A Project On Inventory Management

A STUDY ON INVENTORY MANAGEMENT IN INSTRUMENTATION LTD, PALAKKAD
SUMMER PLACEMENT PROJECT

submitted by
RAIJA.K. R.
REG. NO: 1235F0256 under the guidance of
Pr !. C.VINOT"A ,M#A, M.P"IL$

in partial fulfillment of the requirements for the award of the Degree of
MASTER OF #USINESS ADMINISTRATION

of the Bharathiar University, Coimbatore
2012 201!
GURUVAYURAPPAN INSTITUTE OF MANAGEMENT

"#ffiliated to Bharathiar University$
COIM#ATORE % 6&1 105

Guruvayurappan Institute of Management 1
DECLARATION
% RAIJA.K.R,student of G'r'()*'r)++), I,-./.'.0
! 1),)2010,.,
Coimbatore, hereby declare that the pro&ect wor' titled ( A STUDY ON INVENTORY MANAGEMENT IN INSTRUMENTATION LTD, PALAKKAD3 which is submitted to Bharathiar University in partial fulfillment of the requirements for the degree of )aster of Business #dministration, is a record of original research wor' done by me under the guidance of, Pr !. C.VINOT"A, M#A,M.P"IL of *uruvayurappan %nstitute of )anagement, that this is genuine and has not been submitted elsewhere for any other degree or diploma
+,#C-. D#3- .
/#%0#121/ /-* 45.126780279
ACKNO4LEDGEMENT
8irst and 8oremost % would li'e to than' the #lmighty, origin of all 'nowledge, for the abundant blessings he has showered upon me1 % would li'e to e:press my sincere gratitude to Dr. VERG"ESE MAT"E4, #.S5 6E,227, M#A, P8.D, DGM 6G0r1),*7 FIIE, Director, *uruvayurappan %nstitute of )anagement, Coimbatore1 Dr. T"OMAS T. T"OMAS, #.S5 , M#A , PGDPR9J , P8.D, +rincipal, *uruvayurappan %nstitute 5f )anagement, for their active support and guidance during the course of my studies in the institute1 ;ords can<t describe the source of motivation and inspiration that my faculty guide M-. C. VINOT"A ,M.#.A, M.P8/: has rendered. % than' her for the support, advice and encouragement and without her valuable advices and suggestions this report would not have been successful1 ;ith great pleasure i e:press than's to Mr.C.#ALAKRIS"NAN, Deputy )anager "+=#$,Mr.T.R);8)1 8),,>enior5fficer"+=#$,Mr.R)1)58),;r),,)anager"8=# $,Mr.A.K.K0-8)();)-,0unior wor'1 % would li'e to than' my family, friends and well wishers for their encouragement in completing the pro&ect wor'1 % ta'e this opportunity to e:tend than' to all who has helped me and encouraged me all throughout in bringing the best of this pro&ect1 5fficer #ccounts"8=#$ of %nstrumentation ,imited,+ala''ad for their necessary help and guidence in completion of my pro&ect
RAIJA.K.R /eg 4o. 1235F0256
TA#LE OF CONTENTS
CHAPTER NO 1.0 DESCRIPTION INTRODUCTION 1.0.1 INTRODUCTION OF THE STUDY 1.0.2 NEED OF THE STUDY 1.0.3 SCOPE OF THE STUDY 7 8 9 10 PAGE NO
1.0.4 OBJECTIVE OF THE STUDY
10
1.1
INDUSTRY PROFILE
11
1.2
COMPANY PROFILE
14
1.3
THEORETICAL FRAME WOR
!0
2.0 3.0 4.0 !.0 ".0
REVIEW OF LITERATURE RESEARCH METHODOLO#Y
"2 "8
DATA ANALYSIS AND INTERPRETATION 71 FINDIN#S AND RECOMMENTATION CONCLUSION BIBLIO#RAPHY 102 10! 10"
LIST OF TA#LES
3#B,- 45
3%3,3he percentage of current asset to
+#*- 45
!1111 !1112 !1116
inventory of %,+1 %nventory 3urnover ratio %nventory @olding +eriod /atio 5f )aterial Consumption 3o
?9 ?? ?A
!111! !1117 !1119 !111? !111B !111A !11110 !1211 !1212 !1216
3urnover %nventory 3o Current #sset /atio %nventory 3o ;or'ingcapital /atio Debtors 3urnover /atio Creditor 3urnover /atio %nput 5utput /atio ;or'ingcapital 3urnover /atio 3rend #naysis 5f ;or'ingcapital 3rend #nalysis 5f Cash 3rend #nalysis of Debtors /elationship Between %nventory #nd
B0 B2 B! B7 B? BB A0 A1 A6 A!
!1611
Current #sset /elationship Betweeen /awmaterial #nd
A9
!1612
Current#sset /elationship Between %nventory #nd
A?
!1616
/aw material
AA
LIST OF C"ARTS
Guruvayurappan Institute of Management !
3#B,- 45
3%3,5rganiCation Chart 5f 3he +urchase
+#*- 45
11211 11212 11216 1121! 11217 11219
Department 5rganiCation Chart 5f >tores Department 5rganiCation Chart 5f /eceipt >tore 5rganiCation Chart 5f Component >tore +roducts 5f %,+ 5rganiCation Chart 5f ++C Department 5rganiCation Chart Duality Control
26 2? 2A 62 66 !2
1121? !1111 !1112
Department %nventory 3urnover ratio %nventory @olding +eriod /atio 5f )aterial Consumption 3o
!9 ?B ?A
!1116 !111! !1117 !1119 !111? !111B !111A !1211 !1212 !1216 !1!11
3urnover %nventory 3o Current #sset /atio %nventory 3o ;or'ingcapital /atio Debtors 3urnover /atio Creditor 3urnover /atio %nput 5utput /atio ;or'ingcapital 3urnover /atio 3rend #naysis 5f ;or'ingcapital 3rend #nalysis 5f Cash 3rend #nalysis 5f Debtors 8>4 analysis
B1 B6 B! B9 B? BA A0 A2 A6 A! 106
Guruvayurappan Institute of Management "
DEDICATED TO GOD ALMIGHTY MY DEAR PARENTS AND FRIENDS

1.0 .1 INTRODUCTION TO T"E STUDY
%nventory is the business largest asset 1%t is stoc' of item used in business1 %nventory represent one of most important asset that most businesses posses, because the turnover of the inventory represents one of the primary sources of revenue generation and subsequent earnings for the company<s shareholder and owners1%nventory is very vital to every company that is without inventory no company would survive1 %nventory is meant for Eprotection< and for Eeconomy< in cost1 2eeping inventory of sufficient stoc' will help to face lead time component, demand and supply fluctuation and any unforeseen circumstance in the procurement of materials1 3hough to have inventory is must, inventory is such a thing that will pile up and creep into the area of profits to turn them as losses and can put the company in red1 %t is therefore, necessary to have Control over inventory to save the company
from piling up inventories and to avoid losses1 Better said than done, is the word that suits inventory Control1 3he management of inventory is a 'ey concern of all business1 %f a companyFs inventory level is too low, it ris's delays in fulfilling itFs customers orders1 %f the inventory is too high, it is tying up dollars that can be better used in other areas1 %t also ris's obsolescence and spoilage1 >uccessful businesses 'eep their inventory turns high, but also 'eep their service level at or above the industry standard1 %nventory is a stoc' of goods required by an organiCation for its successful operation1 %nventory refers to materials procured, stored and used for day to day functioning of the whole organiCation1 %nventory is directly related to production and mar'eting department, still the finance department has to play a vital role in the management of inventory1 3he purpose of inventory management is to 'eep stoc' in such a way that there is no overstoc'ing or under stoc'ing1 %nventory is one of the most e:pensive assets of many companies representing
as much as 70G of total invested capital1 %nventory Control relates to a set of policies and procedure by which an industry determines which materials it will hold in stoc' and the quality of each that it will carry in stoc'1 %nventory is the largest item in the current assets category and must be accurately counted and valued at the end of each accounting period to determine a company<s profit or loss1 >o the management of inventory is important1%nventory management is the process of efficiently overseeing the constant flow of units into and out of an e:isting inventory1 %nventory management is a very important function that determines the health of the supply chain as well as the impacts the financial health of balancesheet1-very organiCation constantly strives to maintain optimum inventory to meet its requirements and avoid over or under inventory that can impact the financial figures1
1.0.2 NEED FOR T"E STUDY

%nventories perform certain basic functions which are of crucial importance in the firm<s production and mar'eting strategies1 -ffective Control over the utiliCation of materials has much bearing on profit and here is an attempt to study the management of materials1 3his study helps the company to detect and evaluate its own strength and wea'ness and also give recommendation for the better inventory management1 ;ithout inventory management it would be difficult for any company to maintain Control and be able to handle the needs of customers1%nventories are necessary for a firm to operate efficiently and almost all business transactions involve the delivery of a product or services in e:change of currency1
1.0.3 SCOPE OF T"E STUDY

%nventory is the ma&or element in the wor'ing capital of any trading and manufacturing concern1 3he scope of the present study e:tends to ensure proper inventory management and cost Control1 %t provides a guideline for the management of the materials of the company and helps to introduce necessary changes as and where required1 3he scope of inventory management concerns the fine line between replenishment lead time, carrying cost of inventory, asset management,inventory forecasting,quality management, replenishment, returns and defective goods and demand forecasting1Balancing these competing requirements lead to optimal inventory levels, which is an ongoing process as the business need shift and react to the wider environment
1.0.& O#JECTIVE OF T"E STUDY

PRIMARY O#JECTIVES o 3o study the tools and technique of inventory management adopted at %nstrumentation ,imited1
SECONDARY O#JECTIVES
o 3o analyse effectiveness of inventory management1 o 3o study the inventory Control measures in inventory management o #nalysis of inventory management by using ratio analysis1 o 3o study the inventory management procedure
1.1 INDUSTRY PROFILE

I,-.r'10,.)./ , is defined as the art and science of measurement and Control of process variables within a production or manufacturing area 1#n instrument is a device that measures a physical quantity such as flow, temperature, level, distance, angle, or pressure1 %nstruments may be as simple as direct reading thermometers or may be comple: multi variable process analyCers1 %nstruments are often part of a Control system in refineries, factories, and vehicles1 3he Control of processes is one of the main branches of applied instrumentation1 %nstrumentation can also refer to hand held devices that measure some desired variable1 Diverse handheld instrumentation is common in laboratories, but can be
found in the household as well1 8or e:ample, a smo'e detector is a common instrument found in most western homes1 # valve is a device that Controls the flow of a fluid1 3oday valve can Control not only the flow but the rate, the volume, the pressure or the direction of liquids, gases, dry materials, through a pipeline or similar passage way1 3hey can turn on and off, regulate, modulate, or isolate1 3hey can rough in siCe from a fiction of an inch to as large as 60 feet in diameter and can vary in comple:ity from a simple brass value available at the local hardware stoc' to a precision designed ,highly sophisticated coolant system Control Halve, made of an e:otic metal alloy in a nuclear reactor Halves can Control flow of all types from the thinnest gas to highly corrosive,
super heated steam, abrasive sherries, to:ic gases and radioactive materials1 3hey can handle temperature from cryogenic region to molten and pressure from highly vacuum to thousands of pounds per square inch1 3he valve is one of the most basic and indispensable components of our modern technological society1 %t is essential to virtually all manufacturing process and very energy production and supply system, yet it is one of the oldest products 'nown to
man with a history of thousands of years1 %nstrumentation can be used to refer to the field in which, instrument technicians and engineers wor', or can refer to the available methods of measurement and Control and the instrument, which facilitate them1 8or core industries li'e power , oil, gas ,petro chemical equipment which will help to function and chemical etc1 3here is a good need for Control and instrumentation equipment which will help to function industries smoothly1 # wide range of electronics equipment and instruments are needed for Control and measurement of the flow of gas, oil, valves, pressure, welding valves, etc are used1
%t is a very comparative industry where new technological development are concern which will in function requires heavy instruments in /esearch and Development "/=D$ facilitate for the companies engaged in this field face high level of competition1 But there is good demand for these producers in the global mar'et in the highly industrialiCed world1
1.1.1 INSTRUMENTATION INDUSTRY IN INDIA

