project

A Project Study Report

RSWM Limited (Kharigram)Titled

“Inventory and Stores Management”Submitted in partial fulfillment for the

Respective Courses

Submitted By: - Submitted To:-Rekha swarnkar Arifa Zabin

MBA Sem. – IV (Lecturer)

2008-2010

AISHWARYA INSTITUTE OF MANAGEMENT & It

ADARSH NAGAR, UNIVERSITY ROAD

UDAIPUR (RAJ), 313001

PROJECT REPORT ON INVENTORY AND STORE MANAGEMENT

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Preface

Project initiation is the process of formally conceiving, approving, and launching a

new project.Our project on the inventory management has all these basic

conceptual building.

Inventory management is a very crucial aspect of the financial wing of any Industry.

In the present scenario of high competitiveness and product availability for any

corner of the world at price acceptable to the customer, the area which can make

any product cost effective is through Inventory management. Our choice to work on

the theme was motivated through this philosophy of reduction in cost through better

Inventory management.

The aim of the project was to study the RSWM inventory management system and

its complexities and also to proactively suggest certain measures which could be

useful to the existing set up, the modus operandi was to have in depth study of

various functions/aspects of the existing system and arrive at certain suggestions

on each area of operation. The idea was also to co relate each aspect with its

financial impact.

Each and every individual of the unit cooperated to maximum extent and the time

frame given was fully utilized in different phases. Although proper guidance was

received but part of the system is traditional and thus were not very open to the

modern use of technique like JIT/KABAN/Toyota production system

I have tried to make this report readable by suggesting techniques and

recommendations.


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Even though, I have tried to make effort at my level best, there may be many

mistakes shortcoming in my project work, which I hope will be forgiving by the

reader.

With Thanks

Team of Project


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ACKNOWLEDGEMENT

Learning will never end: is very popular and well said. One will learn new things

through out his life span. Any effort is able to fruit when it is nurtured by the needed

guidance and supervision, momentous for the right execution, to accomplish it. The

same happened with us when we are doing this project. It is totally new thing for us,

we never been exposed to this area in my life. Completion of this project was

looking tremendous job for us but the support and guidance that we got from

company, faculty guide and friends make me able to complete it successfully.

We would like to express our heartfelt thanks to Mr. N K Shrivastava (General

Manager HRD), Mr. S.M.Jain (Deputy Manager-Material), Mr. K.K Maheshwari (GM-Commercial) for providing me the opportunity to step in to the practical

corporate world and to team up our classroom learning with the exposure available

in the organization which gave us a robust opportunity to learn.

We would also like to thank the supporting staff Mr.Gourav Bakliwal (H.R.

Department) for their help and cooperation throughout our project. We also take

privilege to extend our earnest thanks to the personnel at Rajasthan Spinning & Weaving Mills Limited, who provided us all the needed information necessary for

the accomplishment of the project.


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EXECUTIVE SUMMARY

Books are the treasures of knowledge and a theoretical base is pivotal for

understanding the realities of practical field. But, at the same time, practical

knowledge is crucial for having an insight into the implementation of theory in

corporate world.

With the privilege of an opportunity provided to me by RSWM Ltd. Kharigram, for

the fulfillment of my purpose “bridging the gap between theory and practical“, I

undertook 1 month training at purchase, store and accounts department of RSWM

Ltd. Kharigram. During this training, we conducted a study of project, about

INVENTORY AND STORE MANAGEMENT.

Under the project INVENTORY AND STORES MANAGEMENT first of all I

interacted with the employees of all the relevant department and they provided me

all the information regarding inventory and store to analyze, so that I could get

acquainted with the terms relating to the purchase and store keeping of the

material. The deptt. provided me the summary of store of April month, which shows

the current stock of all the divisions like General, Engineering, Spinning, Fuel and

Packing. The total stock is – Rs. 14705672.73

The data has been gathered through interaction and discussions with the

executives working in the division. Some important information has been gathered

through a couple of unstructured interviews of executives.

This study provides an insight into the management of High Value items and also

draws the attention of the management towards movement of 'A' class items over

period of 4 years.


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Content

Introduction

Introduction to the Industry

Introduction to the Organization

Introduction to the Company

SWOT Analysis of the Company

Research Methodology

Title of the Study

Objective of the Study

Type of Research

Overview of Inventory Management

Scope of Study

Limitation of Study

Introduction to Department

Process of Acquiring Inventory and Payment

Scrap Management

SWOT Analysis

Conclusion

Suggestion and Recommendation

Annexure

Bibliography


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INTORDUCTION:

INDIAN TEXTILES INDUSTRY

Textiles account for 14 per cent of India’s industrial

production and around 50 per cent of its export

earnings. From growing its own raw material (cotton,

jute, silk and wool) to providing value added

products to consumers (fabrics and garments), the

textile industry covers a wide range of economic

activities, including employment generation in both

organized and unorganized sectors. Indian fabric is

in demand with its ethnic, earthly colored many

textures. This conveys that it holds potential if one is

ready to innovate.

The textile industry is the largest industry in terms of employment economy,

expected ‘to generate 12 million new jobs by 2010. It generates massive potential

for employment in the sectors from agricultural to Industrial. Employment

opportunities are created when cotton is cultivated. It does not need any exclusive

Government support even at present to go further. Only thing needed is to give

some directions to organize people to get enough share of the profit to spearhead

development.


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Segments

Textile industry is constituted of the following segments

• Readymade Garments

• Cotton Textiles including Handlooms (Mill made / Power loom/ Handloom)

• Man-made Textiles

• Silk Textiles

• Woolens Textiles

• Handicrafts including Carpets

• Coir

• Jute

Manmade fibers account for around 40 per cent share in cotton dominates

Indian textile industry. India accounts for 15% of world’s total cotton crop

production and records largest producer of silk.

It is the second largest employer after the agriculture sector in both rural

and urban areas India has a large pool of skilled low-cost textile workers,

experienced in technology skills.

Almost all sectors of the textile industry have shown significant

achievements. The sector has shown a 3.66 per cent CAGR over the last five

years.

India’s cotton textile industry has a high export potential. Cost

competitiveness is driving the penetration of Indian basic yarns and grey fabrics in

international commodity markets. Small and flexible batches of apparels can be

manufactured in India and can provide a larger variety of casual wears and leisure

garments at significantly lower costs.


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Besides natural fibers such as cotton, jute and silk, synthetic raw material

products such as polyester staple fiber, polyester filament yarn, acrylic fiber and

viscose fiber are produced in India.

Current Scenario

Textile exports are targeted to reach $50 billion by 2010, $25

billion of which will go to the US. Other markets include UAE,

UK, Germany, France, Italy, Russia, Canada, Bangladesh

and Japan. The name of these countries with their

background can give thousands of insights to a thinking mind.

The slant cut that will be producing a readymade garment will

sell at a price of 600 Indian rupees, making the value addition

to be profitable by 300 %.Currently, because of the lifting up

of the import restrictions of the multi-fiber arrangement (MFA)

since 1st January, 2005 under the World Trade Organization (WTO) Agreement on

Textiles and Clothing, the market has become competitive; on closer look however,

it sounds an opportunity because better material will be possible with the traditional

inputs so far available with the Indian market.

At present, the textile industry is undergoing a substantial re-orientation towards

other then clothing segments of textile sector, which is commonly called as

technical textiles. It is moving vertically with an average growing rate of nearly two

times of textiles for clothing applications and now account for more than half of the

total textile output. The processes in making technical textiles require costly

machinery and skilled workers.


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The application that comes under technical textiles are filtration, bed sheets and

abrasive materials, healthcare upholstery and furniture, blood-absorbing materials

and thermal protection, adhesive tape, seatbelts, and other specialized application

and products.

INTRODUCTION TO THE ORGANIZATION

LNJ BHILWARA GROUP INFORMATION

The LNJ Bhilwara Group has been in the business of clothing and graphite

electrodes manufacturing business and services. This group was started in 1960 by

Mr. L N jhunjhunwala. People around the world with the following companies:

Rajasthan Spinning & Weaving Mills Ltd.

(Yarn, fabric garments, technical textiles, Denim)

BSL Ltd .

(Fabric - worsted, polyester & silk furnishing )


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http://www.lnjbhilwara.com/#bsl

http://www.lnjbhilwara.com/#rswm

Bhilwara Melba De Witte Pvt. Ltd.

(Automotive fabric)

Maral Overseas Limited

(Cotton yarn, fabric & knitted garments)

HEG Ltd.

(Graphite Electrodes/Steel)

I ndo Canadian Consultancy Services Ltd.


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http://www.lnjbhilwara.com/#mol

http://www.lnjbhilwara.com/#bhlm

(Design and Engineering Services for power Sector, Industrial Building and

Irrigation Stricture)

Malana Power Company Ltd.

(Hydro Power Generation)

AD Hydro Power Ltd.

