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PART-A GENERAL INTRODUCTION
There are four important components for running an industrial organization i.e., Men, machine, material and money. All these four components have to be employed in an industry in order to make the manufacturing process to extract the finished products and marketing it properly to get sales realization with profit. Profit making is an important goal or an object of any industrial organization. To attain the maximum profitability utilizing the above set Four M’s to the optimum level. Money is used for procurement of the material which is required for the production. During the time of procurement the requirement of the proper material has to be identified and required quality and quality of material has to be decided in advance. This is nothing but a process of material procurement planning. The very purpose of planning of procurement of material is to purchase the good quality material for a most competitive lowest price. This will help the organization to undertake manufacturing process most effectively with minimum or nil wastage. Many times in an industry organization’s improper planning in material procurement leads to filing up material stock in the form of raw-materials; semi-finished goods ( W-I-P) unsold finished goods. The aim of such stock is called inventory. Any unwanted stock leads to debt capital which cannot be appreciated as good financial management. Hence, material and money are playing a vital role in the efficient financial management. This project is select to have detailed study about the “Financial Planning and forecasting” which is the one of the important activity in any industrial organization to reach the organization goal with out much effort. Because, inventory management has to be definitely considered for the increase of profitability and reduce the working capital investment in the process of manufacturing. unwanted
INDUSTRIAL PROFILE The invention of paper Written communication has been the center of civilization for centuries. Most of our important records are on paper. Although written has been around for a long time, paper hasn’t. infact, putting thoughts down in written form wasn’t easy or partial. Earlier people discovered that they could make simple drawing on the walls of caves which was a great place for recording thoughts, but wasn’t portable. Imagine spending hours scratching a massage into a heavy clay table and then having to transport it, that’s exactly what the Sumerians did around 4000 BC. Although this form of written communication was not portable, is still wasn’t practical because of its weight. For centuries people tried to discover better surface on which to records their thoughts. Almost everything imaginable was tried. Wood, stone, ceramics, cloth, bark, mettle, silk, bamboo, and tree leaves were all used as a writing surface at one time or another. The word ‘paper’ is derive from the word “papyrus” which is plant found in Egypt along the lower Nile River. About 5000 years ago, Egyptians created “sheets” of papyrus by harvesting, peeling and slicing the plant into strips. The strips were then layered, pounded together and smoothened to make a flat, uniform sheet. The person credited with inventing paper is Chinese man named Ts’ai Lun. He took the inner bark of a mulberry tree and bamboo fibers, mixed them with water, and pounded them with a wooden tool. He then poured this mixer on to a flat piece of coarsely woven cloth and the water drain though, leaving only the fibers on the cloth. By the tenth century Arabians were substituting lines fiber for wood and bamboo, creating a finer sheet of paper. Although paper was of fairly high quality now, the only way to reproduce written work was by hand, painstaking process. By 12th century paper making reached Europe. In 1448, Johannes Guttenberg, a Germen, was credited with inventing printing press. ( it is believed that movable type was actually invented hundreds of years earlier in Asia ). Book and other important
led to a rapid increase in the demand for paper.
documents could now be reproduced quickly. This method of printing in large quantities
Some of the important development in recent decades is as follows: 1. Multi-stage bleaching of Kraft-paper, lending to availability of fully bleached Kraft- pulp. 2. Use of chloride-di-oxide for pulp for pulp bleaching permitting higher rightness with the retention of strength. 3. Coating of paper, while passing through the paper machine dryer section. Greatly expanding use of coated paper for printing. 4. Use of soluble bases for sulfite pulping permitting pulping of more species wood by the sulfite process. 5. Bleaching of high yield pulp, ground-wood and semi-chemicals. 6. Wet strength paper use of synthetic resins for economic production of wide variety of paper that are strong when wet. 7. Multi-stage sulfites pulping permitting greater variety of pulp properties. 8. Continues cooking of Kraft and semi-chemicals pulp making is possible, reduction in capital and operating cost. 9. High yields pulping: combined chemical and mechanical action to produce pulp from wood in high yield. The geographical spread of the industry is given in the following table: State Andhra Pradesh Assam Bihar Chathisghad Gujarat Haryana Himachal Pradesh Jammu and Kashmir Jharkhand No of Mills 39 2 7 9 91 17 7 1 2
. Global demands add stagnated in 1990-93 at around 250MN TPA with showing down of economic growth. India’s per capital consumption is very low at 3 kg against a world average of over 45 kgs. In the new s print segment total capacity is around0. 30 are large wood/bamboo based mills.8 MN tons per annum.4million TPA (MTPA). and Japan (12-15%) account for a major portion of the demand. 80 are agro based and rest are waste paper based. Western Europe (around 20%). Per capital consumption actually dropped 3-5% and with dropping demand capacities closed down. In 1994-95 international pulp and paper prices kept rising on the back of growing demand.MPM Karnataka Kerala Madhya Pradesh Maharashtra Nagaland Orissa Pond Cheri Punjab Rajasthan Tamil Nadu Uttar Pradesh Uttaranchal West Bengal Total Indian paper industrial scenario: 19 13 27 90 1 6 7 73 70 34 94 16 26 594 Inventory Management The paper industry is cyclical in nature: its demand is linked to the level of economic activity and the supply is influenced by domestic production and as well as international trade in pulp and paper. of this 73% is dominated by four major players in the public sector while the rest of the capacity is shared by 14 players. domestic industry has nearly 600 mills with an aggregate capacity of 3. Structure of paper industry. The recovery started in 1993-94 with improvement economic outlook. The effective capacity is about 2.6 million tones as a lot of mills are sick. Out of 600 mills. USA ( over 30% ).
Wood Paper Agro based Secondary Waste . There are 12 companies with a capacity of 50. Structure of paper industry based on end product produced. Based on the raw material used.MPM consumed and the end product manufactured. the mills can be classified as wood-based ( hard wood or bamboo ).000 TPA and above.000 TPA and only 2 with 1. agro residue based ( baggase and rice / wheat straw ) and news paper based ( imported waste paper and pulp ). Inventory Management The industry can be classified on the basis of size. the type of raw materials The Indian paper industry comprises of nearly 600 mills with a total capacity of around 3. Paper and paper board print News Structure of paper industry based on Raw materials required for making paper.8 M TPA. More than 200 mills have capacities of less then 20000 TPA.00.
Jute waste. International paper prices are not expected to prices are not expected to price substantially over the short medium term. Besides rapid growth in population.a). industrial paper and special paper. Also. Straive Glasses. expansion of existing units and revivals of sick units remain the practical option for capacity addition. paper mills in India have to look for ways to cut down costs to compete with imports. Due to increased supply. Establishment of new business area such as telecom and power will lead to increasing literacy levels.MPM (Hard Wood & pulp Bamboo) Raw-materials Inventory Management & Imported (Baggase. growing quality consciousness and changing consumer preferences will drive paper demand. Domestic paper companies will thus continue to reel under the pressure of reduced margins. The paper and paperboard segment constitutes of cultural paper. HISTORICAL PAPER INDUSTRY DEVELOPMENT IN INDIA Indian paper industry is classified broadly into two categories into two categories paper and paper bonds then newsprint. . enhanced literacy levels. thus improving low per capital consumption of paper (3. However. In view high capital costs.2 kgs p. Cotton Liners & Industrial waste) Future prospectus of paper industry: Strong demand from packaging segment will drive demand growth for industrial paper. a depreciating rupee will marginally protect domestic companies from imports. some of the companies have put their expansion plans on hold or have reduced their investment opting for lesser capacity expansions.
lower capacity utilization and slow down in investments/capacity addition. Fiscal incentives were also offered. Since 1990 the paper industry in India. decreased in demand supply gap and then back full circle to an increase in paper prices. This lead to spurt in the number of mills with small capacities. The global cycle was further affected by the Asian crises. bamboo as an input to paper industry came under short supply. The downtrend continued till 1992. Taking this into account. The increase in supply coupled with a worldwide recession has pushed the Indian paper industry back into down trend. is following global cycle with periods of over capacity leading to drop in paper prices. demand and imports increased to approximately 10% of the domestic demand. the government of India started encouraging small units based on an agro residue and waste paper in the seventies. But from the late eighties industry started facing an oversupply situation lower price realization and plant closures. when demand supply situation improved. From 1993. By the end of sixties. Most of the domestic production was concentrated in the hands of a few large mills. the capacity for paper production lagged.MPM Inventory Management Paper industry in India has a long history with the first mill being commissioned in 1832. BASIC PROBLEMS FACED BY THE NEWSPRINT IN INDIA The economic liberalization policies initiated by the Narasimha Rao committee government in 1991 have been carried through vigor in successive years. which has reduced demand considerably. step with the easing of the worldwide recession in the industry. A booming capital market also helped in raising money for new capacities. The initial development and growth of paper industry till the early nineteenth century was affected by the shortage of wood (soft wood) in the country. in development of a process based on bamboo lead rapid growth of domestic industry. As a result . investments stated increasing. By the late sixties. But in 1914. The industry was in a jolly mood up to 1996. followed by closure of mill.
