Professional Documents
Culture Documents
"INVENTORY MANAGEMENT"
at
THE KRISHNA DIST, MILK PRODUCERS MUTUALLY
AIDED CO-OPERATIVE UNION LTD.,
VIJAYAWADA
Submitted By
P.RAJYA LAKSHMI
Regd No: (412309672160)
(P.RAJYA LAKSHMI)
ACKONWLEDGEMENT
P.RAJYA LAKSHMI
CHAPTER -1
INTRODUCTION
Financial management is that managerial activity which is concerned with the planning &
controlling of the financial resources. In other words managing the funds of the firm most wisely with
a view to maximize the wealth of shareholders. It is concerned with effective use of important
economic resources of business firm.
Financial management is concerned with the acquisition. Financing and management of assets
with overall goal in mind. Financial manager has to forecast expected events in business and note their
financial implication.
Firm anticipating financial needs means estimation of funds required for investment in fixed
and current asserts or long term and short term assets.
FINANCIAL MANAGEMENT
A modern financial management performs several functions it is difficult to task to identify the
functional areas of modern financial management. They are mainly three types as follows.
Investment decision
Financial decisions
Dividend decisions
INVESTMENT DECISION
1. A firms investment decisions involve capital expenditures.
2. They are therefore referred as a capital budgeting decision.
3. It commitment of long-term assets that would yield benefits in the future.
FINANCIAL DECISIONS
1. It is the second important decision or function to be performed by the financial manager.
2. Decide how to acquire funds and how met the firm's investment needs.
DIVIDEND DECISION
1. The proportion of profits distribute as a dividends is called the dividend decision.
2. Maximize the market value of the firm's shares is optimum dividend policies.
NEED OF THE STUDY:
This project report entitled "A CRITICAL STUDY ON INVENTORY MANAGEMENT",
starts with the necessity of realization of definition, concepts and importance of inventory.
Inventory may be defined as usual, but idle resource. If resource may be tangible and
physical such as materials then it is termed as inventory. Inventory Management has
acquired a great significance and sound position in recent years with an objective of
profitability and liquidity. The success or failure of a business enterprise largely depends
upon the management of inventory management.
Moreover inventory can be one of the indicators of the management effectiveness on the
material management front. Inventory management deals with determinants if optimal
policies and procedure for Procuring of commodities. Inventories constitute, in every
business concern, the most significant part of working capital or current assests. Inventories
in Indian industries constitute more than 60% of the current assests. Inventories are
significant elements in cost process.A management student should properly understand the
various aspects. Inventory management if opted for specialization in finance management.
Vijaya dairy is big manufacturing unit and the requirement of inventory for each department is
very high in an organization like vijaya dairy.
OBJECTIVES OF THE STUDY:
PRIMARY OBJECTIVES
To determine and maintain optimum level of inventory management in KRISHNA
DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OPERATIVE UNION LTD.
To find out the reasons for the problems and to evaluate possible ways for resolving
the problems.
SECONDARY OBJECTIVES
o The study is done on inventories help by bulk active division of THE KRISHNA
DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OPERATIVE UNION LTD.
o The scope of the study includes ABC analysis of Raw material work in progress
and finished goods for five financial years.
o This study provides insight to the management of high value items and also brings
attention of management towards movement of ‘A’ class items over period of 5
years.
METHODOLOGY OF THE STUDY:
Primary Data:
The primary data, which is collected, is entirely based on the details given by the
purchase; stores, production and sales department are mainly concerned in KRISHNA
DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OPERATIVE UNION LTD.
Secondary Data:
The secondary data is entirely based on the data obtained for the officers, Managers and
staff of KRISHNA DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-OPERATIVE
UNION LTD.
Managers and supervisors of the organization have also been interviewed to elicit
necessary information on the basis of non-structured schedules. And secondary was
collected from the company's manuals and office records pertaining to production, marketing,
personal and financial position.
LIMITATIONS OF THE STUDY:
Any study is having of its own advantages and certain disadvantages. Among such few of
The reliability of the study depends upon the information furnished by the officials.
This study is entirely based on the given by the stores department, purchase
Since milk is perishable and it has to be converted into the finished goods within 24
The study is exclusively done for the stores department inventory items in
KDMPMACUL
CHAPTER-II
INDUSTRY PROFILE
Industry Scenario:
Dairying has been of life in India since the ancient Vedic times. The modern dairy industry
took roots in 1950 with the sale of bottled milk in Bombay from array milk colony. The first large
scale milk products factory was started in 1945 at Anand a cooperative venture, with the assistance of
UNICEF, for the production of milk powder, table butter and ghee. These products were made from
the buffalo milk.
The world's largest development program over undertaken, the operation flood undertook the
gigantic task of upgrading and modernizing with production, procurement, processing and marketing
with the assistance provided by the world bank and other external agencies, designed and implanted by
the National Dairy Development Board(NDDB) and the Indian dairy corporation. The project was
launched in July 1970. Its basic concept compromises the establishment of co-operative structure on
Anand pattern.
OPERATION FLOOD-1:
Operation flood-1 also referred to as white revolution is a gigantic project profounded by government
of India for developing Dairy industry in the country. The operation flood-2 originally meant to be
completed in 1975 for its completion at total cost of about Rs.l 16 crores. The operation flood-1 was
wholly financed by setting in Indis free metric tones of bottle oil donated out of the surpluses of
European Economic Community
ANAND PATTERN-1:
Under the operation flood-1 the program for increasing milk production was taken up in ice
hinterlands of various breeding tracks on Anand pattern and loudly proclaimed with a trample. The co-
operative were started originally in 18 of Indian milk shed districts and later on mine more milk shed
areas were added to make a total of 27 in 10 states of the country viz, Maharastra, Tamilnadu, Andhra
Pradesh , West Bengal, Bihar, Hariyana , Punjab, Uttar Pradesh and Rajasthan.
Those dairy co-operatives are based on a model known as Anand pattern of dairy co-operative.
Under Anand pattern concept rural co-operative infrastructure was to be built in the village, the milk
producers were and keep their animals. In each participating village, the milk producers were to form
their own village dairy co-operative. Thus Anand pattern dairy co-operative union organizes mobile
veterinary and artificial insemination counters.
In the sphere of co-operativisation the no of Anand pattern organized societies under operation flood
was 63121 on April 1st 1991 as age INST 60753 a year ago indicate one that years as many as 2368
new dairy co-operatives were formed.
OPERATION FLOOD-2:
The operation flood-2 which was started in July 1978 is scheduled to be completed in 1985 at a
cost of 483 crores.