(Hydro Power Generation)

Bhilwara Energy Ltd.

(Holding Company in the Power Sector)

Bhilwara Processors Ltd.

(Process House

Bhilwara Scribe Pvt, Ltd.

(Medical Transcription)


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NETWORK OF LNJ


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INTRODUCTION OF THE COMPANY

Rajasthan Spinning & Weaving Mills Ltd. (RSWM), the leading Company of the

LNJ Bhilwara Group, is principally

engaged in the manufacture of synthetic,

blended, mélange and specialty yarns and

fabric.

RSWM is a premier company of the

Group, with a turnover of Rs.1173.82

crore in 2008-2009. RSWM is exporting a

complete range of yarn and fabric to over 70 countries worldwide, giving RSWM a

markedly visible presence across the textile world. The manufacturing capacity of

the Company is upwards of Yarn per annum from its five units - Gulabpura,

Banswara, Mandpam, Rishabhdev and Ringas located in Rajasthan. RSWM also

manufactures of fabric per annum at its Mordi (Banswara) unit. All the plants are

equipped with state-of-the-art machines and Captive Power Generation facilities.

RSWM is the first composite textile mill in India to be accorded the ISO

Certification. The Company also enjoys a prestigious ‘Three Star Export House’ status and, over the years, has received several Export Awards from SRTEPC. The

company’s leadership in the textile industry is exemplified in the equity that its

brand enjoys in the Indian market - place – “Mayur Suiting”


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RSWM is in the process of modernization drive and increase of spindles of its all

the manufacturing units. RSWM will soon introduce ready -to-wear Apparels.

To enhance its operating capacity; RSWM has acquired Jaipur Polyspin Ltd. for

manufacturing of Synthetic Blended Yarn.


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“COMPANY PROFILE”

Name of the Concern Rajasthan Spinning and Weaving Mills Limited.Locations:

1) Regd. Office

2) Corporate Office

3) Works

Kharigram,P.O.-Gulabpura-311021,Distt.-Bhilwara,

Rajasthan

Bhilwara Towers,A-12, sector-1, Noida-201301 (U.P.)

Kharigram,P.O.-Gulabpura-301021,Distt-Bhilwara, Rajasthan

Lodha, P.O. Banswara-327001, Rajasthan.

Mordi, Banswar-327001, Rajasthan.

Mandpam, Bhilwara-311001, Rajasthan.

Rishabhdev-33802, Distt-Udaipur, Rajasthan.

Ringas, Distt-Sikar, Rajasthan.

Bidadi, Bangalore, Karnataka.

Constitution Public Limited Company.

Date of Incorporation 17/10/1960

Lines of Manufacture Manufacturing of synthetic, blended, grey/dyed yarn, cotton

mélange yarn, cotton blended yarn and fabric under the brand

‘Mayur’.

Also into Garment business and Now also Denim Plant at

Mordi Banswara Rajasthan.

Date of commencement

of commercial Business

1961


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Capital

Authorized Capital

Issued, subscribed

& paid up capital

6500 lacks

6064 lacks

GULABPURA UNIT

Established in 1973, the Gulabpura unit was among the first units to be set up by

the RSWM Ltd.

It is the first textile unit in India to be awarded ISO 9002. It is also IS/ISO 9001:2000

certified. It has the exclusive rights to technology that goes into the production of

Flame Retardant yarns.

The plant produces Dyed yarns and fabric in blends of Polyester, Viscose, Acrylic,

Lycra, Wool, Polyamide, Flex and Modal. It is one of the most versatile plants

manufacturing Yarns.


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1985 the Gulabpura Unit started exporting Polyester-Viscose Yarn to Europe.

Today 35% of its Yarn output is exported and expected to rise to about 50% in the

near future.

BUSINESSES OF RSWM LTD:

RSWM is a leading manufacturer of synthetic and blended spun yarn and fabric. It

is one of the largest exporters of synthetic yarn from India and has a commanding

position in the domestic market. The company also has a presence in the cotton

yarn. Spinning, fabric processing and garments manufacturing segments, Last year

was went to start production in its denim manufacturing plant in Mordi (in the district

of Banswara in Rajasthan), the Company is now present across all segments in the

textiles value chain. During the year under review, the gross turnover of the

Company increased by 10.25% to Rs.1173.83 crores in 2008-2009 from Rs.

1064.69 Crores in 2007-2008. This performance was led by strong performances in

both domestic and export markets. RSWM exports its yarn and fabric to over 70

countries in Europe, North, and South America, the Middle east, Africa, South-east

Asia and Australia. Chart (Under) shows the performance of the Company in its key

markets. Exports of the Company grew by 10.11% to Rs.586.44 crores in 2008-09

Rs.532.58 crores in 2007-08 from, while domestic sales grew by 10.39% during the

year. (2007-08 Domestic Sale-532.10, 2008-09 Domestic Sale-587.39)

As a result, the share of export has increased and now accounts for over 50% of

RSWM’s revenues the-art process house at Mordi, Banswara, and Rajasthan.


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Chart-a- Revenues in key markets(Rs. In crores)

Domestic Sales

Export Sales

Yarn Business


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RSWM offers one of the broadest

ranges of products in terms of fiber

blends, counts and shades. Fiber

processed by the Company includes

polyester, viscose, acrylic, cotton, wool,

rayon, silk, polyamide and linen. In

addition, the Company produces a range

of specialty products made out of both

unorthodox fiber, e.g. Soya protein and

bamboo, and branded fiber such as tencel and lycra. Many of these yarns have

functional qualities – flame resistant, anti-bacterial, anti-static, odour preventive and

UV protective. These are niche products and the Company expects their market

size to increase in the future.

Yarn markets situation improved in 2008-09 compared to the 2007-08 and RSWM

was able to benefit from additional capacities, which became available during this

period, especially in grey yarn and Denim. On the cost side, due to global hike in

the prices of oil, furnace oil prices are a big cause of worry for the industry.

RSWM was able to increase its production of yarn, thanks to the completion of its

modernization and expansion plan that started in 2004-05. Yarn sales grew by

6.44% to Rs. 229.07 corer in 2008-09 from Rs. 215.21 corer in 2007-08. The

current portfolio of RSWM can be categorized into three main categories –Gray

Yarn, Dyed Yarn and Mélange Yarn.

Chart Of Yarn Business


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GREY YARN

Grey yarn is produced using blends of different synthetic

fiber such as polyester and viscose, blends of synthetic and

natural fiber, and pure cotton at the Banswara and

Rishabhdev plants. Although grey yarn constitutes a

relatively lower value-added segment, vis-à-vis dyed and

mélange, it is by far the largest in terms of volume, and is

crucial to the product portfolio offered to customers.

During 2008-09, RSWM Ltd. Added 24000 spindles of

pollster cotton blended yarn at its Kharigram unit. Manufacturing of 100% viscose

yarn at the Rishabhdev plant and open end rotors at the Banswara unit purchased


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levels 2007-08, also achieved full production levels during the previous year. During

the previous to previous year, the Company had diversified into manufacturing

100% cotton yarn. In 2008-09, spindles under 100% cotton yarn increased

marginally to 44,000, taking the total capacity of Gray yarn to 1,64,000 spindles.

Apart from the increase in production due to addition capacity developed during the

year, there were considerable increases in operating efficiencies, as a result of the

modernization of existing plant and machinery.

DYED YARNDyed yarn is produced at the Company's Gulabpura and Ringas plants. These are

relatively higher value added products, and made according to customer

specifications of blend, counts and shades. With the amalgamation of Jaipur

Polyspin Limited (the Ringas plant), RSWM has a capacity of around 92,000

spindles for Dyed Synthetic yarn.

During the year, the thrust of the business was on developing new products with

better margins for a diverse set of the end-use segment which included knitting,

Furnishings, home textiles and carpets. Such sales represented approximately 6%

Of the total sales of dyed yarn, and are expected to grow in the future.

MELANGE YARN

Mélange yarn is a premium product made from cotton and its blends, and is used in

Manufacture of knitwear and hosiery. During the year, the Company had increased

Its capacity of Dyed Mélange yarn, following which it has become one of the

largest Manufacturers of Mélange yarn in the country with 30,000 spindles. While

this Segment is still quantitatively very small compared to the grey and dyed yarn

Business of the Company, it commands the highest value added in RSWM's overall


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Yarn portfolio. During the year, Mélange yarn sales increased by 12.03%.

HEG LTD.

HEG Ltd., a premier company of he LNJ

Bhilwara Group, is India’s leading Graphite

Electrodes manufacturer and an established

global player in the sector. It is the single largest

integrated Graphite Electrodes manufacturing

facility in South Asia South East Asia and the

Middle East HEG is also the only one of its kind

in the region to process the sophisticated UHP

(Ultra High Power) Electrodes with technology

from SERS – a subsidiary of Pechinery, France.

