Manju Final Project

CHAPTER 1

INVENTORY MANAGEMENT

EXECUTIVE SUMMARY1. INDUSTRY PROFILE An electrical battery is one or more electrochemical cells that convert stored chemical energy into electrical energy. The invention of the first battery in 1800 by Alessandro Volta. Batteries have become a common power source for many household and industrial applications. According to a 2005 estimate, the worldwide battery industry generates US$48 billion in sales each year, with 6% annual growth. Battery market rising from $20.3 billion in global revenues in 2010 to $30.5 billion by 2015.There are two types of batteries:1) Primary batteries2) Secondary batteries Major battery manufacturing industries in India:1. Exide industries2. Standard batteries3. Amco batteries4. Tudor India5. Amara raja batteries

2. COMPANY PROFILE Amara raja batteries limited (ABBL) incorporated under the companys act 1956 in 13 Feb. 1985, and converted into public limited company on 6 September 1990. The chairman and managing director of the company is Sri.Galla Ram Chandra Naidu. The company is setting up to Rs.1920 lakhs plant is in 185 acres in karakambadi village in Tirupathi. The company is engaged in the business of manufacturing of acid storage batteries. ARBL comprises of two major divisions viz.

1. Industrial Battery Division (IBD)2. Automotive Battery Division (ABD) Products: AMARON HI-WAY(FOR TURCKS) AMARON HARVEST(FOR TRACTORS) AMARON HIGH LIFE(FOR GENERATORS) AMARON SHIELD (FOR INVERTERS) AMARA RAJA GENPRO (FOR CARS, 3 WHEELERS) QUANTA (F0R UPS BATTERIES)

Amara raja Group of companies:1. Amara Raja Batteries Limited (ARBL), Karakambadi, Tirupati.2. Amara Raja Power System Pvt. Ltd. (ARPSL), Karakambadi, Tirupati.3. Harsha Electronics Pvt. Ltd. (HEPL), Karakambadi, Tirupati.4. Mangal Electro System Pvt. Ltd. (MESPL), Petimitta, Chittoor Dist.5. Amara Raja Electronics Pvt. Ltd. (AREPL), Dighavamagham, Chittoor Dist Introduction to Battery Manufacturing Process in ARBL: The manufacturing process involved in production of valve regulated lead acid storage batteries is mentioned below.a. Grid Castingb. Plate Productionc. Pastingd. Assemblinge. Formationf. Dispatching

3. TOPIC INTRODUCTION Meaning of inventory Inventory is a tangible property held for sale, or materials used in a production process to make a product. The dictionary meaning of inventory is stock of goods or a list of goods. Inventory measured by rupee constitutes the major element in the working capital Components of Inventory

Components of inventoryRaw materialsWork in progressFinished goods

Inventory management The amount of investment is sometimes more in inventory than in other assets. About major part of working capital invested in inventories. A proper purchasing handling, storing and accounting should form a part of inventory management. An efficient system of inventory management will determine, What to purchase How much to purchase From where to purchase, and Where to store.

Importance Of Inventory Management Inventory helps in smooth and efficient running of business. Inventories provide service to the customers immediately. Due to absence of stock, the company may have to pay high prices because of piece-wise purchasing. Maintaining of inventory may earn price discount because of bulk purchasing.

4. RESEARCH METHODOLOGY

Statement of the problem A study on inventory Management at AMARARAJA BATTERIES LIMITED is undertaken in order to know the inventory performance and position of the company and to know the strength and weakness and to assess the profitability of the company. Inventory a double edged sword is usually an asset of an organization; if it is not used properly it will become liability. It is therefore absolutely very important to manage inventories efficiently and effectively in order to overcome unnecessary investment and To identify the problems/challenges involved in the Inventory Management process at AMARARAJA BATTERIES LIMITED.

Need for the Study Every organization needs inventory for smooth running of its activities. It serves as a link between production and distribution processes. The investment in inventories constitutes the most significant part of current assets or working capital in most of the organizations. The purpose of inventory management is to ensure availability of materials in sufficient quantity as and when required and also to minimize investment on inventories. So, in order to understand the nature of inventory management of the organization, I undertook this research, to study the inventory controls for ARBL.

Objectives of the Study To know the existing system of Inventory Management of ARBL. To know ordering and carrying cost for most important raw materials of ARBL. To know the inventory turnover of the ARBL To classify the various components based on its value

Tools and Techniques EOQ (Economic Order Quantity) Stock levels Inventory Turnover Ratios ABC Analysis VED Analysis Sources of Data: Primary data: The primary data is collected by the direct contact with the purchase and stores departments. Secondary data The secondary data that is required for the study is collected from the schedules, past notes, budgets, through company websites and other statements provided by Finance Department of AMARARAJA BATTERIES LIMITED. Scope of the study The study includes EOQ, ABC and inventory turnover ratios of raw materials for the five financial years. The results of the study are applicable to the inventory of ARBL, IBD-Division, Karakambadi. Limitations1. Current year data was not provided by AMARARAJA BATTERIES LIMITED.2. The entire data depends on secondary data.3. Time of study is less to make a detailed analysis.

Findings The year of 2008-09 where the value also increased while compared to in the year of 2010-11 in the classified items are B and C. The A class items where eventually reduced when compared to 2008-09. As the procurement of the orders is not according to the requirement of the orders received, a major part of the inventory is held up as non-moving. The company is not following a proper policy for ordering of the materials, whenever customer orders they are placing of order. The store department depreciation is increased during the year 2006-07 and 2007-08. They calculated depreciation on dead items also this is affected to coming loss, Variance and uncertainties in lead time.

Suggestions

The company has to concentrate more on Research and Development so that it can keep abreast with the latest developments. The company has to eliminate dead inventory and this has resulted in decrease profits. Company should strive for getting the right goods to the right places at the right time for the least cost. Company has to position inventory items according to risk and opportunity. Company has to distinguish between bottleneck items, critical items (high risk, high opportunity)-Product mix. ConclusionThe company can reduce ordering cost by the following proper inventory management technique.

INDUSTRY PROFILE

A battery is an electro chemical device in which the free energy of chemical reaction is converted into the electrical energy contained in the active materials is converted into electrical by means of electrochemical oxidation reduction reactions. Inventory in wider sense, is defined as any idle resource of an enterprise. It is a physical stock of goods kept for the purpose of future affairs. The term is generally used to indicate raw materials in process, finished products, packing, spares and others - stocked in order to meet expected demand or distribution in the future. INTRODUCTION TO BATTERY MANUFACTURING PROCESS The manufacturing process involved in production of maintenance free valve regulated lead acid storage batteries is explained below.g. Grid Castingh. Plate Productioni. Pastingj. Assemblingk. Formationl. Dispatcha. Grid Casting Positive and negative grids required for batteries are made from different alloys. Besides providing the necessary support to hold the active material together, the grids serve as a conductor of current required for the electro chemical reaction that takes place at the active material/electrolyte interface in the battery.Girds are obtained by pouring molten lead alloy in to special water cooled grid moulds. Casting is done on sophisticated automatic casting machines which control the parameters within narrow tolerance to produce consistently good quality grids.b. Plate ProductionThe lead oxide produced by the Barton process is mixed with water, sulphuric acid and special additives like synthetic flock and expanders. The paste mixing is done in a tub mixture. Dry lead oxide along with the additives is added to the tub. Distilled water is first dispensed into the tub when it is in rotation. After a fixed quantity of water addition, sulphuric acid is slowly dispensed into the tub at a slower rate to avoid temperature rise in the mixer. The lead oxide along with the water and acid from a thick and crunchy paste. This paste is then moved and sent to the pasting section.The pasting is done on an automatic pasting machine. The paste is dumped into a hopper which is located at the grid feeding end of the pasting machine. Grids are automatically fed into the machine by a mechanical feeder. The quantity of paste dispersed through the hopper is mechanically adjusted and a pasted plated comes out on a conveyor belt at he other end of the pasting machine.From the pasting machine, the plates are passed through a flash drier which removes surface moisture from the plates. Drying is accomplished by recirculation of heated air, next sent to the curing operation. In this process, the plates are maintained at a specified temperature and relative humidity. Curing for positive plate is done in an oven at a temperature f around 80-90C. The negative plates are cured in a humidity room at a lower temperature.