A humble attempt has been made in it sufficient appraisal of the achievements made in some
sufficient field during operation flood-1. These achievements if as all made particularly the anand
pattern dairy co-operative unions are to serve now bedrock of operation flood. Their unions are to act
to the starting. Nucleuses for co-operative cluster federation. The main instrument for this gigantic
project operation food-2. The average nucleus cluster federation would six districts unions registered
and unregistered.
The Indian dairy co-operative, National possible are not required to indicate the basis on which the
state wise allocations were made in operation flood-2 up to end of the 11,979 Gujarat state alone got
the lion's shares of 1666. 70,00,000 five states Haryana, Bihar, Rajasthan and Andhra Pradesh put
together the total disbursement in their case was 1732 lakhs only. This trend is going to be maintained
in operation flood-2.
OPERATION FLOOD-3:
The Indian dairy industry is growing rapidly and may become a string competitor to world dairy
powder. The milk sector is the second largest contribution to the agricultural economy in terms of
produce phenomenal growth is a result of national airy development board through the operation
Flood programs.
Operation flood-2 now in its closing phase only consolidated the procurement affords to boost
production. The projection for milk output for 200 AD is nearly 90 tones at on 5% growth rate. It is
now 5-8% dairy factories established under operation flood, which cover 170 milk sheds can handle
14.3 millions liters milk daily. They have a milk drying capacity of about 696 tones per day.
The rapid growth in milk production did way with import of milk powder except for a (26400
tones) during the brought years
At the time of industrialization at cattle feed factory at kanjari in October 1964. the late sri
LALBAHADUR SHASTRY , the Prime Minister of India paid unscheduled visit producers co-
operative societies and stated there overnight .He was impressed by the social economic changes
brought milk co-operatives in Krishna district and desired to have a National level organization to milk
producers co-operative societies replicate anansin other part of the country.
Thus the National Dairy Development Board was set up under the empowerment of ministry of
agriculture and irrigation, Govt of India in Sep 1965 under the society registration act 1860 and the
Bombay trust act 1950.
The president of India nominates the board of directors including chairman, secretary; National
Dairy Development Board is the chief of the organization.
The program dairy industry was mooted with commendable help of the united national
international children's emergency fund, food and agriculture organization and freedom from hunger
company campaign Organization of the U.K. these organization insisted lot of the establishment of the
dairy units at hydria and vijayawada in 1967 and 1969 respectively, which led to pioneer dairy
development program in Andhra Pradesh? Later to set cooling and chilling centers have been set up to
feed these two gigantic units.
The government of Andhra Pradesh started dairy development corporation to interest of milk
producers and ensuring adequate supply of fresh milk at reasonable price to the urban consumers as
A.P.D.D.C ., come in to the existence on 2nd April 1974. A.P.D.D.C ., providing employment to
nearly 20 employees and organism easy many as 87 dairy units including seven milk factories , 13
district dairies, 22 chilling centers , 18 cooling centers and 15 mini cooling centers.
In addition to that the private units have been contributing their little mite in the development
of dairy industry M/s Hindustan milk foods that has started a malted milk product factory in
Rajamundry. Further to enhance working efficiency and to increase the turnover, the government has
constituted on autonomous dairy development corporation on the recommendation measure the dairy
industry improving towards massive milk production and milk collection.
DAIRY DEVELOPMENT:
In 1960 pilot milk supply scheme was started in the state for the dairy development. Its initial
capacity was 100 liters a day at the time of starting. Now its daily collection increased to 11 lakhs
liters per day. It is also working as alien between milk producers of the towns by providing reasonable
price to the producers to maintain stable market.
OPERATION FLOOD:
In our state operation flood was divided in three types "Anand level".
1. Village level - D.C.S
2. District level - M.P.C.V
3. State level - A.P.D.D.C.F
OPERATION FLOOD PROGRAMME:
Indian dairy development corporation own the responsibility of implementations of operation
flood programs, which provides money assistance put 70% towards loans and 30% as subsidy.
National Dairy Development Corporation selected district of the state for implementation of operation
flood. It divided the districts into ten milk collecting mandals.
COMPANY'S MISSION:
Farmer's prosperity through technical innovations and customer orientation with specific focus on
quality and cost.
COMPANY'S VISION:
Dairying in the district to be the major instrument of strengthening rural economy & making
available safe milk and milk products.
SAILENT FEATURES:
1. Daily average milk procurement: 163794 litres.
2. Turnover of business has reached to 200 crores.
3. Daily milk sales average reached to 1600001itres.
4. Obtained ISO 9001:2000, 14000 and H.A.C.C.P certification.
5. Earning profits and distributing bonus to its members
6. Paying RS.68 crores per year to farmer as cost of milk procured from them.
7. Strengthened the rural economy by avoiding middlemen and making available safe milk and
milk products to the consumer.
8. Provided self employment to the rural women.
COMPANY PRIDE:
o First powder plant established in south India
o Largest democratic functionary in the district serving the farming community
o Having more than RS. 1000 crores grass root level production base.
o Providing direct and indirect employment to people
o First dairy to introduce five varieties of liquid milk.
o Fist dairy to introduce liquid ice cream in tetra brick pack.
o First dairy cooperative to introduce curd in cups in south India
o First dairy to introduce butter milk and lassie in tetra brick pack
o Annual turnover more than RS.121 crores with a continuous growth rate.
o First dairy to introduce Basundi in cups and milk cake.
MILK – PROCUREMENT:
Milk is being procured twice a day from about 830 villages in the district organized through 29
routes and 6 chilling centers besides getting raw milk directly to the factory from certain villages in a
radius of 50 km around Vijayawada. Among 480 centers, about 431 are registered societies as under
Anand pattern.
UNIQUE ACHIEVEMENTS:
The company got ISO 9001 and ISO 14000 trademark for its quality of milk.
The company recently made record sales of 1.64 lakh Its/day where as its previous sales record
was 1.45m lakh Its/ day.
S.W.O.T ANALYSIS
STRENGTHS
1. Milk production potential in Krishna district substantial.
2. Ability to handle highly perishable product milk.
3. Adequate infrastructure facilities available.
4. Availability of well experienced professionals.
5. Ability to meet any consumer demand for milk and milk products.
6. Ability to offer quality aseptic products with high profitability.
7. Established bondage with farmers.
8. Access to developmental funds and grants.
9. Access to other co-operatives.
WEAKNESSES
1. 1 High fixed costs occupyingl 5% of business turnover.
