inventory management srinivas reddy

7/28/2019 Inventory Management SRINIVAS REDDY

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INVENTORY MANAGEMENT

INTRODUCTION

The term inventory originates from the French word inventories and Latin word

indentation, which implies a list of things found. The term inventory includes raw

materials work in progress finished goods, spares, in generally inventory mean stock,

and financial language, inventory means raw materials, work in progress, finished

goods.

The term inventory includes the following categories of items.

1. Production Inventories: - Raw Materials, parts and components which enter

the forms product in the production process.

2. MRO Inventories: - Maintenance, repair, operating suppliers which are

consumed in the production process but which dont become part of the

product. Eg:- lubricant oil, soap, machine repair parts.

3. Work in Process Inventories: - Semi finished products found at various

stages in the production operation.

4. Finished Goods Inventory :- Completed products ready for shipment

NEED OF THE STUDY

Every industry on average spends 70% on raw materials (inventory).

Therefore there is a need to know the raw material cost and also there is a great

importance to understand the inventory management system of this industry.

The study helps a lot to various departments to take steps to control the

inventory process.

BOMMA INSTITUTE OF INFORMATICS Page 1


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SCOPE OF STUDY

This study on inventory management has a wider scope as it assists the firms in

Defining the policies for inventory management.

Determining the most appropriate inventory management techniques and

methods.

Determining the economic order quantities, stock outs, safety stock, lead time.

In minimizing handling and storing cost.

Reduce wastage / scrap / obsolete items.

OBJECTIVES OF THE STUDY

The objectives are:

1. To study the present practices observed inventory management and inventory

of raw material.

2. To see how far these accomplish the set objectives.

3. To suggest any possible changes and improvements.

4. To present the conceptual theoretical framework relating to inventorymanagement.

5. To conduct a study on existing practices of inventory management in the

company.

6. To determine the inventory status of the company and analyze them.

7. To study the inventory valuation methods of the company.

8. To suggest various control systems for inventory management.



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METHODOLOGY OF THE STUDY

Sampling techniques

There are two basis alternative approaches to sample selection namely. Probability sampling

Non-probability sampling.

The executives related to all departments were interviewed on the basis of judgment

and convenience of the interviewer which helped the interviewer to get accurate and

understand the opinion of the officers and executives.

Source of Data

The methodology is to study the inventory perception towards cement company withspecial reference to Sagar Cement it contains.

Primary data

Secondary data

Primary Data

Primary data has been collected with the help of the person questionnaires, interviews,

enquiry, observations designed and developed for this purpose. The questionnaires has

been supplied to all theOfficers/ executives to edit the required informati3on. Interviewing technique

and personal observation has been used simultaneously to make the study exact and

relevant.

Secondary Data

This data has been collected from previous published records like Annual reports

inventory reports, printed statements do the company like wed site etc.



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LIMITATIONS OF THE STUDY

As the details of inventory are maintained confidentially. The project deals with

fewer areas of inventory

As the time spent on project is only one month, it is not possible to go in to detail

study of item wise.

The project covers the area of stores and spares under inventory management

system of the company.

The collected information is mainly through secondary data.



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INDUSTRY PROFILE

Joesph Aspidin with the invention of cement in the year 1812 has made a great

contribution for industrial development. Today, the industry has become one of the

major contributors to the national income. China is the first largest cement produce in

the world and India stands second. The ex-Factory cement prices in India are the

lowest in the world compared to the other. (Excluding the freight).

Compared to every other building material, increase in the cement price has been

the lowest for the last six years. Also cement is the second largest revenue contributor

in terms of excise duty. (3500 corers per Annum).

The industry has invested Rs.30000 corers of capital by way of share holders

stake and debt from public financial institutions. Yet, the industry has not been able to

recover the continuous increase in the input costs. Cement industry today directly

employs over 1.5 lakh workers. Over 12 lakh people are directly supported by the

industry.

The entire industry has been adversely affected by the depressed cement prices.

In fast over the last five years, cement price index has declined by 1.1% despite the

rise in the recent price, the cement price index is much lower than the index during

1996. But the cement industry the fluctuation of prices is norm. More than 70% of the

cement manufacturing units are in red. Ten of the largest cement companies have been

declared sick under BIFR. Being a highly captive industry there is a compelling need

to attain reasonable returns to service a huge debt burden of over Rs.1500. Cr.

In Indian the manufacture of cement was started in Tamil Nadu early in 1904.

At present India is one of the top ten cement producing countries in the world.

Now there are more than 90 units producing more than 300 million tones of cement

per year. Cement industry today has come to a long way from a seller market to a

buyer market.



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Cement is one of the basic and essential commodities for building activities and

its demand is more than the supply and position is likely to be continued the position

has been changed and some of the units are bringing their prices regularly down.

Effective from 1982 Feb. 28th government of India has introduced dual pricing

policy where by 66.6% of the licensed capacity is to be supplied on the government

and surplus producing above 66.6% is available to the manufacturer for sale in the free

market.

Cement Prices in some countries from last six months.

Rs/Mt(EX- Factory)

4600

3450

2750

2100

1900

2800

0 2000 4000 6000MEX

CIOUS

A

SR

ILANKA

THAILAN

INDONESI

INDIA

Rs/Mt(EX-Factory)

Cement prices nave been fluctuating a great extent over the last few years. In

all countries of the world cement attracts the last amount of taxes. In India cement is

One of the highest taxed commodities. The Ex- Factory price in India despite the

recent hike is the cheapest in the world.

Components of Price:

First lets understand which components make up the price of the cement.

Power and coal alone account for nearly 60% of the variable costs. Freight and

transport costs from another major chunk of the cement prices in different locations.

During the last nine years input costs of major component, which contribute to the

final price of the cement have risen between 100% to 220%.



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Cement is one of the highest commodities in India. Levies on cement comprise

a whooping 25% to 30% of its price. Practically all major inputs in cement production

fall under administered price mechanism. Costs of inputs in cement production have

gone up by Rs. 108 per bag during the last decade.

On the other hand cement prices during the last five year have infarct come

down. Moreover since April 2000 costs on account wages petroleum products, royalty

and freight have further increased.

CEMENT PRICE DEFLIES INFLATION:

Compared to the increase in the prices of other construction materials, cement

prices have hardly increased over the last five years. Price index of cement is far below

the increase seen in the world price index.

Cement prices are driven by demand and supply, cost of production, capital

related costs, brand values, grade of cement, distance from source of supply,

seasonally and fair return on investment. Cement prices on the country have kept low

despite the inflationary pressures.

The enthusiastic response of industry to the government policies during the

liberalization phase has resulted in greater benefits to the consumer easy availability,

best quality, and most competitive price. In the bargain, it is the fair return on the

investment that has been the worst hit considering the steep escalation in input costs

cement still under priced as bottom lines of many cement companies would reveal.

CEMENT INDUSTARY APERSPECTIVE:

After the decontrol of the cement industry in the 80s several new and

additional capacities were setup. Almost a decade later, when liberalization swept

across the country, the government announced several Hugh infrastructure projects.



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Anticipating a massive demand for cement in the coming years, almost 60% of

the total cement is consumed by the infrastructure project- the industry went in for a

second round of capacity increase. Efficient plans and higher capacity utilization

meant greater production.

Unfortunately, many of these big government projects are yet to reach the blue

print stage. Even housing plans could not fully materialize, as intended by the

government. Demand for cement failed to keep pace with supply excess resulted in

high unremunerated cement prices. Today the cement industry has an installed

capacity of 113 million tones.

