Chettinad Cements Puliyanur

1

STUDY ON INVENTORY MANAGEMENT OF

CHETTINAD CEMENT CORPORATION

LTD, AT PULIYUR.

PROJECT REPORT

Submitted by

M SABARINATHAN

Register. No: 088001201035

in partial fulfillment for the award of the

degree

of

MASTER OF BUSINESS ADMINISTRATION

DEPARTMENT OF MANAGEMENT STUDIES

JAYAM COLLEGE OF ENGINEERING & TECHNOLOGY

NALLANUR DHARMAPURI - 636813

MAY -2010

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JAYAM COLLEGE OF ENGINEERING & TECHNOLOGY

NALLANUR DHARMAPURI -636 813

Department of Management Studies

PROJECT WORK

MAY 2010

This is to certify that the project entitled

A STUDY ON INVENTORY MANAGEMENT OF

CHETTINAD CEMENT CORPORATION LIMITED, AT

PULIYUR

is the bonafide record of project work done by

M SABARINATHAN

Register No: 088001201035

of M.B.A (Master of Business Administration)

during the year 2008-2010.

--------------------- ----------------------------------

Project Guide Head of the Department

Submitted for the Project Viva-Voce examination held on _________

----------------------------- ---------------------------

Internal Examiner External Examiner

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DECLARATION

I affirm that the project work titled A STUDY ON INVENTORY

MANAGEMENT OF CHETTINAD CEMENT CORPORATION LIMITED, AT

PULIYUR being submitted in partial fulfillment for the award of Master of Business

Administration is the original work carried out by me. It has not formed the part of any

other project work submitted for award of any degree or diploma, either in this or any

other University.

(Signature of the Candidate)

M SABARINATHAN

(Register No. 088001201035)

I certify that the declaration made above by the candidate is true

Signature of the Guide,

4

ACKNOWLEDGEMENT

The ultimate result of any research work depends upon the help and guidance of

many persons. The help and guidance of such people cannot be left unnoticed.

I take this opportunity to thank them for providing the relevant and necessary

inputs for successful completion of this project

I thank ANNA UNIVERSITY, COIMBATORE for this academic vision in

integrating the class room learning with real life’s situational experience, by making the

project work, a part of curriculum.

I would like to express my deepest gratitude to Dr. R. PARTHIBAN. Our

principal and Mr.B.ADHINARAYANAN.M.B.A. M.Phil. (Ph.D.,) our head of the

department of management studies for bring the inspiration and motivation force which

encourage to work towards excellence in the challenging task.

I words cannot adequately express my gratitude to my guide Mr. RD SURESH.

M.B.A. for valuable guidance, constant encouragement and supervision, motivation

especially in times of difficulty and stress.

My special thanks Mrs. PERIYAKARUPPAN, personal manager. HRD dept

Chettinad Cement Corporation Ltd, Puliyur, Karur. For his consent and permission to

undertake a project in the organization concerned and FINANCE department Chettinad

Cement Corporation Ltd,Puliyur, for his valuable guidance and direction through out

the project.

I extended my thanks to my beloved parents, friends, who gave us

encouragement and helped us at different stages of this project with warm gestures.

(M SABARINATHAN)

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ABSTRACT

This is an attempt to understands the relationships and trends to determine

whether or not financial power of the industries and is personal efficiency have

been satisfactory the concept of inventory management is typically devoted to

evaluate past current and prosecuted performance of the industry firm generally it

is the analysis.

The study period was annual one month is the finance department of the

industries. The main sources of the industries data were some industries with

executives and other several any data like periodically, company magazines,

annual reports. Data was mainly collected from general accounts sector of the

financial departments.

Inventory Management is mainly carried out tools like ratio analysis ABC

analysis and comparative balance sheet working capital of the previous year

inference are made of these tools and based on these inference finding and

recommendation are recommended.

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CONTENTS

DESCRIPTION Page No.

List of Tables

List of Figures

Abstract

1. Introduction

1.1.About the study 1

1.2.About the Industry 11

1.3.About the Company 15

2. Main theme of the project

2.1 Objectives of the study 24

2.2 Scope and Limitations 25

2.3 Methodology 27

2.4 Review of literature 28

3. Analysis and Interpretation 31

4.Findings, Recommendations and Conclusion

4.1.Findings 65

4.2.Recommendations 66

4.3.Conclusion 67

Bibliography 68

LIST OF TABLES

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TABLE.

NO

3.1

3.2

3.3

3.4

3.5

3.6

3.73.8

3.9

3.10

3.11

CONTENTS

CURRENT RATIO

LIQUID RATIO

DEBT EQUITY RATIO

PROPRIETARY RATIO

INVENTORY TURNOVER RATIO

WORKING CAPITAL TURNOVER RATIO

DEBTORS TURNOVER RATIO AVERAGE COLLECTION PERIOD CREDITORS TURNOVER RATIO

AVERAGE PAYMENT PERIOD

GROSS PROFIT RATIO

PAGE. NO

31

33

35

37

39

41

4345

47

49

51

3.12 NET PROFIT RATIO 53

COMPARATIVE BALANCE SHEET FOR THE 3.13 YEAR 2004-2005 55




3.17 COMPARATIVE BALANCE SHEET FOR THE YEAR 2008-2009 63

LIST OF CHARTS

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S. NO. CHART TITLE PAGE NO.

1 CURRENT RATIO 32

2 LIQUID RATIO 34

3 DEBT EQUITY RATIO 36

4 PROPRIETARY RATIO 38

5 INVENTORY TURNOVER RATIO 40

6 WORKING CAPITAL TURNOVER RATIO 42

7 DEBTORS TURNOVER RATIO 44

8 AVERAGE COLLECTION PERIOD 46

9 CREDITORS TURNOVER RATIO 48

10 AVERAGE PAYMENT PERIOD 50

11 GROSS PROFIT RATIO 52

12 NET PROFIT RATIO 54

CHAPTER -1

INTRODUCTION

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1.1 INTRODUCTION ABOUT THE STUDY

The term inventory refers to the stock pile of the products a firm offering for sale

and the components that makes up the product. In other words inventory is

composed of assets that will be sold in future in the normal course of business

operations. The assets which turns store as inventory in anticipation of need are

rawmaterials, work-in-progress and finished products. The raw material inventory removes

dependency between suppliers and plants. The work in progress inventory removes

dependency between various machines of a product line. The finished goods inventory

removes between plants and its customers or market.

Inventory, as a current asset, differs from other current assets because only

financial manager are not involved. Rather, all the functional areas, finance, marketing,

production and purchasing are involved. The views concerning the appropriate level of

inventory would differ among the different functional areas .The job of the finance

manager is to reconcile the conflicting viewpoints of the various functional areas

regarding the appropriate inventory levels in order to fulfill the overall objective of

maximizing the owners wealth. An optimum level of inventory should be determined

on the basis of the trade-off between costs and benefits associated with the level of

inventory.

Today the efficiency and state of Industrialization of a country is known by the

method of inventory management because poor or mismanagement of inventory is

harmful not only to the industry, but to the country as a whole as it affects the

economic, social and political environment of the country .Inventory is stock of goods

required by an organization for its successful operation. Inventory is classically defined

as an idle resource of any kind having an economic value. Inventory makes a significant

contribution to the operational efficiency and profitability of the enterprises, and so, it is

very essential to reduce the amount of capital locked up in inventories .

Some terms used in the inventory management.

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MAXIMUM STOCK

Maximum stock is the stock level at which maximum quantity of an item of

material can be held in at any time. Stock should not exceed maximum level, if it

exceeds this level; it blocks the working capital of the business.