c. Assembling The process of assembly is different for power plus and power stack. Plates are first stacked into groups with the negative and positive plates alternating with the glass absorbent separator interspread between the plates. These separators are wrapped around individual plates. The stacked plates are next burned together in a group burning machine. In the case of smaller batteries, this operation is done on a cast on strap machine. The groups of plates with separator is inverted into a mould wherein a strap and the inter cell posts are cast separately and placed on the burning mixture. The positive and negative straps are burned manually using an oxyacetylene torch. The completed elements are then introduced into cell jars or battery monoblock containers. Minimodule batteries pass through the intercell welding stage wherein adjacent elements in the battery are interconnected by welding the respective lead posts through a hole in the partition of the plastic. The welding is accomplished by a two-stage process. The welding electrodes will press on the lead alloy posts in the first stage. Under the pressure the lead extrudes through the hole in the partition of the container. When the two posts make contact, a very high welding current is passed which fuses and welds the two parts. The weld is next tested on a shear tester. This internal cell welding operation is not necessary for the large single cell units. These cells are connected externally to suit various configurations by using lead plated copper connectors. The batteries next pass through the process of a cover sealing on a heat sealing machine. Here, a plastic cover is heat sealed onto the plastic container. The sealing is accomplished by melting the bottom surfaces of the cover and top surface of the container with the help of heating plates and then pressing the two parts together allowing the molten plastic to fuse together and form a leak proof joint. Batteries are further checked on a leak tester to confirm the soundness of the sealing operation. This test consists of pressurizing the cell or battery and immersing in a water tank then batteries are subjected to Formation.d. Formation The assembled batteries are filled with a specified grades and quantity of sulphuric acid and left on stand to enable the absorbent separators to soak. Then electricity is passed through the grids for formation. During the formation, the active material on the positive plate is converted into lead oxide and is converted into spongy lead on the negative plate. Time of formation and charging current depends on the size and the number of the plates. After formation, the batteries are cleaned and the resealable vent plugs are fixed. Finished operations like labeling, stamping final cleaning and inspection are being carried out before packing. The mini-modules can be kept on mild steel racks or inside the system as per the requirement. e. Dispatch After completing the battery manufacturing, packed and labeled to that battery and transport to the various places.f. PastingAmong all the stages, we are mainly concentrating on the pasting of the plates. In pasting process we have some stages: The main aim of this process is to improve the life, performance and storage capacity of the battery. We achieve this by doing the process of curing and drying of the plates at some constant temperature. Curing Process:TEMPERATURE46C

HUMIDITY100%

DURATION16hrs

For curing the plates, we need to maintain the Constant Temperature and Humidity at some set value for some duration of time.Intermediate Drying Process:TEMPERATURE49C

HUMIDITY50%

DURATION8hrs

Dry Cycling: This is the final process where we maintain 0% Humidity and 80C temperature to eliminate the moisture.

How Battery Works: When your place the in your cars ignition and turn the ignition switch ON a signal sent to the battery. Upon receiving the signal, the battery takes energy that it has been strong in chemicals form and releases it as electricity power is used in crank the engine. The batteries also release energy to power the cars light and other accessories. It is the only device, which can store electrical energy in the form of chemical energy, and science it is called as a storage battery.

Sealed Maintenance Free (SMF) battery: Sealed maintenance free (SMF) batteries technology is leading the battery industry in the recent years in automobile industry and battery sector around the globe. SMF batteries come under the rechargeable battery category so it can be used a number of times the life of a battery. SMF batteries are more compact then the wet type batteries. It can be at any position, these batteries are very popular for portable power requirements and space constraint applications. The replacement market, on the other hand, is much longer. The replacement market is characterized by the presence of large unorganized sector, which constitutes around 55-60% of the total replacement market. This is possible due to low capital entry barrier. These players have the advantage of inapplicability of exercise duties and sales tax.

Industrial Batteries: Industrial batteries can be basically classified into main categories: Automotive Batteries Stationary Batteries The automotive batteries are used in electric vehicles and forklifts. The stationary batteries used in Telecom, Railway and power industries have registered a growth in excess of 20% and this trend in likely to be continuing in the next 5 years. The industrial segment is highly technology is an important factor land is vital for brand reference. The total demand for the industrial battery segment is met by indigenous production with a small saves of about 10% of by imports. The demand for industries has grown slowly & steadily.

Recycling of Batteries: Battery acid is recycled neutralizing it into water of converting it to sodium soleplate for laundry manufacturing. Cleaning the battery cases, melting the plastics and reforming it into pellets recycle plastic. Lead, which makes up 50% of every battery, is melted, poured into slabs and purified. Prospectus of SMF/VRLA Batteries in India:The following factors are influencing demand of VRLA Technology batteries: Entry of multinationals in telecom industry. DOTS policy decision to upgrade the overall technology base. Constraints in the use of conventional battery in radio paging and cellular segments.

Telecom: The government policy to increase the capacity from 10 million lines by 2006 increased the demand for storage batteries considerably. The value added services like radio paging and cellular will increase the demand for storage batteries in future considerably. Railway:In railways, the estimated demand is based on the annual post production which comes to 2500 numbers by railways itself and 1000 numbers more by various other segments, plus replacements demand and annual requirements for railway electrification. Power Sector:In power sector the estimated 90 private power projects which are expected to produce 40000 MV with approximate capital outlay of Rs.1, 40, 000 cores would keep the industry figured brighter in the coming years. The demand for VRLA batteries is in creased due to its performance over the conventional batteries. So it is more acceptable to the consumers.

Value Regulator Lead Acid Batteries: In the recent years in automobiles industry and battery sector around the globe VRLA batteries have become the preferred choice in various applications such as uninterrupted power supply, emergency lights, security systems and weighting scales. VRLA batteries are leak-proof, explosion resistant and having life duration of 15-20 years. These batteries with stand the environment conditions due to high technology, in built in the batteries. Each cell is housed in power coated steel tray making them convenient to transport and installation. So transits damages are minimized in case of these batteries.

General manufacturing process of a battery in ARBL

COMPANY PROFILE

Amara Raja Batteries Ltd Amara Raja Batteries Ltd incorporated under the Companies act 1956 in February 1985, and converted into public limited company on 6thSeptember 1990. Amara Raja Batteries Ltd is established by Mr. Rama Chandra N. Galla & the Chairman of Amara Raja Batteries LTD; He is a post graduate engineer with over 16 years experience in power systems as an electrical engineer in Nuclear and conventional source power generating stations across the USA. He holds an M.S. Degree in system science from Michigan state university. Ramachandra Galla worked in various capacities such as Sr. Electrical Engineer, Electrical Project Engineer, and Sr. Electrical Project Engineer for Sergeant & Lundy, Chicago, USA. He was involved in various Nuclear power plant projects. Amara Raja is having a technological Joint Venture with Johnson Controls INC (JCI), USA in the year 1991 who owns 26% stake in the company. JCI is a Leading battery manufacture in USA. Johnson Controls is a Fortune 500 company and also the largest manufacturer of lead acid batteries in North America and a leading global supplier to major automobile manufacturers and industrial customers. Amara Raja has its Registered Office and Head Office at Karakambadi near Tirupati in A.P. Karakambadi is located at an approximate distance of 12 kms from Tirupati. The manufacturing campus at Karakambadi is one of the most beautifully landscaped campuses and boasts of state of the art manufacturing facilities. Amara Raja has demonstrated its commitment to offer optimum system solution of the highest quality and has become the largest supplier of standby power systems to core India utilities such as the Indian Railways, Department of Telecommunications, Electricity Boards and major power generations companies.