2. Milk and milk products are high priced using competitive edge.
3. Product manufacturing facilities are outdated due to lack of modern facilities.
4. Work culture not compatible with growing for customer service.
5. Employee's skills at various levels require upgradation.
6. Business systems and modern management culture is yet to be adopted.
7. Managers lack of business experience.
OPPORTUNITIES:
1. Increased purchasing capacity.
2. Rapid urbanization.
3. Growing food service sector.
4. Responsive state government.
5. Export opportunities for long life aseptic milk.
6. Responsive milk producer base.
THREATS:
Intense competition in liquid milk market.
Entry of organized private sector.
Increasing competition for the marketable surplus milk in rural areas.
Employee's resistance to change.
SUCCESS STORY:
District Krishna is on the river rain track of Krishna a butting Bay of Bengal. Krishna District is
known for its quality cattle. In milk cattle population it ranks second in the state.
Organized dairying in Krishna commenced in 1965 with integrated Milk product assisted by the
UNICEF, a milk conservation plant 1.25 LL Pd was commenced in April, 1969 at VIJAYAWADA.
The dairy industry in the District had its beginning under state govt as part of animal husbandry
activity. It was integrated milk project (1960), dairy development department (1971), Andhra Pradesh
dairy development corporation (1974) and A.P. Dairy Development Co- operative Federation (1981).
Union collects milk from about 1 lakh milk producers covering 800 villages organized through 20
routes. District union has 6 milk chilling centers one each operating at Pamarru, Hanuman Junction,
Veerankilock, Gudlavalleru, Chillakollu and Tiruvuru with total processing capacity of 1,22 lakh
Its/day.
It has milk products factory with the facilities to manufacture different milk products.
Milk Processing 2.5 lakhs Its/day
Milk Drying 22 MT/day
Butter 22 MT/day
Ghee 18 MT/day
The milk products factory at Vijayawada handles surplus milk from all coastal districts. About
1.73 lakh kgs/day with peak touching 3.18 lakh kgs/day. The factory conserves fat in the shape of
white butter usually to the extent of 1000 MTs per year.
An Aseptic Packing Station (APS) was set up in the, Milk Products Factory to pack 50000
liters of long the milk (UHT MILK) per day. Union has also 2 cattle feed mixing plants with a total
capacity of 50 Mt/day.
B. FIELD:
S.NO Name of the Centre Unit Capacity
1 MCC Pamarru Lts/day 50000
2 MCC Veerankilock Lts/day 18000
3 MCC Gudlavalleru Lts/day 18000
4 MCC Hanuman Junction Lts/day 18000
5 MCC Chillakallu Lts/day 12000
6 MCC Tiruvuru Lts/day 12000
Total 128000
7 No of computerized milk
Collection and testing centers 25
8 No. of bulk coolers operating 6
(planned to establish ten more)
C. CATTLE FEED:
S.NO Name of the plant Unit Capacity
1 FMP Buddavaram M.T.s/day 30.0
2 FMP Gudlavalleru M.T.s/day 18.0
MILK RECEPTION:
As soon as milk is arrived at the reception dock either through cans or tankers, the laboratory
authorities conduct all the platform / Bacteriological/ Chemical tests and after its quality confirmation
the milk is received and sent to storage.
RAW MILK:
Milk products factory Vijayawada is directly connected by around 175 villages a radius of around
50 kms around Vijayawada. The milk collected from these villages is collected directly at milk
products factory, Vijayawada for which it equipped with a can conveyer, an electrical weighting
machine, a dump tank and a straight through can washer with cleaning capacity of 600 cons per hr.
Chilled Milk :
Cilled milk from chilling centers and other stations through milk tankers is received at the and
after receiving quality confirmation from laboratory the milk is sent for storage.
OPERATIONS:
Separation of required quantity of whole milk to the extent of demand and with admixture of
whole milk /cream and skim milk in required proportions, milk is standardized according to their
composition and sent them to the packing or products manufacturing divisions.
BUTTER SECTION:
It is equipped with three butter churns with drum capacity of 1500 Its each. The cream loaded in
the drums is churned for about three hours for separation of liquid butter milk from cream after setting
of butter; it was washed with chilled water to remove solids from it. The butter formed is collected and
sent back to processing section while the solids in liquid form of butter milk is sent back to processing
section for further usage.
GHEE SECTION:
There are 7 ghee boilers in ghee section each with 1000 Its capacity in which butter is malted for 3
hours at 120° c. After attaining satisfactory flavor, colour etc the ghee is pumped to ghee setting tanks
where it is allowed for eight hours for setting of sediment at the bottom of the tank. There are settling
tanks each 8000 Its capacity and two storage tanks each 3000 les capacity. Then the ghee is clarified
and filtered with fine filters. After obtaining satisfactory report from lab authorities the final filtered
ghee is packed in 51t, 21t, lit and 54 It etc. The total capacity of ghee packing is 18.0 M.T per day.
BI-PRODUCTS SECTION:
All the fresh milk products like butter milk, sweet lassie. Khova, paneer, yoghurt, milk cake are
manufactured and packed under strict hygienic and aseptic conditions in this section.
POWDER SECTION:
It has two powder plants. An alia level makes single effects gravity flow milk evaporator plant
with drying capacity of 8. M.T s per day and another valcan level double effect gravity flow milk
evaporator plant with drying capacity of 14. M.TS per day are under operation. Fine and superior
quality ISI grade SMP is packed in 25 kg, 1 kg and Vi kg packs.
MILK PACKING:
It has the capacity to pack 200000 Its of various varieties of milk per day. It is equipped with eight
sachet packing machines each capacity is 150 tubs per hour. Five varieties of milk in Vi It sachets for
direct consumers. Cans for institutions are being packed.
DISTRIBUTION NETWORK:
1) LIQUID MILK DISTRIBUTION:
Vijayawada city is divided into 24 zones. Each zone is connected by a separate milk route
operating both morning and evening to distribute the milk to the commission agents and cold chain
points.
2) PRODUCT DISTRIBUTION:
a) Local distribution with in the district: Through distributors, stockiest and retailers. Products
are delivered to these Distributors /stockiest /retailers.
b) Distribution to outside district: Through stockiest and EX-factory direct sales through out
the country.
PERSONNEL AND HRD:
Personnel officer is heading the personnel department. HRD activities are carried out for the
benefit of the employees. It is looking after the service/ administration matter of the staff of this union
besides implementation of the following Acts for their welfare.
