Issues related to Inventory Management in Zuari Cement

Student no:
Enrollment no:

Course:

UNIVERSITY
Year

1|Page
 CERTIFICATE OF ORIGINALITY

This is to certify that the project titled “Issues related to Inventory Management in Zuari
Cement” an original work of the Student and is being submitted in partial fulfillment for the award
of the Post Graduate Diploma in Management in ___________ University. This report has not
been submitted earlier either to this University or to any other University/Institution for the
fulfillment of the requirement of a course of study.

SIGNATURE OF GUIDE SIGNATURE OF

STUDENT

Place: Place:

Date: Date:

2|Page
 Table of Content

Chapter TOPIC Pg.no

1. Introduction

2 Methodology

3 SWOC of the Research

4 Outcomes of the Study

5 Experiences of the Study

Bibliography

Questionnaire

3|Page
 CHAPTER 1

INTRODUCTION
A term inventory refers to the stock file of the products a firm is offering for sale and the
components that make up the product. In other words, inventory is composed of assets that will be
showed in future in the normal course of the business operations. The assets which firms store as
inventory in anticipation of need are:

Raw materials Work in process (Semi Finished goods) Finished goods

The raw material inventory contains item that are purchased by the firm from other and are
converted into finished goods through the manufacturing (production) process. They are an
important input of the final product. The working process inventory consists of items currently
being used in the production process.

They are normally semi-finished goods that are at various stages of production in a multi
stage production process. A finished goods represented final or completed products which are
available for sale. The inventory of such goods consists of items that have been produced but are
yet be sold.

Inventory, as a current asset, differs from other current assets because only financial
managers are not involved. Rather all the functional areas, finance, marketing, production, and
purchasing are involved. The views concerning the appropriate level of inventory would differ
among the different functional areas.

The job of the financial manager is to reconcile the conflicting view points of the various
functional areas regarding the maximizing the owner’s wealth. Thus, inventory management, like
the management of other current assets, should be related to the overall objective of the firm. It is
in this context that the present chapter is devoted to the main elements of inventory management
from the view point of financial management.

The objective of inventory management is explained in some detail sections. Section two
is concerned with inventory management techniques. Attention is given here to basic concepts
relevant to the management and control of inventory.

4|Page
MEANING OF INVENTORY

Inventory is a list for goods and materials, or those goods and materials themselves, held
available in stock by a business. It is also used for a list of the contents of a household and for a
list for testamentary purpose of the possessions of someone who has died. In accounting inventory
is considered an asset.

TYPES OF INVENTORIES

Inventories play a major role in a business or depending on nature of the businesses. The
inventories may be classified as under.

(I) Raw Materials

Materials and components scheduled for use in making a product. These are the basic
inputs, which are converted into finished products through manufacturing process. Raw material
inventories are those units, which have been purchased and stored for future production.

(II) Work in process / Progress

Materials and components that have begun their transformation to finished goods.
Materials issued to the stop floor, which have not yet become finished products they are value
added materials to the extent of labor cost incurred.

(III) Finished Goods

A finished goods is a completed part that is ready for a customer order. These goods have
been inspected and have passed final inspection requirements so that they can be transferred out
of work-in-process and into finished goods inventory. From this point, finished goods can be sold
directly to their final user, sold to retailers, sold to wholesalers, sent to distribution centers, or held
in anticipation of a customer order.

BASIC REASONS TO KEEPING AN INVENTORY:

There are three basic reasons for keeping an inventory:

5|Page
  TIME: The time lags present in the supply chain, from supplier to user at every
stage, requires that you maintain certain amount of inventory to use in this “lead
time”.
 UNCERTAINTY: Inventories are maintained as buffers to meet uncertainties in
demand, supply and movement of goods.
 ECONOMIES OF SCALE: Ideal condition of “one unit at a time at a place where
user needs it, when he needs it “principle tends to incur lots of costs in terms of
logistics. So bulk buying, movement and storing brings.

NEED TO HOLD INVENTORIES

Martin and miller identified three general motives for holding inventories

Transaction Motive:

This refers to the need of maintaining inventory to facilitate smooth production and sales
operations.

Precautionary Motive:

Precautionary motive for holding inventory is to provide a safeguard when then actual level of
activity is differing than anticipated. This inventory serves when there is a unpredictable changes
in the demand and supply forces.

