While
accomplishing this primary and most important goal, buyers must replenish stock in such a
way as to minimize the "total cost" of each piece. If you minimize your total cost of
inventory, you will maximize your profits! Decisions involved in minimizing the total cost
of inventory include:

Decide the best source of supply for each product in each stocking location. Do you
buy it? If so, from what vendor? Are replenishment quantities transferred from a
central warehouse or distribution center? Do you assemble a product from
component parts in this warehouse?

Determine the economic order quantity for each product. The economic order
quantity (i.e., "EOQ") balances the cost of the material with the carrying cost of
inventory and the cost of issuing and receiving replenishment orders (Jon
Schreibfeder, 2008).

Warehouse Personnel
Warehouse people make up the third side of the triangle of cooperation and responsibility.
They must:

Organize stock in the warehouse to minimize the cost of filling orders. It makes
sense to store material to maximize the efficiency of the order fulfillment process.

Keeping inventory records accurate. If the quantity in the computer system does not
agree with what is in the warehouse, salespeople won't know what is available for
sale, and buyers will not replenish inventory at the right time. This task probably
will involve conducting full physical inventories or cycle counting certain products
each day.

Ensure that all material movement (both receipts and disbursements) are properly
recorded. This will ensure that quantities in your warehouse remain accurate. After
all, you can have an accurate forecast and bring material in such a way to minimize
your total cost. But if it isn't properly recorded in your computer system, you will
probably experience problems such as:
o

Bringing in unnecessary stock because previous stock receipts weren't

correctly posted and you actually have more inventory than your system
reports.

Unexpected stock outs due to unrecorded material disbursements,

substitutes, damaged parts, and other "sloppy" procedures.

Protect inventory from breakage, spoilage, misplacement, and theft. Inventory is

valuable, and all employees must realize that their paychecks result from the sale of
inventory. If inventory is "lost," it must be paid for out of the company's profits.
This means that fewer profit dollars are available to pay employees. (Jon
Schreibfeder,2008)

Achieving effective inventory management is probably one of the most effective

undertakings to increase your company's profitability. But it cannot be accomplished by
just one person or department. It takes cooperation and commitment from everyone in

sales, purchasing, and the warehouse. You must implement and maintain the "triangle of
cooperation and responsibility."
Protect the company against theft Make sure that the only people in your warehouse
belong in your warehouse. Pilferage is a larger problem than most distributors realize.
Establishing an approved stock list for each warehouse Order only the amount of nonstock or special order items that your customer has committed to buy. Before adding an
item to inventory, try to get a purchase commitment from your customer. If this is not
possible, inform the salesperson who requests the tem that he or she is personally
responsible for half the carrying cost of any part of the initial shipment that isnt sold
within nine months (Jon Schreibfeder, 2008).
Assign and use bin locations Assign primary and surplus bin locations for every stocked
item. All picking and receiving documents should list the primary bin location (in either
characters or a bar code). With correct bin locations on documents, order picking is
probably the least complicated job in your warehouse. Assign inexperienced people to this
task and your most experienced warehouse workers to receiving inventory and stock
management.
Recording all material leaving the warehouse There should be appropriate paperwork for
every type of stock withdrawal. Under no circumstances should material leave the
warehouse without being entered in the computer. Eliminate "no charge/no paperwork"
material swaps. Product samples should be charged to a salespersons account until they are
either returned to stock or charged to the customer.
Process paperwork in a timely manner All printed picking documents should be filled by
the end of the day. Stock receipts should be put away and entered in the computer system
within 24 hours of arrival.
Set appropriate objectives for the buyers Buyers should be judged and rewarded based on
the customer service level, inventory turns, and return on investment for the product lines
for which they are responsible. Ensure that stock balances are accurate and will remain
accurate Implement a comprehensive cycle counting program. A good cycle counting
program can replace your traditional year-end physical inventory.

ii.

Replenishment, the Order Point and the Line Point

Replenishment of inventory is normally based on safety stock quantities, order points, line
points, and standard order quantities:
Safety Stock Quantity: This is the level of inventory maintained in stock to protect stock
outs resulting from unexpected customer demand or vendor shipment delays.
Order Point: The Safety Stock Quantity plus predicted demand during the anticipated lead
time gives the point at which inventory should be replenished.
Line Point: The Order Point plus predicted demand during the supplier review or order
cycle the normal length of time between typical replenishment orders with the supplier.
Standard Order Quantity: This is the minimum quantity that can be ordered once
(Horngren, et al, 1997).
Replenishment orders are typically placed with a supplier when the Replenishment Position
(On Hand - Committed on Current Outgoing Orders + On Current Incoming
Replenishment Orders) of an item is between its Order Point and Line Point Stock receipts
for the replenishment orders. This will normally be received when the replenishment
position is somewhere between a point equal to the Line Point Line point
Quantity
Order point