Maral Overseas Limited (MOL)

Maral Overseas Ltd., a part of the

LNJ Bhilwara Group, a conglomerate

with a global presence. Maral is the

country’s largest ‘Vertically-

Integrated’ knitwear company located

in the heart of India’s cotton

producing region near Indore,

Madhya Pradesh.

Its other units are located in Jammu

and Noida (NCR-Delhi). Maral is

India’s first 100% Export –Oriented-Unit to get the prestigious ISO certification.

Maral has been accorded a ‘Trading House’ status, and is an internationally


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preferred manufacturer and supplier of Cotton Yarn, Knitted Fabrics, Knitwear and

Sweaters. Maral has been accredited by Marks & Spencer.

Bhilwara Melba De Witte Pvt. Ltd:

Bhilwara Melba De Witte Pvt. Ltd. (BMD) was

established in 1998. It is a joint venture of LNJ

Bhilwara Group and De Witte Liter, a part of

Gamma Holding of Belgium, to manufacture high

performance specialized furnishing fabrics.

BMD has its manufacturing plant at Banswara in

Rajasthan. It has fully integrated state-of-the-art facility for automotive textiles,

which is equipped with Air-texturing, yarn dyeing, warping, weaving, warp & circular

knitting, processing and lamination.

BSL Limited (BSL):

BSL Ltd. established in 1971 at Bhilwara, Rajasthan. Today, BSL has emerged as a strong global player producing over 12 million meters of fabric every year. BSL is equipped with state-of-the-art technology.

Right from raw material sourcing to product finishing, meticulous attention is paid to detail at every stage of production.


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The emphasis is to achieve shorter lead times and greater efficiency by following

integrated yarn preparation, spinning, weaving and finishing processes.

Bhilwara Spinners Ltd. :Bhilwara Spinners Ltd. (Bhilspin),

established in 1980, manufacturers

Synthetic Blended Grey and Dyed yarns

at its manufacturing Unit at Bhilwara in

Rajasthan. Today, the company has

30,000 spindles to manufacture 12,000

MT per annum. Bhilspin has been

accorded “Export House" status and

conferred "Niryat Shree” for its export

performance. Bhilspin also enjoys IS/ISO 9001:2000 certification.

Fabric and Garments Business: The company manufacturing a range of blended suiting fabric and has a significant

presence in the domestic market with its Mayur brand. Apart from this, the segment

includes a new garments unit in Bangalore and a fabric processing plant in Mordi

Banswara (Rajasthan).

Fabric: RSWM believe that there is a huge potential for this business in the new

market scenario and has plant to strategically move to the higher value added

products in Fabric. The company expects significant gains from this move and has

plans to further ramp-up the fabric manufacturing capacity. To give a quantum

boost to these initiatives, RSWM signed up with Salman Khan, one of the most

popular actors in the Hindi film industry, as the brand ambassador for its Mayur

range of suiting and shirting.


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Garments: During the year, the company scaled ups the commercial product ion in

its new garments facility in Bangalore. The garments business is a new area for

your company. The business has a strong order book position and the company

expects a healthy pay back from the Garment business n the future.

DenimDuring the previous year, RSWM had decided to enter the Denim Fabric

manufacturing business, in line with its strategy to move to higher value added

segments for wider based growth in the future. With in the category, your company

plans to focus on producing high-end specialty Denim fabric, which has better

realization and demand in international market. The state-of-the art denim

manufacturing facility, with an investment of Rs.……….. , will come up at its existing

ovation in mordi, and have a capacity of 27million meters per annum.


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Thermal Power:

RSWM’s manufacturing process relies on furnace oil based power Plans for their energy

requirements. High crude oil prices during the Last fees years have had an adverse impact on

the profitability of our Operation. Last year, company decided adverse impact in thermal power

plants to rope in this ever-increasing cost of power. The 46 MW plant is being located in

Banswara, Rajasthan. The plant will provide captive power to our existing operations in

Banswara, Bhilwara, Rishabdev,

Kharigram, Ringas, Mordi and also the proposed Denim projected in Mordi. The existing

furnace oil-based power plants will be kept as stand –by -facilities. Social Initiatives:

Over the last 47 years, RSWM has taken a number of initiatives in education, healthcare and

community development. The company has established and Promoted a number of school and

training centers, including facilities for the physically disadvantage near its manufacturing

plants. It also runs “MAYUR HELPLINE” a 24 hour free ambulance service for trauma victims.

The company stated an initiative to create awareness in nearby village about the Activities of

the company and providing employment to local people. In Kharigram, a blood donation camp

was organized; where 77 units of blood were Donate by employees of unite.

AWARDS

RSWM is the winner of SRTEPC Highest Export Award

for polyester/viscose yarn exports for the last several consecutive

years, which includes two gold and one bronze in March 2005.

Maral is India’s fully integrated 100% EOU cotton knitwear unit and winner of

TEXPROCIL Silver trophy in 100% EOU / EPZ category. Maral has also been awarded Silver

Trophy by AEPC.

Maral is the recipient of Rajiv Gandhi National Quality Award.

Maral bagged "Genentech Safety Award".

RSWM, Rishabhdev unit bagged National Export Award.. Rishabhdev unit also

bagged SRTEPC Excellence award for highest production in export of 100% Polyester spun

yarn.

BSL received the "National Certificate of Merit" for outstanding export

performance.

Bhilwara Spinners has been accorded the prestigious “Niryat Shree”-Certificate

of Excellence for Outstanding export performance.

Of COMPANY

Strength

1) India enjoys benefit of having plentiful resources of raw materials. It is one of the

largest producers of cotton yarn around the globe, and also there are good resources of fibers

like polyester, silk, viscose etc.

2) There is wide range of cotton fiber available, and has a rapidly developing synthetic

fiber industry.

3) India has great competitiveness in spinning sector and has presence in almost all

processes of the value chain.

4) Availability of highly trained manpower in both, management and technical. The country

has a huge advantage due to lower wage rates. Because of low labor rates the manufacturing

cost in textile automatically comes down to very reasonable rates.

5) The installed capacity of spindles in India contributes for 24% share of the world, and it

is one of the biggest exporters of yarns in the global market. Having modern functions and

favorable fiscal policies, it accounts about 25% of the world trade in cotton yarn.

6) The apparel industry is largest foreign exchange earning sector, contributing 12% of

the country's total exports.

7) The garment industry is very diverse in size, manufacturing facility, type of apparel

produced, quantity and quality of output, cost, requirement for fabric etc. It comprises suppliers

of ready-made garments for both, domestic or export markets.

8) RSWM Ltd. has a bench marked in the industry. As one of the earliest and largest

exporters to high fashion markets like – Europe and USA.

Weakness

1) Massive-Fragmentation: A major loophole in Indian textile industry is its huge fragmentation in industry structure, which

is led by small-scale companies. Despite the government policies, which made this

deformation, have been gradually removed now, but their impact will be seen for some time

more. Since most of the companies are small in size, the examples of industry leadership are

very few, which can be inspirational model for the rest of the industry.

2) Political and Government Diversity: The reservation of production for very small companies that was imposed with an intention to

help out small scale companies across the country, led substantial fragmentation that distorted

the competitiveness of industry. However, most of the sectors now have been de-reserved,

and major entrepreneurs and corporate are putting-in huge amount of money in establishing

big facilities or in expansion of their existing plants.

Secondly, the foreign investment was kept out of textile and apparel production. Now, the

Government has gradually eliminated these restrictions, by bringing down import duties on

capital equipment, offering foreign investors to set up manufacturing facilities in India.

In recent years, India has provided a global manufacturing platform to other multi-national

companies that manufactures other than textile products; it can certainly provide a base for

textiles and apparel companies.

Despite some motivating step taken by the government, other problems still sustains like

various taxes and excise imbalances due to diversification into 35 states and Union

Territories. However, an outline of VAT is being implemented in place of all other tax

diversification, which will clear these imbalances once it is imposed fully.

3) Labor Laws:In India, labor laws are still found to be relatively unfavorable to the trades, with companies

having not more than ideal model to follow a 'hire and fire' policy. Even the companies have

often broken their business down into small units to avoid any trouble created by labor

unionization. In past few years, there has been movement gradually towards reforming labor

laws, and it is anticipated that this movement will uphold the environment more favorable.

4) Distant Geographic Location: There are some high-level disadvantages for India due to its geographic location. For the

foreign companies, it has a global logistics disadvantage due the shipping cost is higher and

also takes much more time comparing to some other manufacturing countries like Mexico,

Turkey, China etc. The inbound freight traffic has been also low, which affects cost of shipping

– though, movements of containers are not at reasonable costs.

5) Lack of trade memberships:India is serious lacking in trade pact memberships, which leads to restricted access to the

other major markets. This issue made others to impose quota and duty, which put scissors on

the sourcing quantities from India.