Speculative Motive:

This motive influences the decision to increase or decrease the levels of inventory to take the
advantage of price fluctuations.

Inventory control is vitally important to almost every type of business, whether product or
service oriented. Inventory control touches almost every facet if operations. A proper balance must
be struck to maintain proper inventory with the minimum financial impact on the customer.
Inventory control is the activities that maintain stock keeping items at desired levels. In
manufacturing since the focus is on physical product, inventory control focus on material control.

6|Page
 “Inventory” means physical stock of goods, which is kept in hands for smooth and efficient
running of future affairs of an organization at the minimum cost of funds blocked in inventories.
The fundamental reason for carrying inventory is that it is physically impossible and economically
impractical for each stock item to arrive exactly where it is needed, exactly when it is needed.

Inventory management is the integrated functioning of an organization dealing with supply

of materials and allied activities in order to achieve the maximum co-ordination and optimum
expenditure on materials. Inventory control is the most important function of inventory
management and it forms the nerve center in any inventory management organization. An
Inventory Management System is an essential element in an organization. It is comprised of a
series of processes, which provide an assessment of the organization’s inventory.

Inventory management is the management of inventory and stock. As an element of supply

chain management, inventory management includes aspects such as controlling and overseeing
ordering inventory, storage of inventory, and controlling the amount of product for sale.

INVENTORY MANAGEMENT

Inventory management is primarily about specifying the size and placement of stocked goods.

Inventory management is required at differ locations within a facility or within multiple locations
of a supply network to protect the regular and planned course of production against the random
disturbance of running out of materials or goods. The scope of inventory management also
concerns the fine lines between replenishment lead time, carrying costs of inventory, asset
management, inventory forecasting, inventory valuation, inventory visibility, feature inventory
price forecasting, physical inventory, available physical space for inventory, quality
management, replenishment, returns and defective goods and demand forecast.

Inventory management involves:

 Inventory management is the active control program which allows the management of
sales purchases and payment.
 System and processes that identify inventory requirements, set targets, provide
replenishment techniques and report actual and projected inventory status.

7|Page
  Inventory management helps providing a good understanding ground and the capacity to
control financial costs.
 The Inventory management will control operating costs and provide better understanding.

OPERATING CYCLE OF INVENTORY MANAGEMENT

Operating Cycle is the time duration to convert sales after the conversion of resources into
invention, into sales there is difference between current assets and fixed assets. A firm required
many years to recover initial invests in fixed assets such plant and machinery or land buildings or
furniture and fixtures etc. On the contrary, investment in current assets such as inventory and books
debts are realized during the firms operating cycle, which in usually less than a year.

The operation cycle can be said to be the heart of the working capital. The need for
working capital or current assets cannot be over emphasized as already observed. The main
motive of many business firms is to achieve maximum profits, which can be earned depending

8|Page
 upon the magnitude of the sales among other things. However, sales do not convert in to cash
instantly.

There is invariable time lag between sale of goods and receipts of cash. Therefore, the
need of working capital in the form of current assets to deal with the problem arising good sold.
Therefore, sufficient working capital requires sustaining sales activity. Technically this is
referring to as the operating the cash cycle.

The continuous flow form cash to supplies to inventory to accounts receivable and back
into cash what is called operating cycle.

NEED & RELEVENCE OF THE STUDY

The study helps the management to improve its profitability through a reduction in non- moving
inventory. It develops the policies for both continuous review of inventory management system.
The study helps to show the level of the inventory in the organization. The company will make
the proper inventory methods from the suggestions of the study.

STATEMENT OF THE PROBLEM

The research problem statement for the project is “How implementation of automated systems is
useful for effective inventory management at Zuari Cement Pvt. Limited?”

OBJECTIVES OF THE STUDY

 To study the inventory management followed in Zuari cement.

 To identify the existing inventory management and its effectiveness.
 To learn about the systems and their performance in inventory management.

9|Page
COMPANY PROFILE

THE COMPANY

The Zuari cement was started in 1994 to operate the cement plant of Texaco ltd., under a
working arrangement. Subsequently Texaco‟s cement business was taken over by the company
in 1995. Today Zuari Cement‟s manufacturing facility at yerraguntla in Andhra Pradesh is one
of the largest in South India.