1. 1 Industrial Dispute Act 1947
2. 2 Payment of wages Act 1936
3. 3 Minimum Wage Act 1948
4. 4 Equal Remuneration Act
5. 5 Gratuity 1972
6. 6 Workmen Compensation Act
7. 7 ESI Act 1948
8. 8 Trade Union Act 1926 etc.,
FINANCE:
Sr. Accounts officer is heading the finance who is assisted by four Asst. Account
Superintendent and finance staff. The union has started its operations independently from 8-02-1985
on wards after taking the fixed assets from the state federation at their book values as on that date.
SHARE CAPITAL:
Authorized share capital Rs. 500 lakhs. The unions paid up share capital at present are Rs. 106.24
lakhs and Rs. 31.87 lakhs are share suspense waiting for conversion.
MEANINIG OF INVENTORY:
Every enterprise needs inventory for smooth running of its activities; it serves as a link
between the recognition of a need and its fulfillment the greater the time leg. The higher the
requirements of inventory, the unforeseen fluctuations in demand and supply of goods also necessitate
the need for inventory. It also serves as a cushion for future prices fluctuations. The simple meaning of
inventory is "stock of goods" or "list of goods" the word inventory is understood differently by various
authors. In accounting language it means stock of finished goods only, for a manufacturing concern it
includes raw-materials, work-in-progress, finished goods etc
Inventories constitute the most significant part of current assets. Many companies maintain
60% of current assets as inventories. Because of the large size of the inventories maintained by the
firms, a considerable amount of funds is required to be committed to them. It is therefore absolutely
imperative to manage inventories efficiently in order to avoid unnecessary investment. A firm
neglecting the management of inventories will be failed in its long run profitability and may fail
ultimately. It is possible for a company to reduce its levels of inventories to a considerable degree with
in the range of 10 to 20% without any adverse effect by using simple inventory planning and control
techniques. The reduction in excess inventories has a favorable impact on the profitability of the firm.
OBJECTIVES OF INVENTORY MANAGEMENT:
1. Minimize investment in inventories in order to maximize profits.
2. In order to minimize carrying costs and ordering costs of inventory. To minimize obsolescence
in stores.
3. To avoid excess and inadequate stocks.
4. To provide check against losses of materials.
NATURE OF INVENTORIES:
Inventories are the stock of the product a company is manufacturing for sale and components
that make up the product. The various forms in which inventories may exist in a manufacturing
company are:-
1. Raw materials
2. Work-in-progress
3. Finished goods
RAW MATERIALS
Raw materials are those basic inputs that are converted into finished product through the
manufacturing process. Raw materials inventories are those units, which have been purchased and
stored for future productions. A company should maintain adequate stock of a continuous supply to
the factors for an uninterrupted production. If it is not possible for a company to produce raw materials
whenever needed, a time lag exists between demand for materials and its supply also there will be
some uncertainty on procuring raw materials in time on many occasions.
The procurement of materials is delayed because of uncertain factors like strike, transport,
disruption or short supply. Therefore the firm should maintain sufficient stock of raw materials at a
given time to streamline production. Other factors which may necessitate purchasing and holding raw
materials are quantity discounts and anticipated price increase. The firm may purchase large quantities
of raw materials than needed for the desired production and sales levels to obtain quantity discounts of
bulk purchasing. At times the firm would like to accumulate raw materials in anticipation of price rise.
WORK IN PROGRESS
The inventories are semi-finished products. They represent products that need more work before
they become finished products for sale. Work in progress inventory builds up because of production
cycle. Production cycle is the time span between introduction of raw-materials and mergence of
finished products at the completion of production cycle. Till, production cycle completes, stock of
work in progress has to be maintained. Efficient firms constantly try to make production cycles
smaller by improving their production techniques.
FINISHED GOODS
Finished goods are the completely manufactured products, which are for sale. Stocks of raw
materials and work in progress facilitate production, while stock of finished goods is required for
smooth marketing operations. Stock of finished goods has to hold because production and sales are not
instantaneous. A firm cannot produce immediately when customers demand goods. Therefore to
supply finished goods on a regular basis, their stock has to be maintained for sudden demand from
customers. In case the firm sales are seasonal in nature, substantial finished goods should be kept to
meet the peak demand. Failure to supply products to customers would mean loss to firm's sales to
competitors.
The level of finished goods inventories would depend upon the co-ordination between sales and
production as well as on production time. The levels of three kinds of inventories for a firm depend on
the nature of business.
A manufacturing firm will have substantially high levels of three kinds of inventories while a retail
or wholesale firm will have a very high level of finished goods inventories and no raw materials or
work in progress inventories. Within manufacturing firms there will be differences.
Large Engineering companies produce long production cycle, products therefore they carry large
inventories on the other hand, and inventories of a consumer product will not be large because of short
production cycle and fast turnover. Firms also maintain a fourth kind of inventory called supplies.
Supplies include office and plant cleaning materials like soap brooms, oil, fuel, light, bulbs, etc. these
materials do not directly enter production, but are necessary for production process.
INVENTORY DECISIONS
In an inventory control situation, there are three basic questions to be answered. They are:
How much to order? That is to say, what is the optimal quantity of an item that should be
ordered whenever an order is placed?
When should the order be placed?
How much safety stock should be kept? Thus, what quantity of an item in excess of the
expected requirements should be held as buffer stock in anticipation of the variations in its
demand and/or the time involved in acquiring fresh supplies.
INVENTORY COSTS:
In determining optimal inventory policy, the criterion most often is the cost function. The classical
inventory analysis identifies four major cost components. Depending on the structure of an inventory
situation, some or all of these are included in the objective function.
PURCHASE COSTS:
This refers to nominal cost of inventory. It is the purchase price for the items that are bought
outside sources, and the production cost if the items are produced within the organization. This may be
constant per unit, or it may vary as the quantity purchased/ produced increases or decreases. Quite
often, situation is found when it may be stipulated that, for example the unit price is rest 20 for an
order unto 100 units and rest 19.50 if the order is for more than 100 units.
CARRYING COSTS:
They are involved in maintaining or carrying the inventory. It represents the cost that is associated
with storing an item in inventory. Carrying costs are also known as holding cost or the storage cost.
The main components of this category of carrying costs are
1. Storage cost i.e. tax, depreciation and maintenance of the building, utilities etc.
2. Insurance of inventory against fire and theft
3. Deterioration in inventory because of pilferage, fire, technical obsolescence, style obsolescence
etc.
4. Serving costs such as labour for handling inventory, clerical and accounting costs.
The opportunity cost of funds consists of expenses in raising funds (interest of capital) to finance
the acquisition of inventory. It funds were not locked up in inventory they would have earned a return.