Opportunity

1) Complete elimination of the quota restrictions under the Multi Fiber Agreement (MFA)

by 2005 will provide an expanded opportunity alongside enhanced competition for the

Indian textile units, as more markets would be open for access.

2) The government encourages the establishment of 100 per cent export oriented spinning

units. According to the 2000-01 Exim policy, all capital goods in the textile Sector have been

covered by Export Promotion Capital Goods scheme, which attracts 5 per cent customs duty

without any countervailing duty.

3) The company has Big Plans for MAYUR brand. Currently MAYUR is a Rs. 100 crore

brand and company wants it to be Rs. 300 crore, brand in 5 years.

Threats

1) Appreciating Indian rupee as against USD and EURO has made imports cheaper and

exports costlier and less profitable.

2) Competition with small size spinner with higher quality and low cost.

3) Increased trends of the readymade garments and fashion fabrics viz cotton fabric as

against individually stitching change.

Policy InitiativesThe government adopted the National Textile policy in 2000 to harness opportunities for

increasing India’s share in global trade. The policy aims to increase the value of textile and

apparel exports from the current US$ 10 billion to US$ 50 billion by 2010. It also aims to

increase cotton productivity by at least 50 per cent and upgrade its quality to international

standards.

The government will encourage the establishment of world-class integrated textile complexes

and processing units. A scheme for setting up integrated apparel parks has been initiated. This

will enable the ready-made garment industry to set up modern units with excellent

infrastructure. Rapid implementation of the Textile Up gradation Fund Scheme aimed at

providing an impetus to the modernization of textile and jute industries is a priority with the

government. A provision of US$ 41 million in 2001-02 and an incentive for modernization is

offered by enhancing the depreciation rate of machinery installed under the scheme to 50 per

cent per annum.

RESEARCH METHODOLOGY

Title of the Study

INVENTORY AND STORES MANAGEMENT

AT

RAJASTHAN SPINNING & WEAVING MILLS

KHARIGRAM, GULABPURA

Objective of the study

Main Objective: -

In this dynamic WORLD every movement is backed by some objective behind it. Objective, if

defined clearly, it makes the track easy for completion of the task. In the management studies

Summer Projects are of vital importance and add the much-needed practical exposure to the

budding managers.

In the charismatic corporate world, we got the opportunity to undergo summer training in

RAJASTHAN SPINNING AND WEAVING MILLS LIMITED (RSWM LTD) which is one of the

largest textiles companies of the country in term of turnover. Getting the original experience of

the business milieu and understanding as well grasping the intricacies of Mill Store Inventory

was the foremost objective of our Project at RSWM Ltd.

Specific Objective: -

The OBJECTIVE is achieved only if the study is defined systemic and procedural and the

following points were defined & monitored closely for successful completion.

Understanding the business dynamics from history & present environment of Rajasthan

spinning & weaving mills ltd.

To know about the Mill Store Material requirement of the company and how company is

managing their available material.

Understanding the steps involved in fulfilling the material requirement of individual

department and the application of the same for optimum utilization.

Attain Knowledge of the satisfactory level of Inventory.

Emphasizing on material requirement Budget control of individual department so that

maximum utilization at minimum cost of material can be possible

RESEARCH TYPE

This is a primary type of research. There were no past reports and history about Inventory and

store management. All the data and information was collected by individual. This project is

done here first time. In this type of research no prior data and information is available.

OVERVIEW OF INVENTORY AND STORES MANAGEMENT

Origins of the word Inventory

The word inventory was first recorded in 1601. The French term inventaire, or "detailed list of

goods," dates back to 1415. Inventory management is primarily about specifying the size and

placement of stocked goods. Inventory management is required at different locations within a

facility or within multiple locations of a supply network to protect the regular and planned

course of production against the random disturbance of running out of materials or goods. The

scope of inventory management also concerns the fine lines between replenishment lead time,

carrying costs of inventory, asset management, inventory forecasting, inventory valuation,

inventory visibility, future inventory price forecasting, physical inventory, available physical

space for inventory, quality management, replenishment, returns and defective goods and

demand forecasting.

INVENTORYInventory is a list for goods and materials, or those goods and materials themselves, held

available in stock by a business. In accounting inventory is considered an asset.

It involves a retailer seeking to acquire and maintain a proper merchandise assortment while

ordering, shipping, handling, and related costs are kept in check.

Systems and processes that identify inventory requirements, set targets, provide

replenishment techniques and report actual and projected inventory status.

Inventory management handles all functions related to the tracking and management of

material. This would include the monitoring of material moved into and out of stockroom

locations and the reconciling of the inventory balances.

“Inventory refers to stock-pile of product a firm is offering for sale and component that make up

the product.”- Boltan S.E.

Inventory - A physical resource that a firm holds in stock with the intent of selling it or

transforming it into a more valuable state.

Definition - A physical resource that a firm holds in stock with the intent of selling it or

transforming it into a more valuable state.

Raw Materials

Works-in-Process

Finished Goods

Maintenance, Repair and Operating (MRO)

Inventory examples –

While accounts often discuss inventory in terms of goods for sale, organizations -

manufacturers, service-providers and not-profits - also have inventories (fixtures, furniture,

supplies,) that they do not intend to sell. Manufacturers', distributors', and wholesalers'

inventory tends to cluster in warehouses. Retailers' inventory may exist in a warehouse or in a

shop or store accessible to customers. Inventories not intended for sale to customers or to

clients may be held in any premises an organization uses. Stock ties up cash & if uncontrolled

it will be impossible to know the actual level of stocks and therefore impossible to control them.

INVENTORY MANAGEMENT

Inventory management means efficient control and management of capital invested in raw

materials and supply, work in progress and finished goods for the purpose of obtaining

maximum return from the investment.

Inventory Management is a set of policies and controls that monitors levels of inventory and

determines what levels should be maintained, when stock should be replenished, and how

large orders should be placed.

Inventory management refers to the process of managing the stocks of finished products,

semi finished products and raw materials by a firm.

The purpose of inventory management is to keep the stock in such a way that neither there is

over-stocking nor under-stocking.

CONCEPT OF INVENTORY MANAGEMENT

Inventory management refers to the process of managing the stocks of finished products,

semi-finished products and raw materials by a firm. Inventory management, if done properly,

can bring down costs and increase the revenue of a firm.

How much one should invest in inventory management? The answer to this question depends

on the volume and value of inventory as a percentage of the total assets of a firm. The

importance of inventory management varies according to industries. For example, an

automobile dealer has very high inventories, sometimes as high as 50 per cent of the total

assets, whereas in the hotel industry it may be as low as 2 to 5 per cent.

The process of inventory management is a continuous one and there are various kinds of

solutions available. It is advisable to employ specialized staff for inventory management.

The inventory management process begins as soon as one has started production and

ordered raw materials, semi-finished products or any other thing from a supplier. If you are a

retailer, then this process begins as soon you have placed your first order with the wholesaler.

Once orders have been placed, there is generally a short period of time available to a firm to

put an inventory management plan in place before the supplies are delivered. Inventory

management helps a firm to decide in advance where these supplies should be stored. If a firm

is getting supplies of small-sized goods, it may not be much of a problem to store them, but in

the case of large goods, one has to be careful so that the warehousing space is optimally

utilized.

From invoices to purchase orders, there is lot of paperwork and documentation involved in

inventory management. Several software programs are available in market, which help in

inventory management.

Inventory Management system provides information to efficiently manage the flow of materials,

effectively utilize people and equipment, coordinate internal activities and communicate with

customers. Inventory Management does not make decisions or manage operations; they

provide the information to managers who make more accurate and timely decisions to manage

their operations.

INVENTORY is defined as the blocked Working Capital of an organization in the form of

materials. As this is the blocked Working Capital of organization, ideally it should be zero. But

we are maintaining Inventory. This Inventory is maintained to take care of fluctuations in

demand and lead time. In some cases it is maintained to take care of increasing price

tendency of commodities or rebate in bulk buying.

Traditional Supply Chain solutions such as Materials Requirement Planning, Inventory

Control , typically focuses on implementing more rapid and efficient systems to reduce the cost

of inventory inRSWM focuses in optimizing the total investment of materials cost and workload

for every Inventory item throughout the chain from procurement of raw materials to finished

goods Inventory . Optimization means providing a balance of supply to meet the demand at a

minimum total cost , Inventory level and workload to meet customers service goal for each

items in the link of Inventory Chain .

It is strategic in the sense that top management sets goals. These include deployment

strategies (Push versus Pull), control policies, the determination of the optimal levels of order

quantities and reorder points and setting safety stock levels. These levels are critical, since

they are primary determinants of customer service levels.