In the year 2000 Zuari enters in to a joint venture with the italcementi group the second largest
cement produce in Europe and Zuari Ltd. Lived off of a separate company.

The Zuari Cement is strategically located at Yerraguntla. The plant location existence of 6km
from Yerraguntla. It is connected to the railway station on by a railway track of 7km length and
is having an exchange plant inside the factory. Plant is connected to the nearest highway by
0.2km land private road.

PROMOTER OF THE COMPANY

This investment was initially made through a 50:50 joint venture with the KK Birla group in
Zuari Cement Ltd., but subsequently in May 2006. Italicement group acquired the full central of
the company.

Now Company is under joint venture having rated capacity of 17 Lakhs per annum company for
that diversified that production of the cement making EPC along with OPC.

FINANCIAL SUPPORT

The required finances for the cement co., are provided by several financial institutions like S.B.I
BNP Paribas, Andhra Bank, Standard Charted Bank.

TECHNOLOGY ADOPTED

The technology adopted in the plant is an open pre-blending stockpiles system for limestone and
clinker. This is a special feature compared to the conventional system of storage which has its
own weakness on the case of the failure of cranes.

EXPANSION OF CAPACITY

10 | P a g e
The expansion of clinker capacity at Yerraguntla by way of new line with a capacity of 5500
tons per day and new grinding unit at Chennai with a capacity of 0.8 million have been finalized
with an estimate capital outlay of MINR 6760. Major permits and clearness requires for the
projects have been obtained and the supply contract for main equipment for Yerraguntla new line
are finalized with M/s F.L.Smith Limited. M/s Claudius Peter Technologies, M/s Maag Gear AG
and M/s Honeywell Automation India Limited. For Chennai grinding unit main equipment are
finalized with M/s Walchandnagar Industries limited, including contracts for erection and
commissioning. On implementation of these projects the total capacity of the company will
increase to 5 million tons.

QUALITY CUSTOMER SERVICE

In an effort to reach out to customers better, Zuari cement had setup a technical cell named Zuari
home partner. This cell gives guidance in the field of building.

Technology, architecture, housing finance and economical usage of the high-quality cement.

Technology experts provide the assistance according to individual requirements. So that

customers get the best value for the investment they have made.

DEVELOPMENT ACTIVITIES

The plant in Yerraguntla had adopted four nearby villages as part of its program of corporate
social responsibility towards the local community. These villages are Thumallapalli, Yalasapalli,
Koduru and Peddanapadu, part of the Kadapa district of Andhra Pradesh State. In particular, the
planet intends to contribute to the improvement of living standards of the people in the
surrounding villages. The strategy focuses on three basis areas: health and hygiene, education
and sustainable livelihoods.

PRODUCTS

Zuari Cement manufactures and distributes its own main product lines of cement. It’s aim is to
optimize production across all of our markets, providing a complete solution for customer's
needs at the lowest possible cost, an approach and it is called as strategic integration of activities.
Cement is made from a mixture of 80 percent limestone and 20 percent clay. These are crushed
and ground to provide the "raw meal”, a pale, flour-like powder. Heated to around 1450° C

11 | P a g e
(2642° F) in rotating kilns, the “meal” undergoes complex chemical changes and is transformed
into clinker.

PROCESS TECHNOLOGY, THE SOLID FOUNDATION

The culture of quality that has always prevailed in Zuari Cement's manufacturing facilities is best
exemplified in the process technology employed. Advanced technology methods are used to
ensure that a high level of quality is attained and sustained right through the manufacturing
process. Yet, these high standards are constantly improved upon by an experienced and
dedicated R&D team to attain performance-oriented cement.

Centralized On-line Process Control

THE PROCESS TECHNOLOGY ADVANTAGES

Complete homogenization of limestone is achieved by stacking the limestone in stock-

plies with the use of stackers and reclaiming it through recliners.
The optimum ratio of raw mix is attained by the use of X-ray analyzer and automatic
weigh feeder which are linked to the centralized computers control room.

12 | P a g e
 Reduced variability in kiln feed and complete homogenization of raw meal is attained
through Continuous Flow Silo. This ensures that every grain of cement is of consistent
quality.

13 | P a g e
 The totally computerized monitoring system enables quality clinkerisation. It dictates the
optimum retention time in the proclaimer and the kiln.