Maximum stock can be calculated as follows-

Re-ordering level + Re-ordering quantity - (minimum consumption x

minimum re-order period)

MINIMUM STOCK

Minimum stock level represents the stock level below which, inventory of any

item should not be allowed to fall. If it goes below this level, it will affect the

production. This level is fixed so that production may not be stopped due to shortage of

materials.

Minimum level can be calculated as follows:

Reordering level - (normal consumption x normal reorder period)

RE-ORDER LEVEL

It is the point at which material are ordered for replenishment of stock. It is the key

point and is the quantity where replenishment of stock is done. Reorder level is fixed

between minimum stock level and maximum stock level, in order to avoid time lag

between the materials ordered and receipt.

Reorder level = maximum consumption x maximum reorder period.

ORDERING COST

The category of cost is associated with the acquisition of or ordering of

inventory. Firms have to place orders with suppliers to replenish inventory of raw

materials. The expenses involved are referred to as ordering cost. The ordering cost

includes preparing a purchasing order or requisition form and receiving inspecting and

recording the goods received to ensure both quantity and quality. The cost of acquiring

material consists of clerical cost and cost of stationary. It is therefore, called set-up

cost. They are generally fixed per order placed, irrespective of the amount of order.

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Total ordering cost = Annual requirement / order quantity x cost of single order.

CARRYING COST

The second broad category of cost associated with inventory is the carrying cost.

They are involved in maintaining or carrying inventory. The cost of holding inventory may

be divided in to 2 categories.

a) Those that arise due to storing inventory.

The main components of this category of carrying cost are storage cost,

insurance of inventory and deterioration in inventory for serving cost.

b) The opportunity cost of funds

This consists of expense in raising funds to finance, the acquisition of inventory.

If funds were not locked up in inventory, they would have turned a return. This

is the opportunity cost of funds for the financial cost component of the cost.

The carrying cost and the inventory size are positively related and move in the

same direction. If the level of inventory increases, the carrying cost also increases and

vise versa.

Total carrying cost = average inventory X inventory carrying cost.

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ECONOMIC ORDER QUANTITY.

The quantity of materials to be ordered at one time is known as economic order

quantity (EOQ). This quantity is fixed in such a manner as to minimize the cost of

ordering and carrying the stock.

Economic order quantity is a tool of store control on the part of material

purchased. It refers to the size which gives maximum economy in purchasing any

material. This is also known as optimum ordering quantity or standard ordering

quantity. EOQ is based on ordering cost and carrying cost. EOQ is the point where in a

single purchase or number of unit should be manufactured in a single process, so that

the total cost i.e., ordering cost or set-up cost and inventory carrying cost are the

minimum level.

EOQ = √2 x A X O / C

Where, A = Annual usage. O = Ordering costC = Carrying cost

1.2 INTRODUCTION ABOUT CEMENT INDUSTRY

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Cement is one of the basic important and powerful raw material used in the

constructions of variety of structure like dams, rocks, bridges, storage tanks, fiyovers

towards, multistoried building ect., it has a variety of applications like hallow bricks,

precuts door and frames, pipes, asbestor, cement sheets, concerting, plastering and other

per-cast and other per-cast and prestressed elements ect., it is greenish gray powder,

which contains the following compounds.

MEANING AND DEFINTION OF CEMENT

The word cement denoted any kind of adhesive in building and civil

engineering. It denoted substance, which can be used to bind together sand and broken

stone, or other from of aggregated into a solid mass. The common reference to cement is

the Portland cement, has become almost an international nomenclature.

Technically, Portland cement is a greenish Gray chemically active, impalpable

power made by burning to a high temperature in a rotary in a rotary in a rotary killin a

pulverized mixture containing definite proportions of oxides of calcium silicon,

aluminium and iron and grinding proportions of clinker. Tow to six percent of gypsum

by weight is added with cement during grinding of clinker to control seating time.

In American heritage dictionary the term cement, is defined as “a building material

made by grinding calcite limestone and caly to a fine powder,which can be ixed with

water and poured to set as a solid mass or used an ingredient in making mortar or

concrete.

COMPONENTS OF CEMENTS

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1.C3 S tricalcium silicate 50%

2. C2 S Dicalcium Silicate 25%

3 C3 A Tricalcium Aluminate’s 10%

4 C4 AF Tetra calcium Alumina Farite 10%

5 Gypsum 2 - 5%

INDUSTRY PROFILE

INTRODUCTION

Cement industry is a core sector industry and forms the backbone of infrastructural

development of the country. Cement is a essential construction material and Cement

consumption has been as vital parameter. In a country’s economic growth of 7% to 8%

in the last ten years. The Cement industry gives direct and indirect downstream

employment.

GROWTH OF CEMENT INDUSTRY IN INDIA

The Landmark of the growth of the cement industry in this country is Chronologically

listed below:

1914 Foundation of a Cement industry. First Cement plant established at porbander,

Gujarat.

1936 11 Cement companies merged to form the Associated Cement Corporation

Limited.

1936 - 1945 Cement was declared as essential commodities under the defense of India

Rules and the same was brought under the government control.

1951 - 1956 5 years Cement units produced 4.6 million tones of Cements.

1956 Cement control order promulgated. System on fright pooling introduced for

equitable distribution of Cements at a uniform price throughout the country.

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1961 Cement manufacture was established

1962 Chettinad cements Corporation Limited was established 1969

Uniform retention price Rs 100 per tone allowed to cement producers replacing

3 hire pricing.

1977 Three tier pricing formula announced for low. Medium Cement producing units.

Levy quotas for sick and new weight are fixed 50%

1982 On the recommendation of gross committee, partial decontrol was announced on

February 28, and manufacturers were allowed to sell one third of output in open market.

1989 Cement Completed decontrolled on March 1.

1992-1993 Cement Capacity was 70.19 million tones and production was 54.08 million

tones.

1996 Cement industry has registered Whooping growth 11.4% as compared to 9.9%

during the same period previous year.

Single tired retention price was fixed at Rs. 320/- tones per port land puzzling

cement and Rs.335/- tones ordinary Portland cement.

The task force report that the per capital consumption was only about hundred Kgs. By

2002 and possible reach a level of 150 Kg by the year 2010, if the present GDP Growth

trend resists.

1.3 COMPANY PROFILE

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Chettinad Cement Corporation

Ltd

Founder

Dr.Rajah Sri M.A.Muthiah Chettiars urge to contribute to the nation building

cause combined with his business acumen culminated in establishment of “ Chettinad

Cement Corporation ltd in 1962 to cater to the growing demands of cements in the

country.

The history of the “house of chettinad” is linked with the 9 decades old saga. In

1912 took birth the house of chettinad thought a visionary idea - list and born

entrepreneur Dr.Rajah Sri Annamalai Chettiar who believed in social transformation

through business. The founder of the house of Chettinad envisaged his company his

companies providing the stimulus for industrial growth and conceived business as a

means of improving the living standards of people.

Establishing company:

Following the footsteps of father Dr,Rajah Sri Annamalai Chettiar.

Dr.Rajah Sri M.A. Muthiah Chettiar continued to combined his business acumen to

establish the company “Chettinad Cement Corporation Limited” in 1962 to cater to

growing demand of cement in the country. The companies first manufacturing unit

located at Puliyur, Karur District. in Tamil Nadu common production in April 1968

today the group is being steered under versatile. dynamic and pragmatic leadership of

Dr.M.A. Ramasamy and his son Sri M.A.M.R. Muthiah based on the footsteps of

Dr.Rajah Sri M.A.Muthiah Chettiar.