Demand during order Order

cycle
Demand during

issued

anticipated lead time

Safety Stock Safety Stock

Line point
Quantity
Anticipated Lead

Demand during order Stock

cycle
Demand during

Received

Time Demand
anticipated lead time
and the Safety
Stock quantity:
Safety Stock Safety Stock
For example, if a product is ordered when its replenishment position is just below the line
Order point

point, shipment would be received when the available stock quantity equals the Line Point
minus Anticipated Lead Time Demand. But if the product is not ordered until the
replenishment position equals the Order Point, the receipt would probably arrive when the
available inventory equals the Safety Stock. Therefore it can be estimated that the
average quantity on hand at the time of stock receipt will be the average of the Line Point
- Anticipated Lead Time Usage and the Safety Stock quantity.
The stock receipt of products with recurring usage will normally be equal to the specified
Standard Order Quantity (SOQ) of the product. The average quantity of this SOQ on hand
during the time it takes to consume the entire SOQ will be equal to half the SOQ:
Therefore the ideal average on hand quantity of an item with recurring usage should be
equal to the average quantity on hand at the time of stock receipt plus half the SOQ:
[(Line Point - Anticipated Lead Time Usage) + Safety Stock]/2 + SOQ/2
Ideal average on hand quantity of each item with recurring usage can be multiplied with its
average cost and compare it with the current inventory value of the product to determine
whether there is currently over stocking or under stocking.
iii.

Lead time and just in time inventory management

Lead time is the time that elapses between the placing of an order (either a purchase order
or a production order issued to the shop or the factory floor) and actually receiving the
goods ordered (Daniel et al, 1999)
If a supplier (an external firm or an internal department or plant) cannot supply the required
goods on demand, then the client firm must keep an inventory of the needed goods. The
longer the lead time, the larger the quantity of goods the firm must carry in inventory.
A just-in-time (JIT) is a philosophy that advocates the lowest possible levels of inventory.
JIT espouses that firms need only keep inventory in the right quantity at the right time with
the right quality. The ideal lot size for JIT is one, even though one hears the term "zero
inventories" used.

Small scale business can maintain extremely low levels of inventory. However, a firm may
have a lead time of up to three months. That means that a firm that uses goods produced
through a process of three months must place orders at least three months in advance of
their need. In order to keep their operations running in the meantime, an on-hand inventory
of three months requirement would be necessary.
iv.

Economic order quantity

It is the level of inventory that minimizes the total inventory holding costs and ordering
costs. It is one of the oldest classical production scheduling models. The framework used to
determine this order quantity is also known as the Wilson EOQ Model or the Wilson
Formula. The model was developed by F. W. Harris in 1913.
The required parameters in determining the EOQ are the total demand for the year, the
purchase cost for each item, the fixed cost to place the order and the storage cost for each
item per year. The number of times an order is placed will also affect the total cost;
however, this number can be determined from the other parameters (Schwartz, 2009).

Assumptions of the EOQ model

1. The ordering cost is constant.
2. The rate of demand is constant
3. The lead time is fixed
4. The purchase price of the item is constant i.e. no discount is available
5. The replenishment is made instantaneously; the whole batch is delivered at once.
EOQ is the quantity to order, so that ordering cost + carrying cost finds its minimum. (A
common misunderstanding is that formula tries to find when these are equal.)
Variables

Q = order quantity

Q * = optimal order quantity

D = annual demand quantity of the product

P = purchase cost per unit

C = fixed cost per order (not per unit, in addition to unit cost)

H = annual holding cost per unit (also known as carrying cost or storage cost)
(warehouse space, refrigeration, insurance, etc. usually not related to the unit cost)

At EOQ Ordering Cost And Carrying Cost Are Same.....

The Total Cost function

The single-item EOQ formula finds the minimum point of the following cost function:
Total Cost = purchase cost + ordering cost + holding cost
- Purchase cost: This is the variable cost of goods: purchase unit price annual demand
quantity. This is PD
- Ordering cost: This is the cost of placing orders: each order has a fixed cost C, and we
need to order D/Q times per year. This is C D/Q
- Holding cost: the average quantity in stock (between fully replenished and empty) is Q/2,
so this cost is H Q/2

.
To determine the minimum point of the total cost curve, set its derivative equal to zero:

.
The result of this derivation is:

.
Solving for Q gives Q* (the optimal order quantity):

Therefore:
Note that interestingly, Q* is independent of P, it is a function of only C, D, H.