Equipped with a six-stage double stream pre-heater cyclone system, the proclaimer only adds
to the quality.

The modern closed grinding units have a high efficiency separator that produces finer particles
of cement. This yield cement matrix with a lower pore diameter. This in turn gives concrete of
higher density and lower permeability.

14 | P a g e
 CHAPTER 2

RESEARCH METHODOLOGY
This chapter provided methods that was used in data collection and they include; Research
design, Survey population, sampling design, Sampling size, Sources of data, Tools and methods
of data collections and probable problems to be encountered during data collection.

RESEARCH DESIGN:

A research design is the arrangement of condition for collection and analysis of data in a manner
which may result in an economy in procedure. It stands for advance planning for collection of
the relevant data and the techniques to be used in analysis, keeping in view the objective of the
research availability of time.

There are three types of research designs. They are,

 Exploratory research design.

 Conclusive research design.
1. Descriptive research design.
2. Causal research design.
 Performance monitoring research.

The Research design used in this study was descriptive research design. It includes surveys and
fact-finding enquiries of different kinds. The main characteristic of this method is that the
researcher has no control over the variables; he can report only what has happened or what is
happening.

SAMPLING TECHNIQUES:

The simple random sampling technique was employed in the selection of the sample.

SAMPLE SIZE:

100

15 | P a g e
DATA COLLECTION METHORD:

The data collection method for the study the researcher should keep in the mind the two sources
of data.

• Primary data

• Secondary data.

PRIMARY DATA COLLECTION:

Source of primary data:

1. Experimentation

2. Observation

3. Questionnaire schedule

Primary data has been collected through structured questioner. The questionnaire consisted of a
variety of questions that lay consistent with the objective of the research.

 Questionnaire

The questionnaire was prepared keeping in view the objectives of study. Different questions
were so arranged to know satisfaction level of customers towards services provided by company.
The questionnaire not only focused gathering information on the above-mentioned areas but also
about the service suggestions to be envisaged under support, update and engage.

Questionnaire contains four types of questions

1. Open Ended
2. Dichotomous
3. Fixed Alternative Question

STUDY CONDUCTED
The primary data was gathered through personal interaction. The information was gathered from
the structured questionnaire.

16 | P a g e
SECONDARY DATA:

Secondary data has been collected from the Company Website, Internet etc.

Simplex percentage analysis:

Percentage analysis is the method to represent raw streams of data as a percentage (a part
in100‐ percent) for better understanding of collected data.

Graphs:
Graphical representations are used to show the results in simple form. The graphs are prepared
on the basis of data that is received from the percentage analysis

Simple random sampling

Simple random sampling was used in selecting respondents from the sample frame. The
researcher used this technique to ensure that each members of the target population has an equal
and independent chance of being included in the sample of this study.

Sampling size
A sample size of 100 respondents was selected using simple random sampling consisting of top,
middle and lower employees.

Data presentation

Data was presented using tables, frequency table and percentages these presentations helped in
the interpretation to come up with interpretation basing on the table.

17 | P a g e
 CHAPTER 3

SWOC OF THE RESEARCH

SWOC analysis is a structured planning method used to evaluate the strengths, weaknesses,
opportunities and threats involved in projects or in a business venture. A SWOC analysis can be
carried out for a product, place, industry or person. It involves specifying the objective of the
business venture or project and identifying the internal and external factors that are favorable and
unfavorable to achieve that objective.

Strengths

 Availability of cheap raw materials.

 Need of cement & absence of substitutes materials to replace the cement.

Weakness

 High rates of unexpected breakdown & maintenance costs.

 High standard operating process.
 High transportation & freight costs.

Opportunities

 Increase the domestic demands & potential to export the cement.

 Technological changes

Challenges

 unstable & sudden changes in political rules & regulations

 Economic changes & competition environments.

18 | P a g e
 CHAPTER 4

OUTCOMES OF THE STUDY

1. Gender

Table no. 1

Gender No. of Respondents Percentage

Male 81 81%
Female 19 19%
Total 100 100%

Chart no. 1

Gender

19%

Male
Female

81%

Interpretation:

Table 1 reveals that 81% of the respondents are male and 19% of the respondents are females.