The cement industry has been reeling under the impact of excessive supplies

and uneconomic realization for the lost four years. As a consequence of this, the

investment has considerably slowed down and there has hardly been an addition of any

fresh capacity in the industry. This bodes ill for the nation, considering the countrys

requirement for the massive in fracture development and ever increasing housing

requirements.

The cement industry has investment value of about Rs 30000 cores out of

which almost 15000 cores is in the form of debit from financial institutions and banks.

On a conservative estimate, lately the industry has been pasting an annualized loss in

excess of Rs 1000 cores. Debits have been turning into non performing assets and

share holders value fast encoding. Over 30 companies are in the red. More than 10 of

them have been BIFR cases. Many cement companies have decontrolled, no cement

plant was economically viable. Growth in the cement industry was insignificant.

The industry doing the period was rife with all kinds of ills hoarding black

marketing and profiteering if the current trend of the erosion of the net worth of the

cement industry continues, the might once again run into dark ages.



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In any economic situation, interest of the consumer and the investor of the

capital have to be protected. Consumers long term interests have to be protected.

Consumers long term interest is served by getting the product at a competitive out of

the efficient economic working of the industry.

Indian cement industry has state- of art technology and the production cost is

most competitive in the world. The industry can survive only when it gets economic

return on the capital employed. India has to implement large infrastructure projects of

roads, bridges, ports etc. which will require a massive quantity of cement in the next

10 years.

With purchasing power increasing in the rural area and semi urban pockets of

the country, housing projects will have to be undertaken an a priority basis. It is

therefore, necessary that cement industry in India should remain healthy and fresh

capacity to meet the growing demand of the cement.

Health of any company requires a fair return on the investment. Then only a

company or an industry can protect the interests of its consumers. An industry that

fails to earn a fair share of return con never survives in the long run. Ultimately, it will

be the retail consumers who will have to bear the brunt.

IMPACT OF MINI BUDEGT:

Reduction of basic customs on non-cooking coal from 25% to 15%

Abolition of special additional of 4%

IMPACT:

The governments decision to slash basic customs duty on non-cooking

coal is expected to benefit the cement.

Considering that international prices of non-cooking coal have nearly

double in the last 12 months. The reduction in the duty will only provide

partial relief to the cement units. Moreover the cement industry largely

dependant on local supplies for non-cooking coal.

Coal accounts for around 20% of the direct cost of the cement makers.

Duty costs coupled with an expected pick-up in.

Demand, should help cement companies struggling on both the cost and

realization fronts.



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COMPANY PROFILE

Started on 20-01-1985 with an installe3d capacity of 200 TPD, promoted by

Sri S. Veera Reddy Managing Director, along with highly competent and successful

technocrats. Plant machinery is very contemporary and suitable a produce wide variety

of cements. Having lime stone mines of highest quality. Mineral available is suitable

for all varieties of cements.

Inherent strengths are:

Highly competent men.

Latest generation sophisticated machinery.

Highly quality minerals.

Which are the three important prerequisites (M3, Men, Machinery, and

materials) for any good product. (The fourth M being marketing for

successful origination)

From the day one, Sagar Cements is a success storey and stood first in all

areas of its activities, made big strides and grown rapidly in phases to its present

cement capacity of 18100 TPD.

Quality consistency is an on going activity at Sagar Cements. Top

managements priority is always to implement new technologies with in a time frame

even at huge investment and to be one of the best quality cement producing industry in

India. Management considers technology up gradation is of highest priority and spent

huge amounts towards latest machinery, systems and pollution control equipment.

The important recent investments:

Latest world best cooler for efficient cooling and better quality( I.K.N.G

mbh, Germany)

Usage of low ash imported coal.

Latest software for process optimization.

The result is sagar cements industry is of latest contemporary technology not

only when it was installed but also today and known in cement industry circle as one

of the highly efficient unit.



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Quality was given the prime importance even during the construction stage of

the project itself. The layout planning, equipment sizing, technology absorption etc.,

were considered purely based on quality aspect of view.

The quality control department is accorded highest status in work and produced

very high quality cement very consistently. During 98 an amount of Rs.40 lakes was

spent for the surveying and quality analysis of the available limestone in our mine.

This is helping in planning our mining activities to supply optimum quality limestone

to factory, the consistent well designed Raw Mix is helping in producing consistent

quality cement.

To improve the quality.

Rs.30 corers is invested towards new machinery

Works are under progress with a budgeted investment of 5.0 corers.

Other schemes are also under study.

Cement is accepted and appreciated by many Govt institutions and big builders.

Company is producing follow grade of cement.

43 Grade ordinary Portland cement.

53 Grade ordinary Portland cement.

SRC (sulphate resistant Cement).

IRST_40 (Railway sleeper cement).

Super grade (Portland pozzolana Cement).

Super steel Grade (Blast furnace slag cement).

Till date Sagar Cements could produce any specialty cement required by the market

for special application. The following are few of the many highly critical constructions

made with Sagar cements:

Bombay:-

Vasai Bridge (NBCC).

Ircon Project.

Thane crecke (Sulphate Resisting cement).



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Chennai:-

Madras Refineries Ltd.

Metropolitan Railway Transport Projects.

( Intercity Railway Bridges)

Hyderabad:-

Buddha Purnima Project.

Khirathabad Fly over Bridge..

Railway sleeper cement (IRST_40).

Kakinada:-

Nagarjuna Fertilizers & Chemicals Ltd.

Kovvur to Rajamundry Bridge III

Vizag:-

Simhadri Thermal Power project. (E.C.C.C.)

H.P.C.L.Project.

Rain Calcining Limited (RCL).

Khammam:-

Paleru dam

Singarenicolleries ltd., Kothagudem

Nalgonda:-

Dindi Project

Jhanphad Hydel power project

Vijayawada:-

Hyderabad Industries limited Kondapally.

Sagar Power ( Narsaraopet, atmakur) Irigation Projects.



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Manufacturing process of 43 Grade & 53 Grade OPC.

It is produced by grinding of Lime stone, (Calcareous) Bauxite, clay& late ritein suitable proportions in tube ball mill to a fine powder, which is called raw meal.

The raw meal is fed to rotary kiln through pre-heater with precalciner system. The raw

meal under goes chemical reactions and reaches to sintering temperature (1350

14000 C) and becomes clinker nodules. These clinker nodules are finally dropped in to

grate cooler. Here the clinker is cooled from 1300 to 100c and transported to clinker

stockpile.

During the burning the strength giving clinker compounds are formed i.e., c3s,

c2s,c3A, &c4AF.in OPC43 graed clinker the c3s content is low (45%) and in 53 grade

clinker the c3s cement is higher (50-55%) . this clinker is ground to stable fineness

with 3-4% gypsum in a ball mill. These finally ground is called ordinary Portland

cement 43&53 graed. 53 graed cement requires higher fineness than 43 Graed cement

to give early strength . 43 graed OPC clinker is made from lower concentration of lime

(CaO). 53 Graed OPC clinker requires higher concentration of lime (CaO).

Application (products):

43 Grades OPC:-

Used for general concrete construction works where special properties are not

required. Its heat of hydration is lower than 53 grade OPC but offer lower resisistance

to sulphate than P.P.C.

53 Grades OPC:-

Used where high early strength are required. Thos helps in faster construction.

The ratio of sand and metal to cement can be higher.

Portland Pozzalana Cement:-

PPC is manufactured by grinding Portland cement clinker (53 Grade) and 15 25% fly

with 3-4% gypsum. The fineness of PPC in higher to OPC cements.