Just-in-time
Just-in-time (JIT) is an inventory strategy implemented to improve the return on
investment of a business by reducing in-process inventory and its associated carrying costs.
In order to achieve JIT the process must have signals of what is going on elsewhere within
the process. This means that the process is often driven by a series of signals, which can be
Kanban, that tell production processes when to make the next part. Kanban are usually
'tickets' but can be simple visual signals, such as the presence or absence of a part on a
shelf. When implemented correctly, JIT can lead to dramatic improvements in a
manufacturing organization's return on investment, quality, and efficiency. Some have
suggested that "Just on Time" would be a more appropriate name since it emphasizes that
production should create items that arrive when needed and neither earlier nor later.
Quick communication of the consumption of old stock which triggers new stock to be
ordered is key to JIT and inventory reduction. This saves warehouse space and costs.
However since stock levels are determined by historical demand any sudden demand rises
above the historical average demand, the firm will deplete inventory faster than usual and
cause customer service issues. Some[1] have suggested that recycling Kanban faster can also
help flex the system by as much as 10-30%. In recent years manufacturers have touted a
trailing 13 week average as a better predictor for JIT planning than most forecasters could
provide.

Stocks
JIT emphasizes inventory as one of the seven wastes (overproduction, waiting time,
transportation, inventory, processing, motion and product defect), and as such its practice
involves the philosophical aim of reducing input buffer inventory to zero. Zero buffer
inventories means that production is not protected from exogenous (external) shocks. As a
result, exogenous shocks reducing the supply of input can easily slow or stop production
with significant negative consequences. For example, [3] Toyota suffered a major supplier
failure as a result of the 1997 Aisin fire which rendered one of its suppliers incapable of
fulfilling Toyota's orders. In the U.S., the 1992 railway strikes resulted in General Motors
having to idle a 75,000-worker plant because they had no supplies coming in.
JIT Implementation Design
Based on a diagram modeled after the one used by Hewlett-Packards Boise plant to
accomplish its JIT program.
1) F Design Flow Process
- F Redesign/relayout for flow
- L Reduce lot sizes
- O Link operations
- W Balance workstation capacity
- M Preventative maintenance
- S Reduce Setup Times
2) Q Total quality control
- C worker compliance
- I Automatic inspection
- M quality measures

- M fail-safe methods
- W Worker participation

3) S Stabilize Schedule
- S Level Schedule
- W establish freeze windows
- UC Underutilize Capacity
4) K Kanban Pull System
- D Demand pull
- B Backflush
- L Reduce lot sizes
5) V Work with vendors
- L Reduce lead time
- D Frequent deliveries
- U Project usage requirements
- Q Quality Expectations
6) I Further reduce inventory in other areas
- S Stores
- T Transit
- C Implement Carroussel to reduce motion waste

- C Implement Conveyor belts to reduce motion waste

7) P Improve Product Design

- P Standard Production Configuration
- P Standardize and reduce the number of parts
- P Process design with product design
- Q Quality Expectations

Effects
Some of the initial results at Toyota were horrible, but in contrast to that a huge amount of
cash appeared, apparently from nowhere, as in-process inventory was built out and sold.
This by itself generated tremendous enthusiasm in upper management.
Another surprising effect was that the response time of the factory fell to about a day. This
improved customer satisfaction by providing vehicles usually within a day or two of the
minimum economic shipping delay.
Also, many vehicles began to be built to order, completely eliminating the risk they would
not be sold. This dramatically improved the company's return on equity by eliminating a
major source of risk.
Since assemblers no longer had a choice of which part to use, every part had to fit perfectly.
The result was a severe quality assurance crisis, and a dramatic improvement in product
quality. Eventually, Toyota redesigned every part of its vehicles to eliminate or widen
tolerances, while simultaneously implementing careful statistical controls for quality
control. Toyota had to test and train suppliers of parts in order to assure quality and
delivery. In some cases, the company eliminated multiple suppliers.

When a process problem or bad parts surfaced on the production line, the entire production
line had to be slowed or even stopped. No inventory meant that a line could not operate
from in-process inventory while a production problem was fixed. Many people in Toyota
confidently predicted that the initiative would be abandoned for this reason. In the first
week, line stops occurred almost hourly. But by the end of the first month, the rate had
fallen to a few line stops per day. After six months, line stops had so little economic effect
that Toyota installed an overhead pull-line, similar to a bus bell-pull, that permitted any
worker on the production line to order a line stop for a process or quality problem. Even
with this, line stops fell to a few per week.
The result was a factory that eventually became the envy of the industrialized world, and
has since been widely emulated.
The just-in-time philosophy was also applied to other segments of the supply chain in
several types of industries. In the commercial sector, it meant eliminating one or all of the
warehouses in the link between a factory and a retail establishment.
Benefits
As most companies use an inventory system best suited for their company, the Just-In-Time
Inventory System (JIT) can have many benefits resulting from it. The main benefits of JIT
are listed below.
1. Set up times are significantly reduced in the factory. Cutting down the set up time to