Apart from cement. The Chttinad house in today engaged in activities

as diverse as granite. engineering. silica. Garnet information technology, plantations,

shipping transportation. stevedoring. clearing and forwarding and logistics having a

combined turnover of about Rs.8,500 million. From a modes beginning of 2 lack tones

capacity per annum. it has gradually increased to 15 lak tones today. presently the plant

employs the modern dry process technology. it has the most advanced. Sophisticated

computer controlled state-the-art loaches mill for grinding raw meal. Loaches lignite

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mill for grinding raw meal. Loaches lignite mill (first of its king in India) a few stage

pre-heated kiln & electronic packing plant. Equipped with centralised control room for

process control the advanced instrumentation and elaborate display screens give up to the

minute information on the production process so corrected.

The company, which has always been striving for total quality.

Possesses international certificates an ISO 9002 and ISO 14001 and takes pride in being

acclaimed as one of the major player in a highly competitive cement industry in India

the company added another features to in cap by installing and commissioning a giant

sophisticated. High-tech and power efficient O&K cement mill resulting in a quantum

leap in production to touch one million tones mark. The company has achieved many

laurels through award for “ best performance” in the cement industry issued by national

productivity council” besides it has been customers to receive national safety awards.

chettinad cements have attached great importance to social responsibility and

environmental values. This is manifest in the installation of the latest pollution control

equipment in the plant.

The company, new state of the art green field cement plant in

Karikal Village. Dinducal district, Tamil Nadu commenced commercial production in

act 2001 with a capacity of 0.9 million tonnes per annum. It is equipped with abb’s

latest knowledge based solution package right form the treatment of raw material to the

packing of cement. making it one of the India’s most modern and efficient plants. With

the large infrastructure projects of the governments for concretising the National

Highways and rural roads. Like the golden quadrilated and the pm’s grams SADAK

YOJANA. In the pipeline the cement industry as well as your company looks forward to

a bright future and hopes to achieve more, milestones in the years to come.

COMPANY PROFILE

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Name of the company : Chettinad cement corporation Ltd.

Type : Public.

Founded : 1962

Managing Director : M.A.M.R.Muthiah.

Chairman : M.A.M.Ramaswamy.

Head quarters : T.Nagar.Chennai.

Production plant : Puliyur. Karikkali.

Revenue : 4.5(crores)

Employees : Above 1000.

Turnover : Granite.Garnet.Engineering.Silica.

Information Technology,Plantations,

Shippin,Transpiration,Stevedoring,

Associated companies

Website : WWW.Chttinad.com

HISTORY OF THE CHETTINAD CEMENT CORPORATION LIMITED

Dr. Rajah Sir. M.A. Muthiah chettiar of chettinad promoted the Chettinad

Cement Corporation Limited. It commenced production in April 1968. The factory is

http://www.chttinad.com/

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located at kumarajah muthiah Nagar in the Puiliyur village of Karur taluk in Karur

district, Tamil nadu and is about 10 km away from Karur. The factory compound

occupies an area of limestone quarry of the factory is located near Palayam at the

distance of 28 km away from Karur. It is one of the best developed and mechanized

mines in the country.

The dynamic and dedicated services of the promoter to the Chettinad Cement

Corporation Limited as the chairman of the factory are continued till 1984. Then the

elected chairman Dr.S. Narayana Swamy successfully led the company from 1985 to

1990. Today the company continuous to uphold its illustration tradition under the

dynamic leadership of Dr.M.A.M.R. Muthiah, the chairman and managing director.

A part from cement, the Chettinad house is engaged in activities as diverse as

granite engineering, silica, garnet, information technology steel and textile trading,

horse breeding, plantation, shipping, transportation, stevedoring, clearing and

forwarding and logistics having a combined turnover of Rs.8,500 Million.

PRODUCTS:

Chettinad Royal Grade 53

Chettinad Grade 43

Chettinad Super Grade

Sulphate Resistant Portland cement

Portland slag cement

Chettinad super steel

PRODUCTION CAPACITY:

The cement plant is designed for a normal capacity is 6 lakhs tones of cement

p.a. it achieves higher capacity every year. Last year it has achieved the target of

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2335605metric tones of cement. From a modest beginning of 2 lakhs tones capacity p.a. it

was gradually increased production capacity to 15 lakhs tones today.

Presently, the plant employees the modern Dry process technology. It has the

most advanced sophisticated, computer controlled state of the art loesche mill for

grinding raw meal. Loesche lignite mill (First of its kind in India). A five stage

preheated kiln and electronic packing plant.

Equipped with centralized control room for process control, the advanced

instrumentation and elaborate display screens give up to the minute information on the

production process. So that any deviation can be promptly corrected.

The company added another feather to its capacity by installing and

commissioning a giant, sophisticated, high-technology and power efficient cement mill

resulting in a quantum leap in production to touch one million tones mark. Chettinad

cement has attached great importance to social responsibility and environmental values.

This is manifest in the installation of the latest pollution control equipment in the plant.

PROGRESS OF NEW CEMENT PLANT:

The company’s state of the Art Green field cement plant in Karikkali village,

Dindigul District, Tamilnadu commenced commercial production in October 2001 with the

capacity of 0.9 million tones p.a. it from the treatment of Raw material to the packing

of cement, making it one of India’s most modern and efficient plant.

The companies commissioned a 15mw captive thermal power plant at its unit

karikkali in October 2004 to cater to the entire power requirement of the karikkali plant there

by reduce the power cost. The company is also in the process of installing a new cement

grinding unit at karrikkalik with a capacity of 0.5 million tones.

BANKERS

State Bank of patiala

Canara Bank

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State Bank of Mysore and

Indian Bank.

PROGRESS OF READY MIX CONCRETS PLANT

The company has proposed to install a Ready Mix concrete plant (RMC) with a

capacity of 30 cu.M per hour at coimbatore to cater the needs of consumers in areas of

southern parts of Coimbatore, Pallakad and Pollachi. The approximate cost of the cost of

RMC installation would be around Rs.275 Lakhs which will be met out of the

internal accruals of the company. Now it is giving profit to the company.

OPPORTUNITIES:

The fact that India being second Largest cement producer in the world and still

having the lowest per capital consumption of cement itself speaks for the vast potential for

growth available in this sector.

TOTAL STRENGTH:

Work men - 112

Staff - 56

Executive - 106

Contract workers - 131

Total - 405

LIST OF AWARDS RECEIVED BY THE CHETTINAD CEMENT

CORPORTATION LIMITED.

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Year S. No. Awards

National safety Award 1976 & 19771.

Merit Award from Regional 19822.

Directorate of worker Education Tamil Nadu Film Arts Association, 1978

3. Chennai National productivity Award (Best

productivity performance in cement

4. industry issued by NPC)

Second Best 1985-1986

Best 1986-1987



Best Productivity Award 1994-1995

5. National safety Award

a. Longest Accident free period

b. Best performance of the year

Conservationist of the year (progress

6. in the field of conservation of energy

metal components and machinery) NCBM National Awards

7. (Improvement in Energy

performances) Second Best

Best

1986

1989

1987

1994-1995

1995-1996

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Best (Manufacturer of Blended 1998-1999

cement) Best (Manufacturer of Blended 1999-2000

cement) Best (Manufacturer of Blended 2000-2001

cement) TNBM Energy conservation Award 1998-1999

8.

NCBM National Awards

9. ( improvement in Electrical energy 1989-1999

performance) second best NCBM National Awards

10. ( improvement in Electrical energy 2000-2001

performance) Ministry of Energy (National Energy

11. 2000-2001conservation Award)(National Energy conservation Award

2002for the cement sector) Tamil Nadu Government awards state

12. 1998safety awards Ist and 3rd prize

WELFARE FACILITIES IN THE COMPANY

STATUTORY WELFARE MEASURES:

Canteen Facilities: (Ref.sec.46, Factories act 1948)

The workers are provided with facility of canteen. This is functioning on

cooperative basis. The company has provided utensils, furniture, electric fans, lights,

water and other facilities. Modernized electrical and other equipments have also been

installed for the preparation of food stuff. Full meals, refreshments, coffee and tea are

supplied from the canteen to the employees.