Accounting perspectives

Inventory needs to be accounted where it is held across accounting period boundaries since

generally expenses should be matched against the results of that expense within the same

period. When processes were simple and short then inventories were small but with more

complex processes then inventories became larger and significant valued items on the balance

sheet. This need to value unsold and incomplete goods has driven many new behaviors into

management practice. Perhaps most significant of these are the complexities of fixed cost

recovery, transfer pricing, and the separation of direct from indirect costs. This, supposedly,

precluded "anticipating income" or "declaring dividends out of capital". It is one of the

intangible benefits of Learn and the TPS that process times shorten and stock levels decline to

the point where the importance of this activity is hugely reduced and therefore effort, especially

managerial, to achieve it can be minimized. It can be further divided into 2 parts-

A) Financial accounting

B) Inventory accounting.

Financial accounting

An organization's inventory can appear a mixed blessing, since it counts as an asset on the

balance sheet, but it also ties up money that could serve for other purposes and requires

additional expense for its protection. Inventory may also cause significant tax expenses,

depending on particular countries' laws regarding depreciation of inventory.

Inventory appears as a current asset on an organization's balance sheet because the

organization can, in principle, turn it into cash by selling it. Some organizations hold larger

Inventories than their operations require in order inflating their apparent asset value and their

perceived profitability.

In addition to the money tied up by acquiring inventory, inventory also brings associated costs

for warehouse space, for utilities, and for insurance to cover staff to handle and protect it, fire

and other disasters, obsolescence, shrinkage (theft and errors), and others. Such holding can

mount up: between a third and a half of its acquisition value per year.

Businesses that stock too little inventory cannot take advantage of large orders from

customers if they cannot deliever. The conflicting objectives of cost control and customer

service often pit an organization's financial and operating managers against its sales and

marketing departments. Sales people, in particular, often receive sales commission payments,

so unavailable goods may reduce their potential personal income. This conflict can be

minimized by reducing production time to being near or less than customer expected delivery

time. This effort, known as "Learn production" will significantly reduce working capital tied up in

inventory and reduce manufacturing costs.

Inventory Accounting

By helping the organization to make better decisions, the accountants can help the public

sector to change in a very positive way that delivers increased value for the taxpayer’s

investment. It can also help to incentivize progress and to ensure that reforms are sustainable

and effective in the long term, by ensuring that success is appropriately recognized in both the

formal and informal reward systems of the organization.

To say that they have a key role to play is an understatement. Finance is connected to most, if

not all, of the key business processes within the organization. It should be steering the

stewardship and accountability systems that ensure that the organization is conducting its

business in an appropriate, ethical manner. It is critical that these foundations are firmly laid.

So often they are the litmus test by which public confidence in the institution is either won or

lost.

Finance should also be providing the information, analysis and advice to enable the

organizations’ service managers to operate effectively. This goes beyond the traditional

preoccupation with budgets – how much have we spent so far, how much have we left to

spend? It is about helping the organization to better understand its own performance. That

means making the connections and understanding the relationships between given inputs –

the resources brought to bear – and the outputs and outcomes that they achieve. It is also

about understanding and actively managing risks within the organization and its activities.

Stores Accounting and Verification Systems:-

Stores accounting is important from the point of view of estimating the cost of the

product for pricing decision. The costing of material has to be done both for the

materials consumed in the production and estimating the value of materials held in

stock.

The following are some of the important and frequently used system for this purpose.

(a) FIFO system

This system is known as first in first out system. This is based on the

assumption that oldest stock is issued first.

(b) LIFO system

This system is known as last in first out system. This is based on the

assumption that the most recent receipts are issued first.

(c) Average cost system

This is based on the assumption that issues to production department are

equally made from different shipments in stock i.e. an average cost of

shipment in stores is charged.

(d) Weighted average cost system

In this system price is calculated by dividing the total cost of material in the

stock from which the material to be priced could be drawn by the total quantity

of materials in that stock.

Stock verification systems:

Some discrepancies between the actual and the book balances of inventories are

bound to occur despite the diligent store keeping. Stock verification is carried

out for the following purposes :

To reconcile the stores record and documents for their accuracy and usefulness.

Identification of areas deserving tighter document control.

To minimize the pilferage and fraudulent practices. Some of the systems of physical

stocktaking are as below:Annual or periodic physical verificatioPerpetual inventory and

continuous stock taking system.

Stores and Spares

Inventory of stores and spares includes material required for day to day maintenance of plant,

mandatory spares as recommended by the vendor of plant and machinery and insurance

spares required to be replaced in case of sudden break-down of plant.

Data collection can better be understood by interpretation of data as use fullness and utility of

research findings lie in proper interpretation. This also will help us in drawing inferences.

Turnover of stores material or inventory turnover ratio

Inventory turnover ratio is one method of exercising material control. The inventory turnover

ration is calculated as follows:

Cost of material consumed = Opening stock + Purchase – Closing stock

Average stock =

The stock turnover ratio can also be determined in days as follows:

Inventory turnover in days =

It is essential to compare the turnover of different kinds of material to find

out the items, which are slow moving thus helping management to avoid

keeping

capital locked up in such items. A low ratio is indicator of slow moving stock, accumulation of

obsolete stock, carrying of too much stock. On the other hand,

a high turnover ratio is an indication of fast moving stock and less investment in stock. A low

turnover ratio will lead to the disadvantage of arising out of overstocking. A stock turnover ratio

for a particular item is zero, it means that the item had not been used at all during the period

and should be immediately disposed off otherwise the quality of the item will be deteriorated.

Although the first calculation is more frequently used, COGS (cost of goods sold) may be

substituted because sales are recorded at market value, while inventories are usually recorded

at cost. Also, average inventory may be used instead of the ending inventory level to minimize

seasonal factors.

This ratio should be compared against industry averages. A low turnover implies poor sales

and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying.

High inventory levels are unhealthy because they represent an investment with a rate of return

of zero. It also opens the company up to trouble should prices begin to fall.

Economic Order Quantity

Economic order quantity is calculated as below :

EoQ =

Where,

A = Annual consumption of inventory

O = Ordering cost of the inventory in a year

I = Carrying cost of the inventory

Ordering cost = Cost of staff + Cost of enter etc.

Economic order quantity is that level of inventory that minimizes the total of inventory holding

cost and ordering cost. The framework used to determine this order quantity is also known as

Wilson EOQ Model. The model was developed by F. W. Harris in 1913. But still R. H. Wilson is

given credit for his early in-depth analysis of the model.

The ordering cost is constant. The annual (or monthly or whatever periodicity you desire, here

we will use annual) demand for the item is constant over time and it is known to the firm.

Quantity discounts doesn't exist. The order is received immediately after placing the order.

Variables

Q = order quantity

Q = optimal order quantity

D = annual demand quantity of the product

P = purchase cost per unit

C = fixed cost per order (not per unit, in addition to unit cost)

H = annual holding cost per unit (also known as carrying cost) (warehouse space, refrigeration,

insurance, etc. usually not related to the unit cost)

The Total Cost function

The single-item EOQ formula finds the minimum point of the following cost function:

Total Cost = purchase cost + ordering cost + holding cost

-

Purchase cost: This is the variable cost of goods: purchase unit price × annual demand

quantity. This is P×D

-

Ordering cost: This is the cost of placing orders: each order has a fixed cost C, and we need

to order D/Q times per year. This is C × D/Q

-

Holding cost: the average quantity in stock (between fully replenished and empty) is Q/2, so

this cost is H × Q/2

EOQ is essentially an accounting formula that determines the point at which the combination of

order costs and inventory carrying costs are the least. The result is the most cost effective

quantity to order.

.

Main Reason for Keeping Inventory-

There are three basic reasons for keeping an inventory:

1. Time - The time lags present in the supply chain, from supplier to user at every stage,

requires that you maintain certain amount of inventory to use in this "lead time"

2. Uncertainty - Inventories are maintained as buffers to meet uncertainties in demand,

supply and movements of goods.

3. Economies of scale - Ideal condition of "one unit at a time at a place where user needs

it, when he needs it" principle tends to incur lots of costs in terms of logistics. So bulk buying,

movement and storing brings in economies of scale, thus inventory.

Objectives of Inventory Management-

The main objectives of inventory management are operational and financial. The operational

objectives means that the materials and spares should be available in sufficient quantity so

that work is not disrupted for want of inventory.

The financial objective mean that investment in inventories should not remain idle and

minimum capital should be locked up in it.

Therefore, the objective of inventory management is to minimize the investment in inventories

keeping in vies the production, sales and financial resources of the firm.

In brief the different objectives of the inventory management may be summarized as follow:

Operating Objectives:

1) To ensure continuous supply of material.

2) To ensure uninterrupted production.

3) To minimize the risks and losses.

4) To ensure better customer services.

5) Avoiding of Stock-out Danger.

Financial Objectives:

1) To minimize capital investment.

2) To minimize inventory cost.

3) Economy in purchasing.

4) To take advantages of favorable market conditions.