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Application:

Super grade produces low heat of hydration than 43 grade OPC cements. Andgreater resistance to the attack of aggressive waters then normal Portland cements. So

minimum water required for curing than others cements. It reduces the leaching of

calcium hydroxide liberated during the hydration of cement. One of the important

reasons for using pozzolzna cements has been the increased resistance they offer to

attack by chemical agencies and particularly seawater. Its initial strength may be lower

but later strength is higher than normal OPC. Its superior properties are the cause for

its present day world wide popularity. Its high resistance and low porosity mad this

grade of cement to be very good to constructions in general and highly durable even in

costal areas.

Sagar Priya Special Grade, IRST_40:-

Sagar Priya Special Grade ordinary Portland cement confirming to IRST 40 of

Indian Railways is made my sagar cements limited which is having full facilities to

produce consistent quality to give better strength.

The minimum strength after 7 days id maintained more than IRS T-40 standard

with 43 Mpa and are progressively increased the 7 days strength.

The magnesia content in the lime stone of our mines is below 1% hence the

concrete products made out off this cement are sound.

The fineness of cement manufactures is consistently above 380M2/Kg. this is

achieved due to closed circuit grinding method using O-sepa technology, which

eliminates higher size particles completely.

Sagar Priya cements works has been inspected by RDSO, LUCKNOW and

approved our process and facilities. The cement made as per IRS T-40/1985 is tested

by Railway institute of technical and Economical services and recommended to supply

for manufacturing process of concrete sleepers.

Sagar Priya Sulphate Resisting Portland cement

Sagar Priya Sulphate cement generally knows as SRC made to IS, BS & ASTM

standards.

Selection of limestone in our mining area through surveying, core drilling and

sample collection of stone. Separate silo is required to store SRC raw meal iron ore



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fines from Bellary are to be mixed in the raw mill process. Raw meal sample will be

checked thoroughly. After confirming to the suitability then only passed to feed to

kiln. For manufacturing of SRC clinker low ash coal is required (25-27%) for reducing

the alumina content.High blain (3000m2/kg) of cement is to be maintained and separates silo is

required to store the SRC.

The sulphate resisting properties in SRC are developed by restricting the C3A

content to below 5%. So there is no 0 excess C3A left to react with sulphates. Low

heat of hydration, less risk of the 3 rmal shrinkage.

Applications:-

SRC can be used in costal areas. Dockyards, Bridges , aqua farm tanks,

sewerage and effluent- carrying drains it will protects the structure from sulphate

attacks. Suitable for massive constructions suitable where soils having higher

percentage of water soluble sulphates, i.e. more than 0.5% at seashore. Penetration of

sulphate ions into concrete made with OPc can result in scaling and ultimately in some

circumstances to complete disintegration.

Storage at the construction site:-

Cement which is stored unprotected for any considerable length of time absorbs

moisture causing lumps formation and resulting in a loss of hardening capacity. So

long as the lumps are easily crumbled between the fingers the strength will not be

seriously affected. If the cement is not properly stored at the construction site, about

10% of strength is lot in a months time. So the period of storage should always be

kept as a short as possible.

Leakage: - No Proper Vibration of Concrete.

Cracks: - Settlement of foundations.

Cement & Concrete:-

Concrete is composed of a course aggregate forming the bulk of the mix, a fine

aggregate filling the voids between, and cement and water to bond the whole together.

The sand, or fine aggregate, and cement may together be regarded as a mortar in which

the coarse aggregate is set. The properties of the concrete depend primarily on the

quality and amount of this interstitial mortar and only secondarily on the coarse

aggregate.



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As per specification sand contain 5 to 50% of material passing on 52 sieve, the

maximum at 30 % the main bulk of the sand, which lies between a no 52 sieve and a3/16 inch mesh should contain particles of varying size and does not consist

predominantly of any one size.

The proportions of cement and aggregate in concrete and expressed as one (1)

cement. X fine aggregate y coarse aggregate by volume or by weight, or alternatively

as the weight of cement per unit volume of mixed concrete.

The proper ties of the cement- sand motar, which binds the coarse aggregate

together, depends on the proporyion of cement it contains the amount of water used,

and on the finess of the sand. The finer the sand,the greater is the surface area it

possesses, and hence the larger the proportion of cement required to cover that surface.

This is one reason why sand should not be excessively fine and contain much material

passing a 100 mesh. An increase in the amount of water above that necessary to give

a workable mix renders the mortar weaker and more permeable and increases the

volume of voids which will be left empty when the concrete dries out and excess water

is removed. If the proportion of the sand in concrete is not sufficient, then is if the mix

is over Sand the fragments of coarse aggregate will be separated more than

necessary by the excess mortar and the mortar itself will be leaner in cement. The

coarse aggregate in concrete is normally quite insert and impermeable and it is the

cement mortar which is the point of attack by most destructive agencies, and which

forms the channel by which water can permeate in to the concrete. The presence of an

excess of this mortar in a weaker condition tends therefore tp lower the resistance of

the concrete to attack. The proportion of sand required decreases as the maximum size

of the coarse aggregate in creases. As a rough working role about 30 -40% by volume

of the aggregate should consist of sand when the maximum size of coarse aggregate is

inch, but this proportion has to be adjusted to suit the particular aggregates used.

The use seawater is reinforced concrete should be avoided for increases the risk

of corrosion of reinforcement. It must never be used for mixing high alumina cement

as it has a very adverse effect on the strength.

The mixing and placing of concrete also play an important part in determining

the quality of the product. The ease with which concrete can be placed depends on the



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workability of the max. The workability of concrete is measured by various tests such

as the slump test. The workability of concrete is influenced by the type and grading of

the aggregate as well as other factors.

The amount of water required of produce a given slump in a concrete mixincreases with the temperature of the mix. This increase from 60-100f raise the water

requirement by the order of 10% this results in a lower ultimate strength and increase

in the subsequent drying shrinkage.

Concrete can be damaged by lack of proper curing. It is essential for the

development of high strength that the concrete should be kept moist for a period and

nor allowed to dry out rapidly. Once a concrete has been cured under moist condition

for a sufficient period, its resistance to attack by chemical action is increased by

allowing it to remain in air and dry out. A film of calcium carbonate forms over the

surface of the material, blocking the pores and producing a hard and dense surface

skin.

And additional factor is involved in reinforced concrete where steel bars are

embedded in the material. The function of the concrete here is not only to provide a

medium to with stand the compressive stresses to which the reinforced concrete

member may be subject, but also to protect the steel reinforcement against corrosion.

Any corrosion of the reinforcement result in the formation of a film of iron oxide over

the metal occupying a volume about 2.2 times that of the iron from which it is formed.

The expansion which thus occurs results eventually in the flaking off or cricking of the

concrete overlies it. The corrosion hence damages not only the steel but also the

concrete. The degree of protection afforded to the reinforcement depends on the

impermeability and thickness of the concrete covering it. Reinforced concrete, which

is exposed to seawater. Reinforced concrete members may show the cracks arising

from deflection under load (or) from shrinkage of concrete.

Failures in Concrete Structure:-

Failures in concrete may be assigned three general causes.

Unsuitable materials.

Error in preparation, placing curing.

Exposure to natural or artificial destructive agents.



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Unsuitable materials:-

Unsuitable materials group defective cements, defective aggregates, and

incorrect proportions of cement and insufficient entrained air to give the required frostresistance and excessive additions of admixtures.

Error in preparation, placing curing

Poor mixing and the use of too wet or dry mixes with the accompanying troubles

of segregation, the last being aggravated by insufficient ramming. Bad jointing two

days work, inadequate curing may also be grouped under this head.