Rest rooms: (Ref. sec. 43, Factories act 1948)

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Rest rooms and Lunch rooms with electric lights, fan and water taps are provided for the

benefit of the working community.

First aid facilities: (Ref. sec. 45, Factories Act 1948)

In all departments first aid boxes are provided at various work spot for the

benefit of workers. After the month they used to replace the box with new medicines.

Uniform and shoes: (Ref. sec. 43, Factories Act 1948)

The uniforms and shoes are given in the company are same to all in the company it

shows there is no differentiation between the employees in the organization.

Gratuity:

Every employee in the organization has gratuity as a retirement benefit.

Insurance scheme:

Every employee in the organization must have personal accident policy. It is

adopting compulsory one of the Organization.

Death relief fund:

The employee has death relief fund in the organization to the benefit of the

employee family.

NON-STATUTORY WELFARE MEASURES:

Housing:

Housing facilities are provided to employees for the workers who don’t find

place in the housing colony certain amount is paid as housing rent allowances.

Recreation:

Employees are also provided with temples and parks for their children inside the

housing colony. A cable T.V. Network is there for housing colony, people which shows

various channels.

25

Education:

The Chettinad Cement Corporation limited educational society running higher

secondary schools where education facilities with concession as per Tamilnadu

educational rules are being provided to the children of the employees.

Community Centre:

There is a community centre which has the facilities to conduct marriage and

other such programmes. Water facilities, vessels, electricity, etc., also provided by the

company. All the employees are eligible to get this by remitting a nominal amount as

rent.

Other facilities:

They are also having co-operative stores, ICICI limited, post office facilities for the

employees.

Vehicle stand:

For the benefit of workers the management has provided a vehicle stand to park

their vehicles.

Hospital:

The hospital which provided for the benefit of employees is common for

Chettinad Cement Corporation. It contains medical treatment including supply of

specialist medicines are given to the employees and to their families. E.C.G facilities

are also provided to the employees. The expenditure costs shared by the management.

Rest shed: (Ref. sec. 47, Factories Act, 1948)

Rest shed and Tiffin rooms with electric light, fan and water taps are provided for

the benefit of the working community.

Sanitary Flush out: (Ref. Sec. 19, Factories Act, 1948)

Lavatory, wash basin and spittoon are provided inside the factory for the use of

workers.

Drinking Water: (Ref. Sec. 18, Factories Act, 1948)

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Drinking water facility is also provided to the workers with in their working spot

itself

First Aid facilities: (Ref. Sec. 45 Factories Act 1945)

In all departments first aid boxes are provided at various work spot for the

benefit of workers. After the month they used to replace the ox with new medicines.

LEAVE HOLIDAY

Chettinad Cement Corporation Limited allows the following holiday

such as National Holidays, festival Holidays

National Holidays

The company provides some of the important national holidays they are as

follows:

Republic Day

May Day

Independence Day

Gandhi Jayanthi

Festival holidays

The company provides holidays to the employees for important festivals like

Pongal

Tamil New Year

Ayudha Pooja

Christmas

Deepavali

NUMBER OF LEAVE PERMITTED PER YEAR

SL.NO. CATEGORY CASUAL SICK LEAVE EARN OR

OF LEAVE (SL) PRILVILEGE

EMPLOYEE (CL) LEAVE (EL/PL)

MAXIMUM

ACCUMULATION1. Workers 7 12 182. Staff 7 12 30

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3. Executive 7 12 304. Contract 7 12 18

workers

Time office is controlled by accounting department. The duty of the time office

is to maintain the attendance and leave record of all the employees. They follow

punching card system in Chettinad Cement Corporation limited. The company gives

each employee an attendance card. The employees while entering or exit the office have

to insert their attendance card into a computerized machine which makes the entry

permission for late coming (hour) will be allowed to all the employee of reasonable

aspect.

Apart from this time office gives details regarding

LOPC (loss on payment)

NSA (Night shift allowance)

OT (Over time)

HW (Holiday work)

RECORDS MAINTAINED BY TIME OFFICE

The importance records maintained by the office are as follows:

Attendance Register

Leave Record

Absenteeism

Loss on payment

Gate pass

On Duty Record

Shift change register leave register

Overtime slips.

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HEALTH AND SAFETY DEPARTMENTS:

In Chettinad Cement Corporation Limited safety is watch word and it has given

prime importance and a safety committee is also constituted monitor the safety

measures.

Safety is a statutory procedure. The following are the members of safety

committee.

Organization chart (linked to Health and Safety departments)

29

ORGANISATION STRUCTURE OF CHETTINAD CEMENT CORPORATION

LIMITED.

Organization structure is the pattern in which various part or components are

interrelate or inter connected. It prescribes the relationship among various positions and

activities.

According to March and Simon “Organization structure consists simply of

those aspects or pattern of behavior in the Organization that is relatively stable and

change only slowly”

In a large and complex Organization, structure is set forth initially by the

design of the major components or sub systems and then establishment of relationships

among these sub systems. It is the patterning of these relationships among these sub

system. It is the patterning of these relationships with some degree of permanency is

referred top as Organization structure. The Organization structure is frame work with in

which an enterprise grows and develops.

The role of sound organization structure can be assessed by one statement of

Andrew Carnegie, a great industrialist of U.S.A, “Take our factories, our Trade. Our

avenues of transportation our money but leave me without organs and in four years I will

have re-established myself”. This speaks of the Organization.

Lounsbury Fish, while emphasizing the role of good Organization structure

Lansbury out that, “Organization is more than a chart. It is the mechanism through

which management directs co-ordinates controls the business. If the organization plan is

ill-designed, if it is merely makes shift arrangement. Then management is rendered

difficult and intellective. In short, the sound Organization facilities management process

encourages growth and diversification provides for optimum use of technological

improvements and encourages human use of human being and stimulated creativity.

The Organization administration of Chettinad Cement Corporation Limited,

have strong foundations. The company is now being managed by a Board consisting of

thirteen Directors, of these three or two whole time Directors. In this composition of

30

Board, one Director is the General Manager is the Chief Executive of the unit. The

management structure has been classified as Executive Directors, Managers, Staff,

Workers and Contract workers.

ADMINISTRATION SET UP:

The Chettinad Cement Corporation Limited is administered by a whole time

Director. He led the company through the managing Director. The managing director

with the help of Chief General Manager. The chief General Manager manages the

departments through Managers and Executives. Under the departments such as

Engineering, Technical, Marketing, Civil, Personnel, Accounts etc. the General

Manager (Engineering) controls the Deputy and Assistant manager (Mech.). The

General Manager (Accounts) control all Accountants, The General Manager (Technical)

controls Electrical and Instrumentation Department. The personnel manager controls the

Time Keepers, Canteen, Clerks, Executive Assistants and security Department.

ORGANISATION CHART

31

32

33

CHAPTER-2

2.1 OBJECTIVES OF THE STUDY

To study and identify the inventory level exiting in the company.

To identify the Total Inventory and Inventory Turnover Ratio.

To identify the Growth of Inventory and Net sales.

To identify the Material Consumption and Raw Material Turnover Ratio.

To minimize idling of men and machine this may arise due to shortage of

raw materials, suppliers and spares and,

To provide efficient and smooth service to the customers.

To keep to minimum

Capital (cash) lock up or investment on inventories and

Inventory carrying cost, i.e., expenses involved in storing and handling

inventories.

2.2 SCOPE OF THE STUDY

34

The inventory manager must anticipate the company’s need at every stage of

production. Inventories protect the inventory manager against unforeseen failures in

supply or a sudden increase demand. Materials are transported thousands of miles

before the arrive at a plant, and while in transit they are someone’s inventory - the legal

owner of that material. Even a flat tire on the carrier’s truck could interrupt the

manufacturing process with a late delivery.