This is the opportunity cost of funds or the financial cost. The carrying cost and the inventory size are
positively related and move in same direction. If the level of inventory increases, the carrying costs
also increased and vice-versa.
It can be easily visualized that the several types of analysis discussed are not mutually exclusive.
They can be, and often are, used jointly to ensure better control over materials. For example ABC and
XYZ analysis may be combined to classify and control depending on whether the items are AX, BY,
CZ, AY of and so on. Similarly XYZ - FSN combine classification exercise will help in timely
prevention of obsolescence.
PURCHASING:
INTRODUCTION:
The scarcity of raw materials has practicality put the people in purchasing department in a very
tight position. The purchasing department can be in a better position. As of today there are four
different groups of buyers, viz, a) Consumers, b) Middle men, c) Government agencies and d)
Manufacturers. In fact the whole economy is dependent on this group for survival. The second group
comprises such as money collection of traders as wholesalers, retailers, and distributors who buy not
for their own consumption, but to sell to others. The fourth category of purchases includes
manufacturers who convert raw materials, components, consumables and packing materials for use in
industrial establishments where saleable products are produced. The subject of purchasing is discussed
here as it applies to the buying, made by manufacturers.
DEFINITION:
In its narrow sense, the term "purchasing" refers merely to the act of buying an item at a price.
This very narrow concept of purchasing has been gradually widened during the last 70 days.
According to Alford and Beatty "Purchasing" is the procuring of materials, supplies, machines,
tools and services required for equipment, maintenance and operation of a manufacturing plant".
According to Walters, purchasing function means "The procurement by purchase of the proper
materials machines, equipment and supplies for stores used in the manufacture. Of a product adapted
to marketing in the proper quality and quantity at the proper time and at the lowest price, consistent
with quality desired".
According to Wasting, Fine and Zen "Purchasing is a managerial activity that goes beyond the
simple act of buying. It includes research and development for the proper selection of materials and
sources, follow-up to ensure timely delivery; inspection to ensure both quantity andquality ; to control
receiving , sore keeping and accounting operations related to purchases".
IMPORTANCE OF PURCHASING:-
Purchasing function provides materials to the factory without which wheels of machines
cannot move.
A one percent saving in material cost is equivalent to a 10% increase in turnover. Efficient
buying can achieve this.
Purchasing manager is the custodian of his firm's purse as he spends more than 50% of his
company earnings on purchases.
Increasing proportion of one's requirements, are now brought instead of being made as was the
practice in the earlier days. Buying therefore assumes significance.
Purchasing can contribute to import substitution and save foreign exchange.
Purchasing is the main factor in the timely execution of industrial projects.
Materials management organizations that exist now have evolved out of purchasing
departments.
Other factors like:-
• Postwar shortages
• Cyclical swings of surpluses and shortages and the first rising materials costs.
• Heavy competition.
• Growing worldwide markets have contributed to the importance of purchasing.
OBJECTIVES OF PURCHASING:
It may be emphasized that some of the functions are the sole responsibility of the purchasing
department, some are shared with order departments and the remaining are the responsibilities in
which the purchasing department has considerable interest.
NATURE OF STORES:
Stores or storage is the function of receiving, storing and issuing materials. It involves the
supervision clearance of incoming supplies, to ensure that they are maintained in good condition,
safety and in readiness for use when required, while they are in storage and issuing them against
authorized requisition. In short, it is connected with the physical handling and well- being of the
stocks. It should be mentioned that, stores is not meant for stocking purchased materials alone.
IMPORTANCE:
Efficient storage of stores yields the following benefits:
1. Ready accessibility of major materials permitting efficient service to users.
2. Efficient space utilization and flexibility of arrangement.
3. A reduced need for materials handling equipment.
4. A minimization of materials deterioration and pilferage.
5. Ease of physical counting.
6. Protecting against waste deterioration, damage and pilferage.
7. Design the buildings physical appearance to create goodwill and to invite business.
STORAGE SYSTEM:
Choosing the most suitable storage system means dealing with a number of interacting and often
conflicting factors. Inevitably, the degree of mechanization affects layout while the scarcity of space
affects the height to which racking is erected. The need for rapid, intensive order packing means a
need for rapid and easy access to stock.
Fixed location means that, goods of a particular type have a position in the store assigned to them
exclusively. It means that while stock can be found immediately without a complex system for
recording its position there can be considerable waster space, because when stocks of any one item are
low, the space left vacant cannot be filled. The assignment of fixed position to a particular type of
goods is made on any one of the following basis.
1. On the basis of the supplier
2. On the basis of similarity of items.
3. On the basis of the joint issue of the items.
4. On the basis of the size and frequency of use.
METHODS OF VALUATION:
The government of India has given sufficient flexibility for companies to introduce scientifically
developed methods of valuation of their stocks. In order to prevent malpractices, it has been stipulated
that such methods must be studied and approved by the Board of Directors, and must be followed for a
minimum prior of three years. The various methods of valuation available are given below.
1. First in first out [FIFO]
2. Last-in -first -out [LIFO]
3. Periodical Simple Average Method
4. Normal cost/ Standard cost method
5. Weighted average method
6. Replacement price method
1. FIFO:
In this case it is assumed that the stores follow the principal that oldest stock issued first so that
stock left out is from the later arrivals. Hence all issues are assumed to have come out from older
stocks. These are valued at old price. The cumulative value of stock out will give the net value of the
existing stock.
2. LIFO:
Here stores are issued from the last stock. This means issues have taken place from later
arrivals. Hence all issued are valued as per the price of the latest arrivals to compute value of stock left
in stores.
NORMAL COST / STANDARD COST METHOD: This method is mostly used for items
manufactured in house. Here the average cost of a certain lot is calculated and used as cost of items
issued. Since this method is used for items manufactured, one can use standard costing method also for
valuation of such stocks.
2. The production department as well as of the outside customer and side by side holding down the
costs.
Inventory is maintained due to the following reasons.
1. 1 To carry reserves in order to prevent stock outs or cost sales.
2. 2 Never having much of anything on hand.
3. 3 To gain economies in purchases by buying items beyond the desired amount.
4. 4 To maintain reserves in stocks for the period of replenishment.
Thus a well formulated inventory policy of an enterprise in likely to ensure smooth and efficient
running of production operation providing optimumUtilization of man, machine and material. The
decision regarding the appropriate size of the inventory is of paramount significance.
LIMITATIONS OF INVENTORY CONTROL:
1. The control of inventories is complex because of the many functions it performs. It should
be viewed as a shared responsibility.
2. The objectives of better sales through improved service to customer, reduction in inventories
to reduce size of investment and reducing cost of production by smoother production
operations are conflicting with each other.