This shape of the voids present in a fractured surface may give some indication

of the consistence of the mix. Small double holes with smooth surface and spherical

shape are characteristic or rather wet mixers, while the presence of numerous voids of

irregular shape and an uneven distribution of the fine aggregate indicates the use of a

mix which has been too dry for the degree of ramming employed. Bad grading of the

aggregates is also usually indicated by the appearance of the fractured surface.

Aggregates

Concrete or mortar is made up of cement, water, and aggregates (store chips and

sand) and at times chemical additives. The aggregates, fine (sand) and coarse (stone

chips) make up about 75 % of the volume of concrete. Generally sp. Gravity of

aggregates 2.4 and 2.90.

The aggregates from main matrix of the concrete or mortar. The aggregate

particles are hold together by cement matrix, formed out of the past of cement. While

the coarse aggregates from the main matrix, the fine aggregates from the filler matrix

between the coarse aggregates. With cement and water the entire matrix binds together

into a solid mass called concrete. The aggregates may be igneous (granite or basalt) of

sedimentary (Lime stone, etc,) rock.



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Selections Factors of Aggregates:-

Sl.No Factors Influence of concrete property

1. Specific Gravity Strength/absorption2. Chemical stability Durability

3. Surface texture Bond grip

4. Shape Water demand(strength)

5. Gradation or particle Water demand(strength)

6. Size distribution Bleeding and segregation

7. Maximum size Strength

8. Deleterious materials Water demand bound cohesion and durability.

Quality of Aggregate:-

The presence of clay, dust, slit or mud in aggregates beyond the permissible

limits is harmful, because it results in production of lower strength concrete. Generally

grit and dust portions of the aggregate will cause an increase in water demand and

subsequent drop in concrete strengths.



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INVENTORY MANAGEMENT AN OVERVIEW

One of the major tasks of any management today is to control inventories. Quite

often, it is a massive task; yet it has to be done since the cost of inventories is totally non-

value producing and is a direct charge on the profits of their company. Let and controlled

it can eat away all the profits of the company and drag it into the sick bed. The problem

with inventories is that it has several facets and its environment is very complex in nature.

TYPES OF INVENTORY:

For the purpose of control, it is very essential to study the following four types of

inventories in detail:-

1. Raw Material Inventories

2. MRO Inventories or maintenance, repairs and operating supplies.3. Work-In- Progress or In-Process Inventories.

4. Finished goods Inventories.

Raw Material and Production component:

Raw Material and Production component are purchased from outside suppliers

and the reason for their existence is to uncouple the purchasing function from the

production function.

The size of this inventory is dependent upon factors such as internal lead-time for

the purchase, supplier lead time, vendor relations and availability of material, government

import policy, in the case of imported material, the annual consumption of the material

and relative criticality of the material.

MROs:

MROs are bought out materials required for maintenance of the production

process but which do not form part of the finished product. These include petrol, oil and

lubricants, machine repair parts, jigs, tools, etc.

Work- In-Progress Inventory:

Work- In-Progress Inventory might exists merely because of the production cycle

time or could also be maintain for decoupling successive manufacturing operations. The

decoupling could be employed either for implementing an incentive scheme or to enable

each of the production departments to plan independently.



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The size of the inventory is dependent on the production cycle time, the percentage

of machine utilization the make / buy policies of the company, the management policy for

decoupling the various stages of manufacturing.

The Finished Goods Inventory:The Finished Goods Inventoryis maintained to assure a free flowing supply to the

customer and for this the marketing department insists on the substantial finished goods

inventory. The size also depends on the ability of the marketing department to push the

product, the companys ability to stick to the delivery schedule of the client.



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FUNCTIONS OF INVENTORY:

Inventory has five basic functions. These functions must be understood if

inventories are to be analyzed to determine how much inventory is really required. These

functions are1. The lot-size Inventory:

Most companies manufacture items in lots rather than at exactly the rate they are

required. The main reason relates to productions and efficiency. As a result of this,

inventory is excess of immediate requirements will be carried.

2. Fluctuating inventory:

This inventory exists because demand or supply fluctuates. Safety stock is

fluctuating inventory.

3. Anticipation Inventory:

These are the inventories that are built in anticipation of future demand. Anticipation

inventory might take the form of an inventory build up during a slack season to keep the

labor employed, while providing for demand during the peak season. Inventory build-ups

a head of the holiday season, in anticipation of strikes, and to provide initial inventories

of new products of new products items are also anticipation inventory.

4. Transportation Inventory:

These inventories exist because materials are moved from place to place. A company

with a plan in nasik and stock points at Bombay, Calcutta, Chennai and Nagpur, would

normally have considerable amounts of inventory in transit between the plant and the

stock point warehouses. If the time for rail shipment across the country were two weeks

on the average there would be a two weeks supply of inventory in transit.

5. Decoupling Inventories: Such in inventories are needed for meeting our demands

during the decoupling period of manufacturing or purchasing.

OBJECTIVES FOR INVENTORY CONTROL:

The first consideration is the overall objective of the work of stock control. Like all

other activities in the company, inventory management has to contribute to welfare of the

whole organization. The logistic operation must aim to contribute to profit by servicing

the marketing and financial needs of the company.



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The aim is not to make all items available at all times as this may well be

determinable to the finances of the company. The normal role for stock control is to meet

the required demand at a minimum cost. The aim of long term profitability has to be

translated into operations and financial targets, which can be applied to daily operations.The purpose of the inventory control function in supporting business activity is to

optimize three targets.

1. Customer Service

2. Inventory Cost

3. Operating Cost

The first Target

Customer service can be considered in several ways, depending on the type of

demand. In a general stores environment the service will normally be taken as

availability ex stock, where as in a supply to customer specification, the service

expected would be delivery on-time against customer requested data.

The Second Target

Inventory costs, requires a minimum of cash tied up in stock. This target has to be

considered carefully, since there is often the feeling that having any stock in the stores for

a few months is bad practice. In reality minimizing the stock usually means attending to

the major costs; very low value items are not considered a significant problem. Low

inventory can also be considered in terms of space or other critical resources. Where the

item is voluminous or the stores space restricted, the size of the items will also be a major

consideration.

The Third Target:

Avoiding operating as become more of an issue as focus has been placed on

inventory management. The prime operating costs are the stores operations, inventory

control, purchasing and associated services. The development of logistics, linking

distribution costs with inventory, has added a new set of transportation costs tothe

analysis.

Optimizing the balance between these three objectives is the focus of inventory

control the better the balance greater the profits provided the company.



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MECHANICS OF INVENTORY CONTROL:

It would be worth recapitulating the entire process of materials procurement and

stocking, before we go into the details of the mechanics of the inventory control. The

starting point is the sales forecast, which enables the management to decide how much ofwhat products it will have to produce to meet the demand.

There are various factors in this decision, the chief of them are ;

1. Production Capacity

2. Product Mix

3. Raw Material Availability

The next point is to make out a bill of materials or a list of all materials that will

be required to produce the goods. Production may not necessarily follow a constant

pattern throughout the year.

There may be for example, lot size production, i.e. a minimum quantity that will

make for an economical batch of production. Next, there may be a seasonal production to

meet the demands during the particular season. To cite an example, in pharmaceutical

industry there are some drugs which are required only in summer and the once that are

required in winter.

There are only produced for three to four months in a year. In view of these

variations in production pattern, there will naturally be a variation in the monthly

requirement of materials.

Some materials may be required only from Jan to March and none thereafter.