Reasons for Inventory Management-

Improve customer service

Economies of purchasing

Economies of production

Transportation savings

Hedge against future

Unplanned shocks (labor strikes, natural disasters, surges in demand, etc.)

To maintain independence of supply chain

INVENTORY MANAGEMENT must tie together the following objectives, to ensure that there is

continuity between functions:

• Company’s Strategic Goals

• Sales Forecasting

• Sales & Operations Planning

• Production & Materials Requirement Planning.

Inventory Management must be designed to meet the dictates of market place and support the

company’s Strategic Plan. The many changes in the market demand , new opportunities due

to worldwide marketing , global sourcing of materials and new manufacturing technology

means many companies need to change their Inventory Management approach and change

the process for Inventory Control .

Scope of Inventory Management

Various activities covered under inventory management are as follow-

1- Material Planning and control – Activities performed are:

a) Estimation individual requirements of parts.

b) Preparing materials budget

c) Forecasting the levels of Inventories

d) Scheduling the orders

e) Monitoring performance in relation to production and sales.

2- Procurement/purchasing of materials – The following activities are undertaken under this

heading:

a) Selection of source of supplies through vender development

b) Finalization of terms and conditions of purchase order

c) Placement of purchase orders

d) Follow-up

e) Maintenance of mutually beneficial suppliers relationship

f) Approval of payment to suppliers etc.

3- Inventory control :

a) Establishing inventory levels

b) Inventory analyses – ABC, EOQ, ROP etc.

c) Lead time analysis and reporting

4- Stores and stores administration :

a) Physical control of materials

b) Preservation of stores

c) Minimization of obsolescence and damage through timely disposal and efficient handling

d) Maintenance of stores records

e) Planning for proper location and stocking

f) Physical verification of stocks/inventory and reconciling

5- Standardization and simplification :

a) Value analysis

b) Disposal of scrap, surplus, obsolete material

c) Cost reduction

6- Determination of inventory policies

7- Determining various stock level

8- Determining economic order size

9- Safety or buffer stock

10-Determining lead time

Limitation of the study

1) Limited sources – limited sources of the information were one of the major hindrance

during the study due to absence of proper guidelines, it was very typical to prepare the report.

As it known that, this is a primary type of research so there were many problem in collecting

the data

2) Time limit – To learn the whole process and to understand the criticality of the system, it

required a lot of time and unfortunately the time was the major constraint. It was very tough to

acquire the practical knowledge in such a short period of time.

3) Overburden of work – As there were limited no. of employees, they all were busy in their

given task that’s why many of time they don’t have enough time to explain the required things.

Purchase Department

Purchasing of all the required material is done here. All the departments send their

requirements to purchase department and this department fulfill their wants as much as

needed and possible.

This department make available necessary inventory. It purchases material as soon as

possible to avoid any kind of interruption in production. For this it gives priority to the delivery

time and quality first and price least.

They try to reduce order cost by placing few larger orders rather than numerous small orders.

It works in order to remove repetition of inventory.

Purchase department has all the information about the existing suppliers for particular material.

It place order to the best available vendor so that best material can be provided to

departments.

Purchase department develop a vendor development policy in which the department motivate

and support those vendors who are capable but not in condition to establish themselves by

itself. The reason behind that is to decrease monopoly and to open all the alternatives and it is

also helpful in the economy development.

After accomplishing all the process relevant to the purchasing of material the further process is

done by Store Department.

Importance of purchase department

1) To minimize the time lack between placing an order and receiving the goods.

2) Purchase department plays an important role in reducing order cost.

3) It helps to provide good quality product at a reasonable price.

4) It maintains good supplier relationship.

5) To avoid excess of inventory and investment.

6) To proper utilization of funds.

STORE

A store is “the function of receiving, storage, issuance preservance of materials of all types.”

Stores “is a place for all and all in it’s place” All types of materials raw materials, components,

sub assemblies whether purchased or manufactured in house, are stored in a “Store”.

It is the place where all inventory is kept. In RSWM there are 2 segments of stores

1) Receipt Store

2) Main Store

1) Receipt Store – All the goods which are purchased are firstly received at receipt store,

where it is checked according to order details. An M.R.N is prepared immediately after the

checking. Further on particular department, is recalled for the approval of goods.

2) Main Store – When goods are approved, they are transferred to the main store, where

they are kept till issue. Slip is required for such issuing. If budget limit is crossed then the main

store will not issue the goods to that particular department.

Importance of Store-1) To keep and maintain inventory in a systematic way till the issuing.

2) To keep the account of all the inventories.

3) To avoid any kind of mismanagement

4) To proper allotment of material to particular department.

5) All the data about the inventory can be access easily.

6) Prior action is done to avoid deviation at later stage.

7) Time saving.

Process of Inventory and Store Management

DESIGNATION OF PURCHASE DEPARTMENT

DESIGNATION OF STORES

WORK AREA OF PURCHASE DEPARTMENT

Mr. S.M.Jain(Deputy Manager Material ) :

Head of the purchase and store department. All the orders are passes under his permission.

Mr. Dinesh Pareek(Executive) :

Purchase of Engineering and Civil, furniture and fixtures and building materials is managed

under him.

Mr. Jinesh Kathed(Deputy Officer) :

Purchase of spare parts used in production(Spinning) and maintenance is managed under

him.

Mr. S.P.Jain(Assistant Officer) :

Purchase of Packing material, general items, dyes and chemicals, stationary and printing, local

purchasing is managed under him.

WORK AREA OF STORES

Mr. Y.K.Agarwal(Executive) :

Controlling of Stores and Issuing the Material is managed under him.

Mr. Anil Tripathi(Deputy Officer) :

Preparation of statement, maintain budget, L.P.G and furniture repairing is managed under

him.

Mr. Manoj Garg(Deputy Officer) :

Bill passing, preparation of challan of repairing material and follow up is managed under him.

Mr. Umesh Kushwah(Assistant) :

Managing the total receipt, Checking, preparation of MRN(Material Receipt Note), Approval of

material, transfer of approved material to main store.

WORK AREA OF ACCOUNTS DEPARTMENT

Mr. A.K. Pokharna(Accounts Officer) :

He is totally responsible for accounting work of purchase and stores department he cross tally

all the figures through all the facts and figures related with the inventory and at last he makes

the payment to the suppliers.

INDENT

It is a requirement note prepared by the individual department, which need the material. It is

also known as Purchase Requisition.

Departments are

1) Spinning and Post Spinning (mill 1 to 6)

2) Administration Deptt.

Each department made its individual indent as per requirement. Mainly indent is of two type:

Regular Indent

Against Immediate Indent

Regular Indent: It is prepared in the previous month for future month’s demand. It is

decided in target meeting held in last month. Regular indent is used for the small and regular

items.

Example- Stationary items

Against Immediate Indent: This indent is prepared when urgency is there like machine

breakdown whose prior prediction is not possible. Every year a budget is fixed for such

indents.

Budget

Every year purchase Budget for every department is prepared. The department can make

indent within that budget limit only. If their demand crosses the limit then Special Sanction is

needed, which is sanctioned by Mr. Rajiv Jain(COO) or Mr. J.C.Laddha(ED).

Performa of Indent:

1)

2) Requisition No.: It is the indent no. required for further processing.

3) Dept.: Name of the department which propose the indent

4) Item Code: In RSWM everything is done through coding. There is a series of items which is

used in this process.

The basic item series is:

G - General Items

C - Capital Goods

F - Furniture

D - Dyes

Z - Packaging items

H - Fuels

T - Printing & Stationary

S - Scrap

There are some department codes also. for eg.

P - Spinning

PG - Blow room

PH - Carding

5) Item Description – Item which is required by the department is detailed under is this

heading.

6) Unit - Measuring unit of item described in “Item description” column. E.g. - K.G., Ltr., No.

7) Quantity Required – It is the quantity of an item which is required.

8) Delivery Date – It is the expected date on which item is required.

9) Current Stock – Stock of the material in all unit of R.S.W.M is checked.

10)F.O.C. Quantity – Is there is any free of cost material available in the store then that

Material will be come under this heading.

11) On Order – An indent of same material of which order is placed but not received yet.

12) On Requirement – Material of which indent is already in processing but order is not yet

placed.

13) Unit Rate – Price of the item is specified here.

14) Value – Total price of item demanded. (V = price x quantity).

15) Monthly Average Consumption – In this the consumption rate of the material is checked. It

is further classified in 2 parts.

A) This year ;

B) Previous year.

16) Last Supplier Code – It is the code of last supplier of the same material.

17) Last Supplier Name – It is the name of last supplier from which the same material was

purchased.

18) Last Purchase Order Number – It is the last purchase order no. of same material.

19) Lead Time Days – This includes the no. of days by which delivery extend.

20) Po. No. and Execution Date – It includes no of order and date on which material is

received.