19 | P a g e
 2. Age

Table no. 2

Age Group No. of Respondents Percentage

18-25 27 27%
25-35 32 32%
35-45 19 19%
45 years and above 22 22%

Chart no. 2

Age Group
35

30

25

20

15

10

0
18-25 26-35 36-45 46 years and above

Age Group

Interpretation:

Table 2 reveals that 27% of the respondents are of the age group of 18-25 years, 32% of the
respondents are of the age group of 26-35 years, 19% of the respondents are of the age group of
36-45 years and 22% of the respondents are of the age group of 46 years and above.

20 | P a g e
 3. Educational qualification

Table no. 3

Educational qualification No. of Respondents Percentage

Upto SSC 29 29%
HSC 21 21%
Graduate 37 37%
Post graduate 13 13%

Chart no. 3

Education qualification
40

35

30

25

20

15

10

0
Upto SSC HSC Graduate Post graduate

Education qualification

Interpretation:

Table 3 reveals that 29% of the respondents have an education qualification of upto SSC, 21% of
the respondents are HSC qualified, 37% of the respondents are graduates and 13% of the
respondents are post graduates.

21 | P a g e
 4. Company is well aware of growing issues with performance in the organization.

Table no. 4

Awareness No. of respondents Percentage

Strongly disagree 8 8%
Disagree 21 21%
Neither agree nor disagree 14 14%
Agree 34 34%
Strongly agree 23 23%

Chart no. 4

Awareness
40

35

30

25

20

15

10

0
strongly disagree disagree neither agree nor agree strongly agree
disagree

Awareness

Interpretation:

From the above table it can be seen that 34% of the respondents agree, 21% disagree, 14%
neither agree nor disagree, 23% strongly agree and 8% strongly disagree that company is aware
of growing issues with performance in the organisation.

22 | P a g e
 5. The company has mandatory tracking of fill rates and inventory turns for all
products.
Table no. 5

Tracking No. of respondents Percentage

Strongly disagree 6 6%
Disagree 18 18%
Neither agree nor disagree 17 17%
Agree 32 32%
Strongly agree 27 27%

Chart no. 5

Tracking
35

30

25

20

15

10

0
strongly disagree disagree neither agree nor agree strongly agree
disagree

Tracking

Interpretation:

From the above table it can be seen that 32% of the respondents agree, 18% disagree, 17%
neither agree nor disagree, 27% strongly agree and 6% strongly disagree that company has
mandatory tracking of fill rates and inventory turns for all products.

23 | P a g e
 6. Unqualified Employees are a problem in managing inventory in Zuari Cement.

Table no. 6

Employees No. of respondents Percentage

Strongly disagree 19 19%
Disagree 36 36%
Neither agree nor disagree 10 10%
Agree 23 23%
Strongly agree 13 13%

Chart no. 6

Employees
40

35

30

25

20

15

10

0
strongly disagree disagree neither agree nor agree strongly agree
disagree

Employees

Interpretation:

From the above table it can be seen that 23% of the respondents agree, 36% disagree, 10%
neither agree nor disagree, 13% strongly agree and 19% strongly disagree that unqualified
employees are a problem in managing inventory in Zuari Cement.

24 | P a g e
 7. You can’t plan, due to a lack of forecasting.

Table no. 7

Forecasting No. of respondents Percentage

Strongly disagree 13 13%
Disagree 34 34%
Neither agree nor disagree 12 12%
Agree 26 26%
Strongly agree 15 15%

Chart no. 7

Forecasting
40

35

30

25

20

15

10

0
strongly disagree disagree neither agree nor agree strongly agree
disagree

Forecasting

Interpretation:

From the above table it can be seen that 26% of the respondents agree, 34% disagree, 12%
neither agree nor disagree, 15% strongly agree and 13% strongly disagree that they can’t plan,
due to a lack of forecasting.

25 | P a g e
 8. Are the inventory management systems automated in Zuari Cement?

Table no. 8

Automation No. of Respondents Percentage

Yes 81 81%
No 19 19%
Total 100 100%

Chart no. 8

Automation

0%

Yes
No

100%

Interpretation:

Excel and other manual processes don’t operate in real time or allow multiple users to access
them at the same time. An automated system, in contrast, enables multiple employees to track
items across several locations, all while monitoring orders and shipments for those items. As
Zuari cement has an automation system for inventory management that means there is certainly
no problems the system.