RE-ORDER LEVEL/POINT:
The concept of re-order point is basically related with lead time demand. The problem is that
demand can never be accurately projected over the lead-time. Once we know the demand in lead time,
re-order level can be easily determined mathematically Re-order Level=Lead Time demand + Safety
Stock.
ABC (ALWAYS BETTER CONTROL) ANALYSIS:-
ABC analysis is the selective inventory control technique and this is the first step in the inventory
control process. This is the process in which 1000's of different types of inventories are classified to
determine the type an degree of control required for each. This technique is based on the assumption
that the firm should not exercise the same degree of control on the items of inventory.
On the basis of unit price and consumption, various inventory items are categorized into three
classes of this analysis:
A
B
C
"A" group involves the largest investment and inventory control must be rigorous and intensive
and the most sophisticated inventory control technique should be applied to these items. Type "A" is
of higher cost and highly scarce resource without which the production process cannot be imagined,
which will be very less in quantity when compared to the investor level.
"A" type of items are only about 10% in number. But account for 75% of the annual inventory
usage value.
"B" group stands mid-way. It deserves less attention than "A" and more than "C". Employing less
sophisticated techniques can also control it. Type "B" is of moderate cost and moderately important.
These are freely available when compared type "A".
"B" type of items are only about 20% in number. . But account for next 50% of the annual
inventory usage value.
"C" group consists of items of inventory, which involve relatively small investments although the
number of items is fairly large. These items deserve minimum attention.
Type "C" items is of lowest cost and less importance when compared to "A" & "B". As these types
of inventories are freely available in the market and can immediately replace or purchase.
"C" types of items are about 70% in number. . But account for next 10% of the annual inventory
usage value.
THE VARIOUS TYPES OF SELECTIVE CONTROLS ON THE BASIS "ABC
ANALYSIS":
CATEGORY "A":
1. Tight control
2. Assess exact requirement
3. Frequent reviews
4. Quantity control
5. Regular and item wise expediting
6. Low safety stocks and order point control
7. Reduced and stabilize lead-time
CATEGORY "B":
1. Moderate control
2. Individual postings
3. Assess frequent reviews
4. Less frequent reviews
5. Item wise expediting
6. Medium safety stocks
7. Lead time
8. Stoked at regional or zonal stores
CATEGORY "C":
1. Minimum control
2. Simple checks
3. Estimate appropriate requirements
4. Group postings
5. Infrequent reviews
6. Visual control
7. Limited and periodic expediting
8. Minimum lead-time control
9. Large order size
10. Stocking at point of view.
• STEPS FOR CONDUCTING ABC ANALYSIS ARE:
1. Obtain unit cost of each manufactured or purchased item in inventory.
2. Obtain the usage in units for each item or estimate the usage over a period of time.
3. Obtain the net value of the usage by multiplying unit cost and the usage.
4. Arrange the items in descending order of the usage value.
5. The no. of items and their values are accumulated on a % of total basis.
6. Roughly divide the total list into 3 groups namely A-items of high usage value which accounts
for 70-75%of the usage value of inventories and about 10-15%. In number B-items of medium
usage value which accounts for the next 15-20% of the usage value .
WHILE APPLYING THE ABC ANALYSIS, THE FOLLOWING POINTS SHOULD BE
TAKEN INTO CONSIDERATION:
1. Although every part of the item is important for the repair of machine, the items with low value
can be given a loose control.
2. Tight control of the high value stocks must reduce costs sufficiently to more than off set the
increased costs caused by lesser controls on the low value items. When applying the ABC
principle, some high value items, Which will not be required due to being in excess, should
actually be considered for disposal at a worth while price.
3. The ABC analysis in variably involves only items moving items since the annual consumption
value is based on consumption besides unit cost. The items, which are non-moving, have also
been considered separately for retention.
PURCHASING:
Many variables contribute to the success and development of the organization. One of such
variable is an efficient purchase and material management with a view to make the existing purchase
function most effective comprehensive plan has been prepared regarding.
1. Raising material purchase requisition.
2. Placing Purchase Order.
3. Receipt and Inspection of material.
4. Payments to Suppliers etc.
1. . Processing of quotations:-
1) Quotations opened by purchase division.
i. Comparative statements of prices are prepared (24 hours).
2) Purchase order prepared if rates are reasonable, if not, negotiations or fresh enquires from
alternative sources made.
3) Purchase order raised by purchase division (DM) gets approved from General Manager routing
through audit and accounts. (2 days).
4) After approval of the purchase order gets registered in material requisition register and the copies
are dispatched to:
1. Suppliers
2. Accounts department.
3. User departments
4. Store concerned
5. Follow up and expediting supply: Follow up should be made at least a week before delivered date
given by purchase order.
REPORTS:
Purchase handles a sizeable portion of finance, it is necessary to have some summary reports
periodically available to the management some of these reports are:-
1) Total value of purchase.
2) Allocation of purchase value against major items.
3) Allocation of purchase value against each requisitioning department.
4) Budget for purchase for the next year.
5) Proposal for services of budget in current year
Trade credit is an essential marketing tool which acts as a bridge for the movement of goods from
the stage of production to stage of distribution to customers. Trade credit creates receivables which the
firm is Expected to collect in the near future thus the book debts or receivables arising out of credit has
three dimensions. First, it embraces an element of risk which needs to be assessed, since cash sales are
totally risk less. Second, it is based on economic values to the buyer; economic value in goods or
services is passed on immediately at the time of sale while the seller expects an equivalent value to be
received, arises at a future date. But, creation of receivables blocks the firm's funds for the period
between the dates of receipt of payment, which is to be financed out of working capital funds.
This makes the firm to average funds from financial institutions and other sources then receivables
represent investment which constitutes a substantial Portion of current assets of manufacturing &
trading firms. All the incoming materials from the suppliers and other units of organization shall be
received at stores. Arrangement shall be made for unloading and receiving of materials, checking up of
packages opening of packages, checking up materials with details of invoices and P.O., identifying
discrepancies, if, any record keeping, preparation of materials receiving cum inspection reports, hand
over of materials to custody, arranging dispatch of materials, returned to
INSPECTION OF MATERIALS:
AMPLING:
The sampling method adopted for testing the polyethylene film shall be as per IS:2808-1977
clause-6.
To
The QCO/DGM (prod/pl)/SAO/DD (P&I) Doc. No:
For/store
Krishna Milk Union, Trevino : 01
MPF, Vijayawada-9. Date:
Page No: .1/1
Sir,
Sub: MP3 stores- Material Quality Test/ Performance Report -request-
Reg
Invoice/dc no. From M/s.