3he %ndian instrumentation industry is in for a sea change1 8rom an age where there was development of analytical instrumentation mainly in the Department of #tomic -nergy "D#-$ and C>%/ labs due to sanctions, very few of these technologies were commercialised1 But with new and emerging trends which are industry specific instrumentation li'e trace analysis instruments, fiber optic based instruments and life science instruments developing, there is a need for a technology plan which will foster closer relationship between the industry and academia, felt industry e:perts1 # technology plan will help to focus on newer technologies in generating %+/I playing the role of funding agencies and providing incentives for commercialisation of indigenously developed technologies1 >ince instrumentation is multi disciplinary,
there is a vast scope for design related activities, especially 5-) manufacturing1 8urther, with the laboratories going in for automation, there is a huge potential for application specific instruments1 3he estimated mar'et siCe for instrumentation industry is about /s 700 900 crore and %ndian companies have a share of about /s 100 crore and growing at 10 17G annually1 %n the analytical instrument segment used for chemical analysis li'e liquids, solids and gases the global mar'et is estimated at around J2! billion, growing at around ? BG and the highest growth has been in the life science sector1 >ome of the top
companies contributing include #pplera, 3hermo -lectron, #gilent 3echnologies, +er'in -lmer, Diagen1 %ndia stood among the lowest in usage of instrumentation compared to its *D+ "011?G$ in the mid B0<s1 Due to the above gaps in technology, local instruments are found to be considerably behind in performance, facilities, ease of use, ergonomy, appearance and ruggedness1 3his gap cannot be bridged without greater attention of local research, development, product innovation, and high quality production1 # few of the %ndian industrial units are at most putting 2 to 6 personnel to the tas' of (developmentK1 -ven then, these personnel are ot left to be (dedicatedK to development but are often drawn into other duties1 3he facilities put aside are marginal and / = D often has to wait for DC and other departments to free up the facilities for tem1 %n the face of in pouring of imported technology, the %ndian industry has an inhibited outloo' and hardly any long term perspective for its in house res-0r)anufacturers %nstitutions
1.2 COMPANY PROFILE

%4>3/U)-43#3%54 ,%)%3-D is a public sector unit which was established in the year 1A9! at 2ota, /a&asthan as its head quarters1 3he company was established for the manufacture of wide range of electronic and pneumatic instruments in collaboration with renowned leaders li'e 3oshiba, 0apan I @=B *ermany1 3he second unit of %4>3/U)-43#3%54 ,3D was set up in +#,#22#D in 1A?! in technical collaboration with the %nternational reputed firm )L> M-)#3-2-
@54-M;-,, C5)+#4M ,3D, 0#+#4 for the manufacture of industrial Control Halves1 3he main products manufactured are global type Control Halves, safety relief valves, butterfly valves and allied items1 3he mar'et served is process industries li'e refineries, petro chemicals, power plant, fertiliCers plant, etc1 3he company is a *ovt1 of %ndia enterprise1 %t was established to satisfy the increased demand for a high technology instrumentation schemes1 3he company started with the turnover of about 2crores in 1ABB 1ABA1 %nspite of stiff competition from about A competitors who have entered the field in the recent past, the company could achieve a high growth1 %,, +#,#22#D is the first Control Halve manufacture in %ndia to receive %>5 A001 certification and recertified for upgraded 2000 version in 8eb 200!13he company has adopted latest manufacturing technology of 0apan1 3he valves are designed and manufactured in conformation with %nternational pressure vessel codes1 3he unit has ta'en up development and manufacture of critical components for special pro&ects for )inistry of Defence as a part of its diversification plan1 3o update the technology of design wor', computer aided design system has been established1 3he company has given due importance in /=D right from inspection stage1 3he /=D center have developed a number of products, some of which have won innovation awards1 )ain strength of %,, +#,#22#D was steady and rapid absorption of technology leading to faster indigeniCation1 Based on the technology
obtained through collaborators, in house developments could ta'e place which in turn added to product range significantly, such developments served to rapidly reduce countries dependence on import1 3he performance of the unit is e:emplary since its inception1 3he unit en&oys leadership in Control Halve segment of process instrumentation in %ndia1 3here is a separate division for repair of Control Halves of any ma'e1 3his is benefited too much company in avoiding shutting of plant for want of repair1 3he manufacturing facility
Guruvayurappan Institute of Management 1!
and testing of valves is treated as one of the best in the world1 3he company produces around 10000 valves per year1 3he company has branches and regional offices e:tensively to cater to sales and timely after sales support1 3he unit conducts regular customer education programmes for the benefit of customers, e:ecutives, and supervisory staff at +ala''ad1 3heoretical and practical 'nowledge is imparted to the participants to carryout preventive maintenance as well as minor modifications or renovation1 /ecently %ndian 5il Corporation has selected %, training team to impart training to customer at 5man1 3he unit has full fledged after sales service department which is adequately stoc'ed with inventory spare parts and is in a position to respond to all sorts of problems with regard to various types of valve within the shortest possible time13he company has been ta'ing active part in curriculum development in the local engineering college and in medical aid and has set up a cancer detection centre at +ala''ad1 # team of highly qualified, well trained and dedicated employees ma'e the operations of the company profitable and the life of the employees meaningful and colorful1 3he industrial relations are at its best in the unit1#ll activities of %,, +#,#22#D from order registration to dispatch have been computeriCed in a most modern style1
1.2.1 VISION )anufacture and supply quality products to customer1
1.2.2 MISSION @igh level customer satisfaction through better quality products and timely delivery
Guruvayurappan Institute of Management 1"
-:cellence with economy1 +roduction and greater productivity of company growth and national prosperity1
3eam wor' and mutual trust1 /espect and concern for individuals1
1.2.3 O#JECTIVE
3o carry on in india or any other part of the world all 'ind of business of manufacturing,storing,pac'aging,distribution,transporting,repairing,maintaing,trading of all 'ind of Control Halves1 )anufacturing of all 'ind of low product for dedicated application across wide ranging related to fluid Control = Control Halve1 3esting and calibration of all types of Control Halves and allied products are for simulation of field parameters1 >pecial testing li'e dynamic response setting, nelium lea' testing, radio graphic inspection etc are in hi tech CBH test laboratory for importing distinct advantages
1.2.& S4OT A,):*-/-
S.r0,2.8
o +roduct is of high quality o )orale of employee is very high
o 8inancial level of company is good o /=D is strong o )onopoly in production of Control Halve
40)<,0-o @igh employee turnover o ,ac' of cordination among group o 4o systematic internal chec'ing o ,ac' of technical upgradation o ,ac' of departmentalisation o ,ac' of computer = internal facilites
O++ r.',/.*
o ;ide spread demand for product o -fficiency of wor'ers can be enhanced o +lant capacity can be enhanced o %ncreased future collaboration with yamata'e ltd o 4egotitation to e:tend its e:port matters
T8r0).
Competition 3echnological changes
1.2.5 LOCATION OF T"E FIRM
%4>3/U)-43#3%54 ,3D, +#,#22#D is located in the 4ational @ighway !? at distance of !0'm west of Coimbatore city in 3amilnadu and B'm east of +ala''ad city in the state of 2erala1
1.2.6 ISO CERTIFICATION

%nstrumentation ,imited +ala''ad, is the first Control Halve manufacturer in %ndia to receive %>5 A001 certification and recertified for upgraded 2000 version in 8ebruary 200!1
1.2.= VARIOUS DEPARTMENTS

3he following are the various departments in %, Commercial department -ngineering department Design department +roduction and +lanning department )aterial management department #ncillary department +roduction department +lant maintenance department Duality Control department %3 department 8inance and accounts department +ersonnel and administrative department Civil department >ecurity department
1.2.> MAJOR CLIENTS

Bharat @eavy -lectricals ,imited "B@-,$
3#3# Consulting -ngineers 4ational 3hermal +ower Corporation >teel #uthority of %ndia ,imited ">#%,$ Cochin /efineries ,arson and 3ubro /eliance %ndustries >tate -lectricity Boards of #ll >tates 2erala minerals and metals limited 2eltron *#%, %5C, #CC 8-D5 Chemte: engineering ,arson = 3ubro Cochin refineries
1.2.? TRADE UNIONS

3here are two trade unions in the company, they are %43UC C%3U
1.2.10 FACILITIES
1.2.10.1 TEC"NICAL E@PERTISEAAFTER SALES SERVICE
Being in the field of Control Halves for the last 60N years, %,+ have got the best manpower trained in the fields of research, design, application engineering, manufacturing, testing, field claim abatement techniques and these personnel invariably get together to suggest optimum design features for solving problems faced during commissioning or normal operation of plants1 ;e have also a full fledged after sales service department which is adequately stoc'ed with inventory of spare parts and are in a position to respond to all sorts of problems with regard to various types of valves within shortest possible time1Besides, an e:tensive networ' of Branch 5ffices and /egional offices is available to cater to sales and timely after sales support1
1.2.10.2 CUSTOMER%EDUCATION PROGRAMME

/egular customer education programmes for the benefit of both -:ecutive and supervisory levels are conducted at +ala''ad1 %n these programmes, theoretical and practical 'nowledge is imparted to the participants in order to carry out preventive maintenance as well as minor modificationsL renovations that might be required at a later stage1 /ecently, %ndian 5il Corporation ,td1 has selected our training team to impart training to customers at 5)#41
1.2.10.3 MANUFACTURING FACILITIES

3he facilities for manufacture and testing of valves Bellows >ealed Halves, -lectrical #ctuators etc1 one of the best in this part of the world1 Control Halves, Butterfly
Halves, /otary +lug Halves, >afety /elief Halves, +ressure /educing Halves, established at +ala''ad plant are
%,+ is the only company in %ndia to have all in house facility to manufacture globe type Control Halves ranging from OP to 60P siCe and rating up to #4>% 2?70 special class and Butterfly valves up to siCe 2!00 4-1 # team of -ngineers and 3echnicians trained for the past so many years are available to bring out the best quality product1 3he plant is also equipped with sophisticated C4C lathes, C4C drilling, machining centre and vertical turret lathe with a swing of !16 )eter, roller burnishing machine, vertical turret lathes and productivity is of a very high order ensuring quality and reliability1 # Clean room facility is created for manufacturing of Bellows >ealed Halves1 ;e have with us special 4C machines which not only ensure very high degree of accuracy but also repeatability and higher productivity1 %t is a fact that many leading valve manufacturers in the world have started buying castings from %ndia1 %nstrumentation ,td,+ala''ad can claim for having developed many of the sources for supply of castings for Control Halve requirements1 %t en&oys a much better rapport with the suppliers to bring out the best quality aspects to the castings1 )ore so, because the pro:imity to the supplier is well en&oyed by way of frequent interaction with the foundries right from the stage of pattern ma'ing through mould ma'ing and pouring and hence, %,+ is fully aware of the actual quality levels of the castings procured by them which may not be the case of the people who do not have the facility to 'eep a close watch of such critical castings1
1.2.10.& RESEARC" AND DEVELOPMENT