26 | P a g e
 9. Does Zuari Cement have a barcode inventory management system?

Table no. 9

Barcode system No. of respondents Percentage

Yes 100 100%
No 0 0%
Total 100 100%

Chart no. 9

Barcode System

0%

Yes
No

100%

Interpretation:

From the above table it is clear that Zuari Cement has barcode inventory management system
and it helps in getting the accurate data with just a scan.

27 | P a g e
 10. Zuari Cement is successfully managing all the issues related to Inventory
Management.

Table no. 10

Satisfaction No. of respondents Percentage

Strongly disagree 5 5%
Disagree 11 11%
Neither agree nor disagree 22 22%
Agree 36 36%
Strongly agree 26 26%

Chart no. 10

Satisfaction
40

35

30

25

20

15

10

0
strongly disagree disagree neither agree nor agree strongly agree
disagree

Satisfaction

Interpretation:

From the above table it can be seen that 36% of the respondents agree, 11% disagree, 22%
neither agree nor disagree, 26% strongly agree and 5% strongly disagree that Zuari Cement is
successfully managing all the issues related to Inventory Management.

28 | P a g e
 CHAPTER 5

EXPERIENCES, LEARNINGS AND CONCLUSION

Experiences:

 Inventory level of the company shows the increase of the raw materials, work-in-process
and finished goods. The inventory level of Zuari cement Pvt. limited is well.
 Inventory turnover ratio detected some problems. Now they use their cement which are
produced in Zuari cement Pvt limited for their own purpose. If they sell that to others also
then only the ratio will be increased.
 Zuari cement Pvt limited sells the 25 per cent of the cements produced, remaining they
used for own purpose. For sales to others more credit days may be allowed to their
agents.

Learnings:

 81% of the respondents are male and 19% of the respondents are females.
 27% of the respondents are of the age group of 18-25 years, 32% of the respondents are
of the age group of 26-35 years, 19% of the respondents are of the age group of 36-45
years and 22% of the respondents are of the age group of 46 years and above.
 29% of the respondents have an education qualification of upto SSC, 21% of the
respondents are HSC qualified, 37% of the respondents are graduates and 13% of the
respondents are post graduates.
 34% of the respondents agree, 21% disagree, 14% neither agree nor disagree, 23%
strongly agree and 8% strongly disagree that company is aware of growing issues with
performance in the organisation.
 32% of the respondents agree, 18% disagree, 17% neither agree nor disagree, 27%
strongly agree and 6% strongly disagree that company has mandatory tracking of fill
rates and inventory turns for all products.

29 | P a g e
  23% of the respondents agree, 36% disagree, 10% neither agree nor disagree, 13%
strongly agree and 19% strongly disagree that unqualified employees are a problem in
managing inventory in Zuari Cement.
 26% of the respondents agree, 34% disagree, 12% neither agree nor disagree, 15%
strongly agree and 13% strongly disagree that they can’t plan, due to a lack of
forecasting.
 Excel and other manual processes don’t operate in real time or allow multiple users to
access them at the same time. An automated system, in contrast, enables multiple
employees to track items across several locations, all while monitoring orders and
shipments for those items. As Zuari cement has an automation system for inventory
management that means there is certainly no problems the system.
 Zuari Cement has barcode inventory management system and it helps in getting the
accurate data with just a scan.
 36% of the respondents agree, 11% disagree, 22% neither agree nor disagree, 26%
strongly agree and 5% strongly disagree that Zuari Cement is successfully managing all
the issues related to Inventory Management.

Conclusion:

Inventory management is a vital function that helps and ensures the success of manufacturing
companies. Successful implementation of inventory will improve the entire business
significantly. Modern inventory management processes utilize new and more refined techniques
that provide for dynamic optimization of inventories to maximize customer service with
decreased inventory and lower cost. The goal of good inventory management is not perfection
but improvement. These improvements should not be viewed as a short-term effort but should
continue on a permanent basis. The ROI of inventory management will be seen in the forms of
increased revenue and profits, positive employee atmosphere and an overall increase of customer
satisfaction. A truly effective inventory management system will minimize the complexities
involved in planning, executing and controlling a supply chain network which is critical to
business success.

30 | P a g e
31 | P a g e