21) Budget – Under this the total budget of the particular department is described. This is

divided in different segment like-

TOTAL (Original+Additional) Budget of Cost Center

TOTAL Balance Budget of that Cost Center

LESS: Pending order of that Cost Center

LESS: Pending Indent of that Cost Center

Unauthorized Indent of that Cost Center

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

BALANCE AMOUNT

LESS: Current Indent

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

NET AMOUNT

Cost Center Inventory

When balance amount is received than this current indent amount is deducted and net

amount is received.

The department can get any required material if only it has budget under its account and if it

crosses the budget limit than it will be needed special sanction.

Otherwise it can’t be put into further processing. This sanction would be done by C.O.O. or

E.D.

INQUIARY:

When indent is received the purchase department makes inquiry about the item which is

needed. Inquiry includes – Market research, price comparison and conditions, which are

favorable to RSWM

In market research they search for suitable suppliers who provide them better quality products

at lower price. They also give importance to lead time.

RSWM give emphasize –

1) On quality

2) Delivery and

3) Price.

In RSWM they select best alternative vendor amongst available vendors pool even there are

some fixed suppliers also from which heavy machinery, fuel, furnance oil are purchased.

Eg. –

1)Lakshmi Machinery Works Limited, Coimbatore.

2)Claraint Company of dyes, Mumbai.

RSWM also helps in supplier development they have made vendor development policy, which

helps to reduce monopoly, to increase quality, to purchase material at low price and to provide

best delivery time. The another objective behind this policy is to develop Small Business

Units(SBU’s) which ultimately helps to develop Indian economy.

In certain there cases there are some local vendors from which some particular item are

purchased eg. Furniture repairing, Stationary and printing. Repairing items are send to the

vendors from which day work purchased.

QUOTATION

After enquiry R.S.W.M(Purchase Department) demands for the quotation from selected

vendors. Under this price, quality and other information related to the product is provided by

vendors.

PRICE COMPARISION

After receiving quotation from various vendors, purchase department prepare Price Comparative Statement in which they compare among prices of different vendors and then

take decision from which vendor they will gain more.

ORDER

After enquiry when supplier is fixed the purchase department send the material requirement in

written form which known as Order and the Performa is called Order Form.

Contents Of Order Form-

1) Order No.- It is a computerized based series in continuation.

2) Date – When order form is prepare.

3) Tin No. – The Tin No. of RSWM Kharigram 0841001037

4) R.S.T. No. – 0610/1054 Dated on 01/05/1974.

5) C.S.T. No. – 0610/1054 Dated on 27/05/1974.

6) Bankers – The Following bankers are

A- S.B.B.J Kharigrma, Gulabpura.

B- Bank Of Rajasthan, Gulabpura

7) Suppliers Name – Name of the supplier from whom the material will be purchase.

8) Suppliers Code – Code which is generated for this particular suppliers.

9) Production Description –

A- Indent No. - It is the code of indent of that particular material.

B- Item Code – It is the unique code of particular item which developed and used by

RSWM

C- Description – Detailing about the particular item.

D- Quantity Unit – How much material is required and in what units it is measured.

E- Rate/Unit – Price of single of that item.

F- Discount – Any price concession if given by the supplier.

Next part of order is about terms and condition. In terms it includes-

1) – Excise Duty(If payable)

2 ) – Sales Tax – Mainly C.S.T. charged @ 2%

3 ) – Ex godown– If there is ex godown then it means all the charges

from packaging of material at supplier godown to the delivery at RSWM Kharigram Stores are

payable by RSWM itself.

4 ) – F.O.R – this terms is there it means till transportation charges are included in price

from transportation to delivery is paid by RSWM

5 ) – Delivery – This is the date on which material is expected to reach the destination.

6 ) – Payment Mode – How the payment is made to supplier whether it is in advance and it

has a time limit. It may be through by Cheque/Bank Draft/Cash.

There are 4 copies of order form. 2 copies are send to the supplier, 1 copy to store and

last copy to accounts department.

MATERIAL RECIEPT NOTE

This is the part of process which comes under stores department. M.R.N. is prepared when the

material is received by the RSWM stores.

M.R.N. is prepared for all the goods whether they are usable, returnable, replacable, not

approved. It is a base that shows goods are received by stores department. When these goods

are approved then M.R.N. is passed to Accounts Department.

PERFORMA OF M.R.N. DEPARTMENT

1) Supplier Code and Name – Here, the code of the particular supplier is mentioned which

is already set. The name and station is also specified.

2) Challan No. – It is the no. of receipt given by transporter by whom material is sent to the

R.S.W.M by the supplier.

3) Invoice No. – An invoice is sent by the supplier with the material received at the store

every invoice has its identity no.

4) P.O.Type – (L - Local / R - Repair / I - Import).

It is the type of purchase order whether it is local purchase, repairing item, import purchase.

5) M.R.N. and Date – It is M.R.N. identity no. and date when M.R.N. is prepared eg.

Goods are received

6) M.R.N. Confirm Date – It is the date on which goods are approved by the related

department and the goods are transferred from receipt store to main store.

7) Transporter Name – In this field the name of transporter is shown.

8) Payment Terms – In which form the payment is to be done is specified under this

heading. It can be advance or within particular time period.

9) Mode of Payment – Payment is made through Cheque/Bank Draft/Cash is mentioned

under this category.

10) Form Applicable – If any form is applicable to the material purchase is given under this.

11) Invoice Amount – The amount which was described in invoice is mentioned here.

12) Deduction Amount – Any type of discount or deduction is described here.

13) Credit to Party – It is the final amount which has to be paid.

(Invoice amount-Deduction amount)

14) Credit to Employee – If any amount is paid by the employee relevant to the goods

purchased like freight charges, is credited to the employee’s account.

15) Debit to CENVAT, VAT,CVD – Under this heading tax details are described.

16) P.O. LN.(Purchase Order Line No.) – Under this, no. of items are specified.

17) Article Code and Description – This is the code of particular item and detailed about

that item.

18) UM(Unit Measurement) – This is the measuring unit of material.

19) Data Code – This is the specified code which is generated for particular material.

20) Quantity Accepted – The quantity of the material which is approved by the department.

21) Basic Rate – Price of single unit of the material.

22) Basic Amount – It is the total price of the material purchased.

(Rate X Quantity)

23) Discount Amount – This is the discount which is given by the vendor on the material

price.

24) Sales Tax – This is the description of tax which is charged on the purchased items.

25) P&F MISC. Exp. – Any packing and forwarding expenses, if pay is mentioned here.

26) Freight Charges – Any freight charges paid by R.S.W.M employee to acquire the

material.

27) Other Vendor – If there is any mediator or any other supplier, who purchases the goods

on behalf of R.S.W.M or help the R.S.W.M in acquiring that material, they are called as other

vendors and any amount paid by those vendors comes under this heading.

28) Misc. Deduction – There are many differences between the calculation done manually

and computerized. The difference amount is basically in decimals. To adjust that amount some

deductions or changes have to be done and this are described under misc. deduction.

29) Excise Duty – If excise tax is paid on the material purchased than that amount is

specified under excise duty.

30) Total – This is the total amount which is received after balancing all the figure.

ISSUE REQUISITION NOTE

After approval, the material is transferred to main store from receipt section. Here, material is

issued on the basis of issue slip.

Issue slip is a document in which gives the right to the department to get material issued.

Without issue slip one could not get the material. This issue slip is the proof that the

department is permitted to get the ordered material. And it is signature by executive (Store

Head) and department Head.

Every department has particular time slot given by store, during that time departments can get

the material.

PERFOMA OF ISSUE REQUISITION NOTE

1) Requisition No. – It is the identity no. of the indent prepare for that material.

2) Date – It is the date when IRN is prepared.

3) Department Code – It is the specific code for the department which wants to get issued

the material.

4) Name – Here, the name of the department is given.

5) Item Code – This is the code given to specified item.

6) Description – There is information about the material which has to be issued

7) Project Code – This is the description about the material it shows that in which section

of the department that material has to be used.

8) Sub Head Description – Which type of material has to be issued, is comes under this

heading.

9) Stock – No. of units available in the store.

10) U.M.(Unit measurement) – Measuring unit of the material.

11) Quantity Required - NO. of units of material required by the department.

12) Quantity Issued – No. of units of material issued by the store.

13) Amount – It is the total amount of the material issued.

14) Location – In which shelf the material is kept in the store is mentioned under this

heading.

BILL PASSING

When material is approved by the department, it is stored in the main store. The M.R.N. of the

approved goods is further passed to other employee of main store for bill passing. That is bill

passed to the account department. There are certain cases when bill of particular material is

not passed, these cases are –

1) If material is for trial practice.

2) If original invoice is not available.

3) If new technology is to be used.

Accounts department – Here, accounts department plays the role of payee. All the payment

of purchase are done by this department. Department makes payment according to terms and

conditions, already fixed in order form.