Domestic paper companies will thus continue to reel under the pressure of reduced margins. Inventory Management industry is on the road to globalization and its getting even more inter wined with the The sharp rise is pricing during 1973-74 created a paper crisis in the county. Due to increased supply. thus improving the low per capita consumption of paper (3. • International paper prices are not expected to rise substantially over the shortmedium term.2 KGS per annum). paper mills in India have to look for ways to cut down costs to compete with imports. royalties on bamboo and hard wood have been increased by 100% to 700% in the last 6 years in some states. Over cost too have been rising quite fast. 3. However. enhanced literacy levels. Power and coal both supplied by the public sector units have risen by 400% in the last decade.MPM overseas market. Besides rapid growth in population. The international price of capital equipment needed by the news print industry has been souring. a depreciating rupee will marginally protect domestic companies from imports. Also. . especially in south India. 2. The acute shortage of local timber and heavy excise duties has burdened the newsprint industry. some of the companies have put their expansion plans on hold or have reduced their investment opting for lesser capacity expansions. • In view of the high capital costs. which has been struggling all along out and above all these problems there is services power cut. Future Prospects of paper industry: • Establishment of new business area such as telecom and power will lead to increasing literacy levels. growing quality consciousness and changing consumer preferences will drive paper demand. HIGH COST OF PRODUCTION 1. Similarly chemical materials have also risen by similar percentage. 4. expansion of existing units and revival of sick units remain the practical option for capacity additions.
The foundation stone was laid by the then Maharaja of Mysore Sri. Growth/ history of MPM in chronological order: Year 1936 1937 1952 Activity Incorporated as a public sector company Commercial production started with 4000T per annum First expansion: production increased to 8000T per annum . Shimoga Dist. single location integrated plant in the country manufacturing news. the MPM never looked back. In 1976 the company ventured a major expansion project by installing new machinery to produce 75000 MT of news print per annum and increasing the capacity from 24000 MT to 30000 MT per annum of writing and printing varieties of paper. The integration of sugar mill with paper mill is with the idea of utilizing the byproducts of sugar mill i. The project was completed during 1981.e..5 million. was incorporated in the year 1936 as a joint sector company. the company was able to help the country to reduce imports substantially.MPM Inventory Management COMPANY PROFILE Background and inception of the company The MPM situated on the bank of river Bhadra at Bjadravathi.2. writing and printing paper and sugar at a single location. It was started with a small capacity of Rs. then to 18000 MT in 1964 and to 24000 MT in 1972. Since inception. sugar cane baggase for paper production and avoid dependence of forest based raw materials and avoid deforestation. Krishanarajendra Wodeyar. a sugar mill of 2500 TCD was commissioned and thus MPM become the first largest. It went from one threshold of progress to another expanding its annual capacity to 8000 MT in 1952. In 1983.. Karnataka state. With the commissioning of newsprint project.
MPM 1964 1972 1976 Inventory Management Second Expansion: production increased to 18000T per annum Modernization: production increased to 24000T per annum Major expansion to manufacture 75000T per annum news print and to increase writing & printing paper production from 24000T per annum to 30000T per annum. . ♦ To consciously work toward conversion of resources and minimization of wastes of all forms. thus increasing the self power generation capacity to 41MW expansion of effluent treatment plant with increased aeration capacity and introduction of post Aeration treatment Retrofitting of SR evaporators.” ♦ To make continuous effort to improve quality by continuous training ♦ To actively involve people to contribute toward high productivity through teamwork and innovation. 1981 1983 1993 1994 1998 2002 2004 VISION MISSION AND ORGANIZATION STRUCTURE OF MPM: VISION “Mysore papers mill committed to deliver products and service to satisfy the needs of customer. commercial production of newsprint started with self power generation of 25MW commissioning of 2500 tons sugar mill conversion of stoker fired boilers into SR boilers refitting of chemical recovery boilers commencing of 90T/Hr SR boiler along with 3rd extraction cum back pressure turbo generator (TG) of 16MW capacity. ISO14001 certificate (for pollution control) and also ISO9001 for quality of product.
KOLKATTA & . EUCA. PINE AND BAGASSE • • • • CAPACITY : 30000T WRITING PRINTING & SPECIALIT PAPER 75000T NEWSPRINT 2500T SUGARCANE CRUSHING • • CORPORATE OFFICE REGIONAL OFFICE : : BANGLORE DELHI. PRODUCTS RAW MATERIALS : : : : 20TH MAY 1936 173 PAPER AND SUGAR(subsidiary) BAMBOO. No. MADRAS. ACACIA. SHIMOGA(D).. KARNATAKA • ESTABLISHMENT COMPANY Reg. ♦ Enhancing productivity Inventory Management A GLANCE OF THE ORGANIZATION: • • • NAME OF THE COMPANY TYPE OF THE COMPANY LOCATION : : : MYSORE PAPER MILL LTD PUBLIC SECTOR COMPANY BHADRAVATHI(T).MPM MISION ♦ Creating a vibrant work culture ♦ Customer Satisfaction ♦ Consistent quality ♦ Competitive price.
Ali Asker Road. Tamil Nadu . Maharashtra. printing.MPM Inventory Management MUMBAI QUALITY POLICY MPM shall be reputed.10. AREA OF OPERATION The regional office is situated at 16/5. a) Year of starting 1997 b) Annual Capacity – 1. Mumbai. Bangalore. COMPETITOR: Ballarpur Industries Ltd. Gujarat a) Year of starting – 1996 b) Annual Capacity – 132-00 Tones per year c) Grade of paper-Newsprint Tamil Nadu Newsprint and paper Ltd.. The branches offices are situated at New Delhi. packing and industrial paper Rama Newsprint and papers Ltd.00 tones per year c) Grades of paper Writing.. Kolkata and Chennai. profitable and growth oriented company employing skills that take pride in satisfying customer needs with superior products and services..
00 metric tones per year c) Grades of paper--Writing and printing board including MICR and Copier d) It is a private company. Dandeli a) Year of starting – 1958 b) Annual capacity – 157. English News Paper • • • • • • Times of India New Indian Express Deccan herald The Hindu The State man The Tribhuvan . News print is used for printing Newspaper in all languages in India.Newsprint.. Andra Pradesh a) Year of starting 1966 b) Annual capacity 98.P.5-00 tones per year c) Grades of Paper--Base paper.MPM a) Year of starting – 1984 Inventory Management b) Annual Capacity – 180-00 Tonnes per year c) Grades of paper -.M.. CUSTOMER OF THE MPM M. A few of important customer are as follows. printing and writing Andrapradesh paper mills Ltd.750. wedding and greeting cards The West coast paper mills Ltd.
towards the end of 1970’s to diagnose the cause of organization problem and to formulate programs for improvement the 7-S framework.MPM Kannada News Paper • • • • Tamil Paper • • Dina malar Dinakaran Prajawani Samyuktha Karnataka Udayavani Kannada Prabha Inventory Management Telugu News Paper • • • Enadu Vartha Andra Bhumi Marathi News Paper • • • Sakal Maharastra times Samachar APPLICATION OF MCKENSY’S 7S MODEL Structure The 7-S framework was developed by the consultant at the Mckensy’s Company. a very well known management consistency firm in USA. Strategy Systems Shared values Skills Style Staff .
they are operational excellence. There are 3 types of labours based on their skills they are 1) skilled labours 2) semi-skilled labours 3) un-skilled labours STYLE: The management believes in an open organization. Management itself takes all finance decisions. Customer’s focus and product leadership. Reduced cost of production. The business strategy emphasizes the following 1. STRATEGY: The Mysore paper mill limited started on 1st April 1937 in the remote village of Bhadravathi. . In Mysore paper mills Ltd. There is no perfect mission statement in the MPM but the main aim of the company will be producing good quality of paper and sugar to the public as well as providing more number of employment and increase the standard of living of the people.MPM Inventory Management SKILLS: In Mysore paper mills Ltd employees are to be recruited on the basis of their Qualifications. The Mysore paper mill company’s business philosophy is based of three core values. Increase their market shares. marketing decision. The management will be taking the decision itself may be in any area like production decision. 2. They do not involve employees for taking any decision. Training facilities be provided to be both employees both internal and external.
Produce always quality product. Reduce the import of news print from the foreign market. Inventory Management 6. To grow niligiri plant within the premises of the company. The company has made huge investments in technological resources to ensure that products are superior and the service delivery in terms of these products offering standard. wood eucalypt. 10. Provide employment opportunity to the people of the area. 7. 5. 4. Reduce the import of news print from the foreign market. To meet social responsibilities. To manufacture and deal in all kinds of sugar and sugar products 12. 13. That means first they collect the opinion of trade unions based on that the top management take the decision which is better for company. 14. including the control system. To manufacture and deal in all kinds of sugar and sugar products 11. performance management measurement and reward systems. Meet the national and regional demand of paper and paperboard. SYSTEMS: The management believes in the utilization of cutting edge technology of deliver world class products and services. Increase company performance. Which Provide raw materials for the company at low cost. STAFF: . Recycle all the wastage products. 9. planning budgeting and information system they follow the bottom to top approach in decision making. The system of the Mysore paper mills limited company clearly shows the formal processes and procedures used to manage the organization. timber.MPM 3. 8. To cultivate and raise grass.