/=D Centre is equipped with the state of the art C#DLC#) facilities1 3his centresF wor' stations are supplied by @ewlett +ac'ard loaded on which are the >D/C %deas >oftware for Design, modelling and 8-) analysis along with F>olid ;or'sF for solid modelling1 3his wor'station is connected to +Cs with #utoC#D 2007 on ;indows 2000 networ'1 3his wor'station is directly connected to a C4C machine supplied by
@-M,%*-4>3#-D3, *ermany, for computer aided manufacturing1Bellows sealed valves developed through in house /=D were awarded the %mport >ubstitution #ward by the *overnment of %ndia for 1AA0 A11
1.2.10.5 TESTING
3he Duality #ssurance and %nspection >tandards adopted by %4>3/U)-43#3%54 ,%)%3-D conform to the latest international standards and all the products moving out of +ala''ad plant bear a stamp of high degree of quality and reliability1 -:cellent test facilities are available where hydrostatic testing of large siCe valves can be conducted with ease1 )any of these test facilities include presses, providers apart from variety of fi:tures, test flanges designed and manufactured over the years1 >ome of the special tests conducted by %,Lfacilities include dynamic response testing, helium lea' testing, radiographic inspection, ultrasonic and magnetic particle testing, CH test etc1
1.2.10.6 INFORMATION TEC"NOLOGY CENTRE

Complete business application starting from business enquiry, order processing till after sales service are computerised on the latest state Qof the art technology power +C rupees 9000 machine supplied by %B), whose bac'bone is the world renowned /DB)> 5/#C,- ?166 and D22 as front end1
1.2.10.= PURC"ASE DEPARTMENT

+urchase department is an important function of material management as the moment an order is placed for the purchase of materials1 # substantial portion of the company<s wor'ing capital is committed which effects the cash flow position of the company1 %n %,, +#,#22#D, the purchase department plays important role because
purchasing has its effect on every vital factor concerning the manufacture, quality, cost, efficiency and prompt delivery of goods to customers1 %ts function is to procure
materials, supplies, services, machines and tools at the most favourable terms consistent with maintaining the desired standard of quality1 3he head of this department is 'nown as the purchase manager
Chart 11211.Or2),/B)./ , 58)r. ! .80 +'r58)-0 ;0+)r.10,. is as follows
>enior )anager ")aterial$
)anager ")aterial$
-ngineer ")aterial$ OCD05./(0- O! P'r58)-0 D0+)r.10,. 3o ma'e continuous availability of materials1 3o ma'e purchase competitively and wisely at the most economical price1 3o purchase proper quality of materials1 3o develop good suppliers relationships1 3o develop alternate source of supply1 3o adopt most advantageous method of purchase to ensure smooth delivery of materials from suppliers1 3o serve as an information centre on the materials, 'nowledge relating to prices, sources of supply, specification, mode of delivery, etc1
R050/(/,2 +'r58)-0 r0E'/-/./ , # purchase requisition is a form used as a formal request to the purchasing department to purchase materials1 3his form is prepared by the store 'eeper for regular stoc' materials and by the departmental head for special materials not stoc'ed
at regular items1 3he requisition is approved by an e:ecutive, such as the plant superintendent or wor' manager, in addition to the one originating the requisition1 3he purchase requisition is generally prepared in triplicate1 3he original copy is sent to the purchase department1 3he duplicate 'ept by the store'eeper or the department which initiates the requisition and the triplicate is sent to the authoriCing e:ecutive13he purchase requisition initiated by the store'eeper for regular items of materials is called Eregular< purchase requisition and the purchase requisition prepared by the departmental head for special materials is 'nown as special or Eoccasional< purchase requisition1 /egular purchase requisitions are prepared when the items of materials reach at the ordering levels ie, the level at which the order for replenishment should be placed1 3his is done with a view to avoid the shortage of materials and ma'e available uninterrupted supply of materials to &obs of department1 EF+: r/,2 .80 - 'r50- ! -'++:* ),; 58 -/,2 .80 -'++:/0r-.
# source of supply of materials must be selected after a receipt of the purchase requisition1 3he purchase department usually maintains for every group of materials a list of the supplier<s names and addresses1 Duotations may be invited from these suppliers by issuing tenders to them1 5n receipt of the quotation from the suppliers a comparative statement of various quotations received should be prepared and the desirable suppliers should be selected1 ;hile selecting the suppliers to whom order is to be given for the purchase of materials, the purchase department should 'eep in mind 1$ manufacturing capacities 2$ reliability of the suppliers 6$ financial condition of the suppliers !$ the management of the supplying firm 7$ price quoted 9$ quantity for which price quoted is applicable ?$ terms of payment B$ terms of delivery and A$ specifications to which the products are manufacture1
3hus, the suppliers from whom materials are purchased should be dependable and capable of supplying materials of uniform quality at right time at reasonable prices1 3he purchase manager should maintain all the necessary records 'eeping in mind the most important ob&ectives of the purchase rate at proper time to help smooth running of the production function.
Pr0+)r)./ , ! +'r58)-0 r;0r
#fter choosing the supplier, the purchase department prepares a purchase order for the supply of stores1 3he order is the written authoriCation to the suppliers to supply the particular materials or material1 +urchase order is a document which gives the authority to the receiving departments to receive the materials ordered for and the accounts department to accept the bill from the suppliers for payment1 3hree to five copies of purchase order are prepared depending upon the siCe of the organiCation1 3he original copy is sent to the suppliers 5ne copy is sent to the receiving department 5ne is to the person who invited the purchase requisition 5ne copy is sent to the accounting department 3he last copy is retained by the purchase department for future reference
R050/(/,2 ),; /,-+05./,2 1).0r/):%n this organiCation a separate receipt and inspection department independent of stoc'ing location should be set up to receive and inspect materials1 3here are various functions performed by receipt and inspection department1 )aintenance of purchase order files1 /eceiving, unloading and unpac'ing the materials delivered by the suppliers under delivery channel1
Chec'ing quantity and physical condition of materials received1 Chec'ing quality of materials received1
#fter chec'ing the quality of materials, the department will submit a report as to the quality and if some materials are re&ected the reason there $%. C805</,2 ),; +)--/,2 ! C/::- ! r +)*10,. ;hen the invoice is received from the supplier, it is sent to the store accounting section to chec' both the authenticity and the arithmetic accuracy1 3he quantity and price mentioned in the invoice are chec'ed with the reference to stoc' received not and the purchased order respectively1 @aving thus verified the invoice in all respect, the stores accounting section certifies and passes the invoice for payment1 Harious other functions of purchase department of %4>3/U)-43#3%54 ,3D areI Co ordination of sales and production through budgetary Control techniques1 )aintenance of adequate internal Control over the material acquired by means of reliable boo' and physical inventory1 8i:ation of responsibility for the purchase of materials1 >implifying the paper wor'1 >election of personal for purchase of materials1
3he purchase department is fully informed about the various sources of supply of materials, stores and plant, etc1 3his department is also responsible for planning the delivery of materials to ensure uninterrupted suppliers1 %n %4>3/U)-43#3%54 ,3D, +#,#22#D purchase functions are carried out by two divisions1 8oreign purchase department
%ndigenous purchase department
3hese departments procure materials from outside suppliers1 3he foreign department purchase materials from foreign suppliers and indigenous department from domestic suppliers1
1.2.10.> STORES DEPARTMENT

>tores are the reservoir of materials for uninterrupted production1 3he stores department plays a very important role in the organiCation1 3his helps in minimiCing production cost and providing effective service1 %n this organiCation the bully and heavy stores should be stored nearest to the department requiring them in order to minimiCe the labour and transportation charges1 %n this way, planned location of the stores department will avoid delay in the movement of materials to the department in which there are needed1 -fficient store 'eeping helps us to protect the raw materials from losses due to damage and pilferage and avoid overstoc'ing and understoc'ing ensure effective material Control1
F',5./ ,- ! S. r0- D0+)r.10,.

3o receive and store raw material 3o store non confirming material and prevent unauthoriCed use 3o store consumables li'e welding cod, paining, etc1 3o receive all components delivered by customers or suppliers1
C8)r. 1.2.2: ORGANISATION C"ART OF STORES DEPARTMENT
>enior )anager
)anager "purchase$
Deputy )anager ">tore$
>upervisors
>tore 'eeper
>ecurity
TYPES OF STORES
CentraliCed store De centraliCed store CentraliCed store with sub store
C0,.r):/B0; -. r0
%n this central store, the materials are received by and issued from one stores department1 #ll materials are 'ept at one central store1 %n this better Control can be e:ercised over stores because all stores are housed in one department1 Better layout of
stores is possible1 ,ess storage space as stores are 'ept to a minimum1 ,ess botheration is inventory chec's at all the stores located in one place1 But in this store there is increases transportation cost because one central store may not be near to every department of the organiCations1 3here is a greater ris' in case of fire brea'down in transport may stop production in departments1 D0%50,.r):/B0; -. r0%n this type of stores, independent stores are situated in various departments1 @andling of stores is underta'en by the store 'eeper in each department1 3he departments requiring stores can drawn from this respective store situated in this department1 3he disadvantage of centraliCed stores can be eliminated if there are decentraliCed stores1 >uch type of stores set up to meet the requirements of materials of each production because of the heavy e:penditure involved1 C0,.r): -. r0- G/.8 -'C -. r0%n this organiCation, departments are situated at a distance from the central store, so in order to 'eep the transportation cost and handling charges to minimum, sub stores should be situated near production departments1 8or each item of materials, a quantity is determined and this should be 'ept in stoc' in sub store at the beginning of any period1 #t the end of the period the store'eeper of each sub store will requisition from the central store the quantity of the material consumed to bring the stoc' up to the predetermined quantity1 Besides, the department may be divided into si: components and they areI /eceipt store
Component store /aw material store
*eneralL @olding store Duarantine store 3oolLproduction store
C8)r. 1.2.3 :Or2),/B)./ , 58)r.%R050/+. -. r0 @ead of the department
5fficer in charge
>upervisor in charge
>upporting staff receipt group
>upporting staff documentation group
1.2.10.? RECEIPT STORE

3he store receives all the materials from the vendors1 Documents started from this store1 F',5./ ,- ! R050/+. -. r0I
/eceive all incoming products delivered by suppliers L customers1 Compare the quantity of materials as vouched by the supplierL customers and intimate discrepancies, if any to the concerned procurement agency
3o provide intimation to concerned procurements agency in case of e:cess supply of items1
+repare and sent relevant voucher to quality Control for the received products1 /eceive vouchers bac' from quality Control department credit accepted product to /aw material store component store and non accepted product to quarantine store1
3he goods can be received in three waysI 3hrough transport "#rranged by company or supplier$ Courier is by o Door delivery o Collect from the office1 o +ersonality "hand to hand$
3he payment is made by C5D "cash on delivery$ or on credit1
1.2.10.10 COMPONENT STORE