be more productive will allow the company to improve their bottom line to look
more efficient and focus time spent on other areas that may need improvement. This
allows the reduction or elimination of the inventory held to cover the "changeover"
time, the tool used here is SMED.
2. The flows of goods from warehouse to shelves are improved. Having employees

focused on specific areas of the system will allow them to process goods faster
instead of having them vulnerable to fatigue from doing too many jobs at once and
simplifies the tasks at hand. Small or individual piece lot sizes reduce lot delay
inventories which simplifies inventory flow and its management.
3. Employees who possess multiple skills are utilized more efficiently. Having

employees trained to work on different parts of the inventory cycle system will

allow companies to use workers in situations where they are needed when there is a
shortage of workers and a high demand for a particular product.
4. Better consistency of scheduling and consistency of employee work hours. If there is

no demand for a product at the time, workers dont have to be working. This can
save the company money by not having to pay workers for a job not completed or
could have them focus on other jobs around the warehouse that would not
necessarily be done on a normal day.
5. Increased emphasis on supplier relationships. No company wants a break in their

inventory system that would create a shortage of supplies while not having
inventory sit on shelves. Having a trusting supplier relationship means that you can
rely on goods being there when you need them in order to satisfy the company and
keep the company name in good standing with the public.
6. Supplies continue around the clock keeping workers productive and businesses focused on
turnover. Having management focused on meeting deadlines will make employees work
hard to meet the company goals to see benefits in terms of job satisfaction, promotion or
even higher pay.
Problems within a JIT system
The major problem with just-in-time operation is that it leaves the supplier and downstream
consumers open to supply shocks and large supply or demand changes. For internal reasons, this
was seen as a feature rather than a bug by Ohno, who used the analogy of lowering the level of
water in a river in order to expose the rocks to explain how removing inventory showed where flow
of production was interrupted. Once the barriers were exposed, they could be removed; since one of
the main barriers was rework, lowering inventory forced each shop to improve its own quality or
cause a holdup in the next downstream area. One of the other key tools to manage this weakness is
production levelling to remove these variations. Just-in-time is a means to improving performance
of the system, not an end.

v.

Balancing inventory and costs

There are three types of costs that together constitute total inventory costs: holding costs,
set-up costs, and purchasing costs.

Holding costs
Holding costs, also called carrying costs, are the costs that result from maintaining the
inventory. Inventory in excess of current demand frequently means that its holder must
provide a place for its storage when not in use. This could range from a small storage area
near the production line to a huge warehouse or distribution center. A storage facility
requires personnel to move the inventory when needed and to keep track of what is stored.
If the inventory is heavy or bulky, forklifts may be necessary to move it around.
Storage facilities also require heating, cooling, lighting, and water. The firm must pay taxes
on the inventory, and opportunity costs occur from the lost use of the funds that were spent
on the inventory. Also, obsolescence, pilferage (theft), and shrinkage are problems. All of
these things add cost to holding or carrying inventory.
If the firm can determine the cost of holding one unit of inventory for one year (H) it can
determine its annual holding cost by multiplying the cost of holding one unit by the
average inventory held for a one-year period. Average inventory can be computed by
dividing the amount of goods that are ordered every time an order is placed (Q) by two.
Thus, average inventory is expressed as Q/2. Annual holding cost, then, can be expressed
as H (Q/2).

Set-up costs
Set-up costs are the costs incurred from getting a machine ready to produce the desired
good. In a manufacturing setting this would require the use of a skilled technician (a cost)
who disassembles the tooling that is currently in use on the machine. The disassembled
tooling is then taken to a tool room or tool shop for maintenance or possible repair (another
cost). The technician then takes the currently needed tooling from the tool room (where it
has been maintained; another cost) and brings it to the machine in question.
There the technician has to assemble the tooling on the machine in the manner required for
the good to be produced (this is known as a "set-up"). Then the technician has to calibrate
the machine and probably will run a number of parts, that will have to be scrapped (a cost),
in order to get the machine correctly calibrated and running. All the while the machine has

been idle and not producing any parts (opportunity cost). As one can see, there is
considerable cost involved in set-up.
If the firm purchases the part or raw material, then an order cost, rather than a set-up cost,
is incurred. Ordering costs include the purchasing agent's salary and travel/entertainment
budget, administrative and secretarial support, office space, copiers and office supplies,
forms and documents, long-distance telephone bills, and computer systems and support.
Also, some firms include the cost of shipping the purchased goods in the order cost.
If the firm can determine the cost of one set-up (S) or one order, it can determine its annual
setup/order cost by multiplying the cost of one set-up by the number of set-ups made or
orders placed annually. Suppose a firm has an annual demand (D) of 1,000 units. If the firm
orders 100 units (Q) every time it places and order, the firm will obviously place 10 orders
per year (D/Q). Hence, annual set-up/order cost can be expressed as S(D/Q).