Induction and training program are designed to conduct for all employees at regular basis to ensure that these levels are continually enhanced feed back for continuous improvement in solicited from all understood. Being a dynamic organization to frequent change in policy so as to suit business needs that require to be a learning organization fulfilled by the systems and processes which document all changes and feedback received.MPM Inventory Management Staff requirement is designed to ensure that those on board have the primary focus as customer service with a high level of product and process knowledge and operation excellence. Being a dynamic organization susceptible and the changes are well understood. Which helps them to improve their skills and knowledges? WORK FLOW MODEL: . Development programmes are conducted by MPM every year only for the persons who are in the management cadder.
1. Purchase Orders:
At the first stage the company receives purchase order from its agents. They are mentioning the product grade, quality, quantity etc. 2. Release Raw Material to Pulp Mill: The purchase department releases the raw materials to the pulp mill 3. Pulping Process: In this pulping process the raw material pulping made in pulper with water. It will undergo cleaning of pulp, refining and addition of required chemicals. 4. Production Process: The pulps are passes to the paper machine and it passes through solid press water removal. Then it passes through Dryer machine and it passed change calendar machine next it passes to the online coating machine 5. Size Cutting: Then passes to the size cutting machine in this machine they cutting the paper bands according to the customer requirement 6. Finishing Yard: The finished yard paper boards are passes to the stores or finishing yard. 7. Packaging: The next step is packing. The workers pack the paperboards in bundles as orders. 8. Documentation: Before delivering the paperboard to the customers it should be documented in the stores ledger. 9. Dispatching: After documentation in proper ledger, the next process is dispatching the goods to customers.
BRIEF EXPLANATION ABOUT THE ORGANIZATIONAL STRUCTURE OF
The organizational structure of enterprises would depend upon its size, product manufactured and its fictional divisions. The organizational structure may be flexible. The company may change its structure according to the needs and suitability. In MPM Ltd., the Board of directors is having the major position in the company. The chairman is the chairman cum managing Director (CMD) of the company. He is held responsible for formulating and implementing the policies, Procedures and rules with the assistance of Board of Directors appointed by the Government and various financial institutions. Different functional department heads like production, marketing finance, and HRD & A etc., also assists him. The Government appoints the General Manager of HRD & A. He always keeps contact with all other functional departments for routine administration. He also keeps direct contact with C.M.D. Each functional department heads are assisted by the Assistant Managers. The Director of Production is in charge of some divisions’ viz., Material, Paper, Pulp, Sugar, Chemical etc., there is always co-ordination between all functional departments through horizontal communication.
FUNCTIONAL AREAS (DEPARTMENTS) OF MPM:
MICKINEY’S 7 S MODELS ORGAN IZA TION STRUCTURE OF THE MPM LTD
BOARD OF DIRECTORS
DIRECTOR FINANCE COMPANY SECRETAR Y
G.M. (H.R. D. & P)
AGM. (MAINT) AGM (PROJ)
AGM (PB) (In Change)
Sr. MANAGER (Mktg) Sr. MANAGER (CD) Sr. MANAGER (NP) Sr. MANAGER (IA)
DEPUTY MANAGERS ASST. MANAGERS
Activities of Chipper House:- Receipt of Raw material:Raw Material is received in accordance with the production requirement & silo stock of chips.MPM FINANCE DEPARTMENT Inventory Management CHIEF OF DIRECTOR OF FINANCE ASST. GENERAL MANAGER SENIOR FINANCE MANAGER MANAGER OF CONTROL & BUDGET MANAGER OF FINANCE IN SALES MANAGER OF ESTABLISHMENT MANAGER CORPORATE FINANCE MANAGER B/P MANAGER MAIN A/C COSTING PRODUCTION PROCESS: Chipper House:Chipper house is a place where the different types of wood are cut in to homogeneous product to heterogeneous and uniform chips. .
Storage of chips & issue:The accepted chips are stored in silo and issued to digestion process whenever required. There are two drum chippers used for bamboo & four disc chippers used for hard wood. Screening & Conveying:Here the accepted chips are sent to the digestion and unaccepted chips are screened and sent for re-processing. Accounting:A record of all the above activities is kept in a systematic manner. Chipper house issues chips to two streams of pulp mills’ MICKINEY’S 7 S MODELSL : IN PROCESS OF RAW MATERIAL DEPARTMENT: . There are two types of chippers namely disc chippers & drum chipper.MPM Inventory Management Chipping process:Different chippers are run for different raw materials.
Yard cleaning: • • • • • • Cleaning to prepare the area for further storage Cleaning to ensure better utilization of the materials and minimize storage loss. Yard Safety: 7. Safety against hazards like stacks collapse.MPM 1. Safety against unfair/ illegal activities like theft. Prioritize the chipper requirement Store as per need. availability in separate stacks and storage potentiality. Prevent material from other damages. Suppliers particulars Material Status Validity of supply Qualification of both received and issued material. Issue on the basis of requirement of production material mix quality and priority of period of storage. Receipt : Inventory Management • Material loaded vehicle must complete the mill security formalities “Only valid materials will be accepted” 2. Inspection: • • • • • Material type Material Quality and Quantity. Consolidate all the above activities and to generate production report • • • • Budgeting Stock assessment Controlling yards loss. 3. Accounting: . fire etc. 6. Reports for finance purpose. Transit documents verification: 4. Weightment: • • • • 5.
THE SWOT ANALYSIS OF THE MPM IS A FOLLOWS STRENGTH • • • • • • • Market leader in paper manufacturing. Technical and experience manpower. Improved infrastructure. ISO14001 (for pollution control) certified company. SWOT analysis it is an effective way of analyzing the organization potential by identifying strength. weakness to examine the opportunities and Threats which may affect the organization carrying out an analysis using SWOT tool will be enough to reveal the changes which can be implemented easily and gain results. Automated and highly sophisticated machines. . QS9000.MPM SWOT ANALYSIS OF THE COMPANY Inventory Management SWOT analysis is a tool for auditing an organization and its environment. Well planned layout. It is the first stage of planning and helps marketers to focus and key issue. Efficient communication network. ISO9001.
• Due to advance in technology there is a scope for recruiting and retaining right people on right job. Adopting auto motive machines may cause fear among the existing A new entrant is market may dilute the market share of company. Inventory Management Additional land of 75000 acres for replanting eucalyptus trees. interference as it is a public sector firm. OPPORTUNITIES • Capacity of meeting higher demand and attain optimum utilization of existing resources. Firm is getting raw material cheaply for the production.. Good marketing network over all India Firm is getting raw material quickly for in time production. it may Creative and enthusiastic people in future development of the company. As the company is in process of decreasing the existing manpower. employees of the job loss. which may morale and the productivity of employees. . As the customer expectations is increasing day by day it has become There is a frequent change in the top management due to political lose opportunity of obtaining. THREATS • • • Price of raw material is comparatively high. difficult to satisfy them completely.MPM • • • • • WEAKNESS • • • • • Capacity to meet higher demand. The cost involved in completion of the product is high. • • As the company has obtaining six sigma and Qs company has the Forfeiture of paper industry can be directly linked increase level of capability of achieving global standards’ literacy.
MPM Inventory Management .
56).11 31. The function of the accounts department is to record the various transaction of the company in financial terms apart from the quantitative records necessary to be maintained.08 44.924.742.MPM ANALYSIS OF FINANCIAL STATEMENT SUMMARY OF LATEST ANNUAL REPORT:- Inventory Management It is very essential to keep written record of all the transaction in appropriate books.2010 For the year ended 31. As per the balance sheet and profit and loss account of the company there is decreasing in sales of Rs 42490.72 lakhs in 2009 and RS.142.37 -2989.490.28)] in 2010.944835. -7.22) in 2009.981.347. which help in calculating the profit and clarifying the financial position of the company with paper control system one can detect the leakage extravagant and misuse of fixed assets.86 [(Rs -7722. Even if we compare it to the previous year loss was Rs -3202.03.3 0 1037.28(1632. now it shows -10.56.33.6 5 . It shows that the loss has been increased instead of the decreasing loss / gaining the profit for the company.7 2 761. That will base on the balance sheet and the profit & loss account for the previous year and current year.9 8 3132.(-3202.7 4 For the year ended 31.2009 32.5 6 41. But the Balance of (-) loss brought forward from previous year shows that the company is going under loss. THE MYSORE PAPER MILL LIMITED PPROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2010 ( RS in Lakhs) PARTICULARS A INCOME Sales Less: Excise Duty & Cess Other Income Variation in stocks 33.739.722.72 lakhs in 2010 and the company is present academic year it has the loss of Rs.59 259.03. 42 42. 2009 and 2010. The following statement will show the comparison between the previous years.7 2 1.029.742.