F',5./ , 3o store fully machined components, sub assemblers and accessories1 3o maintain /5, items as per desired items
3o periodically chec' the condition of shelf life items for deterioration and ta'e suitable actions1
3o insure timely receipt and issue of materials for production1 3o increase training is provided to all employees1
1.2.10.11 RA4 MATERIAL STORE

3his store is used to store raw materials li'e bar stoc', casting, forging, pipes, etc and semi finished component used for production1 F',5./ , 3o store raw materials li'e bar stoc'ing, casting, forging, pipes, etc and semi finished components1 3o monitor the stoc' levels as per /5, and raise indents whenever the level reach /5, as requested by ++C1 )CH machined items from sub contractors are credited to the store by )CH " )echaniCed Credit Houcher$
1.2.10.12 GENERAL STOREA "OLDING STORE

F',5./ , 3o store tools, production consumables li'e welding rods, paints, etc and stationery1 3o monitor the stoc' level as per the /5, and raise indent whenever the levels reach /5,
3he materials are issued when );H ")aterial ;ithdrawal Houcher$ is given to store which contains the code no description units etc1 3he inspection of stoc' is once in si: months
1.2.10.13 HUARANTINE STORE

F',5./ , 3o receive non accepted materials from receipt store, bill further ordered 3o store non confirming material and prevent any unauthoriCed use1
1.2.10.1& 4ASTE MANAGEMENT

>craps are dumped in the scrap yard by issuing )/H ")aterial /eturn Houcher$1 %t disposes by giving tenders and sale it for a normal value1 C8)r. 1.2.&:Or2),/B)./ , 58)r. ! C 1+ ,0,. -. r0, r)G 1).0r/): -. r0 ),; 8 :;/,2 -. r0
>enior )anager ")aterial$
>enior -ngineer
Component L /aw material >tore
@olding >tore
>enior 8oreman
%>5
5# L +rogress man >2L>>) A;(),.)20- ! 8)(/,2 -. r0 ;0+)r.10,.
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Correct 'nowledge of the location of different items1 -asy accessibility of the items1 -asy measurement and movement of material handling equipments and men1 /educe spoilage of material at stores1
-nsure proper utiliCation of available store1
1.2.10.15 PRODUCTION FUNCTION

C8)r. 1.2.5: PRODUCTS OF INSTRUMENTATION LTD, PALAKKAD +/5DUC3 +/58%,-
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CONTROL VALVES %t is a valve with pneumatic, hydraulic and electric or other e:ternally powered actuators that automatically, fully or partially opens or closes the valves to a position directed by signals transmitted from Controlling instruments1 # Control Halve plays a very important part in automatic Control of modern plants which depends on the correct distribution and Control of following liquids or gases1
3he Control Halve has got basically two units namely an e:ternal actuators and the valve body assembly1 3he valve shell constitutes still and firm parts1 3he materials for valve bodies are cost iron, carbon steel, charm moly belnum, nic'el steel, stainless steel, etc #UTTERFLY VALVES Butterfly Halve is a Control Halve that utiliCes a rotatable dis' or a vane as a valve closure member1 %t is the most common type of rotary valve used for Control1 %ts face to face dimension is less so that it can be installed in a lesser space1 Butterfly Halve may be of water type "without flange$ or flange type1 3hey are designed based on #merican water wor's authority "#;;#$ standard1 Different parts of a valve are dis' body, shaft seat, etc1 3ypes. soft sealed valve with no lea'age metal to metal seals with standard lea'age1 SAFETY AND RELIEF VALVES >afety #nd /elief Halves are designed to protect systems or vessels from e:cessive pressure1 3he relief valves are designed to release e:cessive pressure in systems containing incompressible fluids where there is no chance of e:plosion under over pressure1 >afety Halves are designed to provide immediate relief of over pressure with any fluid particularly compressible fluids which could cause e:plosion of wor'1 -lectrical #ctuators
3ypes. ,inear and rotary type for 54 588 and regulating duty )anual #ctuators 3ypes. ,inear and rotary actuators with gearbo: and hand wheel F: G 0:010,.3ypes. orifice plate, flow noCCle, virtual tubes
S+05/): ():(0- ),; +r ;'5.Below seated valves. %n collaboration with )L> >-*#U,-, > # 8rance pressure rating up to #4>% 2700 19>, Bellows available in materials li'e >>619,, @astelloy c, %nconel, )onel, etc #ntis urge valves. "H#R$ special high pressure drop valve for gas service in pressure rating of #4>% 2700 lbs with ,5 dh trim and class ! lea'age 3eflon valve. 8or e:treme corrosive conditions @igh pressure drop Halve. 8or liquid application with high pressure drop services from S inches to 9 inches siCe1 /ating #4>% 170 to #4>% 2700 lbs1 >pecial anti cavitations< cascade trim +ilot operated Halve. 8rom S inches to 9 inches siCe pressure rating #4>% 2700 lbs lea'age class 7
1.2.10.16 MATERIAL "ANDLING

3he system concept in material handling13he system approach to handling is distinguished by its disregard of the traditional regard boundaries of function and departments1 3hus more detailed investigation and analysis ma'e it easier to diagnosis, conceptualism design and evaluate comple: columniation of sophisticated hard wor', organiCational inter relationships and infrastructure flow1 Usually results
in an integrated composite of facilities, activities and information flow and encompasses as much of the total problem environment as is feasible and economical1 S*-.01 +r 50;'r0 3he procedure for analyCing a material handling problem from system point of view is more comprehensive1 3he general phases and step involved are as follows. +roblem %dentification %dentify the problem
Determine the scope of the problem Define the problem -stablish ob&ectives +roblem %nvestigation Determine what data to collect -stablish waste plan and schedule Collect data Develop weigh and analysis data >ystem synthesis >tructure alternate system >elect feasible system >ystem Design Define proposed system
Develop and design system components >ystem %mplementation +rocedure equipment 3raining of personnel %nstallation of equipment
Pr0-0,. 1).0r/): 8),;:/,2 -*-.013he material is bought by truc' and unloaded by using cranes "in heavy bay$ force lift
and also by hand, casting are placed in the yard outside the machine shop where each suppliers has been allotted separate area1 @eavy casting are moved by force lift, &umpos and trolleys1 /eceipt store inspect the supplied materials for length, number and quantity, as may be the case1 3hese items are stored in specific locations1 /ac's are provided for stored materials are offered to quality Control for inspection1 Casting is pre inspected1 4ormal shortage period is about ten days1 >ome of the components are sent for rewor'1Casting is either given to such contractors done by #ncillatory department or machine in the shop itself1 %n the shop casting are given rough machining1 3he handling is done by force lift and crane1
1.2.10.1= CODING OF COMPONENTS

Coding is the name of components using some codes1 3he ob&ective of coding is to classify components by their feature and to code these features so that components having similar code number possess similar feature13hen the spare part is using an alphabet followed by the drawing number1 3hen the item number of products is
written in the code1
8ollowed by the material code and the serial process which is denoted in two spares in code1 %n the total code will have appro:imately si:teen entities "both number and alphabet$ B 01 001 - Drawing 4o 1 990 ;here, B Q -conomic year 01 Q Component number 001 Q >erial number
- Q >pare parts 1 Q %tem number 990 Q )aterial code !0 Q >pecial process #fter operation in fabrication shop the parts require finish machining1 3his is done on lathe1 3he transportation is done by 0umbos and 3rolley13he actuators is assembled separately for different si:es area using -53, -53<s and 0%B cranes are used for handling the parts1 >ome finished components required for assembly are collected by production planning and Control department "++C$ from the component stores and 'ept bit mashed in separate bins1 8inished goods brought for calibration using -53s13he calibrated products are ta'en to the painting room1 3hese products are hung from the hoo' provided on a rail1 /ollers are provided for easy handling1 #fter painting products are 'ept on floor1 #t time of dispatch, the products brought to pac'ing area1 -53s are used for all movements and for holding the products while
pac'ing13he truc's are brought near the pac'aging area and the pac'ed products are loaded using -53s1
1.2.10.1>
PRODUCTION
PLANNING
AND
CONTROL
DEPARTMENT
3he ++C department interacts with various departments to plan the production process and 'eep trac'ing the progress for the timely e:ecution of orders13his department receives production request from the commercial department1 %t immediately prepares the bill of materials and here subsequently material procurement requisition ")+/$ is being sent to the concerned procurement agencies1
;ithout the order from the production planning = Control department no production is commenced in the production department1 FUNCTIONS OF PPC 3o review contracts ant to plan schedule and monitor production 3o co ordinate special testing and to give wor' order and drawings to wor's department 3o provide information and current production status to commercial department1 C8ART 1.2.6: Or2),/B)./ , ! PPC ;0+)r.10,. /- )- ! :: G
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1.2.10.1? PRODUCTION DEPARTMENT

%4>3/U)-43#3%54 ,%)%3-D, +#,#22#D is following the traditional method of manufacturing which is process specification of production1 %n this type the same types of machines are grouped together1
C8)r. 1.2.6:T80 Or2),/B)./ , 58)r. ! Pr ;'5./ , D0+)r.10,. >-4%5/ )#4#*-/
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%n %4>3/U)-43#3%54 ,%)%3-D, +#,#22#D ?7G of total production is Control Halves and remaining are flow noCCles, butterfly valves, etc, safety valves, etc1 Control Halves are mainly used for regulating the flow fluids through pipes13he main wor's of production department is to transform drawings, specifications, materials and instructions into saleable is products and to do so with the most efficient use of machines and men available1 3he production department mainly divided into two sectionsI )achine shop #ssembly shop
MAC"INE S"OP
)achine shop performs the following functionsI 3o receive orders from ++C 3o study drawings and technology sheet 3o get necessary components from raw materials store
3o load schedule and monitor processing of &obs on machines 3o offer machined components to quality control )onitor result of inspection 3o return scrapped materials to store 3o store and issue fitting tools, measuring instrument to sub contractors 3o credit accepted components to component store
3he intimate general stores of the tools and consumables to be maintained in record level
3he machine shop consists of about 2! lathes, ! milling machines, B drilling machines, 9 grading machines and C4Cs1 #ll the C4Cs are located in the right end of the machine shop, which is a separate chain1 3he capacity and specification of each machine are different1 Hertical turret lathe are used for machinery very big components, which cannot be done in ordinary lathes1 )achines have provision for holding more than one tool1
ASSEM#LY S"OP
F',5./ ,-: 3o carry out assembling 3o plan schedule and monitor the assembling of pids 3o offer components to quality Control 3o get the result of various test in final production
3o identify finished products in unique manner 3o pare, then sent to the assembling sections where they assembled, welded, painted, etc after collaboration the products are inspected by inspection manager1
3he ob&ections of inspections areI 3o detect and isolate facility material or wor' and so to prevent waste 3o prevent further wor's being done on pieces already specified 3o protect the firm<s reputation by reducing the number of complaints from customers
3he test may be chemical or physical simpler and cheaper, comple: and costly1
/e&ected materials are recorded on a routine document which copies are passing to stores department1 # further copy being retained by the production department concerned and constituted all authority to draw new suppliers1 3he products are then
pac'ed in wooden container are too heavy, cranes are used for lifting the containers into truc'1
HUALITY PALAKKAD
POLICY
OF
INSTRUMENTATION
LIMITED,
5ur quality policy of %4>3/U)-43#3%54 ,%)%3-D, +#,#22#D is to supply quality products as per customer<s requirement1 %t enhances customer<s satisfaction through continual improvement bac'ed by timely after sales service1 # customer is the most important visitor to our premises1 @e is not dependent on us1 ;e depend on him1 @e is not an interruption to our wor'1 @e is the purpose of it1
@e is not an outside to our premises1 @e is a part of it1 ;e are not doing a favour in servicing him1 @e is doing as favour in giving us an opportunity to do so1 C 1+),*I- );(/50 . 01+: *00- r02)r;/,2 E'):/.* Mou are an important person of this organiCation1 Mou are the ma'er of the quality products1 %4>3/U)-43#3%54 ,3D, +#,#22#D, quality policy is to give total satisfaction to their customers through design, manufacture and supply of products bac'ed by after sales service and customer<s education1
3he total quality system ensures that the products are manufactured completely in accordance with all requirements applicable safely codes, engineering and quality standards and customer satisfaction1 3his system has been documented as quality policy in quality assurance manual1
H'):/.* CD05./(0%nternal integration through effective communication1 >haring responsibility through empowering1 Continuous updating of products and manufacturing technology1 +rompt after sales service1 Developing reliable vendors through interaction and education1 Continuous up gradation of employee<s s'ills1
C ;/,2 ! 5 1+ ,0,.-
Coding is the naming of component using some codes1 3he ob&ective of coding is to classify components by their features and to code their features so that components having similar code number process similar feature1 %n total code will have appro:imately si:teen entities "both number and alphabets$ B01001 B 01 990 ;hereI B -conomic year Component number 001 Qserial number - "Drawing number$ 1990!0 001 Drawing 4o 1
- >pare parts 1 Qitem number 990 material code !0 special process
C8)r. 1.2.=: HUALITY CONTROL DEPARTMENT C"ART