About Johnson Controls Johnson controls inc. ranking 136th among the fortune 500 companies in the world a largest battery manufacturer in North America and second largest in the world. Forbes magazine praised it as Americas Best Technology Users. It had won the General Motors Supplied of the Year award as well as the Manufacturing Excellence award by National Association of Manufacturers. Being a leader in Auto Battery Market it become the OEM (Original Equipment Manufacturer) Supplier to Daimler Chrysler, Ford, Honda, Nissan and Toyota. Its after market includes Auto Zone, Interstate Battery, Sears and Wall-Mart. Amara Raja has demonstrated its commitment to offer optimum system solutions of the highest quality its and has become the largest supplier of standby power systems to core Indian utilities such as the Indian Railways, Department of Telecommunications, Extensive plans have been charted out for the future, wherein the company undertaken to become the most preferred supplier for power back-up systems.Amara Raja has offered time tested world-class technology and processes developed on International standards be it high integrity VRLA systems like Power Stack and Power Plus of the recently launched high performance UPS battery KOMBAT & AMARON HI-LIFE automotive batteries that are the products of the collaborative batteries efforts of engineers at Johnson patrols Inc. and Amara Raja. Amara Raja has offered time tested world-class technology and processes developed on international standards be it high integrity VRLA systems like power stack and power plus or the recently launched high performance UPS battery KOMBA T & AMARON HI-LIFE automotive batteries that are the products of the collaborative batteries efforts of engineers Johnson controls Inc. ARBL comprises of two major divisions viz., I. Industrial Battery Division (IBD)II. Automotive Battery Division (ABD)I. Industrial Battery Division (IBD) Amara Raja has become the benchmark in the manufacture of Industrial batteries. India as one of the largest and fastest growing markets for Industrial batteries in the world and Amara Raja is leading in the front with an 80% market share for standby VRLA batteries. It is also having the facility for producing plastic components required for Industrial batteries. ARBL is the first company in India to manufacture VRLA batteries (SMF). The company has set-up Rs.1920 Lakhs plant in 18 acres in Karakambadi village, Renigunta Mandal. The project site is notified under B category.Capacity: The capacity of IBD is 75 million ah. Customer Base: Telecom: Our Batteries power almost half of BSNL / MTNL exchanges. 70% of the Private Basic Service providers' exchanges (Siemens) More than 70% of the Cellular service providers' exchange (Nokia, Eric son) Telecom customers include: All ITI (Indian Technology Institutions) plants for In-house and switch requirements. BSNL / MTNL All NT Switch OEMs viz., Lucent, Alcatel, Siemens, Nokia, Ericsson etc., All C-DOT switch OEMs viz. BEL, BHEL, CGL, UTL, etc. All private Basic and Cellular service providers And all Network Integrators Power Control We provide Back-Up critical installations in Power generating Units and provide back-up power for transmission and distribution sub-stations like: Raichur Thermal Power station North Chennai Thermal Power station3. ARBL is an approved vendor for NTPC (National Thermal Power Corporation Ltd) / NHPC (National Hydro Power Corporation) and Power Grid Corporation Oil & Gas ARBL provides integrated solutions for renewable energy back-up power for ONGC's offshore platforms. The island of Lakshadweep is powered through Amara Raja Power Systems. Also provide back-up power for low power transmitters for Doordarshan. Motive Power ARBL is the country's first manufacturer of maintenance-free traction batteries used in Forklifts and Pallet trucks.

Our Customers:APC (American Power Control), Siemens (All type of power Supply Products) Eg: Switch Boards, Alstom (Power Projects) E.g.: Metro Line Delhi, Compton Greaves etc (Power Products). Defense ARBL introduced new technologies for back-up power in Defense, Police and Paramilitary communication systems.

UPS & EPABX: ARBL is the preferred suppliers for all leading UPS back-up manufacturers like APC, Numeric (India), DB Power, APLab, and Electronics & Controls etc. Our UPS batteries are the fastest growing battery brand since its launch in July 2002 with a nation-wide footprint of Sales and Service points and over 300, 000 batteries in use at over 10,000 customer sites. Railways ARBL pioneered the use of maintenance-free batteries in the Indian Railways. Over 50 % of Indian Railways' II and III Tier self-generation Air-conditioned coaches are powered by ARBL. Over 40% of Railway's Signaling and Telecom power supply solutions are provided by ARBL. Competitors The major competitors for Amara Raja Batteries products are Exide Industries Ltd., Hyderabad Batteries LTD., and GNB.II. AUTOMOTIVE BATTERY DIVISION (ABD)ARBL has inaugurated its automotive plant at Karakambadi in Tirupati on September 24th 2001 this plant is part of the most completely integrated battery manufacturing facility in India with all critical components, including plastics sourced in house from existing facilities in site. In this project Amara Raja strategic alliance partners Johnson controls, USA have closely worked with their Indian components required for automotive batteries. CAPACITY: With an existing production capacity of 5 lakh units of automotive batteries the new Greenfield plant will now be able to produce 3.5 million Batteries per annum. This is the first phase in the enhancement of Amara Raja production which the company has invested Rs.75 crores. In the next phase at an additional cost of Rs.25 Crores. Production capacity will increase to 5 million units estimated to complete around 1 year. After that ARBL will become the single largest facility for battery manufacture in Asia. PRODUCTS: Some of the products of ABD are Amaron Highlife Amaron Harvest Amaron Shield Amaron Hi-way Customers ARBL has prestigious OEM (Original Equipment manufacture) clients like FORD general motors, Daewoo motors, Mercedes Benz Daimler CHRYSLER, Maruti Udyog ltd premier Auto Ltd., and recently acquired a preferential supplier alliance with Ashok Leyland, Hindustan motors, Telco, Mahindra & Mahindra and Swaraz Mazda, Hyundai. Competitors: Exide industries Standard batteries Amco batteries Tudor India Amara raja batteries Hyderabad batteries

AMARA RAJA GROUP OF COMPANIES1. Amara Raja Batteries Limited (ARBL0), Karakambadi, Tirupati.2. Amara Raja Power System Pvt. Ltd. (ARPSL), Karakambadi, Tirupati.3. Harsha Electronics Pvt. Ltd. (HEPL), Karakambadi, Tirupati.4, Mangal Electro System Pvt. Ltd. (MESPL), Petimitta, Chittoor Dist.5. Amara Raja Electronics Pvt. Ltd. (AREPL), Dighavamagham, Chittoor Dist. Mile Stones of Amara Raja Batteries Ltd:1985 DEC - Foundation stone laid for Amara Raja.1992 MAY - Designed & implemented the most advanced battery manufacturing facility in India1997 FEB - Received the ISO 9001 certification1997 DEC - Commissioned own plastics & tool room sections1997 DEC - Joint venture with Johnson Controls 1999 MAY - Received QS 9000 certification2000 JAN - Launched Amaron automotive batteries2001 APRIL- launched the new corporate logo2001 SEP - Awarded the ISO 14001 certification New Corporate Logo launched2002 MAY - Commissioned phase 1of new automotive battery plant, with capacity of 2million 2002 JULY - Launched Quanta UPS batteries2002 AUG - Launched Amaron Hiway and Harvest batteries2004 MAR - Received Ford World Excellence Award2004 SEPT - Launched Amaron PRO, GO and FRESH automotive batteries2004 OCT - OE agreement with Maruti Udyog Ltd.2005 JUN - OE agreement with Hyundai motors.2005 - NK series Limited edition batteries Launch ARBLs Future Plans Maximizing the exports Emerge as global player Constant up gradation of products. Stream of new models. Constant stress on improving productivity. Awards for Amara Raja Batteries ltd Automotive Product of the year 2000 by Overdrive Creative Advertiser of the year '02 by ABBY Ford "World Excellence Award" Ford Q1 Award ISO-9001 in 1997RWTUV QS 9000 in 1999RWTUV ISO/TS 16949 in 2004RWTUV Quality benchmarks Best Business Practices as per JCI ISO 14001 in 2002RWTUV Part of the world's largest battery manufacturing alliance - Johnson Controls Inc., USA Largest manufacturer of standby VRLA batteries in South Asia Pioneered the widely used VRLA batteries for industrial application in India Amara Raja Batteries Ltds Strengths: Proven technology from GNB and Johnson Control Inc being a pioneer Strong and well organized customer base. Full-organized infrastructure in place. Manufacturing facilities perceived as a benchmark in India. Complete range of VRLA batteries.

MISSION AND VISION Mission Mission, mantra, way of thinking, philosophy, what we live for call it what you want, you'll find it below. Introduce yourself to the way we think. "To transform our spheres of influence and to improve the quality of life by building institutions that provide better access to better opportunities, goods and services to more peopleall the time.

Vision-2025 Through the amararaja way and through ensuring progressive partnership we will be a global leader in. batteries and battery technologies and dominant player in Indian Ocean.