Please arrange for Quality Test/ Performance Report of the material received through the
reference cited above
Name of the material Quantity,
Yours faithfully
STORES MANAGEMENT:
Objectives of stores in KRISHNA DISTRICT MILK PRODUCERS MUTUALLY AIDED CO-
OPERATIVE UNION LIMITED:
1) To disseminates modern concept and techniques of efficient and effective stores management.
2) To disseminates modern concept and techniques of inventory management agreement, there by
ensuring optimum utilization of available resources.
3) To improve services level of stores and inventory management functions.
4) To minimize the losses due to deterioration and obsolescence.
5) To identify and dispose of scrap, surplus and obsolete materials in most economical manner.
6) To develop a cadre of committed professional in stores and inventory management.
DISADVANTAGES:
1) More material handling operations.
2) Chances of bottlenecks and delay are likely to be more.
3) More exposed to loss due to natural calamities like fire, rain, dust etc.
Whenever the items can be substituted for each other, they should be preferable considered as
on item.
More emphasis should be given to the value of consumption and not to the cost per unit
of items.
CLASS OF ITEMS
Sl.No A B C
1 Polythene Film Ghee items Powder items
2 Ammonia Gas Nitric Acid SFM Stickers
3 Curd Cups, Lids, Basundi cups & SFM Bottles
Boxes spoons
4 Keep records of Keep records of No records are Kept
Receipt and use Receipt and use
5 More effort to reduce Moderate effort Minimum effort
6 Close checks on Some checks on ghee No checks need more
Schedule revision For in need upto 2-3 than 3 months
less than 2 weeks months
7 Frequent ordering Less frequent ordering Bulk ordering
8 Continual expediting Expediting for No expediting
prospective shortage
9 Accurate forecasts Less accurate Approximate
forecasts forecasts
10 Low safety stock for Large safety stock Large safety stock
less Than 2 weeks upto 2-3 months more than 3 months
11 High consumption Average consumption Low value
value value
DATA ANALYSIS AND INTERPRETATION
SIZE OF INVENTORY:
The size of inventory depends on several factors such as sales volume, capacity of plant,
availability of raw-materials, fluctuations in prices of raw-materials and finished goods, length of
production cycle etc. generally progressive organization inventory levels continuously increase as
increase in sales and production. As already stated the prime objective of inventory management is to
optimize size of inventory so that smooth performance of production and sales are possible. Increase
in size of inventory involves extra cost apart from adversely effecting profitability and liquidity. The
size of networking capital is measured with the help of following ratio.
Inventory
Size of Inventory = ................................
Total Current Assets
INVENTORY 2005-06
S.NO PRODUCTS AMOUNT
1 Milk & Milk Products 11,64,15,812.95
2 Cattle Feed and Seeds 6,50,880.70
3 Stores & Packing Materials 1,58,50,112.04
4 Mechanical & Garage Spares 65,46,601.92
5 Feed Raw Materials 47,63,876.31
Total 14,42,27,283.90
INVENTORY 2006-07
S.NO PRODUCTS AMOUNT
1 Milk & Milk Products 9,57,12,921.63
2 Cattle Feed and Seeds 4,40,075.00
3 Stores & Packing Materials 2,33,09,360.60
4 Mechanical & Garage Spares 52,39,362.62
5 Feed Raw Materials 50,29,186.62
Total 12,97,30,906.50
INVENTORY 2007-08
S.NO PRODUCTS AMOUNT
1 Milk & Milk Products 13,01,41,326.23
2 Cattle Feed and Seeds 4,91,944.00
3 Stores & Packing Materials 1,44,03,819.59
4 Mechanical & Garage Spares 37,97,118.86
5 Feed Raw Materials 47,90,586.09
Total 15,36,24,794.70
INVENTORY 2008-09
S.NO PRODUCTS AMOUNT
1 Milk & Milk Products 11,28,39,476.42
2 Cattle Feed and Seeds 13,55,364.00
3 Stores & Packing Materials 1,32,24,600.32
4 Mechanical & Garage Spares 42,00,291.38
5 Feed Raw Materials 37,35,576.19
Total 13,53,55,308.30
INVENTORY 2009-10
S.NO PRODUCTS AMOUNT
1 Milk & Milk Products 15,22,23,908.00
2 Cattle Feed and Seeds 10,42,833.00
3 Stores & Packing Materials 1,78,07,488.78
4 Mechanical & Garage Spares 33,14,434.20
5 Feed Raw Materials 38,75,404.75
Total 17,82,64,068.70
CURRENT ASSETS 2005-06
SIZE
Inventory
Size of Inventory = x100
Total Current Assets
YEAR INVENTORY Current Assets Size
2005-06 14,42,27,283.90 27,77,73,454.45 51.92%
2006-07 12,97,30,906.50 29,69,44,628.10 43.68%
2007-08 15,36,24,794.70 34,63,20,480.10 44.35%
2008-09 13,53,55,308.30 32,67,99,568.80 41.41%
2009-10 17,82,64,068.70 41,20,83,934.00 43.25%
Table 5.1
YEAR INVENTORY CURRENT ASSETS SIZE
2005-06 14,42,27,283,9 27,77,73,454,45 51.92%
2006-07 12,97,30,906,5 29,69,44,628,1 43.68%
2007-08 15,36,24,794,7 34,63,20,480,1 44.35%
2008-09 13,53,55,308,3 32,67,99,568,8 41.41%
2009-10 17,82,64,068,7 41,20,83,934,0 43.25%
SIZE
60.00%
51.92%
50.00% 43.68% 44.35%
41.41% 43.25%
40.00%
30.00% SIZE
20.00%
10.00%
0.00%
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
The table shows the size of inventory in the selected enterprise during the period of 2005-
2010s. It is evident from the table that inventory constituted the most important element of total
Current Assets in this study as it is found on an average around 52 percent of the total Current Assets.
It is observed from the table that the size of inventory in KRISHNA DISTRICT MILK PRODUCERS
MUTUALLY AIDED CO-OPERATIVE UNION LIMITED has gradually decreased and increased
from 48.21% TO 44.27% in 2005-2006 & increased in 2007-08 from 44.27% to 51.92% in the study
period & also gradually decreased from 51.92% to 43.68% in 2007-2009 & increased in 2010 from
43.68% to 44.35% In the study period.
• REASON:
This is due to fluctuations in prices and monopoly supplier.
• SUGGESTION:
It is better to start own manufacturing unit or opt. for alternative supplier.