Before making payment each and every doubt is make clear i.e. order, M.R.N. is checked

here. Employee manually cross check the order and M.R.N. if there is any difference between

order rate and M.R.N. rate then accounts department issues an amendment letter to stores. It

is signed by the next higher authority. Basically they match the –

- Payment mode

- Rate of item

- Size of item

- Quantity of item

- VAT & CENVAT(if payable)

-

They also check the debit and credit of the vendors party so that double payment can be

avoided. If advance payment is made to the party than it must be already debit and when bill

passes to the accounts department then that party must be credited.

Process of Accounting :

Checking from orderThey manually check the MRN bill passing with order. If there is any difference they issue an

amendment letter to stores for correction.

Updation in systemIf there is no difference between order and MRN bill passing then the detail of invoice updated

on the system.

Batch RunIt is a program on system in which voucher is generates. Voucher is of 4 type-

1- Journal voucher

2- Sales voucher

3- Purchase voucher

4- Expense voucher

Voucher printingThrough batch run voucher is generated and that voucher is printed out for further processing.

Voucher checkingAfter printing the voucher, it is checked by the employee to avoid further mistakes.

Voucher approvalIf the voucher is correct then it is approved and payment is made to the party.

TDS deduction TDS (Tax deducted at source) is deducted for the repairing items only.

Payment

Payment is made to the party after conforming all the terms and condition day to day allocation

to parties is also done before making payment. Payment can be done in-

1) Advance

2) Cash / Cheque

3) Bank draft

After the making of payment to the party that is closed and it is the final step of the inventory

process.

SCRAP

Scrap- The waste material which is of no use to the firm is called Scrap. It has no scope to be

utilized further in the mill.

Here Scrap is divided into following categories-

1) Iron Scrap

2) Plastic Scrap

3) Cone carton Scrap

4) Wooden Scrap

5) Chindi Scrap(Waste Clothe)

6) Anti Plastic Jeri can Scrap

7) Plastic Bobbin Scrap

8) HDP Scrap

9) LDP Scrap

Scrap has its own value. Its not thrown out, it can be sold further to small unit who use this

scrap in their process. RSWM earn money through selling the scrap. So we can say that scrap

is very important part of inventory.

Through scrap problem of unwanted un useful, idle items can be solved.

There are different yards for keeping this scrap, which are called scrap yard. It consist all the

type of scrap. Scrap of each and every category is kept in separate scrap yard in RSWM

Costly scrap item are kept in stores and general or regular items are kept in scrap yard under

purchase department.

There are fixed days for collecting scrap from different department these days are Monday and

Thursday. Scrap is sold every month. Payment can be made in advance or cash.

Process

Step 1 – A memo is made by relevant department.

Step 2 – That memo is given to the different buyers.

Step 3 – After that a contract is made by CCD (Corporate Commercial Department).

Step 4 – applications or tenders are invited there. Then best profitable tender is accepted and

at last a contract is made.

If the value of scrap is more than 10,000 Rs. then it will be dealt by CCD and if it is less than

10,000 Rs. then purchase department would handle it.

Step 5 – After that an invoice is made of the sold scrap.

TAXES – 4% vat is charged on the scrap items.

There are 4 copies of the invoice which are to be send to

1 Buyer

2 Store/Purchase Department

3 Accounts Department

4 Main Gate

There is a main gate entry of each and every item, without gate pass no one can carry the

scrap material inside or outside of RSWM

Performa Of Scrap Contract

1) Name of Firm – The name of the firm R.S.W.M is given here.

2) Date – Date of contract is mentioned here.

3) Name of Contractor – The person who has signed the contract, whose name is mentioned

here.

4) Subject – The reason of contract is described here then there is detailed information about

the contract.

5) Particulars – Name of the scrap items which is to be sold.

6) Approx Quantity – There is approximate idea of the scrap’s quantity.

7) U.M – Measuring unit of the scrap is mentioned here.

8) Rate per U.M.(in Rs.) – There is rate of scrap item at per measuring unit.

9) Commercial Terms and Condition – There are some terms and condition which are

attached with the contract. It have all the essential information related to contract.

10) Signature of Authorized Person – There is approval(signature) of Deputy General Manager

of Corporate Commercial Department. Which prove that this contract is authentic?

Of Inventory Management at RSWM Ltd.

Strengths –

1) RSWM’s E.R.P. system – purchase, store and all other departments are interlinked through

the E.R.P.(Enterprises Resource Planning) which consist T.I.M.(Textile Integrated

Manufacturing) which is very helpful in managing the inventory.

2) Time management – The working of RSWM inventory management department is

appreciable as it manages time very well. They try to minimize the lead time.

3) Disciplined Environment – Uniformity and decorum is maintained there very well.

Everything is well arranged in stores department, which shows the discipline.

4) Upgraded technology – use of a highly upgraded technology makes the RSWM’s inventory

system most effective and efficient.

5) Absence of stock-out problem – inventory control ensures an adequate supply of materials

and stores minimizes stock out and shortages.

6) Use of zero inventory system – RSWM uses zero inventory system which reduces the cost

by reducing amounts of-

- Raw materials and purchased parts and subassemblies by having suppliers deliver

them directly

- Reducing the amount of works-in process by using just-in-time production.

- Reducing the amount of finished goods by shipping to markets as soon as possible.

Weakness –

1) Higher cost and excessive inventory than are required - it is commonly seen that there is

high cost and excessive inventory, which causes loss.

2) Using poor process, practices and antiquated support system.

3) Much more complex system than the uninitiated understands.

4) Resist to change – The RSWM is not ready to adopt any kind of change in inventory

system. They are very much comfortable with the existing system that’s why they don’t want to

replace it even if there are many better options in front of them.

5) Inadequate no. of employees – there are lesser no. of employees which causes

mismanagement due to extra burden of work on their shoulders. Employees have to do their

own work as well as extra work also to accomplish the task given to their department which

causes delay in action.

Opportunity –

1) Create new suppliers – They can develop small vendors who can further help them in

acquiring good quality material at low price.

2) Development of long term relationship – Company should develop long term relationships

with vendors. This would help in improving quality and delivery.

Threats-

1) Competitors – There is a lot of competition. Suppliers have many options to sell their

goods. So RSWM has to be agreed with supplier’s terms and conditions.

2) Recession - Because of recession they have limited source to purchase the material and

due to this they have to pay more than they expect.

3) Delay in Delivery - There may occur problem which results in delay of the material, which

can cause heavy loss. E.g. transportation strike. It is a big threat for RSWM to get material at

right time. Hence company has to carry large safety stock.

CONCLUSION

At the last after the study of the whole report, in the conclusion it can be said that :-

Inventory and Store Management plays an important role in every business. It is concerned

with both short and long term financial decision. Fixed capital investment generates that

productive capacity where as working capital makes the utilization of that capacity possible.

The acquiring of inventory and after this its management both the things are equally important.

In respect of RSWM ltd. –

1) Company is expanding its business continuously it will increase the use and need of

inventory

2) Company’s inventory controlling system is tightening its grip on inventory, purchasing and

consumption.

3) Company should make efforts for sustaining in the local Indian market also.

4) It is having many opportunities for more growth in future.

5) Due to all the expansion and modernization company’s inventory and store management is

improving day by day.

6) Company is having best place in exports markets and its all brands are famous.

SUGGESTION AND RECOMMENDATION

1) Effective computerization – Computer should not be use merely for accounting purposes

but also for improving decision making.

2) Review of Classification – ABC, FSN and other classification which are used here must be

periodically revised.

3) Improve Coordination – Better coordination among purchase, stores, production, marketing

and finance department will help in achieving greater efficiency in inventory management.

4) Reduce working capital – The solution's ease of increased target-setting frequency

combined with the "scientific" nature of the algorithms provides clients with a mechanism to

lower investment in inventory assets.

5) Lower operating cost – Limiting inventory assets leads to a reduction in carrying costs;

savings can be expected in facility operating costs, transfer transportation costs and other

inventory related costs such as damage, obsolescence and product handling.

Annexure

1) Purchase Requisition (Indent)

2) Order Form

3) MRN(Material Receipt Note)

4) IRN(Issue Requisition Note)

5) Journal Voucher

6) Invoice

7) Contract for Sale of Scrap

8) Inventory department wise summary, 04, 2009

Bibliography

Web sites : -

www.rswm.in

www.lnjbhilwara.com

www.google.com

http://www.google.com/

http://www.lnjbhilwara.com/

www.wiekipedia .org

www.businessworld.com

Books : -

Chandra Prasanna, Financial Management(Theory and Practices)

I.M.Pandey,Financial Management

Journals: -

A Broader Perspective (Annual Report 2007-08and 2008-09 of RSWM)

Company Profile (Annually-2008 )

Inventory Data of RSWM Ltd.

http://www.businessworld.com/

http://www.wiekipedia/

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