INTRODUCTION 1.1 Introduction Management must be concerned with all aspects of the firms operations including production of goods, delivery of services, sales, marketing activities and supporting functions such as personal training and data processing to handle these responsibilities most firms make extensive use of financial data and reports. As businesses become larger and more complex finance assumed the responsibility of dealing with problems and decisions associate with managing firms assets.Inventory in wider sense, is defined as any idle resource of an enterprise. It is a physical stock of goods kept dept for the purpose of future affairs. The term is generally used to indicate raw materials in process, finished products, packing, spares and others stocked in order to meet expected demand or distribution in the future. Inventories constitute the major element in the working capital of many business enterprises. Inventories constitute the most significant part of current assets of large majority of companies in India. On an average, inventories are approximately 60 % of current assets in public limited companies in India. Because of the large size of inventories maintained by firms, a considerable amount of funds is required to be committed to them. It is impossible for a company reduces its levels of inventories to a considerable degree, e.g., 10- 20 %, without any adverse effect on production and sales, by using simple inventory planning and control techniques. The reduction in excessive inventories carries a favorable impact on a companys profitability.

Meaning of inventory Inventory is a tangible property held for sale, or materials used in a production process to make a product. The dictionary meaning of inventory is stock of goods or a list of goods. Meaning of Inventory management Inventory management involves the control of assets being produced for the purpose of sale in the normal course of the companys operations.

Definition of Inventory The term inventory has been defined by The American institute of Accountants, As the aggregate of those items of tangible personal property which are held for sale in the ordinary course of business, process of production for sales control currently consumed in the production of goods or service to be available for sale.

Definition of inventory management:-Good planning is good inventory management and good inventory management is good financial management.-S. K. Kuchal Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock by a business. It is also used for a list of the contents of a household and for a list for testamentary purposes of the possessions of someone who has died.

Nature of Inventories Inventories are stock of the product a company is manufacturing for sale and components that make a product. The various forms in which inventories exist in a manufacturing company are: raw materials, work in process & finished goods. Raw Materials: Raw materials are those basic inputs that are converted into finished product through the manufacturing process. Raw materials inventories are those units which have been purchased and stored for future productions. Work-in-process: Work-in-process inventories are semi-manufactured products. They represent products that need more work before they become finished products for sale. Finished Goods: Finished goods inventories are those completely manufactured products which are ready for sale. Stocks of raw materials and work-in-process facility production, while stock of finished goods is required for smooth marketing operations. Thus, inventories serve as a link between the production and consumption of goods.

Importance of Inventory Sufficient inventory for production sale process. Proper determination of profit True financial position Methods of inventory valuation FIFO LIFO HIFO BASE STOCK METHOD INFLATED PRICE METHOD SPECIFIC IDENTIFICATION METHOD AVERAGE COST MARKET PRICEThe ARBL using the FIFO method for physical issue and weighted average method for valuation. Inventory Management Techniques In managing inventories, the firms objective should be in consonance with the shareholders wealth maximization principle. To achieve this, the firm should determine the optimum level of inventory. Efficiently controlled inventories make the firm flexible. Inefficient inventory control results in unbalanced inventory and inflexibility the firm may sometimes run out of stock and sometimes may pile up unnecessary stocks. This increases the level of investment and makes the firm unprofitable. Some of the techniques are as follows: EOQ (Economic order quantity) The economic order quantity is that inventory level, which minimizes the total of ordering costs and carrying costs. It is the question, how much to order the quantity when inventory is replenished. If the firm buying raw materials, this is to purchase the quantity of each replacement and if it has to plan for production run, it is how much production to schedule. It may be solved through EOQ.

EOQ = 2AO / CWhere A = Quantity required O = Ordering cost C = Carrying cost ABC Analysis (Activity Based Control) This is one of the widely used techniques to identify various items of inventory for the purpose of inventory control. It is very effective and useful tool for classifying monitoring and control of inventories a firm should not keep same degree of control on all the items of inventories. It is based on paretols law. It is also known as selectivity inventory control. The firm should put maximum control on those items whose value is the highest with the comparison of other two items the technique concentrated on important items and is also known as control by importance and exception.Under ABC analysis the materials are divided into three categories A, B, C.Past experience have shown that 15 % of the items contributes to 70 % of value of consumption and this category is called A.About 30 % of the items to contribute to 20 % of value of consumption and this category are called B.Category C covers about 55 % of items materials which contribute only 10 % of value of consumption. FSN Analysis (fast, slow, non moving) Fast moving, slow moving & non moving classification is based on the pattern of issues from stores and is useful in controlling obsolescence. Date of receipt or last date of issue, whichever is later is taken to determine the no. of months which have lapsed since the last transaction. The items are usually grouped in periods of 12 months it has to avoid investments in non moving or slow items. It is also useful in facilitating timely control. For analysis, the issues of items in past two or three years are considered. If there are no issues of an item during the period, it is N items, then up to certain limit, say 10 15 issues in the period, the item is S item. The items exceeding such limit of no. of issues during the period are F items. The period of consideration & the limiting no. of issues vary from organization to organization. VED Analysis VED: Vital, Essential & Desirable classification VED classification is based on the criticality of the inventories. A vital item its storage makes cause havoc & stops the work in organization. They are stocked adequately to ensure smooth operations.Essential items here, responsible risk can be taken. If not available, the plant does not stop; but the efficiency of operations is adversely affected due to expediting expanses. They should be sufficiently stocked to ensure regular flow of work.Desirable items its non availability does not stop the work because they can be easily purchased from the market as & when needed. They may be stocked very low or not stocked. Ratio Analysis The ratio analysis is one of the most powerful tools of financial analysis. It is the process of establishing and interpreting various ratios. It is with the help of ratios that the inventory management can be analyzed. More clearly and decision made from such analysis. Following ratios are used in the study. INVENTORY MANAGEMENT CONCEPT & CONTEXT

Inventory Management The amount of investment is sometimes more in inventory than in other assets. About 90% part of working capital invested in inventories. A proper planning of purchasing, handling, storing and accounting should form a part of inventory management. An efficient system of inventory management will determine, What to purchase How much to purchase From where to purchase, and Where to store.

Components of Inventory

Components of inventory

Work in progressStores and sparesFinished productsRaw materials

Raw materials: Raw materials are those inputs that are converted into finished goods through a manufacturing or conversion process. These form a major input for manufacturing a product.Work In Progress: Work in progress is a stage of stocks between raw materials and finished goods. Work in progress inventories are semi-finished products. They represent products that need to under go some other process to become finished goods.Finished Products: Finished products are those products, which are completely manufactured and ready for sale. The stock of finished goods provides a buffer between production and market.Stores And Spares: Stores and spares inventory are purchased and stored for the purpose of maintenance of machinery. Need to Hold Inventories They are three general motives for holding inventories. Transaction motive: Transaction motive includes production of goods and sale of goods. Transaction motives facilities uninterrupted production and delivery of order at a given time. Precautionary motive: This motive necessitates the holding of inventories for unexpected changes in demand and supply factors. Speculative motive: This compels to hold some inventories to take the advantage of changes in prices and getting quantity discounts.

Importance Of Inventory Management Inventory helps in smooth and efficient running of business. Inventories provide service to the customers immediately. Due to absence of stock, the company may have to pay high prices because of piece-wise purchasing. Maintaining of inventory may earn price discount because of bulk purchasing. Inventory also acts as buffer stock when raw materials are received late and so many sales orders are likely to be rejected. Inventory also reduces product costs because there is an additional advantage of batching and long smooth running production runs.

Types of Inventory Movement inventories Buffer inventories Anticipation inventories Decoupling inventories Cyclic inventories Movement Inventories Movement inventories are also called transit (or) pipeline inventories. Their existence owes to the fact that transportation time is involved n transferring substantial amount of resources. An industrial town by trains, Then the coal, while in the transit cannot provide any service to the customers for power generation. Buffer Inventories Buffer inventories are held to protect against the uncertainties of demand and supply. An organization generally knows the average demand for various items that it needs. The actual demand may not exactly match the average and could hell exceed it. To meet with this kind of situation inventories may be held in excess of the average for expected demand. Similarly the average delivery time may be known. But unpredictable events could cause the actual delivery time to be more than the average. Thus excess stock might be kept in order to meet demand during the time for which the delivery is delayed. These inventories which are in excess of those necessary just to meet the average demand, held for protecting against the fluctuations in demand and lead-time are known as safety stocks. Anticipation Inventories Anticipation inventories are held for the reason that a future demand for the product is anticipated. Production of specialized crackers well before Dewily, Umbrellas and raincoats before rains, fans while summers are approaching.