645.40 7. Net Profit for the year Add: Balance of Loss (-) brought forward from previous year Balance of Loss (-) carried to Balance Sheet Inventory Management 8.220 . 28 1.680 . 94 -4835. Depreciation & Taxation Interest D.67 1.28 -10924.22 -3202. 45 1.18 13. 07 3. 65 68 .86 1009.210 . EXPENDITURE Raw Material Consumed Chemical Consumed Stores Consumed Repair & Maintenance Power and Fuel Labor charges Employee Benefits Administration and Other Expenses Selling Expenses Prior Period Adjustment (net) C.48 9. Profit for the year before Interest.641 .83 78 8. 89 1.047 .415.503.86 19 994.033. Depreciation E.632.83 . 1708.67 4. 9.443.235.33 1.470.56 -3202. 86 11. 78 8.87 -7722.00 77 4. 39 -5003.46 10.150.132 .17 56 40. 27 765 . 88 1.139. Taxation-Fringe Benefit Tax F.864.222.40 712 .05 90 3.47 1.28 36.MPM B.042 . 55 1.
42 4.2008 12.444 .11 12.889 .343.574.94 11.45 For the year ended 31.2009 For the year ended 31.4 6 590. 42 38.331 . CAPTIVE POWER PLANT ATIONS E.040 .847.123.10 11. 02 12.4 4 D.34 55 4.074.612. INVESTMENTS .03.520 . SHARE HOLDERS FUNDS Capital Reserve and Surplus B. FIXED ASSETS Gross Block Less : Depreciation NET BLOCK Capital Work-in Process 50. 29 62.660.3 4 209.76 12.889 .85 35.27 21.34 59 0.692 .27 23.30 11. 35 50.824.57 16.MPM Inventory Management THE MYSORE PAPER MILL LIMITED BALANCE SHEETAS AT 31ST MARCH 2010 ( RS in Lakhs) PARTICULARS SOURCE OF FUNDS A. 76 4.58 11. LOAN FUNDS Secured Loans Unsecured Loans Total A+B APPLICATION OF FUNDS C.917 .4 8 62.914.248 .84 33.8 1 5. 36 37.3 3 13. 96 12.03.323 .717 .234.479 .
395. 49 3.644. 91 5.9 4 497.86 33. 26 3.027. LOANS AND ADVANCES Inventories Sundry Debtors Cash and Bank Balance Loans and Advances Inventory Management 10. 37 3202.378. 38 Less: Current Liabilities and provisions Current Liabilities Provisions 9.090. 30 . 63 MISCELLANEOUS EXPENDITURE ( to the extent not written off or G. adjusted ) VRS Payments H. 62 12.806.2 4 4.520.961.1 4 31.619. 71 3.911. 20 1.942.893. Profit and loss Account TOTAL ( C to H ) -10924.820.MPM F. 37 17.291.631.3 4 15. 49 84. 86 23.340.749. 53 9.625. 28 2. CURRENT ASSETS.4 6 22.692.031.8 8 5.0 8 14.768.1 2 2.28 35.
MPM Inventory Management The above statements are shows the company current situation in the market as well as the financial position that are all discussing below:Analysis of financial statement shows that the danger of imputing companies economics significance 1) 2) 3) 4) 5) to accounting numbers. Net profit margin ratio = net profit \ net sales In 2009 it was 7. Current ratio = current assets \ current liabilities 2009 it was 2. .53:1 but in the year 2010 it shows that 3.28:1 it shows that gross profit margin may reduced to nearly 3times.53:1 but in the year 2010 it shows that 1. Gross profit margin ratio =gross profit \ net sales In 2009 it was 3. The financial information can be extracted from by using various methods they are as follows: financial ratio Du point analysis Standardized financial statements applications of financial analysis Going beyond the numbers Some of the few methods we taking for interpretation of financial position of the company.23:1 it shows that company is not in a financial sound position.37:1 it shows that current assets is more than current liabilities .84:1 but in the year 2010 it shows that 2.
I observed the work techniques that are studied in subject are implemented in the organization like welfare facility.. There was a good reaction and co-operation by the superiors and sub-ordinates in the Mysore Paper Mill Ltd. Finally this project work gave me the clear idea about the working condition in the organization which will help me in future days..0 PM daily and visit different departments daily accordingly to there schedule. I got the clear picture about the organizational work carried on and how the work in allotted and how it is carried out and duties and responsibilities of the employees in the organization.00 AM to evening 5. training techniques etc.MPM Inventory Management LEARNING EXPERIENCE In my Ten weeks of project work in Mysore Paper Mill Ltd. There is a strict rules followed in HR department and attendance was taken daily to check the regularity we were used to stay from morning 9. They helped me in collection the information regarding the different departments and production process.. . I studied and learnt many things carried in the organization. This project work helped me in gaining more knowledge about the work and production carried out in the organization. .
the higher the requirements for inventory. etc. In according language it may mean finished goods only. The grater the time-leg.2 BACKGROUND OF THE STUDEY: Inventory in general meaning ‘stock of goods. The purpose of inventory control and its management is to ensure availability of materials in sufficient quantity as and when required and also to minimize investment in inventories. work in process and stores. it is very essential to have proper control and management of inventories. where as in times no one would ever have doubted that such were beneficial. To understand the exact meaning of the word ‘inventory’ . An increased emphasis on the liquidity has led businessman to hold cash and securities in preference to inventories although the later have an inherent convertibility not possessed by he other categories. It also provides a cushion for future price fluctuations. Thus. The unforeseen fluctuations in demand and supply of goods also necessitate for inventories. There is generally. 1.MPM PART-B Inventory Management 1. In a manufacturing concern. even inventories greatly in excess of the amount needed to carry on the process of production and distribution were considered beneficial. The investments in inventories constitute the most significant part of current assets/working capital in most of the undertakings. In the past. It serves as a link between production and distribution processes. a time lag between the recognization of a need and its fulfillment.’ the word ‘Inventory’ is understood difficultly by various authors. wealth has become more and more identified with money. it may include raw materials. Since the advent of modern industries. Every enterprises needs inventory for smooth running its activities. INTRODUCTION: In recent decade’s businessman have shown an increasing awareness of the need for precision in the field of inventory control. or a list of goods. These have been made a strong tendency towards holding the means for purchase of goods rather than the goods themselves. inventories were considered as indication of wealth. Large inventories are now viewed with alarm.
A. Inventory includes the following things. Work in production. The stocks of finished goods provide a buffer between production and market. C. 1. FINISHED GOODS: These are the final or completed products which are ready for sale. The levels of the above four kinds of inventories differ depending upon The nature of the business. RAW MATERIALS: They are the inputs of the final products. The quantity of raw materials required will be determined by the rate of consumption and the time required for replenishing the supplies. The grater the time in manufacturing. CONUMABLE STORES AND SPARES: These are the goods held for consumption by machines in a manufacturing concern. raw materials work in progress finished goods Consumable stores and spares. while stock of finished goods is required for smooth marketing operation. For example-A manufacturing firm will have all the four . etc. lubricants. Thus inventory serve as a link between production and consumption. in these concerns there will not be a need for finished goods. they don’t enter into the final product but they are required for maintaining and running the machines for production purpose. cleaning materials. oil. The factors like the availability of raw materials and government regulations. They include spare parts. WORK IN PROGRESS: This refers to the goods lying in the manufacturing process. The quantum of work-in-process depends upon the time taken in the manufacturing process. cotton waste etc. The need of finished goods inventory will be more when production is undertaking in general without waiting for specific order.MPM Inventory Management we may study it from the usage side or from the ‘side point of entry’ in the operations. The raw materials enter the process of manufacture but they are yet to attain a final shape of finished goods. they are normally practically finished or semi-finished that are at various stages of production in a multi-stage production process. In some concerns the production is undertaken on order basis. the more will be the amount of work-in-process. D. 3. They are purchased by the firm from others and are used in the production for converting into finished components. B. 2. The purpose of maintaining inventory is to ensure proper supply of goods to customer. 4. too affect the stock of raw materials.
spares.” 1. Raw materials. 2. It is the aggregate quantity of material resources and goods that are idle at a given point of time. valuable or inexpensive. spare parts and finished products held by a business firm. inventory referred to as stock. maintenance supplies and stores and goods in progress.4 ANALYSIS: Date and information collected are analyzed using statistical tools. “The term Inventory includes. INTRODUCTION TO COMPANY: Mysore paper mills Ltd. But with the credit squeeze measures announced by the government of India and the consideration of the recommendations of the committee for inventories top management is deeply a concern with developing suitable norms for inventory control. . Further depending upon the nature of the business. Work In Progress. The most popular of them are. 1. In this inventory than the other categories.3 MEANING AND DEFINITION OF INVENTORY:The term ‘Inventory’ refers to the stock of raw-materials.MPM Inventory Management kinds of inventories. Several authors have defined the term Inventory. money. Hence inventory refers to the ‘stock’ that a business firm keeps to meet its future requirements of production and sales. machinery. when resources involved in materials or goods in any stage of completion. perishable or non-perishable etc. inventories may be durable or non-durable. was established in the year 1937 as a government company later on in 1947. materials. graphs and charts.. for example men. But a retailer or wholesaler will have a high level of inventories of finished goods but they will have no inventories of raw materials. finished packaging spares and other stock in order to meet an unexpected demand or distribution in the future. The resources may be of any type. This company has been converted in to public limited company. Inventory control has been attracting the attention of managers in India for a long time.