For these reasons every manufacturing enterprise carries a certain minimum

amount of inventory. In practice, almost every manufacturer carries an inventory that is

substantially greater than the minimum amount because:

The marketing, sales, and production departments all find it more

convenient to have a supply on hand that it more than ample.

The market indicates a rise in price of the raw material and

therefore increases the inventory levels.

There is a lack of skills necessary to control inventory levels,

and / or top management is unwilling to pay for controls and is willing to

carry extra inventory

35

LIMITATIONS OF THE STUDY

1. The study period covers only for four years which restricts to know more

about the Inventory management of the company.

2. Only quantitative analysis is possible through the statistical tools are used.

36

2.3 RESARCH METHODOLOGY

The term research has been used in so contexts and with such a variety of

meanings that it is difficult for the student to sort it all out. Much of what has been

taught about research is based on misconceptions. Advertisements on television

proudly boast that research has revolutionized a product when in reality a marketing

department has simply made a small change in the product designed to increase its

appeal to consumers.

TYPE OF RESEARCH

There are a number of types of research and not all may be suitable for the

dissertation. Analytical research involves describing the characteristics, to analyze and

explain why or how something is happening. Thus, analytical research aims to

understand phenomena by discovering and measuring causal relations among them.

ACTUAL COLLECTION OF DATA

This study conducted at CHETTINAD CEMENTS was undertaken to

understand the inventory position of the company and to understand how inventory

levels of the company affect the profitability of the company. Data was collected over a

period by interviewing persons in departments like Purchase Department, Bill of

Materials Department, Planning Department and Stores Department. An effort has been

made to understand the workflow of these departments and how they function. During

the study an effort was made to understand how the inventory was stored in the stores

department. It was observed how the company receives inventory, processes the

incoming material, and stores it.

Data was also collected from Balance Sheets, Profit and Loss Accounts and

Journals. The primary data thus collected has been analyzed. Similarly secondary data

collected by interviewing concerned persons and also by observation has been analyzed.

The data from the company has been collected for four years i.e. for 2005, 2006, 2007

and 2008, 20

TOOLS USED FOR DATA ANALYSIS

37

Inventory represents one of the largest investments for any business unless

properly managed; the cost of inventory will strain the firm’s budget and cut into its

profitability. The goal of inventory control is to balance the cost of holding and

maintaining inventory with meeting customer demand.

The tools adopted here are schedule of changes in working capital, Ratio

analysis, and ABC analysis.

The visual inventory system is the most common method of controlling

merchandise in a small business.

This system works best when shortages are not likely to cause major

problems.

The ABC system is a partial system that divides a firm’s inventory into

three categories depending on each item’s rupee usage volume (cost per

unit multiplied by quantity used per time period).

The purpose of classifying items according to their value is to establish

the proper degree of control over them.

2.4 REVIEW OF LITERATURE

38

Literature review heavily relied on published materials like journals, newspaper

articles; magazines and write ups of current issues on the internet concerning inventory

management were constantly reviewed. Details and journals were visited from time to

time as articles appeared in the newspapers and magazines. Methodology is the concept of

methods used in conducting the study. The methodology used for data collection is

mainly through primary and secondary data.

The primary data is collected by interviewing the concerned persons of financial

department, stores department, purchase department, bill of materials department and

other related departments. The data was collected from these persons by having

discussions with them and asking them questions related to the topic. The study at

CHETTINAD CEMENTS was undertaken for a period of three months wherein

information was collected from them regarding their policies, procedures, problems and

techniques adopted.

The secondary data is collected in the form of Balance sheets, Profit and Loss

Accounts and Financial Statements from the annual reports published by the company and

other records, documents, journals, facts and figures of the company.

ARTICLE BY JOHN SCHREIBFEDER

John Schreibfeder, President of Effective Inventory Management Inc, reminds

industrial distributors that purchased inventory is a “sunk” cost. It’s paid for, and no

matter what it’s worth now, the money’s still gone. Once surplus inventory exists,

distributors must find ways to recoup as much of the cost as possible.

One North America industrial distributor found a successful way to redirect

some of its surplus inventory within the own organization. The distributor launched an

internal surplus removal program, which used surplus inventory surplus inventory at

key locations to replenish the normal requirements of other internal locations. When

buyers reviewed their suggested orders, they provided information about surplus

quantities first so that stock was transferred rather than purchased. Although some

freight costs were incurred, interest charge reductions and restocking charge avoidance

successfully offset these costs.

CHAPTER-3

39

ANALYSIS AND INTERPRETATION

ABC ANALYSIS AT CHETTINAD CEMENTS

Chettinad Cements has to maintain several types of inventories. It is not

desirable to keep the same degree of control on all the items. The firm should pay

maximum attention to those items whose value is the highest. Therefore here the

inventories are classified to identify which items should receive the most effort in

controlling. ABC approach is adopted to measure the significance of each item of

inventories in terms of consumption value. The high value items are classified as ‘A’

items and they require the tightest control. ‘C’ items represent relatively least value and

would require sample control. ‘B’ items fall in between these two categories and require

reasonable attention of management. The ABC analysis is done here to concentrate on

important items and is also known as control by importance and exception.

The following steps have been undertaken to implement ABC analysis at

CHETTINAD CEMENTS.

The price per unit for each purchased item is obtained (5 ITMS)

The total consumption value is determined by multiplying consumption

quantity by its unit price.

The consumption value is arrived by the above calculations for each of

the 5 items.

The items are ranked in accordance with the total consumption value,

giving first rank to the item with highest total value. The items are arranged in the

order of decreasing annual-consumption-value.

The ratio of total value of each item to total value of all items is

determined.

The list of values is divided into three groups, namely, A, high-value, B, Medium value,

and C, low-value, in marking that division, a graph with y-axis as “cumulative

percentages of value of inventory”, and x-axis as “percentage of inventory items” can be

used. The resulting graph makes it easier to divide

40

BENEFITS OF ABC ANALYSIS FOR INVENTORY REDUCTION

Inventory reduction has been a constant goal for all companies over the years.

The shorter the time from customer order to cash in the bank the better. The fewer

amount is tied up in inventory, the more money available for capital investment and

expansion. Once a company accepts inventory as waste and not a necessary evil of

business, inventory investment will be reduced to levels once thought impossible.

Using the “ABC” concept to analyze and control inventory investment and turns

is the simplest and most efficient method. Most inventories are made up of hundreds

and possibly thousands of individual items necessary to manufacture a company’s

products. By rank ordering the inventory items in dollar terms, A items being the most

expensive to C items being the last expensive, managing inventor investment can be

broken down to a manageable level. “A” items make up 70% of inventory amount;

however, they only account for 3.66% of inventoried items. “B” items make up 20% of

inventory amount and only for normally 12.33% of inventoried items at chttinad

cement corporation. “C” items make up 10% of inventory value and account for

normally 84% of inventoried items, By managing the “A” items, a positive impact can be

made in inventory investment reduction. Reducing one or two “A” items can and will

have a bigger impact on inventory reduction and increased inventory turns, greater than a

possible reduction in all “C” items.

Also, “ABC” classification can be used to design cycle counting schemes.

Count “A” items more often than “B” items and “C” items possibly not at all. The

“ABC” concept allows a manager to devote resources where it will have the biggest

positive impact

Five Main Contains of Cements are as Follows:

C3S TRCALCIUM SILICATE - 50% A - CLASS ITEM.

C2S DICALCIUM SILICATE - 25% B - CLASS ITEM.

C3S TRICALCIUM ALUMINATE - 10% B - CLASS ITEM.

C4S TETRA CALCIUM ALUMINIA FARITE - 10% - C -

CLASS ITEM.