Some may be required every alternative month or once in six months only, and so

on. This call for the making of a production schedule. The bill of materials when

made up, will reflect this schedule precisely not only what materials are required,

but also when they are required and in what quantities.

Of course, not in all industries can a precisely accurate estimate of materials

required be made. There are several industries that depend on other industries for

their orders, and production in their case will depend upon the orders, they

receive.



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COSTS INVOLVED IN INVENTORY:

Holding Costs is the cost associated with carrying or holding the goods in the stock is

known as holding or carrying cost. Holding cast is assumed to vary directly with the sizeof inventory as well as the time for which the item is held in stock.

The following components constitute the holding costs:

1. Inventory Capital Cost: This the interest charges over the capital investment.

Since this is the most important component, a careful investigation is required

to determine its rate.

2. Record Keeping and Administration Cost: This signifies the need of keeping

funds for maintaining records necessary administration.

3. Handling Costs: These include all costs associated with movement of stock

such as; Cost of Labor, Overhead Cranes, Gantries and other Machinery

required for this purpose.

4. Storage Costs: These involve the rent of storage space or depreciation and

interest even if the own space is used.

5. Depreciation, Deterioration, Obsolescence Costs: Such costs arise due to the

items in stock being out of fashion or the items undergoing chemical changes

during storage.

6. Taxies and Insurance Costs: All these costs require careful study and generally

amount to 1% to 2% of the invested capital.

7. Purchase or Production Costs: Purchase price per unit item is affected by the

quantity purchased due to quantity discount or price breaks. Production cost

per unit item depends upon the length of production runs.

8. Salvage Costs or Selling Costs: When the demand for an item is affected by its

quantity in stock, the decision model for the problem depends upon the profit

maximization criterion and includes the revenue from the sale of the item.

Storage Costs or Stock out Costs:

Storage Costs or Stock out Costs are the penalty costs that are incurred as a result of

running out of stock. These costs due to storage of goods, sales may be lost, goodwill

may be lost, either by a delay in meeting the demand or being quite unable to meet the

demand at all.



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In the case where the unfulfilled demand for the goods can be satisfied at a later

date, these costs are usually assumed to vary directly with the shortage quantity and the

delaying time both. On the other hand, if the unfilled demand is lost, shortage scosts

become proportional to shortage quantity only.Set-up Costs:

Set-up Costs these include the fixed cost associated with obtained goods through

placing an order or purchasing or manufacturing or setting up machinery before starting

production.

So they include costs of purchase, requisition, follow-up, receiving the goods,

quality control etc. These are also called order costs or replenishment cost. They are

assumed to be independent of the quantity ordered or produced

.

INVENTORY CONTROL TECHNIQUES

Inventory control refers to the regulation of the stock and flow of materials and stores

is an efficient, effective and economical manner to meet the needs of manufacturing and

trading concerns in order techniques.

Economic order quality fixation of stock levels, ABC quality inventory turnover

ratio input output ratio analysis , pricing of raw material and valuation of stock are most

important.

The important tools & technique of inventory agent & control.

Determination of stock level:-

Carrying of too much and too little of inventories is detrimental to the firm. If the

inventory level is too little, the firm will face frequent stock. Outs inventory heavy

ordering cast and if the inventory level is too high if will be unnecessary tie up of capital.

Minimum Level:-

This represents the quality which must be maintained in hand at all times. If

stocks are less than the low level there the work will stop due to shortage of materials.

Lead Time:-

The time taken is processing the order and their executing it is known as lead

time. It is essential to maintain some inventory during this period.

Rate of consumption:-

It is the average consumption of materials in the industries. The rate of

consumption will be decided on the basis of past experience and production plans.



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Nature of Material:-

The nature of material also affects the minimum level. If a material is required only agent

special orders of the customers then minimum stock will not be required for such

materials.Maximum level:-

The quality of materials beyond which a firm should not exceed its stocks. If the

quality exceeds maximum level limit then it will be over stocking maximum stock level

will depend upon.

The availability of space for strong the materials.

The maximum requirements of materials of any point of time.

The availability of space for strong the materials.

The cost of maintaining the stores.

Danger Level:-

If the danger level arises their immediate steps should be taken to replenish the stock

ever if more cost is incurred in arranging the materials.

Average stock level:-

Average stock level = minimum stock level + of re-order quality.

EOQ (Economic order quality):-Is one of the important techniques used to determine the optimum quality order to

be place from the supplies. The main objective of EOQ is minimizes. The cost of

ordering and cost of carrying materials and total cost of production.

The formula for EOQ is

= 2AB/CS

A= Annual Consumption.

B= Buying cost per order.

C= Cost per unit.

S= storage cost per annual.

Example:-

Material Cost Rs. 1.00

Yearly consumption = 16000

Cost of receiving material = 18



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Storage & caring cost = 20% of Avg inventory.

= 2AB/CS

2X1600X181X20

2X1600X18

1X20/100

2X1600X18X100 = 1700 UNITS

1X20%

From the above diagram it is clearly show that the behavior of the

company cost the ordering cost and the same of these two costs, the charring cost

various directly with the order size where the ordering cost various inventory the

order size.

EOQ model is based on the following assumptions:

1. Material cost per unit remains unaffected by order size.

2. Orders will be received on the expiry of lead time.

3. Variable inventory constant throughout the order.

4. Production and sales can be forecast perfectly.

SELECTIVE INVENTORY CONTROL:-

ALWAYS BETTER CONTROL (ABC):

ABC Analysis is a basic tool, which helps the management to place their efforts

where the results would be useful to the greatest possible extent. The first important step

in inventory management is to have a selective approach to fix up inventory levels, order

quantities and the extent to which the control can be exercised.

The selective approach mainly depends on the annual consumption of various

items. For example, the items like nuts and bolts costs less than the items like engines.

But we cannot safely stock the items like engines because of their heavy cost, while the

items like nut-bolts can easily be stocked. Thus, less control is required for stocking the



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items like nut-bolts etc. But, more emphasis should be given to control the stocking of big

items like engines.

The investment of such items is substantial, and record keeping is expensive. ABCanalysis is a very effective tool for such selective control. This technique involves the

classification of inventory items in to three categories A, B, C in descending order of

annual consumption and annual monetary value of each item. Based on ABC analysis,

and average pattern of percentages of items and percentages of their annual consumption

value may be as shown table pare to analysis by the current stock level in good for

reducing stock levels, but a more consistent classification is required when focusing on

the management of inventory.

The end stock does not necessarily show which items are important for the

business. In fact there may be some important items where the current level of stock is

low because the stores are awaiting an impending delivery. On the other hand some items

may have high stock value simply because no one is buying them. It is therefore usual to

rank the items according to the annual turnover. The annual turnover is given by,



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Purpose:

The purpose of ABC analysis is not to provide different types of service but to provide

service with the least amount of cost and effort.

S.NO

.