9. how much to carry in stocks so as to gain economy in purchasing. 4. how much to order. An inventory control system is to be engineered to achieve the basic purpose for which the inventories are created. what. The various forms in which inventories exist in a manufacturing company are raw materials. Service to customers. when. The fundamental objective of a good inventory control system is to be able to determine. 7. Mysore Paper mills Ltd. Reduction of administrative work load. 3. The company produces and supplying of papers such as news prints. An inventory system provides the organizational provides the organizational structure and the operating policies for maintaining and controlling goods to be stocked.2 STATEMENT OF PROBLEM: * Lack of new technological information system * Inefficient handling of inventory materials * Excessive investment in inventories * Inadequate inventories . Administrative simplicity. 2. At present the company is meeting the requirement of government departments. 2. 5. is public based manufacturing company which is established at Badhravathi. private news print industries and various dealers.MPM Inventory Management The king krishnaraja Wodeyar established this factory to solve unemployment problem for the Badhravathians and for effective utilization of natural resources. Reduction of risk of loss. Practical system. and finished goods. 8. Continuity of productive operations. 6. work in progress. Objectives of Scientific Inventory Control System: The main objective of inventory control management that to be considered by the analyst while designing 1. Effective use of capital.1 INVENTORY CONTROL SYSTEM: Inventories are stock of the product a company is manufacturing for sale and components that make up the product. Economy in purchasing. To maintain a minimum investment in inventories to maximize profitability. 2..
To collect the information regarding the inventory control systems of the company direct personal interview and discussions was made with the material manager.3 SCOPE OF STUDY Inventory Management This study was mainly concentrated on inventory management being adopted by the company. 2.4 OBJECTIVES OF THE STUDY * To assess the efficiency of inventory management in Mysore paper mills Limited.1 LOCATION OF THE STUDY: The study had been conducted at Mysore paper mills limited Badhravathi.2 SOURCES OF DATA The methodology followed for collecting information is based on a) Primary data b) Secondary data PRIMARY DATA: The method which was adopted to collect the primary data was personal interview.5. 2. * To evaluate the inventory control techniques of Mysore paper mills limited. The purchase procedure followed by the company and further actions for satisfying the requirement are analyzed. marketing manager and sales officer and other staff members. The company’s procedure for stores will influence more on the level of inventory of the company.5. . 2. * To analyze the purchase and stores procedures followed by the company.MPM 2. So the study of purchase has vital role to understand the efficient system of the company.5 METHODOLOGY 2.
The study can be extended to other materials also on the same lines. No 1. Janaki Ramudu et al. The ABC classifications were done for materials and some materials were selected and studied. The expected delivery schedules may not be possible in some monopoly items. material management stock maintenance.e. They are: • • • Different accounting records and annual reports and research report of the company. The time constraint which the study has been conducted only for six weeks. 2. 4. Inventory control mechanism have to be built to all points of the supply chain after a thorough system study. REVIEW OF LITERATURE Sl.MPM SECONDARY DATA: Inventory Management For gathering secondary data various other source were used. Vol-41. Different records related to inventory were collected by stores department i. No. The study concentrates on Indian commercial vehicles industry like. Published books. 3 Inventory Management of . Proper management of the components is important to maintain and improve the health of the organization. websites and published annual reports of the company. journals. 2. magazines.2 February 1999 P. Level of accuracy of results of research restricted to the accuracy level. The average level can be fixed after an in depth study. news papers. July 2006 2 Bad goods control in food processing units Prof. Sukhdev Singh. Mousumi Ghosh Vol-34. 3. 3. the control aim at maintaining. Source Dr. Title Inventory control Practice in (IFFCO) Findings Inventories constitute second largest item after fixed assets in the financial statement particularly in manufacturing organizations.6 LIMITATIONS OF THE STUDY 1.
Activity based costing is the current cost management.Roman’s” Vol-40 Year 2005 K. product pricing. ABM can help the business organization in stopping an internal war of numbers. FDI and issues relating to its computation provides the much needed foreign exchange to help bridge the balance of trade deficit and technology Oct 2006 4 Improving foundry performance through activity based costing The Reporting System of Foreign Direct Investment in India A. Better understanding of the business taking right strategic decision in the area of product pricing. It indicates the TML and EML is a more strength compare to BTL. product mix and market segmentation continuous improvement can be achieved through ABC & ABM to succeed in the context of global competitiveness Globalization has shifted cost management paradigm form T Satynaryana July-Dec2005 7 Globalization cost management and Prof Shymmal Banerjee. Activities are a powerful and a useful base for managing and enterprise.MPM Indian Commercial Vehicles Industry. April \2003 5. FDI is an important driving force for the growth and development of nation there is a big competition among the nations in attracting FDI. product sourcing. Cost .EML and SML using and maintained by more percentage of raw material where as TML and EML using less percentage of raw material and more percentage of sales. EML and SML. Inventory Management BTL. Ramamoorthy et al. 6 Activity Based Cost and Management Success of ABM depends on the output of an ABC system. product sourcing.N.
To analyze the purchase and stores procedures followed by the company. Activity Ratios or Turnover Ratios at Mysore paper mills ltd. Thus it is very essential to have proper control and management of inventory. The purpose of inventory management is to ensure availability of materials in sufficient quality and quantities as and when required and allow minimizing investment in inventories. January 2003 4. They are • • • To assess the efficiency of inventory management in Mysore paper mills Limited. ANALYSIS AND INTERPRETATION In this chapter the whole analysis is divided in to three parts. Inventory Management and Control Techniques The literary meaning of the word “inventory” is stock of goods.. The unforeseen fluctuation in demand and supply of goods also necessitates the need for inventory. Every enterprise needs inventory for smooth running of its activities.MPM supply chain management Inventory Management management of cost from producers view point to managing costs for greater customer satisfaction in the global market where value addition refers to value creation per unit cost as the customer sees it and costs refer to cost of customer retention or cost of conversion of a customer in to client Management Accountant. OBJECTIVE 1 TO ASSESS THE EFFICIENCY OF INVENTORY MANAGEMENT IN MYSORE PAPER MILLS LTD. . To evaluate the inventory control techniques of Mysore paper mills limited.. It also provides a cushion for future price fluctuations. It serves as a link between production and distribution process.
selling inventories at very low prices etc. These ratios are also called turnover ratios because they indicate the speed with which assets are being turned over into sales. The different components of inventory are • Raw materials. Store and spares. The profits may be low due to excessive cost incurred in replacing stock in small lots.1 Inventory Turnover Ratio .MPM Inventory Management Activity ratios are calculated to measure the efficiency with which the resources of a firm have been employed. A very high turnover of inventory does not necessarily implies higher profits. stock-out situations.. the lesser amount of money is required to finance the inventory. Some of the turnover ratios that are used to know the efficiency of inventory management in Mysore paper mills lit…. a high inventory turnover velocity indicates efficient management of inventory because more frequently the stocks are sold. (Rs in Lakhs) • • • Table 4. A low inventory turnover ration indicates an inefficient management of inventory. Work-in-process. Finished goods. Usually. are as follows: Inventory turnover ratio Inventory conversion period Raw material turnover ratio Stores and spares turnover ratio Work-in-process turnover ratio Finished goods turnover ratio Inventory to working capital ratio Fixed asset turnover ratio Inventory Turnover Ratio at Mysore Paper Mills Ltd Inventory turnover ratio measures the velocity of conversion of stock into sales.
inventory Ratio 11004.68 45692.989 2.369 it is not good compared to previous year and also cost (cost of goods sold) is high.68 12904.66 3.926 in 2009 because inventory consumed and production high but in the 2010 it is increase to 3.86 Inventory Management Avg.28 44667.631 2.21 13256.155 15617. Inventory conversion period Table 4.2 inventory conversion period Years Days in year Inventory turn (Rs in Lakhs) Days .926 3.43 3.369 Fig 4.1 inventory Turnover Ratio The inventory turnover ratio was 3.577 3.83 11274.16 40331.56 44240.125 14802.81 46860.MPM Years Cost of goods sold 2005 2006 2007 2008 2009 2010 37791.43 in 2005 and it is decreased to 2.