GYPSUM 5% - C -CLASS ITEM.

41

DATA ANALYSIS & INTERPRETION

TABLE NO: 1

ABC CLASSIFICATION FOR 2004-2005

% of total Type of% of Units in

Classification Consumption inventoryInventory

Value controlA 3.66 70 Strict

B 12.33 20 Moderate

C 84 10 Minimal

TABLE NO: 2


% of total Type of

% of Units in Consumption inventory

Classification Inventory Value control

A 3.81 70 Strict

B 11.19 20 Moderate

C 85 10 Minimal

42

TABLE NO: 3


% of total

% of Units in Consumption Type of inventory


A 3.62 70 Strict

B 12 20 Moderate

C 84.38 10 Minimal

TABLE NO: 4


% of total Type of

% of Units in Consumption inventory


A 3.77 70 Strict

B 11.7 20 Moderate

C 84.53 10 Minimal

TABLE NO: 5

43


% of total

% of Units in Consumption Type of inventory


A 3.8 70 Strict

B 11.2 20 Moderate

C 85 10 Minimal

INTERPRETATION:

The table shows that item ‘A’ includes the highest value items, 70% of total

value. This class is least important in terms of number as they represent only 3.66% of the

total units. Item ‘B’ occupies the middle place with 20% items falling under this category.

These constitute about 12.33% of the total units. Nearly 84% of the items fall under class

‘C’ and they constitute only 10% of the total value of items.

CHART NO: 1

44

CHART SHOWING ABC CLASSIFICATION

ABC CLASSIFICATION FOR 2005

90

80

70

60

50

40

30

20

10

0

1 2 3

A B C

CHART NO: 2


45

CHART NO: 4


CHART NO: 5


46

CURRENT RATIO:

It is computed with the help of the following equation.

Current Assets

47

Current Ratio =

Current Liabilities

TABLE -2

CURRENT RATIO

Current

Current Assets Liabilities

Years (Rs.in Lakhs) (Rs.in Lakhs) Current Ratio

2004 - 2005 11396 6934 1.6

2005 - 2006 16435 7928 2.1

2006 - 2007 17986 10768 1.7

2007 - 2008 21789 17296 1.3

2008 - 2009 40469 35837 1.1

INFERENCE:

48

From the above table shows that the current ratio for the year 2004-05 is

1.6.In the year 2005-06 it increase to 2.1. In the year 2006-07 it decrease to 1.7 and in the

year 2007-08 decreases in 1.3. In the year 2008-09 is 1.1.here current ratio has

average level so it should improve this position in future.

CHART NO -2

CURRENT RATIO

2.5

2.0

1.5

1.0

0.5

0.01 2 3 200842009

2005 2006 2007 2009

49

QUICK RATIO:

It is computed with the help of the following equation.

Quick Assets

Quick Ratio =

Current Liabilities

TABLE -3

QUICK RATIO

Quick

Quick assets liabilities

Years (Rs.in Lakhs) (Rs.in Lakhs) Quick ratio2004 - 2005 5392 6934 0.782005 - 2006 6538 7928 0.822006 - 2007 7939 10768 0.742007 - 2008 13962 17296 0.812008 - 2009 23852 35839 0.67

INFERENCE:

From the above table shows that the quick ratio for the year 2004-05

is 0.78.In the year 2005-06 it increase to 0.82. In the year 2006-07 it

50

decrease to 0.74 and in the year 2007-08 increases in 0.81. In the year

2008-09 is 0.67.here quick ratio is decreased.

CHART NO - 3

QUICK RATIO

1.00

0.80

0.60

0.40

0.20

0.00

1 2 3 4 5

2005 2006 2007 200

51

INVENTORY TURNOVER

It is computed with the help of the following equation:

Cost of Goods sold

Inventory Turnover Ratio =

Average Stock

TABLE - 4


COST OF GOODS AVERAGE INVENTORY

YEARS SOLD STOCK TURNOVER RATIO2004-05 40258 6004 6.712005-06 47853 9897 4.842006-07 58417 10017 5.832007-08 84647 7827 10.812008-09 110702 16617 6.66

INFERENCE:

From the above table shows that the r inventory turnover ratio for the year 2004-

05 is 6.71.In the year 2005-06 it decrease to 4.84. In the year 2006-07 it increase to 5.83 and

in the year 2007-08 increases in 10.81. In the year 2008-09 is 6.66.here inventory turnover

ratio has average level so it should improve this position in future.

52

CHART NO -4


12.00

10.00

8.00

6.00

4.00

2.00

0.00 1 2 3 4 5

2005 2006 2007 2008 2009

53

DEBTORS TURNOVER RATIO:

Its is computed with the help of following equation:

Net Credit Annual Sales

Debtors Turnover Ratio =

Average Trade Debtors

No. of working days in a year

Average Collection period =

Debtors Turnover Ratio

TABLE - 5

DEBITORS TURNOVER RATIO

NET CREDIT AVERAGE

YEARS SALES TRADE DEBTORS RATIO IN DAYS2004-05 40258 1505 26.752005-06 47853 1907 25.092006-07 58417 1744 33.502007-08 84647 1699 49.822008-09 110702 1487 74.45

INFERENCE:

From the above table shows that the debtors turnover ratio for the year 2004-05 is

26.75.In the year 2005-06 it decrease to 25.09. In the year 2006-07 it increase to 33.50

and in the year 2007-08 increases in 49.82. In the year 2008-09 is 74.45.here debtor’s

turnover ratio.

54

CHART NO -5

DEBITORS TURNOVER RATIO

Rs. 80.00

Rs. 70.00

Rs. 60.00

Rs. 50.00

Rs. 40.00

Rs. 30.00

Rs. 20.00

Rs. 10.00

Rs. 0.00

1 2 3 4 5

2005 2006 2007 20

55

NET PROFIT RATIO:

It is computed with help of the following equation:

Net Profit

Net Profit Ratio = x 100

Net Sales

TABLE-6

NET PROFIT RATIO

NET CREDIT

YEARS NET PROFIT SALES RATIO2004-05 3941 40258 9.792005-06 4691 47853 9.802006-07 5723 58417 9.802007-08 7397 84647 8.742008-09 14879 110702 13.44

INFERENCE:

From the above table shows that the net profit ratio for the year 2004-05 is

9.79.In the year 2005-06 increase to 9.80.and again same value for the year 2006-07 and

in the year 2007-08 decreases in 8.74 In the year 2008-09 is 13.44.here net profit ratio is

increased.

CHART NO -6

56

NET PROFIT RATIO

14.00

12.00

10.00

8.00

6.00

4.00

2.00

0.001 2 3

2005 2006 2009

R A IO IN %

S14 5

2007 2008

GROSS PROFIT RATIO:

It is computed with the help of the following equation:

57

Gross Profit

Gross Profit Ratio = x 100

Net sales

TABLE NO-7

GROSS PROFIT RATIO

NET CREDIT

YEARS GROSS PROFIT SALES RATIO2004-05 15628 40258 38.822005-06 18060 47853 37.742006-07 26034 58417 44.572007-08 7397 84647 8.742008-09 14879 110702 13.44

INFERENCE:

From the above table shows that the gross profit ratio for the year 2004-05 is

38.82.In the year 2005-06 it decrease to 37.74. In the year 2006-07 it increase to 44.57

and in the year 2007-08 decreases in 8.74 In the year 2008-09 is 13.44.here gross profit

ratio has average level so it should improve this position in future.