Decoupling Inventories The Decoupling inventory is to be decoupled (or) disengage, different parts of the production system. Different machines and people normally work at different rates some slower and faster.A machine, for example might be producing half the output of the machine on which the item being handled is to be processed. The next inventories in between the various machines are held in order to disengage the processing on those machines in the absence of such inventories, different machines and people cannot work simultaneously on a continuous basis. When such inventories are held, then even if a machine breakdowns, the work on others would not stop. Cycle InventoriesCycle inventories are held for the reason that purchases are usually made in lots rater than for the exact amounts which may be needed at a point of time. If purchases are made exactly as and when the item is required, there would be no cycle inventories.But practically, purchases are made in lots, the reason being that if purchases are made frequently and in small numbers then the cost involved in obtaining the items would be very large. Meaning of Inventory Control:Inventory control is a system, which ensures the provisions of the required quality of inventories of required quality at the required time with the minimum amount investment. Thus the function of inventory control is to obtain the maximum inventory turn over with sufficient stock to meet all requirements. Purpose of Inventory Control: The need of controlling inventory is expressed as below. To improve customer services. Permits purchase and transaction economics. Transportation economics. Hedge against price fluctuations. Production economics. Hedge against demand uncertainties. Protects against demand and lead time uncertainties. Factors Influencing Inventory Control: To control the inventory How much to buy at one time? When top buy this quantity?Following four fundamentals factors govern for these questions. Requirements break down time wise. Quantity in stock or on order. Procurement time or lead time. Obsolescence. Factors to be considered when establishing the Control Levels: Average consumption or production requirements Reordering periods-the time between raising an order and receiving delivery of goods. Storage space available Market conditions Likely life of stock-bearing in mind the possibility of loss through determination or obsolescence and The cost of placing orders including generating and checking the necessary paper work as well as physical checking and handling procures.The key issue for a business is to identify the fast and slow movers with the objectives of establishing optimum stock levels for each category and, therefore minimize the cash tied up in stocks. Control policies should include designating responsibility for raising and authorizing orders, signing delivery notes and authorizing payment of invoices.

Stores (or Material) RecordsThe bin cards an the stores ledger are the two important stores records that are generally kept for making a record of the various items of stores.a) Bin Card. A bin card makes a recode of the receipt and issue of material and is kept for each item of stores carried. Quantity of stores received is entered in the receipt column and the quantity of stores issued is recorded in the issue column of the bin card and a balance of the quantity of stores is taken after every receipt or issue, so that the balance at any time can readily seen. These cards are maintained by the storekeeper and the storekeeper is answerable for any difference between the physical stock and the balance shown in the bin card. These cards are used not only for recording receipts and issues of stores but also assist the storekeeper to control the stock. For each item of stores, minimum quantity, maximum quantity and ordering quantity are stated on the card. By seeing the bin card, the storekeeper can send the material requisition for the purchase of material in time. A bin card is also known a bin tag or stock card and is usually hung up or placed in shelf, rack or bin where the material has been kept. Bin cards can also be in the form of loose sheets which can be maintained in a ledger kept in the stores.b) Double Bin System. Some concerns divide the bin, rack or shelf (where material has been kept) in two parts, namely, the smaller part to store the quantity equal to the minimum quality and the other part to store the remaining quantity. The quantity in the smaller part is not issued so long as the quantity is available in the other part. This system helps in exercising stores control in an effective way as it facilitates physical verification and services as a signal when it becomes necessary to use the quantity kept in the smaller part. Stores Ledger. This ledger is kept in the costing department and is identical with the bin card except that receipts, issues and balances are shown along with their money values. This contains an account for every item of stores and makes a record of the receipts, issues and the balances, both in quantity and value.

Bin Card vs. Stores Ledger. The difference between a bin card and the stores ledger can be summarized as follows:

Bin CardStores Ledger

1. A record of quantities only.2. Maintained by the storekeeper.3. Normally posted just before the transaction takes place.4. Each transaction is individually posted.

1. A record of both quantities and values.2. Maintained by the Costing department.3. Always posted after the transaction takes place.4. Transactions may be summarized

Other Factors Involved In Inventory Analysis:

Demand: Demand is the number of units required per period and may be either known exactly or known exactly or known in terms of probabilities or be completely unknown. Further if the demand is known, it may be either fixed or variable per unit time. Problems in which demand is known and fixed are called deterministic problems whereas those problems in which demand is assumed to be random variables are called stochastic or probabilistic problems. Lead Time:The time gap between placing of an order and its actual arrival in the inventory of an item demands upon the length of its lead time. The longer the lead time the higher is the average inventory. Lead time has two components namely. Administrative lead time-from initiation of procurement action until the placing of an order. Delivery leads time-placing of an order until the delivery of the ordered materials.

Order Cycle:The time period between placements of two successive orders is referred to an order cycle. They may be placed on the basis of the following two types of inventory review systems.

Stock LevelsFor efficient material control and to avoid overstocking and under stoking of materials, an important requirement is to decide upon various levels of materials these levels are maximum level, minimum level and re-order level. By making action on the basis of these levels, each item of material will automatically be held with in appropriate limits of control. These levels are not permanent but need revision according to the changes in the factors which determine these levels. Factors: The following factors help in the fixation of these levels. Rate of consumption of materials. Lead the time, i.e., time lag. Storage capacity. Availability of funds investment in inventories. Cost of storage. Risk of loss due to deterioration theft fire etc. Seasonal factors- certain materials are cheaply available during certain seasons. Fluctuations in market prices. Insurance costs. Maximum Level:The maximum stock level is that quantity of materials above which the stock of any item should not generally be allowed to go up. This maximum level may be exceeding in certain special cases. For instance, if a particular lot is purchased at a reasonably low price, the maximum level is crossed. This level is fixed after taking into account such factors as: Rate of consumption of material. Amount of capital needed and available. Storage space available. Incidence of insurance costs which may be important for some materials. Costs of storing above normal stock. Risk of obsolescence and deterioration and Re-order quantity. Danger Level:It is that level below which stock not be allowed to except under emergency conditions. When stock reaches this level urgent action for purchases is initiated. Danger level = Average consumption *Maximum re-order period for emergency purchases.Danger level is below the minimum level. But some firms prefer to fix the danger level above the minimum level and below the re-order level. However fixing danger level below the minimum level is meant for taking corrective action where as fixing it above the minimum level is for preventive action.The formula for computing maximum level is follows:Maximum level= Re-order level + Re-order quantity-(Minimum Consumption* Minimum re-order period) Minimum Level:The minimum level is that level of stock below it should be normally be allowed to fall. This is essentially a safety stock and will not normally be touched. In case of nay item falling below this level, there is danger of stoppage in production and, therefore, management should give top priority to the acquisition of new supplies. This level is fixed after the consideration if the following factors. Rate of consumption, and The time required under top priority to acquire enough supplies to avoid a stoppage in production.Minimum Level = Re-order level (Normal Consumption* Normal reorder period). Re-order Level:This is that level of materials at which a new order for materials is to be placed. In other words this is the level at which a purchase requisition is made out. It is fixed after the consideration of the following factors. Rate of consumption. Minimum level. Delivery time. Variation in delivery time.Re-order level = (Maximum Consumption * Maximum re-order period).

Average stock level:Average stock level = Minimum level + (1/2 of Re-order quantity).Average stock level = (1/2) * (Minimum level + Maximum level).

Methods of Materials Issue:

First In First Out (FIFO):The materials which are received first are issued first and therefore there flow of cost of materials should also be in the same order. Issues are priced at the same basis until the first batch received is used up after which the price of the next batch received becomes the issue price. Upon this batches being fully used for pricing and so on. In other words, the materials issued are priced at the oldest cost price listed in the store ledge account and consequently the materials in hand are valued at the price of the latest purchase. In Amara Raja batteries they are First in First Out method for issuing of raw materials from stores to the production/manufacturing unit. Last In First Out (LIFO):The latest receipts of materials are issued first for production and the earlier receipts are issued last. It uses the price of the last batch received for al the issues until all units from this batch have been issued after witch the price of the previous batch received becomes the issue price. Usually however, a new delivery is received before the first batch in fully used, in which case the new delivery price becomes the last in price and is used for pricing issues until either the batch exhausted or a new delivery is received.

Highest In First Out (HIFO):In this method, issues are always valued at the highest price of the receipt. This rate continues either until the material at that high price is exhausted, after which the next highest price is used a until a new batch of materials is received at a rate which is higher than the previous high rate. Closing stock under this method airwaves remains at the minimum cost. This method however has not been widely adopted.