The conversion of stocks was 106.MPM 2005 2006 2007 2008 2009 2010 365 365 365 365 365 365 3.2 inventory conversion period It may also be of interest to see average time taken for clearing the stocks.41 days in 2005 but it is 124.577 3.926 3. This can be possible by calculating the inventory conversion period.11 124.74days in 2009 and it is short period taken to conversion of stocks compared to previous years that is 108.04 100.41 102.369 Inventory Management over ratio 106. Materials consumed can be found out as opening balance of raw materials plus purchase minus closing balance of raw materials. .989 2.74 108.34 Fig 4.52 122.43 3. Raw material turn over ratio: It is the ratio with which we can measure the efficiency with which the firm converts raw materials in to work in progress.34days in 2010 and it is good to organization.631 2.
3 Raw material turn over ratio: Years 2005 2006 2007 2008 2009 2010 Sales 32128.4 Stores and spares turnover ratio:(Rs in Lakhs) Years Sales Stores and spares Ratio .282 in 2007 there is strong relationship between sales and raw materials but in 2010 it is decrease to 4.07 Fig 4.31 41519.79 9210.00 34927. Stores and spares turnover ratio: Table 4. In the year 2005 it was 4.109 4.146 Raw material 7530.282 6.00 39405.00 42490.MPM Table 4.83 6.266 3.62 9116.146 it shows decrease the efficiency of the firm.67 8139.00 Inventory Management (Rs in Lakhs) Ratio 4.266 and it is increase to 6.613 4.53 6609.00 33743.3 Raw material turn over ratio This ratio indicates the relationship between the sales and raw materials.52 6449.
37 3589.88 in 2010.00 34927.78 3797.82 101.31 41519.31 41519.00 33743.60 Inventory Management 9.02 86.25 (Rs in Lakhs) Ratio 373.00 42490.869 9.18 3582.00 39405.948 8.5 Stock in process turn over ratio: years 2005 2006 2007 Sales 32128.295 410.869 and it is increased to 10.06 .957 10.00 34927. Stock in process turn over ratio: Table 4.00 Stock in progress 86.MPM 2005 2006 2007 2008 2009 2010 32128.75 11.88 Fig 4.4 Stores and spares turnover ratio This ratio indicates the relationship between the sales and stores and spares.978 10.00 3255.948 in the year 2009 and it is decrease to 8.32 3880. In the year 2005 it was 9. so this origination is not using stores and spares properly so it is effect to production decreases.61 3472.49 402.
MPM 2008 2009 2010 39405.00 Inventory Management 134.45 14263.00 42490.56 94.72 11682.05 357.35 (Rs in Lakhs) Ratio 1.31 293.221 1.55 6441.51 Working capital 6861.78 it is not good to organization because stock in process turn over ratio is should be decrease and stock in process could be increase so it is better to origination. But in the 2010 it is increased to 357.80 15340.78 Fig 4.5 Stock in process turn over ratio This ratio shows the relationship between the sales and stock in process.49 in the 2005 but it is decreased to 298.6 Inventory to working capital ratio: Years 2005 2006 2007 2008 Inventory 1104.83 10409.474 .792 1.00 33743. Inventory to working capital ratio: Table 4. It was 373.604 1.45 142.08 298.05 in the year 2009.83 11544.
112 times in 2009.00 34927.83 2.14 4806.6 Inventory to working capital ratio This ratio determines the connection between inventories to working capital.00 39405.50 1.27 2.34 Ratio 1.20 so it is good to organization because the working capital consumption is decreases.112 2.e day to day transaction cost is decrease) so that indicates the organization is good at cost reduction.97 2.83 14660.87 3.91 10619.00 42490.31 41519.63 15409.7 fixed asset turnover ratio:(Rs in Lakhs) Years 2005 2006 2007 2008 2009 Sales 32128.20 Fig 4.49 Inventory Management 14291. Fixed asset turnover ratio: Table 4. (i.64 13745.29 .00 Fixed assets 16268.73 12914.MPM 2009 2010 15893. It was 1.604 times in 2005 but it is decreased to1.but in 2010 it is increased to 2.
7 fixed asset turnover ratio This ratio indicates the extent.46 2.35 .51 3060. which the investment in fixed assets contribution was 1.76 Fig 4. And it has increased to 3.32 1797. But in 2010 it is sudden changes (i.97 times in the year 2005.00 Inventory Management 12234. ANNUAL PRODUCTION The following table is shows about the annual production in Metric Tones in the MPM YEAR 2005-06 2006-07 2007-08 2008-09 2009-10 PRODUCTION 2654.51 2889.32 2784.76 because of huge changes in sales so the fixed assets turn over ratio decreased.29 in 2009.e. decreased) In fixed assets turn over ratio that is 2.MPM 2010 33743.
OBJECTIVE2 TO EVALUATE THE INVENTORY CONTROL TECHNIQUES OF MYSORE PAPER MILLS LIMITED. . The firm should therefore classify inventories to identify which items should receive the most effort in controlling.MPM Inventory Management Production activity can be show in the following graph it is easy to understand the capacity of production of the paper in MPM. The firm should be selective in its approach to control investment in various types of inventories. ABC ANALYSIS Large number of firms has to maintain several types of inventories. The high value items are classified as A-items and would be under the tightest control. The firm should pay maximum attention to those items whose value is the highest. It is not desirable to keep the same degree of control on all the items.
MPM management. It also helps to determine safety stocks frequently of ordering preparing of control statements sources from which material is to be procured etc. ABC analysis enables to exercise selective control when the materials manager is confirmed with a large number of items. Advantages of ABC analysis: • • • • • • • • To minimize purchasing cost and carrying cost Cost minimization and profit maximization. hence ABC analysis is one of the best technique of inventory control. Inventory Management ‘B’ items fall into between these 2 categories and require reasonable attention of ‘C’ items represent relatively least value and would be under simple control. Closer and strict control on these items. • • • • • • • Loss Wastage Scrap Quality Price variance Usage variance Inventory turnover etc. Ensuring availability of suppliers at all times Clerical cost can be reduced Inventory is maintained at optimum level and there by investment in inventory can be regulated and will be minimum Equal attention to A B and C items are not desirable as it is expensive Maintaining enough safety stock for C item . The significance of this analysis is that it spot lights attention to be given in respect of the areas like. which represent a high portion of total stock value.
constitute for 70.58% of total item. this is called low value terms.976% of total annual value and 55.10 Table 4. When compared to a class this inventory required less control and C class item constitute 6.8. So the control on this inventory does not require when compare to the A and B class items.88% of annual inventory consumption and B class items constitute 22. 4.22% of total item this class is called as middle classed value item. No. Of Items 1 2 3 4 5 6 7 8 Caustic soda lye Liquid chlorine Burnt lime Hydrogen peroxide Soap stone powder Ferric Alum Non Ferric Alum Sodium Silicate Item description Price (per unit) 23113 8056 5385 33214 6000 6175 8086 8490 Annual usage (in MT) 7000 4200 23000 3200 9000 600 1500 1300 161791000 33835200 123855000 106284800 54000000 3705000 12129000 11037000 1 6 2 3 4 12 9 10 Annual Consumption Rank .8 Consumption price Data of 20 Items of Mysore Paper Mills limited. ABC analysis is showing table 4.MPM • Interpretation Inventory Management From the ABC analysis Mysore paper mills limited (here took major group of row materials for the analysis) it is clear that A class items that is high value item.05% of total annual value and 22.9 & 4.
58% A 161791000 123855000 106284800 161791000 285646000 391930800 Cumulative Annual Percentage 25.39% 5.MPM 9 10 11 12 13 14 15 16 17 18 Hydrochloric acid Sulphur Rosine Plastic Plug (no’s) Colors Gum tape (no’s) Mother liquor M P steam Reel Core (no’s) A T will Gunny Bags (no’s) 4112 11151 20000 6.72% 19.69% 16.9 Revised table with items arranged according to their respective ranks No Of Items Item description Annual consumption value Cumulative annual value 1 2 3 Caustic soda lye Burnt lime Hydrogen peroxide 4 Soap stone powder 5 6 Reel Core (no’s) Liquid chlorine 52800000 33835200 498730800 532566000 8.25 128 51 1152 1200 400 62 420 160 500 Inventory Management 1727040 1784160 10000000 2700000 96000 550800 25850880 468000 52800000 26350000 15 14 11 13 18 16 8 17 5 7 432000 750 10800 22440 390 132000 425000 Table 4.89% A A A Category consumption consumption .37% B B 54000000 445930800 8.
58% 0.MPM 7 A T will Gunny Bags (no’s) 8 9 10 11 12 Mother liquor Non Ferric Alum Sodium Silicate Rosine Ferric Alum 25850880 12129000 11037000 10000000 3705000 26350000 Inventory Management 558916000 4.42% C 14 Sulphur 1784160 626122040 0.10 Summary of ABC Analysis of 18 Items No of items % of items Range of annual usage 4 22.88% A Category .22 Between 138836080 22.75% 1.58% B C C C C 13 Plastic Plug (no’s) 2700000 624337880 0.27% C 16 17 18 Gum tape (no’s) M P steam Colors 550800 468000 96000 628399880 628867880 628963880 0.074% 0.22 Above Rs 110000000 4 22.015% C C C Table 4.05% B Total annual usage 445930800 Percentage annual usage 70.28% C 15 Hydrochloric acid 1727040 627849080 0.11% 1.087% 0.18% B 584766880 596895880 607932880 617932880 621637880 4.92% 1.