Purchasing Cost
Purchasing cost is simply the cost of the purchased item itself. If the firm purchases a part
that goes into its finished product, the firm can determine its annual purchasing cost by
multiplying the cost of one purchased unit (P) by the number of finished products
demanded in a year (D). Hence, purchasing cost is expressed as PD.
Total = Holding cost + Set-up/Order cost + Purchasing cost
or
Total = H(Q/2) + S(D/Q) + PD

2.2.2 Need for inventory control records

A comprehensive inventory control record system is relevant in order that:a) Goods sold can be recorded and balances in both physical and monetary terms
calculated.
b) Checks can be implemented on regular or random basis to minimize losses due to
pilferage or damage in stores.
c) Goods can be recorded on a receipt in relation to both quantity and price, by use of
highly effective integrated computer system besides the manual system.

d) Replacement of stock can be ordered when re-order level is reached.

e) Records can be examined in order to highlight slow moving inventory which may
deteriorate or become obsolete.
f) Inventory can be charged to the appropriate department code when issued from
store.
g) Returns to store can be properly recorded/ accounted for.
h) Rightful quality and quantity duly signed for and recorded in Goods Received Note
(GRN).
i) Stock taking procedure at a given time is done efficiently.
j) The valuation of stock for balance sheet and profit measurement purposes can be
accurately implemented (Kagiri, 2006).

2.3 Empirical studies

2.3.1 Strategy for resolving maximum profit for inventory minimization

Green and MischaDick (2001) found out that just like any investment in business;
inventory needs to serve the purpose of maximizing profit. However, in many cases
inventory has turned into a major cash flow constraint thus making it necessary to optimize
inventory using analytical and statistical methods in an integrated approach.
One of the biggest challenges in optimizing inventory is the fact that it is merely an output
of many inter-organizational processes, all too often organization attempt to lower
inventory using non-analytical approaches which lower service levels.
The study was conducted through a case study of a major US corporation, where Green and
MischaDick identified two-step approach of significant value; optimizing inventory levels
while viewing the existing order fulfillment process as a given constraint and changing the
fundamental order fulfillment process across the entire system. The first step was used to
make quick and successful cash availability. The second step was used to generate
breakthrough business results and provide a robust order fulfillment process that was to
perform at lower inventory levels while providing extraordinary service levels.

The real world constraint is taken into account prior to deciding on the appropriate changes.
Simulations are conducted to verify the appropriateness of the analytical models using
actual process data.
Cash flow problem is identified, further analysis reveals that inventory levels are high and
turns are below most major competition.
This study has not focused on the systems necessary for inventory management; they have
only taken into consideration inventory level as a strategy for maximizing profit.

2.3.2 Inventory value using six- sigma

Green and MischaDick (2002) found out that old equipment are viewed as not worth
understanding and improving for the operations, however, replacement cost can be
staggering. Certainty purchasing new equipment is necessary at times. However, frequently
it is possible to produce good product with existing equipment. Properly characterizing
existing equipment using statistical methods can yield significant improvements.
The research was carried out through a case study to a major US manufacturer, made the
decision to stop providing critical components. The supplier made the decision because the
equipment was the 30-40 years old, yields had traditionally run at 60% and the margins
were low, a baseline of the extrusion process was performed and a vast list of potential
factors was identified during process mapping. It was also determined through
measurement system studies that the measurement systems were not capable of measuring
the parts. The measurement systems were improved and several screening designed
experiments were conducted. Results showed a few key factors to be important. Follow-up
optimization experiments were run. The process was producing 100% yield within 3
months on existing numbers. The next step was to produce parts that had not been
previously produced. The first parts off of the new die met the desired specification,
although slightly off target.
This study has only considered the value addition or utilization of existing equipment
considered outdated to produce high quality product efficiently, therefore it did not
consider the systems necessary for inventory management

2.4 Knowledge Gap

While earlier researches, on the area of inventory management have focused on the strategy
for maximizing profit by maintaining the necessary inventory level. They have also focused
on the utilization of existing equipment considered outdated to produce high quality
product efficiently and therefore it did not consider the systems necessary for inventory
management. These earlier studies have also focused on inventory management of raw
materials and ordering method which is based on the accuracy of demand forecast for
finished products and has also investigated on the methods for improving procurement and
inventory control using 2-factor classification method i.e. continuous and periodic review.
The implementation of RFID tagging in the inventory management of retailing store in
order to control cost has also been considered. Therefore the past researches have focused
on the systems necessary for inventory management; there have not been any
considerations as to the extent of application in various organizations. This study having
the limited scope of major retail store in Nairobi will be able to capture the data appropriate
for effective adoption of inventory management in the most inventory oriented firms in the
country; as a result any conclusion reached can hold to other industries which are
represented by the firms in practice.