Tools and Techniques / Controls of Inventory Management Financial manager should aim at determination of optimum inventory level based on costs and benefits to maximize shareholders wealth. Inventory management problems can be handling by mathematical techniques. The major problem areas are, classification problem to determine the type of control required, order quantity problem, and order point problem, determination of safety stocks. But these are more suitable parts of production and operation management. Financial manager needs to be familiar with these techniques because of inventory management involves financial costs use of particular technique depends on the convenience of the company. These inventory control techniques may be used by to provide maximum customer service at a minimum cost. Some of inventory control techniques are ABC Analysis EOQ FSN Ratio analysis ABC Analysis is an important factor in controlling the inventory. It is very effective and useful tool for classifying monitoring and control of inventories. The firm should not keep same degree of control on all the items of inventory. It is based on paretols law; It is also known as selective inventory control. The firm should put maximum control on those items whose value is the highest, with the comparison of the other two items. The technique concentrates on important items and also known as control by importance and exception usually a firm has to maintain several types of inventories for proper control of they firm should have to classify inventories in the instance of their relative value. Hence it is also known as proportional value analysis.Under ABC Analysis the materials are divided into three categories like A,B,C 10% of the items contributes to 70% of value consumption this category is called A Category. About 20% of the items contribute to 20% of value of consumption this is known as category B materials category C Covers about 70% of items of materials which contribute only 10% of value of consumption.A-B-C Analysis helps to concentrate more efforts on category A. An attention should be paid in estimating requirements purchasing, maintaining safety stock and properly storing of A category materials. These items are kept under a constant review so that a substantial material cost may be controlled.The control of C items may be relaxed and these stocks be purchased for the year. A little more attention should be given towards B Category items and their purchase should be undertaken at quarterly (or) half yearly.Table 2.1.1: Classification of A, B &C itemsClassNo. of itemsValue of items (x)

A1070

B2020

C7010

Economic Order QuantityEOQ is an important factor in controlling the inventory. It is a quantity of inventory which can reasonably be ordered economically at a time. It is also known as standard order quantity.Ordering cost, and carrying costs are taken in to consideration ordering cost are basically the cost of getting an item of inventory and it includes the cost of placing an order carrying includes cost of storage facilities.Meaning of EOQ: Economic Order Quantity refers to that level of inventory at which the total cost of inventory is minimum. The total inventory cost comprising ordering and carrying cost. Shortage costs are excluded in adding total cost of inventory due to the difficulty in computation of shortage cost EOQ also known as Economic lot size.Assumptions Demand for the product is constant and uniform throughout the period. Head time is constant Price per unit of product is constant Inventory holding cost is based on average inventory Ordering costs are constant All demands for the product will be satisfied.EOQ formulaEOQ can be obtained by adopting two methods. Trail and error approach Simple mathematical formula.The formula is EOQ = 2AO C Where, A = Annual usage C= Carrying cost per unit O = Ordering cost per unitThe above formula will not be sufficient to determine EOQ when more complex cost equations are involved. EOQ applicable both the single items and to any group of stock items with similar holding and ordering costs. Its use causes the sum of the two costs to be lower than under any other system of replenishment. FSN ClassificationUnder this technique inventory is classified based on movement of inventories from stores. FSN stands for fast moving (F), slow moving(S), and Non-moving (N). This technique particularly involved in inventory useful for avoiding obsolescence. Whether a particular inventory is fast moving or not the date of receipt or last date of issue, whichever is later, is taken, which have lapsed since the last transaction.The items are usually grouped in periods of 12 months. Active moving inventory need to be reviewed regularly and surplus items. Which have to be examined further Non-moving items may be examined further and their disposal can be considered. Ratio Analysis The ratio analysis is one of the most powerful tools of financial analysis. It is the process of establishing and interpreting various ratios. It is with the help of ratios that the inventory management can be analyzed. More clearly and decision made from such analysis. Following ratios are used in the study.1) Inventory Turnover Ratioa) Raw Materials Turnover Ratiob) Work-In-Progress Turnover Ratioc) Finished Goods Turnover Ratio2) Raw Material Holding Period3) Work-In-Progress Holding Period4) Finished Goods Holding Period5) Inventory Holding Period1) Inventory Turnover Ratio: inventory turnover ratio is a ratio that establishes the relationship between cost of sales and average inventory. It indicates whether the investment in inventory is within proper limit or not.

Cost of goods sold Inventory Turnover Ratio = -------------------------------------- Average inventory

Opening stock + Closing stock Average inventory = ----------------------------------------- 2a) Raw Materials Turnover Ratio Cost of Materials ConsumedRaw Materials Turnover Ratio = ----------------------------------------- Average stock of raw materials

b) Work-In-Progress Turnover Ratio Cost of goods manufactureWork In Progress Turnover Ratio = ------------------------------------------ Average stock of work in progress

c) Finished Goods Turnover Ratio Cost of goods soldFinished Goods Turnover Ratio = ------------------------------- Average Stock of finished goods

2) Raw Materials Holding Period Days in a yearRaw Materials Holding Period = ---------------------------------------- Raw Materials Turnover Ratio

3) Work-In-Progress Holding Period Days in a yearWork-In-Progress Holding Period = ------------------------------------------- Work-In-Progress Turnover Ratio

4) Finished Goods Holding Period Days in a yearFinished Goods Holding Period = ------------------------------------------ Finished Goods Turnover Ratio

5) Inventory Holding Period Days in a yearInventory Holding Period = ------------------------------------------- Inventory Turnover Ratio

DATA ANALYSIS &INTERPRETATION

A. ABC ANALYSIS: TABLE 4.1 ABC Classifications for the year (2006-2007)ClassValue% of valueCumulative %Items

A168031525454102

B87855152983151

C527605017100327

30864717

GRAPH 4.1 Graphical Representation of ABC analysis

INTERPRETATION:In the year 2006-07 , there Are 102 items which constitutes their value of 54%, in the total value which comes under Acategory.151 items which constitutes 29% in the total value which comes under B category and 327 items which constitutes 17% in the total value which comes under C category.

TABLE 4.2 ABC classification for the year (2007-2008)ClassValue%cumulative %Items

A67963606909069

B6330760898124

C15382542100385

75832620



TABLE 4.3 ABC classifications for the year (2008-2009)

ClassValue%cumulative %Items

A73880742919192

B6858300899176

C8626671100310

81601709



TABLE 4.4 ABC classifications for the year (2009-2010)

classvalue%cumulative %Items

A375515268969610

B1204949539936

C39357101100532

391500473

GRAPH 4.4 Graphical Representation of ABC analysisINTERPRETATION:

In the year 2009-10 , there Are 10 items which constitutes their value of 96%, in the total value which comes under Acategory.36 items which constitutes 3% in the total value which comes under B category and 532 items which constitutes 1% in the total value which comes under C category.

TABLE 4.5 ABC classification for the year (2010-2011)

ClassValue% of valueCumulative %Items

A61,060,68142.8740342.874037

B52,913,62937.1535480.0275665

C28,444,50919.972441001378

Total142,418,8191001450


INTERPRETATION:In the year 2010-11 , there Are 7 items which constitutes their value of 42.87% in the total value which comes under Acategory.65 items which constitutes 37.15% in the total value which comes under B category and 1378 items which constitutes 19.97% in the total value which comes under C category.

B. Ratio analysis:4.6 Raw material turnover ratio

PERIODRAW MATERIAL CONSUMED (Rs)AVERAGE RAW MATERIAL (Rs)RATIO VALUE

2006-07393781245422633314617.39

2007-08779479467546627007516.71

2008-09845305526347593432417.76

2009-1098625897552312948818.85

2010-1110983459834569154881819.30

4.6. Graphical Representation of Raw material turnover ratio

INTERPRETATION: In the above data indicates that raw material turnover ratio is 17.39 times in the year 2006-07 and it is decreased 16.71 in the year 2007-08.then it is increase to 17.76 in the year 2008-09, again it is increased to 18.85 in the year 2009-10 again it is increased to 19.30 in the year 2010-11.it can be conclude that raw material turnover ratio has improved even with increased requirement of raw material and business volatilities.