58

CHART NO -7

GROSS PROFIT RATIO

50.00

40.00

30.00

20.00

10.00

0.00

1 2 3 4 5

2005 2006 2007 2008 2009

TABLE NO -8

Statement Of Changes In Working Capital

2004-05

rs.in lakhs

59

Particulars 31-03-2004 31-03-2005 Increase DecreaseCURRENT ASSETS:Inventory 4076 4939 863 -Sundry debtors 1304 2102 798 -Cash And Bank balances 841 1092 251 -Other current Assets 16 17 1 -loans And advances 2545 2889 344 -A- Total current assets 8782 11039 - -LESS: CURRENT

LIABILITIES:Liabilities 3779 4895 - 1116Provisions 619 154 465 -B- Total current

liabilities 4398 5049 - -Net Working Capital (A -

B) 4384 5990 - -Increase / Decrease in

W/C - - - 16064384 4384 2722 2722

INFERENCE:

From the above table shows that changes in working capital for the years of

2004 -2005 was increase Rs, 1606.

60

TABLE NO -9

61

STATEMENTS OF CHANGES IN WORKING CAPITAL FOR THE YE2005

RS IN lakhs Particulars 31-03-2005 31-03-2006 Increase DecreaseCURRENT ASSETS:Inventory 4939 5112 173 -Sundry debtors 2102 1985 - 117Cash And Bank balances 1092 1075 - 17Other current Assets 17 16 - 1loans And advances 2889 1475 - 1414A- Total current assets 11039 9663 - -Less: CURRENT

LIABILITIES:Liabilities 4895 5414 519Provisions 154 70 84 -B- Total current liabilities 5049 5484 - -Net Working Capital (A -

B) 5990 4179 - -Increase / Decrease in W/C 1811 -

5990 5990 2068 2068

INFERENCE:


2005 -2006 was decrease Rs, 1811.

62

T

ABLE NO -10 STATEMENT OF CHANGES IN WORKING CAPITAL

RS.IN LAKHS Particulars 31-03-2006 31-03.2007 Increase DecreaseCURRENT ASSETS:Inventory 5112 6004 892 -Sundry debtors 1985 1505 - 480Cash And Bank

balances 1075 1395 320 -Other current Assets 16 30 14 -loans And advances 1475 2462 987 -A- Total current assets 9663 11396 - -Less: CURRENT

LIABILITIES:Liabilities 5414 6083 - 669Provisions 70 851 - 781B- Total current

liabilities 5484 6934 - -Net Working Capital (A

- B) 4179 - - -Increase / Decrease in

W/C - - - 2834179 4179 2213 2213

INFERENCE:

From the above table shows that changes in working capital for the

years of 2006 -2007 was increase Rs, 283.

63

CHART NO-10

64

TABLE NO-11

Statement of Changes in Working Capital Rs.In Lakhs Particulars 31-03-2007 31-03-2008 Increase DecreaseCURRENT ASSETS:Inventory 6004 9897 3893 -Sundry debtors 1505 1907 402 -Cash And Bank

balances 1395 1709 314 -Other current Assets 30 18 12loans And advances 2462 2904 442 -A- Total current assets 11396 16435 - -Less: CURRENT

LIABILITIES:Liabilities 6083 6056 27 -Provisions 851 1872 - 1021B- Total current

liabilities 6934 7928 - -Net Working Capital

(A - B) 4462 8507 - -Increase / Decrease in

W/C - - - 40458507 8507 5078 5078

INFERENCE:


2007 -2008 was increase Rs, 4045.

ui

up

65

CHART NO-11

statement of changes in woking capital 2007-200

9000

8000

7000

6000

5000

4000

3000

2000

1000

0

1 2

2007 2008

TABLE-12

STATEMENT IN CHANGES WORKING CAPITAL

66

RS IN LAKHS

Particulars 31-03-2008 31-03-2009 Increase DecreaseCURRENT ASSETS:Inventory 9897 10017 120 -Sundry debtors 1907 1744 - 163Cash And Bank

balances 1709 2149 440 -Other current Assets 18 4 - 14loans And advances 2904 4072 1168 -A- Total current assets 16435 17986 - -Less: CURRENT

LIABILITIES:Liabilities 6056 7759 - 1703Provisions 1872 3009 - 1137B- Total current

liabilities 7928 10768 - -Net Working Capital

(A - B) 8507 1289 - -Increase / Decrease in

W/C - - 1289 -

INFER

ears

67

TABLE NO -7 COMPARITIVE BALANCESHEET FOR THE YEARS OF 2004 - 2005

68

z 2004 2005 INCREASE/DECREASE PERCENTAGE(A) SOURCES OFFUNDSSharehoder;s fundCapital 2950 2950 0 0.00Reserve and surplus 9617 10345 728 7.57Loan funds

Secured loan 29793 12428 -17365 -58.29Unsecured loan 1875 16477 14602 778.77Deferred tax 3667 4470 803 21.90TOTAL 47902 46670 -1232 -2.57(B) APPLICATION OF FUNDS: Fixed assets Block 43723 42208 -1515 -3.46InvestmentsCurrent assets :Inventories 5112 6004 892 17.45Sundry debtors 1985 1505 -480 -24.18Cash and bankbalances 1075 1395 320 29.77Other current assets 16 30 14 87.50Loans and advances 1475 2462 987 66.92Less: currentliabilities:Liabilities 5414 6083 669 12.36Provisions 70 851 781 1115.71Net current assets 4179 4462 283 6.77TOTAL 47902 46670 -1232 -2.57

69

INFERENCE:

Above table shows in the year 2004-2005 share capital (0.00%) same the

amount of both year, reserve& surplus (7.5%), secured loan (-58.29%) decreased. and

unsecured loans (778.77%) increased, fixed assets (-3.46%) decreased,

inventories(17.45%) increased ,sundry debtors (-24.18) decreased, cash at bank (29.77)

increased loans and advances (66.92%) increase, liabilities (12.36%) increase.

TABLE-8

70

COMPARITIVE BALANCESHEET FOR THE YEARS OF 2005 - 2006 IN LAKHS

PARTICULARS 2005 2006 INCREASE/DECREASE PERCENTAGE(A) SOURCES OFFUNDSSharehoder;s fundCapital 2950 2950 0 0.00Reserve and surplus 10345 11796 1451 14.03Loan fundsSecured loan 12428 5906 -6522 -52.48Unsecured loan 16477 26762 10285 62.42Deferred tax 4470 5604 1134 25.37TOTAL 46670 53018 6348 13.60(B) APPLICATIONOF FUNDS:Fixed assetsBlock 42208 44511 2303 5.46InvestmentsCurrent assets :Inventories 6004 9897 3893 64.84Sundry debtors 1505 1907 402 26.71Cash and bankbalances 1395 1709 314 22.51Other current assets 30 18 -12 -40.00Loans and advances 2462 2904 442 17.95Less: current liabilities:Liabilities 6083 6056 -27 -0.44Provisions 851 1875 1024 120.33Net current assets 4462 8507 4045 90.65TOTAL 46670 53018 6348 13.60

INFERENCE:

71



unsecured loans (62.42%) increased, fixed assets (5.46%) increased,

inventories(64.84%) increased ,sundry debtors (26.71%) increased, cash at bank

(22.51%) increased loans and advances (17.95%) increase, liabilities (-0.44%)

decrease.

72

TABLE-9


PARTICULARS 2006 2007 INCREASE/DECREASE PERCENTAGE(A) SOURCES OFFUNDSSharehoder;s fundCapital 2950 2950 0 0.00Reserve and surplus 11796 14492 2696 22.86Loan fundsSecured loan 5906 2404 -3502 -59.30Unsecured loan 26762 28087 1325 4.95Deferred tax 5604 7874 2270 40.51TOTAL 53018 55807 2789 5.26(B) APPLICATION OF FUNDS: Fixed assets Block 44511 48228 3717 8.35InvestmentsCurrent assets :Inventories 9897 10017 120 1.21Sundry debtors 1907 1744 -163 -8.55Cash and bankbalances 1709 2149 440 25.75Other current assets 18 4 -14 -77.78Loans and advances 2904 4072 1168 40.22Less: currentliabilities:Liabilities 6056 7759 1703 28.12Provisions 1875 3009 1134 60.48Net current assets 8507 7218 -1289 -15.15TOTAL 53018 55807 2789 5.26

73

INFERENCE:



unsecured loans (4.95%) increased, fixed assets (8.35%) increased, inventories (1.21%)

increased ,sundry debtors (-8.55%) decreased, cash at bank (25.75%) increased loans

and advances (40.22%) increase, liabilities (28.12%) increase.