CHAPTER-IV

DATA ANALYSIS
&
INTERPRETATION

DATA ANALYSIS AND INTERPRETATION

DETAILS OF RAW MATERIALS

S.NO

PARTI
CULARS

2009-10
QUAN
VALUE

2008-09
QUAN
VALUE

2009-10
QUAN
VALUE

MTS

RS

MTS

RS

MTS

RS

6,02,57

5,16,43,393

5,57,99

4,31,82,80

7,25,239

6,01,30,427

LIME
1

STONE
LATER

RITE

21,057

54,55,237

36,927

1,28,69,04

40,067

2,03,94,980

GYPSUM

13,876

96,17,213

14,919

1,12,56,927

12,658

99,63, 143

12,599

30,03,109

1979

13,63,916

2,680

18,74,025

IRON
4

ORE
CLI

NKER

2,38,94,565

1,67,27,477

TRANSPORT
6

SLAG

52,746

2,16,07,526

37,544

1,33,47,166

23,662

67,76,999

29,175

8308,748

28,845

93,44,390

7,26,517

12,19,98,042

6,68,543

10,70,56,18

8,09,489

10,17,06,94

FLY
7
TOTAL

ASH

DETAILS OF MATERIALS

S.NO

2008-09

PARTI
CULARS

QUAN

VALUE (RS)

MTS

2009-10
QUAN

VALUE (RS)

MTS

LIME
1

STONE

7,58,012

7,30,72,048

7,29,474

8,06,74,608

18,57

7,30,72,048

1002

5,86,836

14,049

77,92,568

19,657

1,30,19,817

PURCHASED RAW
2

MEAL
LATER RITE

(AL)

LATERRITE

6,450

62,43,243

14,369

1,72,89,921

GYPSUM

12,521

1,14,89,566

13,724

1,60,42,857

IRON- ORE

6,450

62,43,243

14,369

1,72,89,921

1,594

8,14,926

597

3,05,126

DOLA MITE

146

42,311

SLAG

93

70,841

IRON-ORE
7

SLUDGE

10

FLY-ASH

TOTAL

42,136

1,68,28,509

2,953

12,52,445

8,57,753

12,80,08,810

7,83,616

13,02,20,264

INVENTORIES
PARTICULARS

2007-08

STORES&SPARES 4,24,62,539

2008-09

2009-10

2008-09

2009-1

3,81,29,634

4,04,73,415

4,03,72,167

4,70,83

RAWMATERIALS

43,23,631

53,84,125

67,10,394

85,08,184

71,09

COAL

78,12,148

1,73,77,900

1,06,81,760

1,55,64,080

1,61.90

PACKING

22,99,089

24,33,166

27,69,936

13,93,343

16,35

MATERIALS
GOODS IN

1,45

TRANSIT
WORK-INPROGRESS
FINISHED
GOODS
DELIVERED

3,28,74,681

2,00,55,080

74,51,674

17,87,742

42,23

66,05,349

16,27,777

20,69,280

26,34,248

17,57

33,92,234

98,63,270

85,28,720

22,39

ENERGY
TOTALS

9,63,77,438 8,83,99,916 8,00,19,735 7,87,88,484 8,03,84

STORES AND SPARES

YEARS
2007-08
2008-09
2009-10
2008-09
2009-10

AMOUNT
4,24,62,539
3,81,29,634
4,04,73,415
4,03,72,167
4,70,83,279

PERCENTAGE
10.20
6.15
0.25
16.62

INTERPRETAION 1. In 2005-06 Total value of stores and spares 4, 24,62,539

2. In 2006-07 total value of stores and spares, comparing previous year
it was Increased by 10.20%
3. In 2007-08 Total value of stores and spares, it was increased by 6.15%
4. In 2008-09 Total value of stores and spares, it was decreased by 0,25%
Comparing By 2007-08
5. In 2009-10 Total value of stores and spares, it was increased by
16.62% by comparing previous years

RAWMATERIALS
YEARS
2007-08
2008-09
2009-10
2008-09

AMOUNT
43,23,631
53,84,125
67,10,394
85,08,184

PERCENTAGE
24.53
24.63
26.79

2009-10

71,09,270

16.44

INTERPRETATION 1.
2.
3.
4.