INVENTORY TURNOVER RATIO:
The lists of all varieties of stocks with the company are treated as stocks. This relationship
expresses the frequency with which average level of inventory is turned over through operations. If the
ratio is high it means that stock is converted into sale as short span of time. It will lead to good profits
for the company. If the inventory is moving quickly then the short term solvency of the company is
also in very good condition. The inventory turnover ratio can be used as valuable measure of selling
efficiency and inventory quality of the company. The turnover ratio is measured with the help of the
following ratio:
Particulars Amount
Opening Stock
Finished Stock of Milk 7,71,65,529.12
Cattle Feed and Seeds 16,62,391.25
Purchase of Milk Products 1,02,000.00
Total 789,29,920.37
Closing Stock
Finished Stock of Milk 11,55,04,647.65
Cattle Feed and Seeds 6,50,880.75
Total 116,155,528.40
= 97491724.38
Average Inventory 2006-07
Particulars Amount
Opening Stock
Finished Stock of Milk 11,55,04,647.65
Cattle Feed and Seeds 6,50,880.75
Purchase of Milk Products 2,04,97,875.00
Total 136,653,403.40
Closing Stock
Finished Stock of Milk 9,49,88,087.13
Cattle Feed and Seeds 4,40,075.00
Total 954,28,162.13
= 105,791,845.26
Average Inventory 2007-08
Particulars Amount
Opening Stock
Finished Stock of Milk 9,49,88,087.13
Cattle Feed and Seeds 4,40,075.00
Purchase of Milk Products 2,64,08,847.00
Total 121,837,009.13
Closing Stock
Finished Stock of Milk 12,95,52,418.23
Cattle Feed and Seeds 4,91,944.00
Total 130,044,362.12
= 112,736,262.18
Average Inventory 2008-09
Particulars Amount
Opening Stock
Finished Stock of Milk 12,95,52,418.23
Cattle Feed and Seeds 4,91,944.00
Purchase of Milk Products 5,66,74,464.00
Total 186,718,826.23
Closing Stock
Finished Stock of Milk 11,18,43,938.42
Cattle Feed and Seeds 13,55,364.00
Total 113,199,302.42
= 149,959,064.3
Particulars Amount
Opening Stock
Finished Stock of Milk 11,18,43,938.42
Cattle Feed and Seeds 13,55,364.00
Purchase of Milk Products 9,25,53,546.00
Total 205,752,848.42
Closing Stock
Finished Stock of Milk 15,16,03,116.00
Cattle Feed and Seeds 10,42,833.00
Total 152,645,949.00
= 179,199,398.7
Table 5.2
YEARS COST OF GOODS AVG INVENTORY RATIO(TIMES)
SOLD
RATIO(TIMES)
13
12.72
12.5 12.35
12.01
12
11.73
RATIO(TIMES)
11.5 11.36
11
10.5
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:-
From the above table it is observed that the inventory turnover ratio has decreased every year.
It has increased from 9.56 times to 12.72 times from the year 2005-06 to 2009-10. It is a test of
efficient inventory management. If the company has higher the ratio, the better is the performance of
the company. If the inventory turnover ratio is higher the operating cycle becomes faster and finally it
will lead to higher profits for the company.
DAYS OF INVENTORY HOLDING:
The reciprocal of inventory turnover ratio gives average inventory holding in percentage term.
When the number of days in a year (say 365) is divided by inventory turnover, we obtain days of
inventory holdings. The size of the days of inventory holding is measured with the help of the
following ratio:
365
Days of Inventory Holding = ----------------------------
Inventory Turnover Ratio
Table 5.3
Year No of Days in Year Inventory Turnover Period(Days)
Ratio
2005-06 365 12.01 30
2006-07 365 12.72 28.69
2007-08 365 12.35 29.55
2008-09 365 11.73 31.11
2009-10 365 11.36 32.13
Period(Days)
33
32.13
32
31.11
31
30
30 29.55
Period(Days)
29 28.69
28
27
26
2005-06 2006-07 2007-08 2008-09 2009-10
INTERPRETATION:
From the table the trend of inventory holding period of the company. It is understood that the
days of inventory holding has gradually decreased from 38days to 30 days, because the inventory
turnover ratio and the inventory holding period are interrelated. If the inventory turnover ratio
increases than the days of the inventory holding decreases and vice-versa. It indicates the improvement
in the management efficiency in converting their inventories into sales as fast as possible.
FINDINGS:
1. It is important to study the size of Inventory Management of any enterprise. It decides the need
for best owing attention in the management of this component. In the enterprise under the
study Inventory formed a major percentage of total assets. It varied between the lowest of 55
percent and the highest of 60 percent to total assets.
2. The composition of current assets is dominated by inventory and receivable in 2001-02 the
composition of current assets are dominated by inventory and other current assets.
3. The inventory index and growth rate of KDMPMACUL is so even for instance the annual
growth of KDMPMACUL is negative.
4. The receivable index in KDMPMACUL is highly uneven. In some year it is highly positive
and in some year it is negative. The unevenness is not good.
5. Some of the inventories are ordered on the basis of minimum stock or reorder level.
6. There is no particular method has been followed for valuing the particular type of inventories.
Fast Moving stocks.
Slow Moving stocks.
Seasonal stocks.
Vital Items.
A valuation at inventories is entirely based on both manual valuation and computer valuation.
SUGGESTIONS:
a. A plan should be drawn to use the surplus milk in some seasons for the manufacturers
of long-lived bi-products.
b. The company should introduce continuous stock verification system for all the
materials.
c. The company should introduce some of the major inventory classification methods like
XYZ analysis and FSN analysis for better control of inventories.
d. The composition of current assets is dominated by inventory and other current assets in
this regard it is advised to the company to maintain a balance among the different
components of current assets.
e. It is better to start own manufacturing unit for materials like which has monopoly
supplier, so that Ordering Cost and Carrying Costs reduce and can have materials in
time.
CONCLUSION
Here an attempt is made to draw conclusion based on the study of KDMPMACU Ltd.
The study revealed the following
The KDMPMACU Ltd. Have maintain slight standard Inventory levels
The KDMPMACU Ltd. EOQ levels was satisfactory.
The KDMPMACU Ltd. ABC Analysis was satisfactory
The KDMPMACU Ltd. RAW material turnover was satisfactory
Over all KDMPMACU Ltd. Financial performance was positive.
BIBILOGRAPHY
OTHER REFERENCES:
1. Manuals of KDMPMACUL.
2. Manuals of Stores Department.
3. Five year Balance sheets (2003-08).
4. Krishna Milk Union at a Glance.