74

TABLE-10


INCREASE/DECREAS PERCENTAGPARTICULARS 2007 2008 E E(A) SOURCESOF FUNDSSharehoder;s fundCapital 2950 2950 0 0.00Reserve andsurplus 14492 23374 8882 61.29Loan funds 0Secured loan 2404 903 -1501 -62.44Unsecured loan 28087 22233 -5854 -20.84Deferred tax 7874 7345 -529 -6.72TOTAL 55807 56895 1088 1.95(B) APPLICATION OF FUNDS: Fixed assets Block 48228 168695 120467 249.79InvestmentsCurrent assets :Inventories 10017 7827 -2190 -21.86Sundry debtors 1744 1699 -45 -2.58Cash and bank balances 2149 2825 676 31.46Other current assets 4 4 0.00Loans andadvances 4072 9435 5363 131.70Less: currentliabilities:Liabilities 7759 7457 -302 -3.89Provisions 3009 9839 6830 226.99Net current assets 7218 4493 -2725 -37.75TOTAL 55807 56895 1088 1.95

INFERENCE:

75


amount of both year, reserve& surplus (61.29%), secured loan (-62.44.%) decreased.

and unsecured loans (-20.84%) decreased, fixed assets(249.79%) increased,

inventories(-21.86%) decreased ,sundry debtors (-21.86%) decreased, cash at bank

(31.46%) increased loans and advances (131.70%) increase, liabilities (-3.89%)

decrease.

76

TABLE-11


PARTICULARS 2008 2009 INCREASE/DECREASE PERCENTAGE(A) SOURCES OFFUNDSSharehoder;s fundCapital 2950 2950 0 0.00Reserve and surplus 23374 36299 12925 55.30Loan fundsSecured loan 903 3761 2858 316.50Unsecured loan 22233 39858 17625 79.27Deferred tax 7345 6430 -915 -12.46TOTAL 56895 89298 32403 56.95(B) APPLICATIONOF FUNDS:Fixed assetsBlock 168695 84608 -84087 -49.85InvestmentsCurrent assets :Inventories 7827 16617 8790 112.30Sundry debtors 1699 1487 -212 -12.48Cash and bankbalances 2825 2585 -240 -8.50Other current assets 4 0 -4 -100.00Loans and advances 9435 19780 10345 109.64Less: currentliabilities:Liabilities 7457 15640 8183 109.74Provisions 9839 20197 10358 105.27Net current assets 4493 4632 139 3.09TOTAL 56895 89298 32403 56.95

INFERENCE:

77


amount of both year, reserve& surplus (55.30%), secured loan (316.0%) increased. and

unsecured loans (79.27%) increased, fixed assets(-49.85%) decreased,

inventories(112.30%) increased ,sundry debtors (-12.48) decreased, cash at bank (-

8.50%) decreased loans and advances (109.64%) increase, liabilities (109.74%)

increase.

78

CHAPTER - 4

4.1SUMMARY OF FINDINGS

ABC analysis at Chettinad Cements, the percentage of unit in Inventory items A =

3.66%, B = 12.33% and C = 84%.

The Inventory and net sales of the company has net sales was increased for based on

proper inventory management system.

The Current asset of Inventories. Inventories decreased for the year 2007 - 08 at

29.78%.

The Gross Working Capital for the Chettinad Cements is stable but fifth year it was

reduced.

The Net working capital for the Chettinad Cements was increased consistently for

every year.

The cash and bank balance of the Chettinad Cements are increase every year

consistently.

Other current asset for the company had positive sign in past records.

The current Ratio for the company maintaining nearest to standard ratio for the last

five years.

The Quick Ratio of the Chettinad Cements are maintain stable manners in last five

79

4.2 SUGGESTION

The company shouldn’t issue the new share capital. But they are increase the

cash balance, current assets and fixed assets.

Increasing in inventories which will leads to the company can holding the

money to lock up.

The current assets of the debtors will show the company in right trend.

The company should maintain high level of opening Raw Material, which will

help the organization to fulfill sudden increase in demand.

Reduction in loan and advance, current liabilities, scrap values and other

expenses will increase the cash balance which can used for purchasing materials

and other needs.

Declaration of dividend amount to the share holders should be made to attract

the share holders and will also motivate them.

Use new techniques for analyzing financial information by using various

techniques to more accuracy can be attained and more time can be saved.

80

4.3 CONCLUSION

Inventory management is part of the overall management strategy. The basic

objective of inventory management is to make sure that inventory is available as and

when required and should not be held in excess quantity. In the management of

inventories, it is well recognized that a small proportion of items account for most of the

critically, need and value. The costs of carrying too much inventory are opportunity cost

of foregone interest, warehousing costs, damage and pilferage, obsolescence, insurance.

The inventory management of Chettinad Cement Corporation Ltd shows an

increasing trend and the analysis of Current assets shows us that inventories

form a major component of current assets.

The inventories is had 60 to 80 percent of total current assets. By using various

ratios the inventory position of the company has been analyzed. The liquidly position of

the company is on the weaker side as shown by current and liquid ratio. The

inventory of Chettinad Cement Corporation Ltd. has been increasing when compared to

increase in sales. The conversion of inventory into sales is slow and too much of

inventory is being blocked.

APPENDIX

BALANCE SHEET PARTICULARS 2004 2005 2006 2007 2008 2009

81

A SOURCES OF

FUNDS Shareholders fund Capital 2950 2950 2950 2950 2950 2950Reserve and surplus 9617 10345 11796 14492 23374 36299Loan fundsSecured loan 29793 12428 5906 2404 903 3761Unsecured loan 1875 16477 26762 28087 22233 39858Deferred tax 3667 4470 5604 7874 7345 6430TOTAL 47902 46670 53018 55807 56895 89298B APPLICATION

OF FUNDS:Fixed assetsBlock 43723 42208 44511 48228 168695 84608InvestmentsCurrent assets :Inventories 5112 6004 9897 10017 7827 16617Sundry debtors 1985 1505 1907 1744 1699 1487Cash and bank

balances 1075 1395 1709 2149 2825 2585Other current assets 16 30 18 4 4 0Loans and advances 1475 2462 2904 4072 9435 19780LESS: CURRENT

LIABILITIES:Liabilities 5414 6083 6056 7759 7457 15640Provisions 70 851 1875 3009 9839 20197Net current assets 4179 4462 8507 7218 4493 4632TOTAL 47902 46670 53018 55807 56895 89298

BIBLIOGRAPHY:

M.Y khan & p.k jain, Financial management (5th ed: Tata Mc Graw-

Hill

publishing company limited) ch.16,p.16.1

M.P pandikumar. Management accounting(1st ed: Excel books,

New

Delhi)ch.12,p.271

T.S. Reddy & Y Hariprasad reddy, Management accounting

Margham

publication:7th edition 2006 (P. 3.26 to 3.75)

S.N. Maheswari, Management accounting Sultan chand & sons,1995 6th edition (P.

81 to 120)

82

C.R Kothari, Research methodology Methods and Techniques, (2nd

ed ;

New Delhi: Viswa Prakasham, 1996)ch.1,p.30-38

WEBSITES:

www.chettinad.com

http://www.chettinad.com/

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Chettinad Cements Puliyanur