4.7 WORK-IN-PROCESS TURNOVER RATIO

PERIODCOST OF PRODUCTION (Rs)AVERAGE WORK-IN- PROCESS (Rs)RATIO VALUE

2006-07478061787125310398518.89

2007-08923695605847812124219.32

2008-09992811385458120825117.08

2009-1010878654391623328567717.45

2010-1112656892562675823651418.73

4.7Graphical Representation of work in process turnover ratio

INTERPRETATION: In the above data indicates that work-in-process ratio is 19.32 times in the year 2007-08 and it is decreased to 17.80 in the year 2008-09. Then it is increase to 17.45 in the year 2009-2010, again it is increased to 18.73 in the year 2010-11. We can conclude that Work-in-progress turnover ratio has improved in the year 2010-11 compare to previous.

4.8 FINISED GOODS TURNOVER RATIOPERIODCOST OF GOODS SOLD (Rs)AVERAGE FINISED GOODS (Rs)RATIO VALUE

2006-2007595801640412085939849.29

2007-20081083325690427779772638.99

2008-20091317723004738904356333.87

2009-201013945268712389041356335.85

2010-201114256394874395689741236.03

4.8Graphical Representation of finished goods turnover Ratio

INTERPRETATION: In the above data indicates that finished goods turnover ratio is 49.29 times in the year 2006-07 and it is decreased 38.99 in the year 2007-2008.then it is decrease to 33.87 in the year 2008-09, again it is increased to 35.85 in the year 2009-10, again it is increased to 36.03 in the year 2010-11.it can be conclude that finished goods turnover ratio has improved even with increased requirement of finished goods and business volatilities.

4.9 INVENTORY TURNOVER RATIOPERIODNET SALES (Rs)AVERAGE INVENTORY(Rs)RATIO VALUE

2006-200759580164047468378187.97

2007-20081083325690414325245607.56

2008-20091317723004717758021897.42

2009-201073541240054603219001012.19

2010-201192190112510718672001012.82

4.9 Graphical Representation of Inventory turnover Ratio

INTERPRETATION: In the above data indicates that inventory turnover ratio is 7.97 times in the year 2006-07 and it is decreased 7.56 in the year 2007-08. Then it is decrease to 17.42 in the year 2008-09. It is increased to 12.19 in the year 2009-2010 again it is increased to 12.82 in the year 2010-11. It can be conclude that inventory turnover ratio has improved even with increased requirement of inventory and business volatilities.COMPARISION OF TURNOVER RATIOS:

4.10 STATEMENT SHOWING COMPARISION OF TURNOVER RATIOSTURNOVER RATIO2006 072007 - 082008 - 092009 - 102010 - 11

Raw material17.3916.7117.7618.8519.30

Work-in-process18.8919.3217.0817.4518.73

Finised goods49.2938.9933.8735.8536.03

Inventory7.977.567.4212.1912.82

INTERPRETATION: In the above data indicates the inventory turnover ratio is Decreased some extent increased to year by year like 2006-07, 2007-08 and 2008-09.But it is increase in the year 2009-10 and 2010-11. Inventory turnover ratio is declined for year by year. That is company production is also declined subsequently sales are also declined. 4.11 RAW MATERIALS HOLDING PERIOD

PERIODNO.OF DAYSRAW MATERIAL TURNOVER RATIOHOLDING PERIOD(In days)

2006-200736517.3920.98

2007-200836516.7121.84

2008-200936517.7620.55

2009-201036518.8519.36

2010-201136519.3018.91

INTERPRETATION: The above table indicates that the raw material holding period for the financial year 2006-07 is 21 days, for 2007-08 is 22 days for 2008-09 is 21 days for 2009-10 is 19 days and the financial year 2010-11 is 19 days.4.12 WORK-IN-PROCESS HOLDING PERIOD PERIODNO.OF DAYSWORK-IN-PROCESS TURNOVER RATIOHOLDING PERIOD

2006-0736518.8919.32

2007-0836519.3218.89

2008-0936517.0821.37

2009-1036517.4520.91

2010-1136518.7319.48

INTERPRETATION: The above table indicates that the work-in-process holding period for the financial year 2006-07 is 19.32 days, for 2007-08 is 18.89 days for 2008-09 is 21.39 days for 2009-10 is 20.91 days and the financial year 2010-11 is 19.48 days.4.13 FINISED GOODS HOLDING PERIODPERIODNO.OF DAYSFINISED GOODS TURNOVER RATIOHOLDING PERIOD

2006-0736549.297.40

2007-0836535.9910.14

2008-0936533.8710.77

2009-1036535.8510.18

2010-1136533.0311.05

INTERPRETATION: The above table indicates that the finished goods holding period for the financial year 2006-07 is 7.4 days, for 2007-08 is 9.36 days for 2008-09 is 10.77 days for 2009-10 is 10.18 days and the financial year 2010-11 is 10.13 days.4.14INVENTORY HOLDING PERIODPERIODNO.OF DAYSINVENTORY TURNOVER RATIOHOLDING PERIOD

2006-073657.9745.79

2007-083657.5648.28

2008-093657.4249.19

2009-1036512.1929.94

2010-1136512.8228.47

INTERPRETATION: The above table indicates that the Inventory holding period for the financial year 2006-07 is 45.79 days, for 2007-08 is 48.28 days for 2008-09 is 49.19 days for 2009-10 is 29.94 days and the financial year 2010-11 is 28.47days.4.15COMPARISION OF HOLDING PERIODHOLDING PERIOD2006-072007-082008-092009-102010-11

RAW MATERIAL20.9821.8420.5519.3618.91

WORK-IN-PROCESS19.3218.8921.3720.9119.48

FINISED GOODS7.4010.1410.7710.1811.05

INVENTORY7.977.567.4212.1912.82

INTERPRETATION: The above table indicates the raw material, work-in-process, finished goods and inventory holding period is little change to year by year like 2006-07, 2007-08, 2008-09, 2009-10 and 2010-11 respectively.

C.EOQ Analysis4.16 ECONOMIC ORDER QUANTITY ON YEAR (2006-07)

DescriptionAnnual consumptiontotal Ordering costcarrying costEOQ

9075-6CL WINDOW GREY TRAY76,216,3202680011.78588889.4

FRPPCPV0 DARK GREY COLOUR75,391,4632200010.012575608.24

1775-6CL WINDOW GREY TRAY19,118,1602680012.65284616.57

PRESSURE RELIEF VALVE VENT SEAL(PS)11,267,376202009.56218209.23

SULPHURIC ACID(CP)1.245 @27 Deg.C10,889,934286006.5309566.5

26Ah PPCP SILVER COVER9,767,363106001.08138468.39

42Ah PPCP SILVER COVER7,627,955106002.78241184.61

Rubber sleeve for 20X2mm connector5,646,62095203.56173781.18

BLACK MASTER BATCH3,169,6362260010.45117088.91

BARIUM SULPHATE2,291,535160004.56126810.67

PVC Shim Roll 175(W) x 0.3(T)2,161,964196002.2196270.9

.

INTERPRETATION:In the year 2006-07 indigeneous items like windows grey trey, dark grey color are having high EOQ. Sulphuric acid is slightly increased. So that you can see the EOQ for all items. 17 ECONOMIC ORDER QUANTITY ON YEAR (2007-08)4.DescriptionConsumptionValuetotal Ordering cost (Rs)carrying cost(Rs)EOQ

9075-6CL WINDOW GREY TRAY10,531,424.00

2400011.78206,976.03

FRPPCPV0 DARK GREY COLOUR8,441,492.872000010.01183,663.38

1775-6CL WINDOW GREY TRAY5,628,480.002260012.65141,814.13

SULPHURIC ACID(CP)1.245 @27 Deg.C1,646,499.10198009.5682,584.66

PRESSURE RELIEF VALVE VENT SEAL(PS)1,313,875.91254006.50101,333.33

42Ah PPCP SILVER COVER699,216.9692001.08109,144.79

PVC Shim Roll 175(W) x 0.3(T)562,956.3084002.7858,326.97

26Ah PPCP SILVER COVER478.0076503.561,433.29

BLACK MASTER BATCH2,042.472010010.452,803.06

BARIUM SULPHATE10,364.11130004.567,687.23

Rubber sleeve for 20X2mm connector3,062.00150002.206,461.77

of Economic 4. 18 Graphical Representation Order Quantity

Interpretation:In the year 2007-08 graph you can see that window grey trey, sulphuric acid,were used in a lot as compared to 2006-07 the window grey trey carrying cost was as same. Where it shows effect on increase in consumption of rawmaterial, this inturn results in increase in EOQ. Total inventory cost will be increased.4.19 ECONOMIC ORDER QUANTITY ON YEAR (2008-09)