>-4%5/ )#4#*-/ "DC$
)#4#*-/ "DC$
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>U+-/H%>5/
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3he quality assurance and inspection standards adopted by %43/U)-43#3%54 ,3D, +#,#22#D confirm to the latest %nternational standard and all the products moving out of +#,#22#D plant bear a high stamp of degree of quality and reliability1 -:cellent facilities are available where hydrastic testing of large siCe valve can be conducted with care1 )any of these testing facilities include pressure provided apart from variety of fi:tures, test flange designed and manufactured over the years1 3he main function is to ensure that quality products are supplied1
Duality Control department function in two areas isI
%nward Duality Control

#ssembly Duality Control
I,G)r; H'):/.* C ,.r : %t carries out of the testing of incoming items1 A--01C:* H'):/.* C ,.r : %t carries out testing to finished products13he test may be chemical, or physical, simple and cheap or comple: and costly1 Duality department follows the norms based on %>5 A0011 3his follows the international plant standard li'e #merican >tandards for )aterial -ngineering "#>)-$, #merican ;ater ;or's #uthority "#;;#$1 Dush %nternational >tandard "D%>$1 H'):/.* +0r/ ; -:/+ %t includesI
-ngineering /egister 5rder ac'nowledgement1 +roduction request1 Delivery chelan1 +ac'ing slip ;arranty card1 %nvoice1 >ervice report1
%nternational %nformation request1 %nter office )emo1 +roduct credit voucher1 Customer purchase order file1 Duality assurance certificate1
%4>/U)-43#3%54 ,imited has achieved a record turnover of /s 100 crore in 200A 10 according to a statement by general manager of the unit, >ri 412 >rivastava1 3he company has also recorded a provisional profit of /s 22 crore1 3he unit in +ala''ad is being e:pended to handle bigger and critical valves weighting upto 27 tones1During the 20010 11 fiscal, the unit has manufactured and supplied 2B00 mm siCe butterfly valves for the HiCard >teel +lant and 2! inch Control Halves
for +ragathi 990 ); power plant in 4ew Delhi1 3he turnover and order boo'ing targets for the 2010 11 fiscal is /s 120 crore and /s 160 crore respectively1
1.3 T"EORETICAL FRAME4ORK

1.3.1 INVENTORY
# physical resource that a firm holds in stoc' with the intent of selling it or transforming it into a more valuable state13he dictionary meaning of inventory is (stoc' of goodsK1%n accounting language it may mean stoc' of finished goods only1%n manufacturing concern, it may include raw material, wor' in process and stores, etc1
%nternational #ccounting >tandard Committee defines (inventory as tangible property held for sale in the ordinary course of business, in the process of production for such sale or to be consumed in the process of production of goods or services for saleK 13he #merican %nstitue 5f Certified +ublic #ccount"#%C+#$ defines (inventory in the sense of tangible goods,which are held for sale in the process of production and available for ready consumptionK
Guruvayurappan Institute of Management !0
3he raw materials, wor' in process goods and completely finished goods that are considered to be the portion of a businessFs assets those are ready or will be ready for sale1 %nventory represents one of the most important assets that most businesses possess, because the turnover of inventory represents one of the primary sources of revenue generation and shareholdersLowners1 subsequent earnings for the companyFs
1.3.2 INVENTORY MANAGEMENT

%nventory is an asset that is owned by a business that has the e:press purpose of being sold to a customer1 3his includes items sold to end customers or distributors1 %t includes raw materials, wor' in process, and finished goods1 3he management of inventory is a 'ey concern of all businesses1 %f a companyFs inventory level is too low, it ris's delays in fulfilling itFs customers orders1
%f the inventory is too high, it is tying up dollars that can be better used in other areas1 %t also ris's obsolescence and spoilage1 >uccessful businesses 'eep their inventory turns high, but also 'eep their service level at or above the industry standard %nventory management is a science primarily about specifying the shape and percentage of stoc'ed goods1 %t is required at different locations within a facility or within many locations of a supply networ' to precede the regular and planned course of production and stoc' of materials11
1.3.3 FUNCTIONS OF INVENTORY

%nventory is required to meet the anticipated customer demand1 Customer generally does purchasing without any pre information to the seller or producer1 )any times, he is undecided about the model, ma'e or quantity of the purchase1
@e would li'e to see the performance of all the available models1 #fter &udging his need and e:penditure, he would select one piece1 %t is almost impossible to 'now how many pieces of a product would be needed each day1 3herefore, inventory serves as a buffer to the anticipated demand1 %nventory guards against stoc' out situations1 3here could be many e:ogenous factors due to which the arrival of raw material may be delayed1 %nventory wor's as the safety stoc' for such situations1 %nventory ensures smooth flow of production process1 >atisfaction of customer is dependent on the timely availability of finished goods and spare parts1 %nventory plays an important role in it1 %nventory management is a high priority area in industry or service sector1 3his is due to conflicting role of inventory1 8or e:ample, the salesman wants high level of inventory to 'eep the promises and quic' delivery1 5n the other
hand, warehousing people of the same industry will prefer lower finished goods inventory so that less storage space is needed 5rdering costs, the cost associated with individual order such typing, approving, mailing, ect1 Can be reduced, to great e:tent, if the firm places large orders rather than several small orders1
1.3.& INVENTORY CATEGORIES

3he various forms in which inventories e:ist areI R)G 1).0r/):-
/aw material are inventory items that are used in the manufacturer<s conversion process to produce components,subassemblies or finished goods13he purpose of holding raw material is to ensure uninterrupted production in the event off delaying delivery13he amount of raw material to be 'ept by the firm depends on various factors
such as speed with which raw materials are to be ordered and procured and uncertainity in the supply of these raw materials1 4 r<%/,%+r 50--
%t includes partly finished goods and material held between manufacturing stages1%t can also stated that those material which are used in the production process but are not finally converted into final products are wor' in progress1 /aw materials are realiCed from inventory and moved to a wor' center1 Direct labour or machines are used to add value by putting the parts together as subassemblies, assemblies and then into final product1 F/,/-80; 2 ;-8inished goods is the completed part that is ready for the
customers to order1 %t help to reduce the ris' associated with stoppage in output on the account of stri'es,brea'down,shortage of materials etc1
C ,-'1)C:0-
Consumables are the products that consumers buy recurrently that is items which get used up or discarded1%t contain the items that will eventually be consumed during the normal operation of institution1 S. r0- ),; -+)r0-
3his category includes those product which are accessories to the main products produced for the main purpose of sale1
1.3.5
TYPES OF INVENTORY
M (010,. /,(0,. r/0-
)ovement inventories also called as transit or pipeline inventory1+ipeline inventory e:ist because material cannot be transported instantaneously between point of supply and point of demand1
#'!!0r /,(0,. r/0-
Buffer inventory also called as safety inventory1%ts purpose is to compensate for une:pected fluctuations in supply and demand as well asunpredictable events such as poor delivery reliability or poor quality of supplier<s products1*enerally higher the level of buffer inventory , the betterthe firm<s customer service1 C*5:0 /,(0,. r*
%t is held for the reason that one or more stages in the processcannot supplyall the items it produce simultaneously13his type of inventory result from the need to produce products in batches and amout of it depends on volume decisions1 D05 '+:/,2 /,(0,. r*
%nventory is used to allow wor' centers or processes to operate relatively independently1;hen such inventory are held even if a machine brea's down the wor' would not stop
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3his type of inventory is accumulated to cope up with e:pected future demand or interruption in supply1%t is a way for manufacturers to maintain consistent operations when the demand for the product is low1
1.3.6 NEED TO "OLDING INVENTORIES )aintaining inventories involves tying up of the company<s funds and incurrence of storage and handling cost1 %f it is e:pensive to maintain inventories, why do companies hold inventoriesT 3here are those general motives for holding inventoriesI 3ransaction motive
#ccording to this s motive, an enterprise maintains inventories to avoid bottlenec's in its production and sales1 By maintaining inventories, the business ensures that production is not interrupted for want of raw materials, on the other hand and sales also are not affected on account of non availability of finished goods, on the other1 +recautionary motive
%nventories are also held with a motive to have a cushion against unpredicted business1 3here may be sudden and une:pected spurt in demand for finished goods at times1 >imilarly, there may be unforeseen slump in the supply of raw materials at a time1 %n both cases, a prudent business world surely li'es to have some cushion to guard against the ris' for such unpredictable changes1 >peculative motive
#n enterprise may also hold inventories to ta'e the advantage of price fluctuation1 >uppose, if the prices of raw materials are to increase rather steeply the enterprise would li'e to hold more inventories than required at lower prices1
1.3.= O#JECTIVE OF INVENTORY MANAGEMENT

3he main ob&ective of inventory management is to maintain inventory at appropriate level so that it is neither e:cessive nor short of requirement 13hus, management is faced with 2 conflicting ob&ectives1 3o 'eep inventory at sufficiently high level to perform production and sales activities smoothly1 3o minimiCe investment in inventory at minimum level to ma:imiCe profitability1
Guruvayurappan Institute of Management !!
Both in adequate = e:cessive quantities of inventory are undesirable for business1 3hese mutually conflicting ob&ectives of inventory management can be e:plained is from of costs associated with inventory and profits accruing from it low quantum of inventory reduces costs and high level of inventory saves business from being out of stoc' = helps in running production =sales activities smoothly1 3he ob&ectives of inventory management can be e:plained in detail as under. 3o ensure that the supply of raw material = finished goods will remain continuous so that production process is not halted and demands of customers are duly met1 )inimiCing inventory cost such as ordering , handling = carrying cost 3o 'eep investment in inventory at optimum level1 +roper Control of inventories help management to procure materials in time in order to run the plan efficiently1 3o reduce the losses of theft, obsolescence = wastage etc1 3o ma'e arrangement for sale of slow moving items1 3o minimiCe inventory ordering costs1 +romotion of manufacturing efficiency.3he manufacturing efficiency of the enterprise increases if the right type of raw material are made available to the production department at the right time1
1.3.> FACTORS INFLUENCING INVENTORY