Class A Items Class B Items Class C Items

1 Frequent ordering is

required

Moderate control is

required

Loose control is

required

2 Size of order is based

on their calculated

requirement

Size of order is based

on their consumption

Size of order is based

on the level of

inventory

3 Procured from many

sources

Procured from two or

three sources

Procured from two

sources

4 Requires keeping

records of receipt and

consumption

Also, requires keeping

records of receipt and

consumption

No need of keeping

any records

5 Moderate effort is

made to reduce lead

time

Moderate effort is made

to reduce lead time

Minimum effort is

made to reduce lead

time

6 Close check on

schedule revision is

required

Some checks on

changes are required on

need

No checks are

required against any

need

7 Frequent ordering is

required

Less frequent ordering

is required

Bulk ordering is

required

8 Continual expediting Expediting for

prospective shortages

No expediting

9 Accurate forecasts Less accurate Appropriate forecast

10 Have high

consumption value

Have average

consumption value

Have low

consumption value

Saving Time:-

Applying the Pareto principle is a way of balancing inventory, stock availability

and critical resource spent on each item. How the law can be applied depends on what the

critical resource is considered to be. The critical resource for all inventory controllers is

time, because of large amount of information required and the wide variety and quantity

of stock held. The Pareto principle shows that 80% of the time in spent doing 20% of the

jobs and a significant time saving can be made if a small reduction can be achieved in



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these jobs. They may be very frequent short jobs or more infrequent, long-winded jobs In

ABC analysis the items are classified in three main categories based on their respective

usage value:

Category A items:More costly and valuable items are classified as A. Such items have large

investment but not much in number.

Category B items:

The items having average annual consumption value are classified as B these

items have less importance than A class items, but are much costly to pay more attention

on their use.

Category C items:

The items having low consumption value are put in category C. Such items can be

stocked at an operative place where people can help themselves with any requisition

formality.

Annual usage* unit cost:

Limitations of ABC Analysis:

1. ABC analysis doesnt permit precise consideration of all relevant problems of

inventory control.

2. If ABC analysis is not updated and reviewed periodically, the real purpose of

control may be defeated.

3. The periodic consumption value is the basis for ABC classification. Hence ABC

classification can lead to overlooking the needs of spare parts whose criticality is

high, but consumption value is low.

XYZ Analysis based of inventory value:

We know that the basis for ABC classification was the consumption value of the items.

But, the basis of the XYZ classification is the closing inventory value of the items.

X- Items with high inventory value

Y- Items with moderate inventory value

Z- Items with low inventory value

XYZ classification is usually performed once in a year during the annual stocktaking

device. This analysis helps us in identifying the items, which are being stocked

extensively.



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XYZ classification can also be combined with the ABC analysis and the controls on the

items can be affected as shown in the table:

XYZ Classification X Y ZABC Classification X Y Z

A A Attempt to

reduce the stock

Attempt to convert

Z items

Items are within

control

B B Review stock and

Consumption more

often

Items are within

control

Review bi-annually

C C Dispose of the

surplus items

Check and maintain

the control

Check and maintain

the control

VITAL, ESSENTIAL, DESIRABLE (VED) ANALYSIS:

The VED Analysis is based on the criticality of the items. If the items are arranged

in the descending order of their criticality viz.

V- Vital Items

E- Essential Items

D- Desirable Items

Than the more attention is paid to the v-type items.

The criticality of an item may be of two-types

1. Technical

2. Environmental

Vital items:



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Such items are those which when required, and not available, they make the whole

system in operative. For example, a clutch wire is vital item for the speed vehicle like

scooter, motorcycle et

Essential items:

Those items which when demanded, and not available reduce the efficiency of the

system are called essential items. For example, Telephone is an essential item. In the case

of E-items some risk can be taken.Desirable items:

Desirable items are such that even if they are not available, they neither stock the

system nor reduce its efficiency but it will be good if they are present in the system. The

VED analysis is useful in stock controlling of spare parts required for maintenance.

This analysis can also be very useful to capital intensive process industries. Since

this analysis is based on the criticality of an item, it can be used in the raw materials,

which are rarely available VED can be combined with ABC for the effective management

of spare parts. This can be shown in the following table.

FSND-ANALYSIS BASED ON USAGE RATE OF ITEMS:

In this analysis, items can be classified according to descending order of their

usage rate, or movement as follows:

F- Fast Moving Items

S- Slow moving Items

N- Normal Moving Items

D-Dead Items

In this classification, a close attention is paid to the F-Items, while D Items are

transferred to the disposal cell. FSND analysis is particularly useful to combat obsolete

items.The cutoff point of four classes are usually indicated in terms of the number of

issues in the past 2 to 3 years. For example, No issue in the past two years, may be


Classification V-Items E-Items D-Items

A- Items Constant control and

regular follow up

Moderate stocks Nil stocks

B- Items Moderate stocks Moderate stocks Very low stocks

C- Items High stock Moderate stocks Low stocks


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classified in D-category; up to 10 issues during that period in S Category; up to 20

issues in N category and more than 20 issues are put in F- category. The XYZ and

FSND both can be combined to control the obsolete items, which are useful in the timely

prevention of obsolescence.

Classification F-Items S-Items N-Items

X- Items Tight inventory

control

Reduction of Stock

to very low level

Quick disposal of

items at optimum

price

Y- Items Normal inventory

control

Low level of stocks Should be

disposed as early

as possibleZ- Items Can reduce

clerical labor by

Low level of stock

GOLF CLASSIFICATION:

These letters stands for Government-Ordinary-Local-Foreign. There are many

imported items which are canalized to the State Trading Corporation, MMTC, Indian

Drugs and Pharmaceuticals Ltd., Metals Trading Corporation etc.

There are special procedures to be followed for procuring such item. As such,

ordinary procedures of inventory control may not work in respect of these materials and

they would require special treatment. Similarly, items that are available within the

country could be treated differently if they were available locally, compared to their being

available only in very distant towns or where they have to be specially manufactured.

Imported items would be a special class by themselves and have to be accorded a

treatment quite unique.

SOS CLASSIFICATION:

Some of the items required may be seasonal in nature and may require special

purchasing and stock age strategies. Many commodities, especially the agricultural and

seasonal in character, have to be purchased at the appropriate time.



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One can not apply EOQ here. A buying and stocking strategy for seasonal items

depends on a large number of factors, and more and more sophistication is taking place in

this sphere and mostly operational research techniques are used to obtain optimum

results.MUSIC 3D ANALYSIS:

A multi unit selective inventory control three dimensional (music 3D) approach

has been advocated. This approach considers criticality of the usage, consumption value

and lead time in supply; with each factor having two variants critical and non-critical

usage, high and low consumption and long and short lead-time, respectively.

MODERN INVENTORY TECHNIQUES:

Just-in-time (JIT)

Journal of business logistics, 1998 by Droge, Cornelia, Germain, and Richard Just

in time refers to a collection of practices that eliminate waste. These organization wide

practices encompass the entire logistics flow of materials from purchasing through

production and distribution.

The elements of JIT may include shared product design with suppliers and

customers, movement toward single sourcing, proximate suppliers and customers,

reduced machine setup times, total preventive maintenance, reliance on analytic tools

( such as pareto charts) to identify source of defects in products and processes, demand-

pull support and cellular plant layout, among others.

The Inventory Effect of JIT

JITs inventory effect results from three interrelated processes. The first concerns

a focus on product and process quality. The adoption of analytic tools (such as pareto

charts) and the inclusion of direct labor to quality improvement programs have a

significant effect on inventory levels.

Analytic tools are used to spot the sources of defects, whether these sources

originate in defective assembly processes, materials, or materials design. These tools

become all the more powerful when their use is orchestrated by direct workers in

production and logistics whose expertise and knowledge is tapped by quality circles.

As sources of defects are identified and remedied, product quality improves, the number

of quality control inspectors declines, and more important, the amount of scrap and



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rework inventory declines. Reductions in work in process inventories lead to a lesser need

for safety stock based up on expected defect levels in inventory. .

Safety stocks of finished goods may also decline because the expected defect rate

is lower.The result is fewer inventories for unanticipated internal delivery delays. Since

machines run when they should, fewer inventories is required to accommodate machine

breakdowns. Demand-pull support links the quantity produced to the quantity demanded,

triggering production only when successive stations demand inventory. Reduced machine

set-up time drives down lot sizes, resulting in less average inventory on hand.