DescriptionAnnual consumptiontotal Ordering cost(Rs)carrying cost(Rs)EOQ

FRPPCPV0 DARK GREY COLOUR10,715,683.2925,000.0011.78213266.3

1775-6CL WINDOW GREY TRAY10,219,086.6818,000.0010.01191708

9075-6CL WINDOW GREY TRAY6,811,081.4721,200.0012.65151093.5

PRESSURE RELIEF VALVE VENT SEAL(PS)1,131,695.1018,000.009.5665281.03

26Ah PPCP SILVER COVER636,410.1821,400.006.5064734.19

42Ah PPCP SILVER COVER623,422.818,500.001.0899061.27

PVC Shim Roll 175(W) x 0.3(T)616,506.387,500.002.7857675.58

BARIUM SULPHATE505,350.788,500.003.5649124.21

BLACK MASTER BATCH250,111.2319,000.0010.4530157.82

SULPHURIC ACID(CP)1.245 @27 Deg.C137,294.7715,000.004.5630054.1

Rubber sleeve for 20X2mm connector

123,520190002.2014606.5

4. 20 Graphical Representation of Economic Order Quantity

Interpretation:In the year 2008-09 graph you can see that window grey trey, sulphuric acid,were same in a lot as compared to 2007-08 the window grey trey was as same.as there was no change in cosumption value, and ordering cost, there is no change in EOQ value. The effect of EOQ is same as 2007-2008.

4.21 ECONOMIC ORDER QUANTITY ON YEAR (2009-2010)

DESCRIPTIONANNUAL COSUMPTIONORDERING COST(Rs)CARRYING COST(Rs)EOQ

1775-6CL WINDOW GREY TRAY116528912850012.56229963.7861

9075-6CL WINDOW GREY TRAY102563652160011.25198455.1375

FRPPCPV0 DARK GREY COLOUR88110522250013.5171377.2836

PRESSURE RELIEF VALVE VENT SEAL(PS)2250653201459.6596936.9270

26Ah PPCP SILVER COVER837520232127.5571762.1425


PVC Shim Roll 175(W) x 0.3(T)69845286542.8265473.7434

BARIUM SULPHATE58269592003.2557436.4880

BLACK MASTER BATCH3658402245010.8538909.3428

SULPHURIC ACID(CP)1.245 @27 Deg.C125612162505.527244.3155

INTERPRETATION In the year 2009-10 indigeneous items like windows grey trey, dark grey color are increased a lot such that sulphuric acid.was slightly increased. As the usage of raw materials increased, consumption value will automatically increased, all this will show effect on increase in EOQ value, so that inventory cost will increses.

4.21 ECONOMIC ORDER QUANTITY ON YEAR (2010-2011)

DESCRIPTIONANNUALCONSUMPTIONORDERING COST(Rs)CARRYING COST(Rs)EOQ

Frppcpv0 dark grey color125623852356014.25201011.0250

Pressure relief valve vent seal(ps)106325462154510.5208887.3944

1775-6cl window grey tray95632512950013.5204438.1296

9075-6cl window grey tray85634212356012.12182463.0704



Barium sulphate653245102364.8552510.6403

Black master batch4652132156011.8541143.9631

PVC Shim Roll 175(W) x 0.3(T)72589695603.9659201.6148

Sulphuric acid(cp)1.245 @27 Deg.C225631156306.5532815.0614

INTERPRETATION

In the year 2010-11 indigeneous items like windows grey trey, frppcpvo dark gray colour are increased a lot such that sulphuric acid.was slightly increased. So that you can see that EOQ has increased a lot.it shows effect on increase in consumption value, where it increses inventory cost of raw materials.

Comparing the EOQ of all the years:

Description2006-072007-082008-092009-102010-2011

9075-6CL WINDOW GREY TRAY588889.4206,976.03213266.3198455.13182463.0704

FRPPCPV0 DARK GREY COLOUR575608.24183,663.38191708171377.28201011.0250

1775-6CL WINDOW GREY TRAY284616.57141,814.13151093.5229963.786204438.1296

PRESSURE RELIEF VALVE VENT SEAL(PS)218209.2382,584.6665281.0396936.9270208887.3944

SULPHURIC ACID(CP)1.245 @27 Deg.C309566.5101,333.3364734.1827244.315532815.0614

26Ah PPCP SILVER COVER138468.39109,144.7999061.2771762.142565680.6126

42Ah PPCP SILVER COVER241184.6158,326.9757675.5882438.333576420.5231

Rubber sleeve for 20X2mm connector173781.181,433.2949124.21

BLACK MASTER BATCH117088.912,803.0630157.8238909.342841143.9631

BARIUM SULPHATE126810.677,687.2315663.9857436.488052510.6403

PVC Shim Roll 175(W) x 0.3(T)196270.96,461.7765473.743459201.6148

Graphical Representation

INTERPRETATION:

If you see the comparison of all the years you can find that window grey trey was imported a lot from out and the cost we spent on that particular item was more than any other item. It shows its effect on total consumption value of EOQ.

FINDINGS

The ABC analysis increase for the year of 2006-2011 where the A category increase lot while comparing to B and C class items. The Raw material turnover ratio is comparing to 2006-2007 Ratio is 17.39% times and they again increased to 19.30% in the year of 2010-2011. The work in process turnover Ratio is while comparing to past data in year of 2007-08 at value 19.32% and the year of 2010-11 is value decreased to 18.73%. Finished goods turnover Ratio is the year of 2006-2007 indicates 49.29% and 2010-2011 increase to 36.03%. Inventory turnover Ratio in the year 2006-2007 is 7.97% times and 2010-2011 is the value increase to 12.82% Comparison of turnover Ratio is inventory turnover decrease some extend but the year is 2006-2009 increase and the again increase in the year is 2009-2011 so the company production is also decline subsequently sales are decrease. The comparison of holding periods the above indicates all the Ratios are investment holding periods, the period of 2006-2011 little changes respectively. The EOQ analyses in the year of 2010-2011 indigenous items like window grey trey are increase lot of such the sulpharic acid so it affects increase in consumption value.

SUGGESTIONS

The company has to concentrate more on Research and Development so that it can keep abreast with the latest developments. The company has to eliminate dead inventory and this has resulted in decrease profits. Company should strive for getting the right goods to the right places at the right time for the least cost. Company has to position inventory items according to risk and opportunity. Company has to distinguish between bottleneck items, critical items (high risk, high opportunity)-Product mix. The company to take the care of the production level they should maintain the following terms are, Reducing cost Improving quality Improving performance Improve delivery Adding flexibility Increase innovations

CONCLUSION

The company can reduce ordering cost by the following proper inventory management.

JIT is not about automation. It not only eliminates waste but also helps for controlling inventory by providing the environment to perfect and simplify the processes. It is collection of techniques used to improve operations. It can be a new production system that is used to produce goods and services.

When the JIT principles are implemented successfully, significant competitive advantages are realized, JIT principles can be applied to all parts of an organization; order taking, purchasing, operations, distribution, sales, accounting, design, etc..,

ELIMINATION OF WASTEJIT usually identifies seven prominent types of waste to be eliminated: Waste from over production. Waste of waiting/idle time. Transportation waste. Inventory waste Processing waste Waste of motion Waste from products defects.Where the JIT concept is implemented?Transfer of plastic moulds from plastic manufacturing unit to automotive battery division.Transfer of finished components from Mangle Precision Products to industrial battery division.

BIBLIOGRAPHY

I M Pandey; Financial Management , Ninth Edition-2004, Vikas Publishing House Pvt Ltd, New Delhi.

Dr. Pradip Kumar Sinha; Financial Management- Tools and Techniques, EXCEL BOOKS, New Delhi.

S N Maheswari & S K Maheswari ; Financial Accounting , Fourth Revised & Enlarged Edition 2005, Vikas Publishing House Pvt Ltd, New Delhi.

M Y Khan & P K Jain; Financial Management-Text problems and Cases, Fifth Edition, Tata McGraw-hill Publishing Company Limited, New Delhi.

Sudhindra Bhatt; Financial Management, Second Edition, EXCEL BOOKS, New Delhi.

Website Sources: www.amararaja.co.in.

Google search.

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