The EOQ should be applied to Mysore paper mills ltd for the purpose of many units should be issued for production department as per production schedule. It is the fixed quantity of material which is ordered when the stock comes down to a reorder level. The every item in EOQ techniques presented in table will be used for paper production. The most convenient way is the following formula: EOQ = √ 2 * Cost of placing an order * Demand for the period Purchase price per unit * cost of storage as % of total landed cost The EOQ applied to Mysore paper mills ltd raw materials for 2 years. If the consumption rates will increase the quantities of raw materials should also be increased for the production. There are various ways of determining the EOQ. For analyzing the EOQ techniques company’s 2 years raw materials data should be taken it should be presented and calculated. so that cost of purchasing is equal to cost of storage making the total inventory cost minimum.976% C ECONOMIC ORDERING QUANTITY: One of the major inventory management problems to be resolved is how much inventory should be added when inventory is replenished. The company’s EOW units will be varied in 2 year because of quantities issued to the production department will be change the year after year. The will involves the ordering cost and carrying cost. such as setting out a tabulation of cost for various order quantities until the minimum cost is determined or by formula or by using a graph. .MPM 15400000 8640000 10 55.55 Below Rs 8000000 Inventory Management 44197000 6.
87 678 .8 1075 √2*4400*110/0.75 645 √2*2000*100/0. Economic Ordering and Quantity is shown in table 4. If the companies carrying cost will occurred by way of loss due to pilferages.75 1579 6 7 Ferric Alum Non Ferric Alum √2*600*110/0. If the company is ordering as well as carrying cost will also increase every year and these cost are different for different items in the company.MPM Inventory Management In 2008 the quantity should be minimum units 9503.70 1493 2 Liquid chlorine √2*4200*110/0.80 1100 3 4 Burnt lime Hydrogen peroxide √2*23000*80/1 √2*3200*100/0.75 1697 √2*8500*110/0. wastages and breakages in the sores and the ordering cost will occur by way of transportation of items from one place to another place.11 calculation of Economic Ordering Quantity for two years: No of Items Items 2010: EOQ=√2AO/C Units 2009: EOQ=√2AO/C Units 1 Caustic soda lye √2*7000*120/0. when compare to year 2009 is units 10032.75 √2*1600*100/1 632 566 8 Sodium √2*1300*120/0.65 2079 961 5 Soap stone powder √2*9000*120/0. The ordering and carrying cost will be the main elements for the paper manufacturing units.11.65 1918 992 √2*27000*80/1 √2*3000*100/0.65 √2*1500*100/0. Table 4.60 451 708 √2*1500*100/0.8 1449 √2*7800*100/0.
It constitute for 85.7% annual inventory consumption of total items of 40% and E class items that is essential of usage of materials the total annual usage is 11.90 √2*500*50/0. Also spare parts be supplied by manufacturer are treated as Vital spare. The inventory policy is to keep at least one number of vital spares irrespective of its value. . This shown in Table 4. those which are needed but their absence for even a will not lead to stop spare of production. The vital spare parts are those which can cause stoppage of the plant if not available usually such spare parts are known as capital or insurance spares. the stock of which even for as short time will stop production for quite same time and where the cost of stock out is very high are known as vital spares.75 114 237 Inventory Management √2*250*45/0.MPM Silicate 9 10 Sulphur Hydrochloric acid Total 10032 √2*160*40/1 √2*420*50/0. the absence for which cannot be tolerated for more than a few hours a day and cost of low production is high and which are essential for the production to continue are known as essential spares.12. Desirable spares.3% of total usage of item. Interpretation From VED analysis Mysore paper mills limited (Here took major group of raw materials for the analysis) It is clear the ‘V’ class item for vital usage of items. Essential spares. The stocking policy is based on criticality of the items.9% of total consumption 30% and this class is called as medium class usage item and D class of usage items this constitute 2.75 158 258 9503 VED ANALYSIS: This classification is usually applied for spare parts to be stocked for maintenance of machines and equipment based on the criticality of the spare parts.
31 V V V E V D E E D D Table 4.19 2.13 Summary of VED Analysis for Ten Items No of items % of items 4 3 3 40 30 30 Total annual usage 43200 6000 1180 % of annual usage 85.7 11.97 2.86 1.58 0.9 2.83 0.33 45.3 Category V E D HML ANALYSIS: .89% 8.MPM Table 4. of Items 1 2 3 4 5 6 7 8 9 10 Caustic soda lye Liquid chlorine Burnt lime Hydrogen peroxide Soap stone powder Ferric Alum Non Ferric Alum Sodium Silicate Hydrochloric acid Sulphur 7000 4200 23000 3200 9000 600 1500 1300 420 160 3 4 1 5 2 8 6 7 9 10 Items Description Annual Usage Rank Inventory Management Cumulativ e of Annual Usage 7000 11200 34200 37400 46400 47000 48500 49800 50220 50380 CAU% Rank category 13.12 VED Usage Data on 10 Items No.35 17.65 6.
31 H Cumulative annual price % unit price Rank catego ry . Table 4. medium and low classification follows the same procedure as if adopted in ABC classification only difference is that in HML. HML analysis is useful for keeping control or consumption at departmental levels for deciding the frequency of the physical verification and for controlling purchase.MPM Inventory Management The high. and M class item that is medium level value price that constitute 31.03% of annual inventory consumption price. The items are inventory should be listed in the descending order of unit value and it is up to the management to fix limits for three categories.14. the classification unit value is a criteria and not the annual consumption value.78% T this shows in Table 4.19% of total annual price and L class items that is low price items constitute 8. constitute for 60. Interpretation: It is clear that H class items that is high value price items.15 respectively.08 M 2 23113 20. Table 4.73 L 6 31169 7.14 Calculation of HML analysis No of items Items consump tion Price per unit Annual Annual usage consump tion R a n k 1 Caustic soda lye 2 Liquid chlorine 3 Burnt lime 5385 23000 2311 3 8056 4200 7000 1617910 00 3383520 0 1238550 00 9 36554 4.
MPM 4 Hydroge n peroxide 5 Soap stone powder 6 Ferric Alum 7 Non Ferric Alum 8 Sodium Silicate 9 Hydrochl oric acid 10 Sulphur 1115 1 160 1784160 4112 420 8490 1300 1103700 0 1727040 1 0 3 4 8086 1500 1212900 0 5 6175 600 3705000 7 6000 9000 5400000 0 8 3321 4 3200 1062848 00 1 Inventory Management 69768 29.44 H M Category .50 31.8 M Table 4.10 M 98519 7.19 H 75768 5. of items % of items Total annual price 2 4 20 40 56327 35783 % of annual price 49.42 L 90029 7.61 L 113782 9.15 Summary of HML analysis for ten items No.27 L 81943 5.46 M 102631 3.
These items constitute a major portion of the total inventories in a company they include the items needed for proper operation. purchasing procedure for stores. demand for an efficient purchasing division.MPM 4 40 21672 Inventory Management 19. since they relay upon a continuous flow of right materials. and at Right time. i. Mass production industries like Mysore paper mills ltd.. in order to achieve competitive advantage in material procurement i) ii) iii) iv) v) vi) To procure right material To procure material in right quantities To procure material in right quantities To procure from right and reliable sources To procure material economically. Because purchasing is one of the main functions in success of a modern manufacturing concerns. right or reasonable price. To receive and deliver materials at • • Right place.. spares. Objectives of the purchase Department The company purchase department stands for following objectives.e. .04 L OBJECTIVE 3 TO ANALYSE THE PURCHASE AND STORES PROCEDURES FOLLOWED BY THE COMPANY The purchasing function occupies a vital and unique poison in the organization of manufacturing industry. components and raw materials which constitute inventory in the company. Under purchase procedure analysis this study considered only. repair and maintenance during manufacturing cycle.
the purchase service selection maintains contact with the vendor. Receipt and analysis of Quotations After receiving a number of quotations from different suppliers.MPM The purchase procedure Inventory Management Steps involved in the complete purchasing cycle of materials. in order to take corrective actions such as transferring some of the orders to some other suppliers. . A purchase order once accepted by the vendor constitutes a contract for the delivery of the articles in accordance with terms of purchase agreement. from whom quotations will be requested. ii. for purchase of required materials. v. Selection of right source of supply The comparative statement as prepared in step (vi)above serves as good guide in selecting the right source of supply. Selection of possible sources of supply This process consists of selecting a fair number of vendors in accordance with established guidelines. it is officially brought the notice of the purchasing department. a purchase order is dispatched to them. Recognition of need. vii. Whenever a department needs an item. Purchase requisition forms the basis for action by the purchasing department. Follow-Up and expediting the order After placing the order. request for quotations is made on prescribed quotation forth to all selected (possible) sources of supply. receipt and analysis of purchase requisition. vi. to supply respective materials. viii. Sending purchase requisition to Head Office In second stage the company stores department sends all orders to head office. Making request for Quotations In this stage. Issuing purchase order After selecting the right supplier. i. iv. iii. they are studied and a comparative statement of rates and other terms and conditions mentioned in the quotations is prepared.