The third and final inventory related element of JIT is exchange with suppliers.

Proximate suppliers shorten inbound supply lines, reducing both the length and the

variance in delivery cycles. This ultimately reduces the level of inventory needed to

account for late or incomplete delivery. The buyer sharing production plans with

suppliers further controls late delivery. Shared buyer seller product design increases the

number of people tackling quality issues and increases the probability of design for

manufacturability (DFM).

ADVANTAGES OF INVENTORY:-

Inventories often constitute a major element of the total working capital, and

hence it has been correctly observed, good inventory. Management is good financial

agent. The basic responsibility of the finance manager is to make sure that the firms cash

flows are managed efficiently. Efficient management of inventory should ultimately

result in the maximization of the owners wealth. The managerial objectives of inventory

are two types.

Operating Objectives.

Financial Objectives.

Operating objectives means that the materials & spares should be available in

sufficient quality. These objectives aim at a Vat avoiding the possibility of delay in

production.

The financial objectives of inventory agent to secure many economics. The

objectives and importance of material are very wide.



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Investment is inventories should not remain Idle & minimum working capital

should be locked in it.

Inventory Turnover Ratio:-The ratio is also called as stock turnover ratio; it may be defined as a ratio which

measures the number of items affirms average inventory is sold during the year.

Inventory turnover ratio = Cast Goods Sold

Average inventory

Or

Sales Revenue

Average Inventory

Manufacturing Concern = Cast Raw material consumed

Avg Value of Raw material in stock

Inventory Records:-

The company is maintaining records in two types.

1. Bin cards

2. Store ledger.

Bin Cards:-

It is only quantitative record of stores receipt, issues and balance and is kept by

the store keeper for each item.

Store Ledger:-

Stores ledger is both quantitative and monetary value record of store receipt issues

and balance is prepared as per the cost over wise. The company is marinating the

following cost entries.

Valuation of Methods:-



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The company is following FIFO method other method.

FIFO method

Last in first out method

Specify price method

Basic stock method etc.

FIFO Method;-

Under this method the pricing of issue is based on a assumption made that the

oldest stock is issued first there fore at the time of issue. The rate pertaining to thet will be

applied unit the whole lots are exhausted.

Advantages:-

It is beneficial when the prices are falling as actual prices are issued, it reflecting

no profit no loss in the pricing. This method is very useful for slow moving materials.

Disadvantages:-

Calculations become complicated due to fluctuation of material prices.

More changes of clerical errors due to complicated calculation.

Under fluctuating prices, one requisition involves more than one price.

In times of raising price this method tends to show the production at low cast

since the cost of replacing the material will be higher.

LIFO Method:-

This method is just opposite to FIFO method. The basic assumption here is that

most recent receipts are issued first. The prices of the materials to be issued would be the

cast price of the last of materials purchased.

Advantages:-

It is benefited where the period of rising prices.

Under this method latest prices are issued there by leading to lower reported profit

hence saving in taxes.



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When there are wide fluxions in price levels this method tends to minimize

unrealized gains or losses in inventory.

Disadvantages:-

This method involves more clerical work, which leads to complicatedcalculations.

Due to wide fluctuations of prices, comparison of cost of similar jobs is very

difficult.



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RAW MATERIALS CONSUMED

BY USING WEIGHTED AVERAGE PRICE METHOD:

It takes into account both the prices paid and the quantities purchased at each price during

a particular period. The price is calculated as;

= Total cost of purchases / Total quantity purchases

GRAPHICAL REPRESENTATION:


DETAILS OF RAW MATERIALS CONSUMED (2007-2010)

S.NO PARTICULARS

2007-08 2008-09 2009-10

Quantity

MTS

Value

Rs.

Quantity

MTS

Value

Rs.

Quantity

MTS

Value

Rs.

1 Lime Stone 602577 51643393 557999 43182820 725239 60130427

2 Laterite 21057 5455237 36927 12869094 40067 20394980

3 Gypsum 13876 9617213 14919 11256927 12658 9963143

4 Iron-ore 12599 3003109 1979 1363916 2680 1874025

5Clinker

Transportation0 23894565 0 16727477 0 0

6 Slag 52746 21607526 37544 13347166 0 0

7 Fly-ash 23662 6776999 29175 8308748 28845 9344390TOTAL 726517 121998042 678543 107056148 809489 101706965


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INTERPRETATION ON RAW MATERIAL CONSUMED:

1. Comparing with 2007-2008and 2008-2009raw material, consumed quantity is

decreased to the 6.6%. The value also decreased.

2. Comparing with 2007-2008and 2008-2009raw material consumed quantity is

increased to the 19.29%.

3. Comparing with 2007-2008and 2008-2009raw material consumed quantity is

increased to the 5.96% and value of material is also increased to the 26.74%.

4. Comparing with 2009-2010 and 2009-2010 ram material consumed is

decreased to the 8.64% but the value of material increased to the 1.07%.



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It takes into account both the prices paid and the quantities purchased at each

price during a particular period. The price is calculated as;

Total cost of purchases / Total quantity purchases

DETAILS OF RAW MATERIALS CONSUMED (2010-2012)

S.NO PARTICULARS

2010-11 2011-12

Quantity

MTS

Value

Rs.

Quantity

MTS

Value

Rs.

1 Lime Stone 758012 73072048 729474 80674608

2Purchased Raw

material1857 1044538 1002 586836

3 Laterite(AL) 14049 7792568 19657 13019817

4 Laterite 21134 10723412 1601 935502

5 Gypsum 12521 11489566 13724 16042857

6 Iron ore 6450 6243243 14369 17289921

7 Iron - ore sludge 1594 814926 597 305126

8 Dolomite 0 0 146 42311

9 Slag 0 0 93 70841

10 Fly-ash 42136 16828509 2953 1252445

TOTAL 857753 128908810 783616 130220264




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INTERPRETATION ON RAW MATERIAL CONSUMED:

1. Comparing with 2010-2011and 2011-2012 raw material, consumed quantity is

decreased to the 6.6%. The value also decreased.

2. Comparing with 2010-2011and 2011-2012 raw material consumed quantity is

increased to the 19.29%.

3. Comparing with 2010-2011and 2011-2012 raw material consumed quantity is

increased to the 5.96% and value of material is also increased to the 26.74%.

4. Comparing with 2010-2011and 2011-2012 ram material consumed is decreased to

the 8.64% but the value of material increased to the 1.07%.



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INVENTORIES


It takes into account both the prices paid and the quantities purchased at each price

during a particular period. The price is calculated as;


INVENTORIES

S.NO PARTICULARSYEAR

2007-08

YEAR

2008-09

YEAR

2009-10

YEAR

2010-11

YEAR

2011-12

1 Stores & Space4246253

9

3812963

4

4047341

5

4037216

7470 83279

2 Raw materials 4323631 5384125 6170394 8508184 7109270

3 Coal 78121481737790

0

1068176

6

1556408

016190287

4 Packing Materials 2299089 24331662769936

1393343 1635482

5 Goods in Transit 0 0 0 0 145657

6 Work in Progress3287468

1

2005508

0

74516741787742 4223884

7 Finished goods 6605349 1627777 2069280 2634248 1757174

8 Elovered Energy 0 3392234 9863270 8528720 2239956

TOTAL9637743

7

8839991

6

8001973

5

7878848

4

33301710



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INTERPRETATION ON INVENTORIES:

1. Comparing with usage of the total inventories value with 2007-2008and 2008-

2009is decreased to the 8.27%.