3he inventory management of an organiCation has an impact on the whole system1 (@ow much to buy at onetimeK and (when to by this quantityK1 3his two fundamental things on which inventory Control depends1 )any factors govern these fundamental things1 3he prime factors that govern these two fundamental things areI /equirements
Guruvayurappan Institute of Management !"
Duality in stoc' or on stoc' ,ead time 5bsolesce
1.3.? INVENTORY CONTROL TEC"NIHUES
%nventory is being maintained as a cushion in supply of materials for continues production without causing stoc' out situation1 3his cushion should not be suicidal to any organiCation1 3he following scientific techniques and methods are being used in Control of inventory1 %nventory management technique >tandardiCation >elective inventory Control 0ust in time +erpetual inventory system %nventory turnover
1.3.10 INVENTORY MANAGEMENT TEC"NIHUES

E5 , 1/5 Or;0r H'),./.*
-5D is an important factor in Controlling the inventory1%t is a quantity of inventory which can be reasonably be ordered economically in time1%t is also 'nown as (>tandard order quantityK1%n determining this ordering cost = carryong cost are ta'en into consideration 5rdering costI
3he term ordering cost is used in case of raw materials and includes the entire cost of acquiring materials1 %t basically the cost of getting an item of inventory and it includes the cost of placing the order Carrying cost
Cost incurred for maintaining a given level of inventory is called carrying cost1 R0 r;0r + /,.
3he order point is that inventory level at which an order should be placed to replenish the inventory1 3o determine reorder point ,ead time,the time normally ta'en in replenishing inventory after the order has been placed and -conomic order quantity should be 'nown1 /eorder ,evelU ,ead time demand N >afety stoc' S)!0.* -. 5<
3he demand for material may fluctuate from day to day1 3he actual delivery time may be different from the normal lead time1 %f the actual usage increase or the delivery of the inventory is delayed the firm can face problem of stoc' out, which can be cost, which can be costly1 >o in order to guard against the stoc' out the firm may maintain a safety stoc'1
M)F/1'1 :0(0: %t is not the function of industry to carry stoc' in e:cess of what is required for current operations, as otherwise the industry will be ta'ingover the functions of trader1)aterial Control requires laying down the upper limit of stoc' abovre which the stoc's will not rise , such limit is ma:imum limit )a:imum stoc' level U /eorder level N /eorder quantity Q ")inimum consumption during reorder period V minimum reorder period$
M/,/1'1 :0(0:
3his is the level below which stoc's should not be fall1Carrying of minimum stoc' avoids a situation of stoc's out resulting in stoppage of production13his stoc' is buffer stoc' or safety stoc' to be used under abnormal conditions or in emergencies and are ta'en care of fluctuations in the lead time )inimum stoc' levelUreorder level "#verage consumption rate V #verage lead time$
D),20r L0(0:
Danger level is the level below which actual stoc' of material should not be allowed to fall under normal situations1%f the actual stoc'of material falls below danger level, there is imminent danger in the stopage of production1 Danger ,evel U )inimum ConsumptionV )inimum /eorder +eriod
A(0r)20 -. 5< :0(0:
#verage stoc' level indicates the average stoc' held by the enterprise during the year1 #verage >toc' ,evel U " )inimum ,evel N)a:imum ,evel$L2
1.3.11 STANDARDIJATION
>tandardiCation is very essential to Control the inventory, as by standardiCation reduction is variety of material is possible1 #nd because of the reduction in variety the advantage is low order cost, low inventory, less storage stoc', conservation of material, variety reduction, less paper wor', easy follow with suppliers, less number of orders1
3he importance of this field has been recogniCed since the days of 81; 3aylor who first drew attention to this fundamental need in any organiCation1 0ust as wor' study is necessary preliminary to wor' specification, and the basic technique for production Control, quality Control, material handling, estimated cost Control, etc1 (>tandardiCationK preliminary necessity to design a basic technique on build Control and standardiCation procedure1+erpectual inventory system is a method of recording the store balance after every receipt and issue to facilitate a regular chec'ing and to prevent the closing down for stoc'ta'ing1#fter every recipt or issue the entry is made in the bin card and the balance is ad&usted1
1.3.12 SELECTIVE INVENTORY CONTROL

>elective inventory means variation in the methods of inventory Control from items to item and this differentiation should be on selective basis by classification1 # company has to stoc' thousands of items of raw materials, standard parts, stores and spares, sub contract items, tools, stationary etc1 to have better Control over the inventory selective inventory Control technique should used in isolationLor in con&unction1 3he selective Control mean selecting the area of Control so that required ob&ective is achieved as early as possible without any lost of time due to ta'ing care of full area )inimum lost of energy and efforts1 #t minimum cost without loss of time1
3he following are the selective Control techniqueI #BC analysis 8>4 analysis H-D analysis
A#C ),):*-/-
Guruvayurappan Institute of Management "0
#BC analysis is a selective Control technique which is required to be applied when we want to Control value of consumption of the items in rupees obviously when we want to Control value of the consumption of the material we must select those materials where consumption is very high1 %n any company manufacturing, there are number of items which are consumed or traded it may run into thousands1 %t is found after number of studies for different companies . Halue of consumption of items "value in /s$ ?0G of consumption 20G of consumption 10G of consumption 10G of no1 of items 17G of no1 of items ?7G of no1 of items # B C 4o1 of items *rade
A /.01- these are those items which are found hardly 7G 10G but their consumption may amount ?0G ?7G of total money spend on materials1 # /.01- these are those items which are generally 10G 17G of the total items and their consumption amount 10G 17G of total money spend on materials1 C /.01- these are large number of items which are cheap and in e:pensive and hence in significant1 3hey are large in numbers running into hardly 7G 10G of total money spend on material1
FSN ),):*-/3his type of analysis is more concerned from the point of view of movement of the item or issue of the item under this type of analysis1 KFI items are those items, which are fast moving i1e1in a given period of time, say a month or year they have been issued up till number of items1 #lthough fast moving does not necessarily mean that these items are consumed in large quantities1
KSI items are those items which are slow moving in the sense that in the given period of time they have been issued in a very limited number of time1 KNI non moving items are those, which are not at all issued for a considerable period of time1 3hus, stores department whose concerned with the moving of items would li'e to 'now and classify that the items are storing in the categories 8>41 >o that they can manage operate and plan stores activity accordingly1
VED ),):*-/H-D analysis is carried out to Control situation, which are critical1 %dentify material according to their criticality to the production, which means the material, without which the production will come to stop and so on from this point of view material classified into three categories1 V % Vital categories of the items are those items for the want of which production will come to stop1 E L -ssential group of items are those items because of non availability of which the stoc' out cost is very high1 D L Desirable group of items are those items because of non availability of which there is no immediate loss of production and stoc' cost is very less and it may cause minor disruption in the production for a short time1
2.0 REVIE4 OF LITERATURE

>urvey of the available literature relating to his field of study is a must for the researcher so that he can 'eep himself updated in his field and related areas1 ;ithout this it will not be possible for a researcher to ma'e a worthwhile contribution1 /eview
of literature in this study deals with the importance and necessity for inventory management in an organiCation1 %nventory management can help business to be more profitable by lowering their cost of goods sold and by increasing sales1 %nventory management is required at different locations of a supply networ' to protect the regular and planned course of production against the random disturbance of running out of materials or goods11 8ollowing paragraphs review the available literature.
2.1 M),-/ A22)rG): 620067 in his article A, I,.r ;'5./ , .
I,(0,. r*
M),)2010,. said that the primary and foremost step in inventory management is acquiring accurate information for inbound operations1 3he information so gained in advance can be a crucial factor in improving the inbound productivity1 >etting up of an advanced inbound strategy and e:ecution framewor' can be done without too much of re engineering effort for the supply chain1 3he perfect way to commence is to ma'e the best use of information available and establish a set of rules and regulations to harness the information efficiently1 2.2 S.0(0, R ,-G r.8620057 mentioned in his article I,(0,. r* M),)2010,. R0(/0G that, (when having inventory , a company does not ever want to have too much of a product, nor does it want to have not enough of that product to meet demand1 %nventory management helps to ensure that a proper inventory is maintained at all times1K >teven also says that a proper inventory management has many benefits for companies1 %nventory management can help ma'e it so that a company has the e:act inventory needed1 4o more , no less1 %nventory management is also an effective way to 'eep trac' of e:actly what products a company has1
2.3 P8/:/+ S:).0r 6200=7in his article "I,(0,. r* M),)2010,. L O,0 S/B0 D 0- N . F/. A::$ says that (if there is one great myth in inventory management it is that one single technique will solve all inventory problems1 4ot that people believe that one technique will solve all problems in all situations but that in any given company one approach is all that is required to manage all inventory1K @e also pointed out that,
there is a wide range of techniques and approaches that people use to manage inventory1 these include 0%3, #BC and 8>4,H-D analysis, /is' )anagement, safety stoc' and -5D<s1 sometimes they are used on a standalone basis and sometimes in con&unction with each other1 #ll are worthwhile techniques when used appropriately1
2.& C8)r:0- A.</,- , , in his publication P /,. ! -):0,I,(0,. r* C ,.r :,R0.)/: ),; M ,0* M),)2010,. 6O5. C0r 25 , 20057 indicates that there are three types of inventory that require management. raw materials, finished goods and wor' in progress1 /aw materials can be cut down in a number of different ways, most notably by ordering smaller batches with more frequency from suppliers "0%3$1 8inished goods inventories can be cut down in multiple ways as well, most notably by either producing only when you actually have an order "0%3$ or by achieving more accurate demand pro&ections1 2.5 -:perts argue that inventory levels should decline mar'edly as a result of the implementation of improved inventory management systems such as 0%31 # paper by R)D)2 +):), ),; M):8 .r) M")(0 I,(0,. r/0- D05:/,0; : A, E1+/r/5): S.';*3 620017 indicates that while it appears that the general level of inventories has decreased across all industries since the 1A90<s, it does not appear that the trend accelerated in the 1AB0<s or thereafter, as 0%3<s proponents might suggest1 2.6 # more recent study by C80,,Fr),<, ),; 4' , O+./1): C ,.r : ),; EE'/:/Cr/'1 #08)(/ 'r ! Pr ;'5./ ,%I,(0,. r* S*-.01620037 indicates that, when studying inventories on a firm level instead of on an industry level, there appears to be a significant decrease in inventories since 1AB01 @owever , Chen, 8ran'
and ;u focus on the economy as a whole 1 3hey do not focus on a particular industry, nor do they focus on distribution, as opposed to production systems1 2.= #part from the tools and techniques, M/<0 S58r)116200?7 in his F/(0 T/+- T I,(0,. r* M),)2010,. has suggested certain tips to have a successful inventory management1 3hey are1
>ell the &un' "even if you thin' it<s not &un'$1 *et a ban' alt, and use it for everything *ear up right1 5rganiCe1 /egular maintenance is better than emergency cleaning1
2.> A;)1. J F0/, in his article #'/:;/,2 ) L0), S'++:* C8)/,,620067 said that (there is a widely held, but inaccurate, perception that new technologies have led directly to declines in the inventory to sales ratio, an important indicator of (buffer inventoryK in the supply chain 1 in theory, information technology based supply chain practices such as &ust in time"0%3$ inventory management, warehouse automation, and the introduction of bar codes should have allowed companies to improve their management of orders and stoc'piles of materials1 2.? #r'50 D. C):;G0:: 6200?7 has mentioned some benefits of #BC #nalysis in his article T80 #0,0!/.- ! A#C A,):*-/- ! r I,(0,. r* R0;'5./ , 1Using the K#BCK concept to analyCe Control inventory investment and turns is the simplest and most efficient method1 )ost inventories are made up of hundreds and possibly thousands of individual items necessary to manufacture a company<s products1 2.10 A-8G).8)++), Pr ;'5./ ,- ),; O+0r)./ ,- M,)2010,.6200>7 has stated that inventory management involves the development and administration of policies , systems and procedures which will minimiCe total costs relative to inventory decision and related functions such as customer service requirements, production scheduling, purchasing and traffic1
2.11 L'50*, H'),./.)./(0 .058,/E'0- ! r M),)2010,.620027 defined inventory management as the recording and monitoring of stoc' level, forecasting future demand and deciding when and how to order1
Guruvayurappan Institute of Management "!
2.12 J'8/ G ,B):0- in his article I,(0,. r* C ,.r : 61???7 says inventory management is ma'ing sure that items are available when customers call for it, but not too much stoc' , so that inventory turnover goals are met1 2.13 #)r;/) in A55 ',./,2 A,; F/,),50 F r M),)20r-61?>>7 opines that for a firm to be successful, the proportion of inventory to current asset should be 'ept at the minimum1 #lso a high inventory turnover ratio which indicates faster movement of materials is advantageous to the firms1 @e also points out that the proportion of finished L semi finished inventory should be 'ept at minimum1 2.1& K8);):G):61?>5$ on his boo' I,(0,. r* M),)2010,. A,; S. 5< E():')./ , revealed that the selected units were found to have recorded slower and declining rates of transmutation of wor'ing capital1 3he main reason responsible for this situation is the high share of inventories in current assets which ranged between !0G and ?0G with an increasing trend during the period of study1 2.15 J)/, in his boo' T80 4 r</,2 O! S. 5< EF58),20- /, I,;/) 61?>>7 has highlighted various facts of wor'ing capital management in the state of /a&asthan1 @e opined that the cash position of wor'ing capital should be improved by reducing inventories and efficient collection of debts1 2.16 R) 61??07 in EE'/():0,50 ! I,(0,. r* C ,.r : M ;0:- evaluates the
management of wor'ing capital and degree of efficiency of managing inventories in the manufacturing underta'ings of #ndhra +radesh public sector1 3he analysis of the structure of inventory reveals that there was overstoc'ing with regards to each and every component overstoc'ing with regards to each and every component of
inventory in the underta'ings selected for study1