e. Functions of store department. To co-ordinate and co-operate to the full extent with the purchasing. Inventory Management Analyzing receiving reports and processing discrepancies and rejections Receiving reports are compared with purchase order in order to find discrepancies. To receive materials and equipments and to check item for identification. VII. breadth and height. To plan store for optimum utilization of the cubic space i.MPM ix. FINDINGS: Inventory control system: As per the study. the correct material has been supplied. After confirming the above. To issue items to the users only on the receipt of authorize store requisitions. IX. VI. length. IV. Checking and approving vendors invoices for payment Invoices should be checked to ensure that. according to agreed terms and conditions. x. To record and update receipts and issues of materials. V. raw material has increase the efficiency of the inventory and drastically has reduced the transportation cost. To ensure that the required materials are located easily To initiate purchase cycle at the appropriate time so that the materials require are never out of stock. Discrepancies found if any during inspection as regards the quantity or quantity of the received material should be promptly bought to the notice of the supplier. VIII. To maintain stocks safely and in good condition by taking all precautions to ensure that they do not suffer from damage. the payment is made to the vender for the value of materials received. manufacturing. The company should take in to account of existing stock level when it changes the design or when it introduces new model otherwise absolute and non moving stocks will increase due to frequent changes. pilfering or deterioration. III. . To record the receipt of materials To correct positioning of all materials and supplies in the store. I. inspection and production planning and control departments. II.
The company is making open order for the whole year to the supplier and the plants according to monthly schedule produce the inventories. There is no co-ordination between employees. . they also consider the value and consumption of raw materials. The stores should be according to the needs of the company this will provide effective safe and good storage system. RECOMMENDATION: There is always a threat from the domestic players and a potential threat from the MNC is for the MPM so it is desirable to contract effective barriers to reduce competition. The company should adopt latest technology to provide a competitive product which can control inventory and increase profitability of the company. For making ABC analysis usually companies consider value and consumption. Inventory Management The employees are very rude behavior and they do not have courtesy to speak The Middle class employees are inefficiency and ineffectiveness towards work. In Mysore Paper Mill Ltd..MPM with subordinates and trainees (visitors). They do not have proper advanced knowledge to prepare books of accounts. Implementation of latest technological systems entrepreneur resource planning software packages as discussed will cater to the additional information requirements of the company which in turn will improve the efficiency of management of inventory control systems. The employees are not interest to give any information to trainees. This is one of the best evaluations of ABC analysis in which the company has developed.
Inventory Management The MPM should also concentrate on the diversification so as to ensure expansion As the dealers are not satisfied by the margin offered by the company. SUGGESTIONS: As per the study inventory management and its implementation in Mysore Paper Mill ltd... The company has use various technologically advanced media such as the internet. advertising and digital displays to promote its products apart from the conventional media. The company should invest on more on R&D to come up with new varieties of paper in a cost effective manner.MPM and to utilize the unexploited opportunities. It should periodically contract its dealers and customer and should review its performance. The company should also target on the high customers who from the customer base from the MNCs. it was revealed that management of the inventories play strong role in the success of the organization. mobile. it should increase the margin for the dealers who have been utilized both for selling and collecting marketing information. .
This will provide effective. production. It helps a lot in achieving effective inventory control over the materials in the company. The company is making open order for the whole year to the supplier and the plants according to monthly schedule produce the inventories. This is one of the best evaluation of ABC analysis in which the company has developed.e. So it makes compulsory use of safety helmets while doing the work which helps to the efficiency and health of employees. In Mysore Paper Mill Ltd.. The control of inventories represents a shared responsibility and . drawing paper etc.. Excessive labor in certain department they should try to remove the labor.MPM Inventory Management Implementation of better and new information system entrepreneur resource planning. marketing. The company can consider by producing the other varieties of paper like cards. The company which gives more cash discount on sales so this is not good for organization. safe and good storage system. purchasing. the employees benefit which increased compared to previous year) that has to be reduce. The Company which is give more concentrate on employees benefit for the current year (i. as discussed will cater to the additional information requirements of the company which in turn will improve the efficiency of management of inventory control system. they also consider the value and consumption of the raw materials. These materials issuing practices are doing well and have more contribution towards effective material management. The store should be moderate according to the needs of the company. Inventory are the results of all fluctuation areas (i. Employers do not use any set of safety helmets and also. software packages. The company should follow the first in first in first out method in issuing the materials to the production department. For making ABC analysis usually companies consider value and consumption.) with in the organization.e. CONCLUSION: The control of inventories is complex of many fluctuation and forms.
.72 761. So the company should reduce the cost which helps to improve the organization.MPM Inventory Management viewed as such.11 41347. Any set of roles used for inventory controls in revalued regularly in Mysore paper mills ltd. It is running in loss.) are high. apart from that the other over heads (i. and selling and distribution expenses.37 -2989. Due to the above condition. It is government undertaking.74 Income sales Less: excise duty total Expenditure 31029. factory.59 259. the purchase and stores department are handling inventory inefficiently in the organization due to the problem of inadequate technology and inexperienced employees. They are maintaining ancient method of books of accounts and it carried high cost and there is no proper utilization of funds.42 32981. The MPM ltd…. I wish this company a grand success in the years to come.. In Mysore paper mills ltd. ANNEXURE Profit and loss account and Balance Sheet are shown below: 31st the profit and loss account for the year ended march 2010 (Rs. 5.08 1142.e. office and administration...56 44739.65 .72 33742. which is run good at production.98 3132. The major factor which is effect the whole organization that is conflict (agency cost) which is high.30 Other income Variation in stock 1037. In lakhs) particulars For the year ended 31-32010 For the year ended 31-32009 42490.
46 10150.48 36033.67 1220.45 1645.77 4503.88 1708.56 -3202.65 68.19 994.17 569.18 13680.47 1047.86 -3202.89 1632.00 -7722.55 1443.87 0.07 3415.28 1864.27 765.83 Inventory Management 9210.40 712.67 4641.86 11.23 10924.40 7042.83 788.MPM Raw materials consumed Chemicals consumed Stores consumed Repairs & maintenance Power and fuel Labour charges Employee benefits Administration and other expenses Selling expenses Prior period adjustment total Profit/loss for the year before interest.86 1009.29 1222.33 1132.05 903.00 40235.28 .94 -4835. depreciation & taxation Interest depreciation Taxation-fringe benefit tax Net Profit/loss for the year Add: balance of loss(-) brought forward from previous year Balance of loss(-) carried to balance sheet 8139.39 -5003.78 8470.
2 7 21248.35 50574.3 4 209.84 Total (A+B) APPLICATION OF FUNDS: C.3 4 554. LOAN FUNDS Secured loans Unsecured loans 4331. In Lakhs) particulars SOURCE OF FUNDS A.3 4 590.57 16917.85 35520.10 11889.MPM Inventory Management THE MYSORE PAPER MILLS LIMITED BALANCE SHEET AS AT 31 MARCH 2010 (Rs.45 B.94 11323. FIXED ASSETS Gross block Less: depreciation NET BLOCK Capital work-in progress 50847.42 33692.0 2 12914.4 2 38612.30 .2 7 23040.4 6 590.3 6 37660. SHARE HOLDERS FUNDS Capital Reserves and surplus As at 31-03-2010 As at 31-03-2009 11889.5 8 11717.76 12444.9 6 12234.11 12479.
00 10924.30 . LOANS AND ADVANCES: Inventories Sundry debtors Cash and bank balances Loans and advances Inventory Management 12824.20 1090. CURRENT ASSETS.14 Total 22768.62 12942.86 33692.8 8 Net current assets 4806.48 62.94 497.28 2644.37 3202.12 2625. CAPTIVE FOREST PLANTATIONS E.29 62.28 35520.63 G.08 31820. MISCELLANEOUS EXPENDITURE • VRS payment-note: 4.26 3911.MPM D.34 15893.81 5074.9 1 5027.76 4343.13 H.24 14291.44 10619. INVESTMENTS F.46 5961.38 Less: current liabilities and provisions: Current liabilities provisions 9031.71 3378.4 9 3395.86 23631. Profit and loss account TOTAL (C to H) 0.49 84.37 17749.53 9340.33 13123.
3/e. .MPM Inventory Management 5. 2003 Production &operation mgt – k. Aswathappa. Sridhar Bhat.in www. K.co. Production &operation mgt – prof. BIBLIOGRAPHY WEBSITES: www.co. MPM quarterly magazines.mysorepapermill.in Paper mill monthly magazines.TMH.mpm. 74th and 75th annual reports. (till 2010) Cost accounting. 73rd .Jawaharlal.
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