In 2005-06 Total value of Rawmaterials 43,23,631

In 2006-07 Total value of Rawmaterials 24.53%
In 2007-08 Total value of Rawmaterials, it was increased by 24.63
In 2008-09 Total value of Rawmaterials, it was increased by 26.79% bY
Comparing with previous year
5. The current year which is 2009-10 flow of materials by comparing with
Previous Years it was decreased by 16.44%.

+
YEARS
2007-08
2008-09

COAL
AMOUNT
78,12,148
1,73,77,900

PERCENTAGE
122.45

2009-10
2008-09
2009-10

1,06,81,766
1,55,64,080
1,61,90,287

38.53
45.71
4.02

INTERPRETATION
1. The Total value of coal is in 2005-06 78,12,148.
2. In 2006-07 Total value of coal is 122.45%.
3. In 2007-08 The coal consumption is 38.53%,
4. In 2008-09 The Total value of coal is increased by 45.71% by
Comparing With 2007-08
5. Present year 2009-10 consumption of coal is 4.02% it was decreased
Comparing with previous year.

PACKING MATERIALS

YEARS
2007-08
2008-09
2009-10
2008-09
2009-10

AMOUNT
22,99,089
24,33,166
27,69,936
13,93,343
16,35,482

PERCENTAGE
5.83
13.84
50.00
13.38

INTERPRETATION
1.In 2005-06 Total value of Packing materials 22,99,089
2.In 2006-07 Total value of Packing materials 5.83%.
3.In 2007-08 Total value of Packing materials comparing with
previous year it was increased by 13.84%.
4.In 2008-09 packing materials are decreased by 50%.
5.In 2009-10 packing materials increased better than previous year
it was 13.38%.

WORK-IN-PROGRESS
YEARS
2007-08
2008-09
2009-10
2008-09
2009-10

AMOUNT
3,28,74,681
2,00,55,080
74,51,674
17,87,742
42,23,884

PERCENTAGE
39.00
68.84
76.01
136.27

INTERPRETATION
1.In 2005-06 Total value of work in progress 3,28,74,681
2.In 2006-07 Total value of work in progress 39%.
3.In 2007-08 Total value of work in progress 68.84%. it was decreased
comparing With previous year.
4.In 2008-09 The Total value of work in progress it was decreased
comparing With previous year. i.e 76.01%.
5.In 2009-10 The Total value of work in progress it was increased by
136.27%.By observing with previous year

FINISHED GOODS

YEARS
2007-08
2008-09
2009-10
2008-09
2009-10

AMOUNT
66,05,349
16,27,777
20,69,280
26,34,248
17,57,174

PERCENTAGE
75.36
27.12
27.30
33.30

INTERPRETATION 1.In 2005-06 The Total value of Finished goods 66,05,349.

2.In 2006-07 The Total value of Finished goods 75.36%.
3.In 2007-08 The Total value of Finished goods increased by 27.12%.
4.In 2008-09 The Total value of Finished goods increased by
27.30%.
5.2009-10 Total value of Finished goods increased by 33.30.

DELIVERED ENERGY

YEARS
2007-08
2008-09
2009-10
2008-09
2009-10

AMOUNT
---------33,92,234
98,63,270
85,28,720
22,39,956

PERCENTAGE

190.76
13.53
73.74

INTERPRETATION
1.In 2005-06 The Total value of Delivered energy is nil.
2.In 2006-07 The Total value of Delivered energy 33,92,234.
3.In 2007-08 The Total value of Delivered energy 19.76%.
4.In 2008-09 The Total value of Delivered energy decreased by 13.53%.
5.IN 2009-10 The Total value of Delivered energy decreased by
73.74%By observing with previous year.

WEIGHTED AVERAGE PRICE METHOD

PARTICULARS

2007-08

2008-09

2009-10

2008-09

2009-10

Stores & Spares

Raw Materils
Coal
Packing
Materils
Goods in
Transit
Work-inprogress
Finished goods
Delivred energy
TOTAL

44.06
04.49
08.11
02.29

43.13
06.09
19.66
02.75

50.58
08.39
13.35
03.46

51.24
10.80
19.75
01.77

58.57
08.84
20.15
02.03

----------

----------

-----------

----------

00.18

34.10

22.69

09.31

02.27

05.25

06.85
-------100.00

01.84
03.84
100.00

02.59
12.32
100.00

03.34
10.83
100.00

02.19
02.79
100.00

Intrepretation:-

1. In 2005-06 to 2008 Spares and Stores are very high by observing

remaining materials.
2. Goods in transit weights are taken only 2009-10 remaining Years
are nill.
3. By observing all materials the highest weights are given Storees and
Spares the lowest weights are given Goods-in-transit

INVENTORY TURN OVER RATIO

YEARS
2007-08
2008-09
2009-10
2008-09
2009-10

AMOUNT

RATIO

23,76,55,692/9,23,88,677
41,21,48,760/8,42,09,826
70,34,96,783/7,94,04,110
72,68,72,943/7,95,86,736

2.57
4.89
8.86
9.13

Intrepretation:1. In 2005-06 taken as a Base year.