2.1= M 8), R0;;* in M),)2010,. ! 4 r</,2 C)+/.):61??17 considered inventory formed the ma&or chun' of current assets of the sample private sector enterprises studied1 Bigger enterprises in the private sector carried the larger inventories as compared to the smaller ones1 %nventory turnover ratios has shown that name of the private sector units carried on inventory unduly in the aggregate11
Guruvayurappan Institute of Management ""
2.1> K'r/), J -0 A0r.8)/: /, 61???7 conducted a study to A,):*B0 .80 E!!/5/0,5* ! I,(0,. r* M),)2010,. S*-.01 /, KEL , mamala unit1 3he study revealed that due to improved inventory management, the unit enables proper arrival of goods, reducing lead time 2.1? Ar/!) T. M 8)110; in his boo' S. r0- ),; I,(0,. r* M),)20101.6200&7 conducted study on wor'ing capital management, the suggestion made by her was that the unnecessary inventories should be avoided as it may cause loss to the concern1 2.20 R0,D' M 8), P.T 6200>7 conducted study on -. r0- /,(0,. r* 1),)2010,. at Carborundum Universal ,imited1 3here should be strict Control over the # class items as well as the vital items1 @ighly trained inventory managers and high quality software will help ma'e inventory management a success1 3he /5% of inventory management will be seen in the forms of increased revenue and profits, positive employee atmosphere , and an overall increase of customer satisfaction1 2.21 M.J #)C)/ ),; Y .D)::0r* IESM, 6M)* 20057, the literature dealing with inventory management policies is very rich and has grown fast during the last year, they classify these policies into 2 approaches according to the type of demand information1 %n the first approach the policies suppose that there is no advance demand information and the decisions are made in real time using the inventory depletion1
3. 0 RESEARC" MET"ODOLOGY INTRODUCTION
/esearch is a systematiCed effort to gain new 'nowledge1/esearch is an art of scientific investigation1 #ccording to Clifford woody, /esearch comprises, defining and redefining problems, formulation hypothesis of suggestion solution, collecting, organiCing and evaluating to determine whether they fit the formulation hypothesis1 # research is the systematic investigation into and study of materials and sources in order to establish facts and reach new conclusion1
3.1 RESEARC" DESIGN

3he present pro&ect describes the e:isting inventory system followed at %nstrumentation ,imited1 3he research design used as analysis in nature of analytical1 # research design is the determination and statement of general research approach or strategy adopted for a particular pro&ect1 %t is the heart of planning1 3he research design adopted for the study is analytical in nature1%t is the specification of methods and procedures for acquiring the information needed13he research design used in the study is descriptive research1
3.2 DATA COLLECTION

3he source which are used mainly on secondary sources of data which is collected from the audited boo's of accounts of %,+, #nnual reports and financial statements prepared and published by the concern10ournals , boo's and websites have been referred to have an overview about the company1
3.3 PERIOD OF STUDY
3he period of study covered from the year from 1 st #pril 200? 61st march 200B to 1st #pril 2011 61st march 2012
3.& TOOLS USED
o 8inancial ratio o Correlation o 3rend analysis o %nventory 3echniques
3.5 LIMITATIONS OF T"E STUDY

3he study is limited for a period of five years1 @ence result obtained can be applied for the selected period1 3he study is mainly done with the secondary data and figures drawn from accounting records, this has some limitations and it affects the study also1 3he financial ratios imply only the monitory aspects of the functions of the firm1 3he ratios cannot be directly regarded as indicator of good or bad performance of management1 #ccuracy and correctness of tools li'e ratio analysis is depends upon the accuracy of published accounts1 3he time available for the study was the another constraining factor1 3he inventory management of %,+ is limited to the e:tent of information made available through published documents and personnel discussion.
&.0 DATA ANALYSIS AND INTERPRETATION I,.r ;'5./ ,
-ffective inventory Controls ensure effective inventory management through which an organiCation can minimiCe their overall pro&ects and liquidity of the respective concern1 %n deals with the analysis of data and their interpretation for understanding the inventory system followed at instrumentation ,imited1 3he data has been collected from the secondary sources and the interpretations are done on the basis of theories
INVENTORY CONTROL TEC"NIHUES IN ILP !" R)./ ),):*-/I,.r ;'5./ ,: /atio analysis is an important tool for analyCing the companyFs financial performance1 /atio analysis is defined as the systematic use of accounting ratio<s in order to weigh and evaluate the operating performance of a firm1 /atio is simply one number e:pressed in terms of another number1 %t refers to numerical relationship between two figures1 %t is obtained by dividing one figure by the other1 #ccounting ratio is relationship e:pressed in mathematical term between two related figures in the financial statements1
OCD05./(0 ! r)./ ),):*-/-:

/atio analysis is a powerful tool of financial analysis1 3he ob&ectives of ratio analysis are summariCed as below. /atio are helpful in &udging financial performance of an enterprise over a period of time1 %t may help the management in the tas' of planning and forecasting1
%t is possible to test liquidity , solvency and profitability of the enterprise through the technique of ratio analysis1 %t helps the management to ta'e decision regarding investment, purchases etc1
%t helps to achieve coordination among various departments1
3he primary ob&ective of ratio analysis is to regulate and Control sales and costs calculation of ratio is a clerical tas' which requires careful selection of the relevant data from the financial statements1 #ppropriate ratios to suit the purposes of analysis should be calculated and interpreted ob&ectively1 #ccording to nature of functions ratios can be classified as liquidity ratios , leverage ratios, activity ratios , profitability ratios1 8or analysis about the inventory management the appropriate ratio is activity ratios1 %t includes. %nventory turnover ratio /atio of material consumption to turnover %nventory to current assets ratio %nventory to wor'ing capital ratio Cash to current asset ratio Cash turnover ratio Debtors turnover ratio Creditors turnover ratio %nput output ratio ;or'ing capital turnover ratio
TA#LE NO:&.1.1 T"E PERCENTAGE OF CURRENT ASSET TO INVENTORY FOR ILP. CU//-43 #>>-3 M-#/> 8%*U/G 58 %4H-435/M
200? 0B >U4D/M D-B35/> 200B 0A 200A 10 2010 11 2011 12 200? 0B 200B 0A 200A 10 2010 11 C#>@ #4D B#42 2011 12 200? 0B 200B 0A 200A 10 2010 11 ,5#4 #4D #DH#4C-> 2011 12
!716! 96120 961B6 ?212! 9710B 129 !1?! ?109 1!6 110 B1B6 111!6 111!2 16127 16196
1B?1B2G 2!!1B9G 2!0162G 266110G 19?1AAG 110?G 1B169G 29192G 116BG 0127G 6917BG !!12AG !21AAG !21?7G 6711BG
I,!0r0,50 3he percentage of sundry debtor to inventory is highest in the year 200B 200A and lowest in the year 2011 2012 where cash and ban' is highest in the year 200A 2010,loan and advances is highest in 200B 200A and lowest in 2011 2012
&.1.2 INVENTORY TURNOVER RATIO

%nventory turnover ratio also 'nown as stoc' turnover ratio establishes the relationship between costs of goods sold and average inventory1 Besides it helps in determining the liquidity of a business concern, this ratio indicates how many times during the period the firm has turned is inventory1 %t shows the rate at which inventories are converted into sales and then into cash1
Cost of *oods >old %nventory 3urnover U #verage %nventory