2. Comparing with 2008-2009and 2009-2010the value of the total inventories isdecreased to the 9.47%.


2011is decreased to the 1.53%.


2012 is increased to the 2.02%.



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STORES & SPARES





STORES & SPARES

YEARS 2007-08 2008-09 2009-10 2010-11 2011-12

AMOUNT 42462539 38129634 40473415 40372167 47083279




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INTERPRETATION

1. In 2007-08 total value of stores and spares is 4,24,62,539.

2. In 2008-09 total value of stores and stores and spares by comparing with 2007-08.

It was decreased with 10.20%.

3. In 2009-10 total value of stores and spares comparing with 2008-09 It was

increased with 6.15%.

4. In 2010-11 total value of stores and spaces with comparing 2009-10. It was

decreased with 0.25%.

5. In 2011-12 total value of stores and spares with comparing 2010-11. It was

increased with 16.62%.

6. By observing base year which is 2007-08 and comparing with current year that is

2011-12. It was increased with 10.88%.



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RAW MATERIALS


It takes into account both the prices paid and the quantities purchased at each priceduring a particular period. The price is calculated as;


RAW MATERIALS

YEARS 2007-08 2008-09 2009-10 2010-11 2011-12

AMOUNT 4323631 5384125 6710394 8508184 7109270




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INTERPRETATION

1. In 2007-08 total value of raw materials is 43, 23, 631.

2. In 2008-09 total value of raw materials by comparing with base year which is

2007-08. It was increased by 24.43%.

3. In 2009-10 total value of raw material by comparing previous year which is 2008-

09. It was increased by 24.63%

4. In 2010-11 total value of raw material by comparing with previous year which is

2009-10. It was increased by 26.79%.

5. In 2011-12 total value of raw materials by comparing previous year which is

2010-11. It was decreased by 16.44%.

6. By observing base year which is 2007-08 and comparing to 2011-12. It was

increased by 64.43%



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COAL




COAL

YEARS 2007-08 2008-09 2009-10 2010-11 2011-12

AMOUNT 7812148 17377900 10681766 15564080 16190278




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INTERPRETATION

1. In 2007-08 the total value of coal is 78, 12, 148

2. In 2008-09 the total value of coal is increased by the comparing base year which

is 2007-08 is 122.44%

3. In 2009-10 the total value of coal by comparing with previous year which is 2008-

09. It was decreased by 38.53%

4. In 2010-11 the total value of coal by observing with previous year 2009-10. It was

increased by 45.70%

5. In 2011-12 the total value of coal by comparing with the base year which is 2010-

11. It was increased by 4.02%

6. By observing the total value of coal by observing from 2007-08 to 2011-12. It was

increased by 107.24%



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PACKING MATERIAL




PACKING MATERIAL

YEARS 2007-08 2008-09 2009-10 2010-11 2011-12

AMOUNT 2299089 2433166 2769936 1393343 1635482




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INTERPRETATION:

1. In 2007-08 the total value of packing material is 22, 99, 089.

2. In 2008-09 the total value of packing material is comparing with base year which

is 2007-08. It was increased by 5.83%

3. In 2009-10 the total value of packing material is compared with previous year

which is 2008-09. It was increased by 13.84%.

4. IN 2010-11 the total value of packing material is compared with base year which

is 2009-10. It was decreased by 49.69%

5. In 2011-12 the total value of packing material is compared with the previous year

which is 2010-11. It was increased by 17.37%.

6. By observing the total value of packing material from 2007-08 to 2011-12. It was

decreased by 28.86%



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GOODS IN TRANSIT





GOODS IN TRANSIT

YEARS 2007-08 2008-09 2009-10 2010-11 2011-12

AMOUNT 0 0 0 0 145657


INTERPRETATION:

By observing from 2007-08 to 2011-12 the total value of goods in transit is increased

145%.



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WORK IN PROGRESS



during a particular period. The price is calculated as = Total cost of purchases / Total

quantity purchases

WORK IN PROGRESS

YEARS 2007-08 2008-09 2009-10 2010-11 2011-12

AMOUNT 32874681 20055080 7451674 1787742 4223884




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INTERPRETATION:

1. In 2007-08 the total value of work in progress is 3, 28, 74, 681.

2. In 2008-09 the total value of work in progress comparing with the base year which

is 2007-08. It was decreased by 38.99%

3. In 2009-10 the total value of work in progress comparing with the previous year,

which is 2008-09. It was decreased by 62.84%

4. In 2010-11 the total value of work in progress comparing with the previous year

which is 2009-10. It was decreased by 76%.

5. In 2011-12 the total value of work in progress comparing with the previous year

which is 2010-11. It was increased by 136.26%

6. By observing from 2007-08 to 2011-12 the total value of work in progress by

87.15%



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FINISHED GOODS





FINISHED GOODS

YEARS 2007-08 2008-09 2009-10 2010-11 2011-12

AMOUNT 6605349 1627777 2069280 2634248 1457174




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INTERPRETATION:

1. In 2007-08 the total value of finished goods is 66, 05, 349.

2. In 2008-09 the total value of finished goods comparing with base year which is

2007-08. It was decreased by 75.35%.

3. In 2009-10 the total value of finished goods comparing with previous year which





is 2010-11.It was decreased by 33.29%

6. By observing from 2007-08 to 2011-12 the value of finished goods is decreased

by 73.39%.



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DELIVERED ENERGY





DELIVERED ENERGY

YEARS 2007-08 2008-09 2009-10 2010-11 2011-12

AMOUNT 0 3392234 9863270 8528720 239956




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INTERPRETATION:

1. In 2008-09 the total value of delivered energy is 33, 92, 234.

2. IN 2009-10 the total value of delivered energy compared with base year which is

2008-09.It was increased by 190.76%

3. In 2010-11 the total value of delivered energy comparing with previous year

which is 2009-10 decreased by 3.53%

4. In 2011-12 the total value of delivered energy comparing with previous year

which 2010-11. It was decreased b 73.73%

5. By observing with from base year to 2011-12 the delivered energy is decreased by

33.96%



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A-B-C ANALYSIS OF AN INVENTORY

A-B-C ANLAYSIS OF AN INVENTORY(2005-2007)

PARTICULARS 2007-08 GRADE PARTICULARS 2008-09 GRADE

Stores & Spares 44.06

A


AWork in Progress 34.1 Work in Progress 22.69

Coal 8.11 Coal 19.66

Finished Goods 6.85B

Raw Material 6.09B

Raw Material 4.49 Delivered energy 3.84

Packing Material 2.39C

Packing Material 2.75

CGoods in Transit 0 Finished Goods 1.84

Goods in Transit 0

100 100

A-B-C ANLAYSIS OF AN INVENTORY (2005-2008)



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PARTICULARS2007

-08

GRA

DEPARTICULARS

2008

-09

GRA

DEPARTICULARS

2009

-10

GRA

DE


A


A


ACoal 13.35 Coal 19.75 Coal 20.15

Delivered energy 12.32 Delivered energy 10.83

Work in Progress 9.31

B

Raw Material 10.8

B

Raw Material 8.84

BRaw Material 8.39 Finished Goods 3.34 Work in Progress 5.25

Work in Progress 2.27 Delivery Entry 2.79


C


C

Finished goods 2.19

CFinished Goods 2.59 Goods in Transit 0 Packing Material 0.18

Goods in Transit 0 Goods in Transit 0.18

100 100 100

INTERPRETATION:

1. First, calcula

inventory management srinivas reddy

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