2. From 2004-08 the ratio increasing gradually i.e 2006-07 2.57,
2007-08 4.89,2008-09 8.86,and 2009-10 9.13 respectively.

SALE OF CEMENT YEARLY

YEARS
2005-06
2006-07
2007-08
2008-09
2009-10

SALES
1,11,18,31,603
1,12,03,59,310
1,53,77,19,469
2,47,14,33,454
2,74,61,83,129

PERCENTAGE
0.77
37.25
60.72
11.12

Intrepretation:1.Total sale of cement is in 2004-08 like this from 2006-07 0.77%, 2005-

06 37.25%, 2008-09 60.72%, and finally 2009-10 11.12% respectively.

PROFITS YEARLY

YEARS
2005-06
2006-07
2007-08
2008-09
2009-10

PROFITS
6,63,63,114
8,88,75,405
10,71,13,012
38,82,58,733
64,30,05,659

TREND RATIO
33.92
20.52
264
65

INTREPRETATION1.The Trend Ratio is from 2004-08 yearly like this 2006-07 33.92%,
2007-08 20.52%, 2008-09 264%, and finally 2009-10 65%
respectively.

INVENTORIES CONSUMED

YEARS
2005-06
2006-07
2007-08
2008-09
2009-10

INVENTORIES
9,63,77,438
8,83,99,916
8,00,19,735
7,87,88,484
8,03,84,989

TREND RATIO
8.28
9.47
1.54
2.03

INTREPRETATION1.Inventories consumption is according to table in 2006-07 8.28% 200506 9.47%, 2008-09 1.54%, and finally 2009-10 2.03% respectively.

CHAPTER-V

FINDINGS
& SUGGESTIONS

FINDINGS

1. Inventory consumption is yearly 2004-08 like this. In 2006-07

8.28%, 2007-08 9.47%, 2008-09 1.54%, and 2009-10 2.03%.

2. Sale of the cement from 2004-08 are as follows.In 2006-07

0.77%,2007-08 37.25%, 2008-09 60.72%, and 2009-10 11.12%

respectively .

3. The production of cement in MTS from 2005-06 to 2009-10 like

this.In 2006-07 1.23%, 2007-08 32.21%, 2008-09 11.55%, and

2009-10 12.10% respectively.

4. Inventory turn over ratio is increasing yearly from 2006-07 2.57%,

2007-08 4.89%, 2008-09 8.86%, and 2009-10 9.13% respectively.

5. Raw marterils consumption is yearly from 2006-07 24.53%,

2007-08 24.63%, 2008-09 26.79%, and 2009-10 16.44%
respectively.

6. Packing materials are yearly from 2006-07 5.83%,

2007-08 13.84%, 2008-09 50%, and 2009-10 13.38% respectively.

7. Work-in-progress yearly from 2006-07 39%, 2007-08 68.84%, 200809 76.01%, and 2009-10 136.27% respectively.

8. Profits are yearly from 2006-07 33.92%,2007-08 20.52%, 2008-09

264%, and 2009-10 65% respectively

SUGGESTIONS

1. As per my own observation Inventory consumption percentage whch

is very low in 2009-10 i.e 1.54%,then the profits are very high i.e
264% and my suggesition is by observing 5 years data .Company will
have to maintain 2009-10 results in future also.
2. To minimize the loss through deterioration ,pillferage,wasteges and
damages .
3. To ensue right quality goods at reasonble price, at right time.
4. Company will try to increase the production ,Where production of
cement is increasingly then the profits also increasing.
5. To design proper usage techniques for the Inventory management.
6. Where the consumption of Inventories is ver high by comparing the
present year 2010-11 to previous years,So company will try to
decrease Inventory consumption and to avoid over stocking of
Inventories .
7. Where increasing of Inventory consumption is very high i.e burden
to maintain warehousing capacity of the company.
8. The company should aim at minimizing cost by implementing
strict cost control and maintain cost records for each
department to identify the risk in controllable costs.

BIBILOGRAPHY

BIBILOGRAPHY

Financial Management Principles & Practices

- S.N.Maheswri

Annual Reports of MADRAS CEMENT LIMITED.

Website: www.madrascement.com

2004-2009