TA#LE NO:&.1.2 T"E INVENTORY TURNOVER RATIO FOR ILP.
Mear
4et sales"in ,a'hs$
#verage inventory "in ,a'h$ 20169 2!1AB 2911A 2B1?? 6!1B?
/atio
200? 0B 200B 0A 200A 10 2010 11 2011 12
?716? A11?! 100121 1011A9 1021B!
61? 619? 61B2 617! 21A!
I,!0r0,50 3he inventory turnover ratio is ma:imum in the year 200A 20101 @igher value indicate better performance13he company was able to sell their inventories quic'ly1 3he ,owest %nventory turnover ratio is in 2011 20121 # low inventory turnover ratio indicates an inefficient management of inventory1
DIAGRAM &.1.1 : T"E INVENTORY TURNOVER RATIO FOR ILP.
&.1.3 INVENTORY "OLDING PERIOD
%nventoryholding period shows whether the stoc' is fast moving or not1 %t is calculated to see the average time ta'en for clearing the stoc'1 3he lower material holding shows whether is any slow moving , fast moving or dormant stoc'1 %t is the average time to convert our total inventory into sales1 3he lesser inventory conversion period it is better because more fastly the inventory is converted into sales1
)aterial @olding +eriodU
Days in a year %nventory turnover ratio
TA#LE NO &.1.3 : T"E INVENTORY "OLDING PERIOD OF ILP. Mear Days #verage inventory turnover ratio"in %nventory @olding period
,a'h$
200? 0B 200B 0A 200A 10 2010 11 2011 12
697 697 697 697 697
61? 619? 61B2 617! 21A!
AB19! AA1!7 A717! 106110 12!11!
I,!0r0,50 3he above table shows that the inventory conversion period for the 7 years %nventory conversion period is minimum in 200A 2010 which indicate the conversion of inventory to sales is faster1 )a:imum inventory holding period is in 2011 2012 1
DIAGRAM &.1.2 : INVENTORY "OLDING PERIOD FOR ILP.
&.1.& RATIO OF MATERIAL CONSUMPTION TO TURNOVER

/atio of material consumption to turnover measures how frequently inventory ta'en for production1 3his ratio shows the proportion of e:penditure on material
consumption to turnover1 %t provide a measurement between the amount of raw material verses the average amount of raw material in the inventory at any given time1# higher ratio is good from the view point of liquidity1 %t is calculated as follows. /atio of material consumption to turnover U -:penditure on material 3urnover TA#LE NO &.1.&: T"E RATIO OF MATERIAL CONSUMPTION TO TURNOVER OF ILP. Mear )aterial consumption 200? 0B 200B 0A 200A 10 2010 11 2011 12 611B9 !91!A 711?9 !B1?? 9B109 ?716B A11?7 100121 1011A9 1021B! 1!22 1709 1719 1!?B 1991 3urnover /atio
I,!0r0,50 3he above table shows a increasing trend of the ratio of material consuption to turnover from 200? 200B to 200A 20101 %n 2011 12 the ratio of material consumption to turnover is ma:imum which is not good for a company1 3he ratio is minimum in the year 200B 200A which is favourable
DIAGRAM &.1.3: T"E RATIO OF MATERIAL CONSUMPTION TO TURNOVER OF ILP.
&.1.5 INVENTORY TO CURRENT ASSET RATIO

%nventory to current assets ratio establishes a relationship between inventory and the total current assets1 3here by analyCing the level of investment in inventory and consumption of total current assets1%t is current asssets are those resources of firm which are either held in the form of cash or a e:pected to be converted in cash within the accountig period1
%nventory to current assets ratioU
%nventory Current #sset
TA#LE NO &.1.5: T"E INVENTORY TO CURRENT ASSET RATIO FOR ILP. Mear 200? 0B 200B 0A %nventory 2!11! 271B1 Current assets ?A1!9 109110 /atio 1606 12!6
200A 10 2010 11 2011 12
29179 601AA 6B1?!
10A177 11?169 11B1AA
12!2 129! 1627
I,!0r0,50 3he inventory to current asset ratio in %,+ has a increasing trend from 200B 200A to 2011 20121%t is ma:imum in the year 2011 1213he lower the percentage of inventory to the current assets, the greater the liquidity of current asset and versa1 ,ow ratio is shown in 200A 101
DIAGRAM &.1.&:T"E INVENTORY TO CURRENT ASSET RATIO OF ILP
&.1.6
INVENTORY TO 4ORKING CAPITAL
# firm is financially sound if its amount of inventory does not e:ceed the amount of wor'ing capital1 3his ratio is calculated to 'now whether there is any overstoc' in the firm1%t is a wise to reduce the the level of asset tied up in wor'ing capitalsince each dollar freed is a dollar that can be used to pay down long term debt,repurchase share etc1
%nventory to wor'ing capitalU %nventory ;or'ing Capital
TA#LE NO &.1.6: INVENTORY TO 4ORKING CAPITAL FOR ILP. Mear %nventory ;or'ing capital /atio
200? 0B 200B 0A 200A 10 2010 11 2011 12
2!11! 271B1 29179 601AA 6B1?!
9A1!? B?10A A1111 A!1!7 BB1B1
16! 12A 12A 162 1!6
I,!0r0,50 %nventory to wor'ing capital ratio analysis it shows the proportion of inventory is less when compared to wor'ing capital1 3he proportions are high in the year 2011 2012 and lower in the year 200B 200A and in 200A 20101
DIAGRAM &.1.5: INVENTORY TO 4ORKING CAPITAL FOR ILP.
&.1.= DE#TORS TURNOVER RATIO

%t indicates how many times the firm is collecting the cash from its debtors to whom firm sells in credits1 3rade debtors are e:pected to be converted into cash with a short period1 Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity of debt collection of a firm1 %n simple words it indicates the number of times average debtors "receivable$ are turned over during a year1 Debtors 3urnover /atio U 4et Credit >ales #verage 3rade Debtors
TA#LE NO &.1.=: DE#TORS TURNOVER RATIO FOR ILP.
Mear 200? 0B 200B 0A 200A 10 2010 11 2011 12
>ales ?716? A11?! 100122 1011A9 1021B!
Debtors !716! 96120 961B6 ?212! 9710B
/atio 1199 11!7 1179 11!1 117B
I,!0r0,50 3he higher debtor turnover ratio is in the year 2011 2012 which is good for the company13he table shows an increasing trend from 200? 2010 and decreased in the year 2010 2011
DIAGRAM &.1.6 :DE#TORS TURNOVER RATIO FOR ILP.
&.1.> CREDITORS TURNOVER RATIO
%n business operations, a firm has to ma'e credit purchase and incur short term liabilities1 >uppliers of goods creditors are li'ely to ta'e in repaying its trade creditors1 8or this purposes, creditors payable turnover ratio is calculated1 3he two components of the ratio are trade creditors and annual purchase1 Creditors turn over ratioUnet credit annual purchaseLtrade creditors
TA#LE NO &.1.>: CREDITORS TURNOVER RATIO FOR ILP.
Mear 200? 0B 200B 0A 200A 10 2010 11 2011 12
+urchase ?716? A11?! 100122 1011A9 1021B!
Creditors ?171 1711? 1!12? 1?1!A 1?1!6
/atio !12! 6109 6192 21?B 61A
I,!0r0,50 3he analysis of creditors turnover ratio reflects whether terms of credit allowed by suppliers are liberal or not1 Creditors turnover ratio is highest in the year 200? 200B which is !12!1%n 2011 2012 %,+ has a favourable creditor turnover ratio which is 61A1Creditor turnover ratio is lowest in the year 2010 2011
DIAGRAM &.1.= : CREDITORS TURNOVER RATIO FOR ILP.
&.1.? INPUT OUTPUT RATIO

%nventory Control can be e:ercised by use of this ratio1 %nput output ratio is the ratio of the quantity of input of material to production and the standard material content of the actual output1 TA#LE NO &.1.?: INPUT OUTPUT RATIO FOR ILP. Mear 200? 0B 200B 0A 200A 10 2010 11 2011 12 I,!0r0,50 3he analysis of input output ratio shows that above shows the tendency is fluctuating year by year1 3his is not favorable to the company1 3he input output ratio is increasing from 200? 200B to 2011 201213he ratio is highest in the year 2011 2012 which is 01A2 %nput !9107 96179 ?6116 ?217! A!1?9 5utput 991A9 B712? A9127 A619A 102197 /atio 19B? 1?!7 1?7A 1??! 1A2
DIAGRAM &.1.> : INPUT OUTPUT RATIO FOR ILP
&.1.10 4ORKING CAPITAL TURNOVER RATIO

;or'ing capital turnover ratio is the ratio which shows number of time the wor'ing capital requirements in sales1 ;or'ing capital of a concern is directly related to sales1%t is used to analyse how effectively a company is using the wor'ing capital to generate sales1 @igher the wor'ing capital turnover ratio the better it is because it means that the company is generating lot of sales compared to the money it uses to fund the sales1 ;or'ing capital turnover ratioU 4et sales 4et wor'ing capital1
TA#LE NO &.1.10:4ORKING CAPITAL TURNOVER RATIO FOR ILP. Mear 4et >ales"in la'hs$ 4et ;or'ing /atio
capital"in la'hs$ 200? 0B 200B 0A 200A 10 2010 11 2011 12 ?716? A11?! 100122 1011A9 1021B! 9A1!? B?10B A01AA A!1!7 BB1A0 110B 1107 1110 110B 1117
I,!0r0,50 3he above table shows that the wor'ing capital requirements of the firm which is highest in year 2011 2012 that is 1117 and lowest 1107 in the year 200B 200A1
DIAGRAM &.1.?:4ORKING CAPITAL TURNOVER RATIO FOR ILP.
&.2 TREND ANALYSIS

3he financial statement may be analyCed by computing trends by series of increase1 3his method determines the direction upwards or downwards and involves the computation of the percentage relationship that each statement item bears to the same
item in base year1 5ne year is ta'en as the base year1 Usually, the first year is ta'en as the base year1 3rend #nalysis is the practice of collecting information and attempting to spot a pattern, or trend, in the information1 #lthough trend analysis is often used to predict future events, it could be used to estimate uncertain events in the pas3 3rend percentage U current year amountL Base year amountV100
&.2.1 TREND ANALYSIS OF 4ORKING CAPITAL TA#LE NO &.2.1: 3/-4D #4#,M>%> 58 ;5/2%4* C#+%3#,
Mear ;or'ing capital"%n la'hs$ 3rend percentage
200? 0B 200B 0A 200A 10 2010 11 2011 12
9A1!? B?10B A01AA A!1!7 BB1A0
100 127167 10!1!! 1061?A A!112
I,!0r0,50 3he analysis shows that there is an increase in wor'ing capital from 200? 200B to 200B 200A then there is decrease in wor'ing capital from 2010 2011 to 2011 20121
D/)2r)1 &.2.1: Tr0,; A,):*-/- ! 4 r</,2 C)+/.):
&.2.2 TREND ANALYSIS OF CAS"
TA#LE NO &.2.2: 3/-4D #4#,M>%> 58 C#>@

Mear 200? 0B 200B 0A 200A 10 2010 11 2011 12 Cash" %n la'hs$ 1291 !1?! ?109 1!2B 110! 3rend percentage 100 1B110A 1!B1A! 9109 2!12A
I,!0r0,50 3he trend analysis of cash shows a vast decrease in the year 2010 201113he trend percentage on cash has a huge increase on the year 200B 0A and then decreases rapidly in 200A 20101
D/)2r)1 &.2.2:Tr0,; A,):*-/- ! C)-8
&.2.3 TREND ANALYSIS OF DE#TORS TA#LE NO &.2.3: 3/-4D #4#,M>%> 58 D-B35/>
Y&'( 200? 0B 200B 0A 200A 10 2010 11 2011 12
D&)*$(+ 4!.34 "3.20 "3.84 72.2! "!.08
T(&,- .&(/&,*'0& 100 139.39 100.9 113.17 90
I,!0r0,50 3he analysis shows that there is an fluctuating effect on the value of debtors1%t is highest in the year 200B 200A and lowest in the year 2011 2012
D/)2r)1 &.2.3:Tr0,; A,):*-/- ! D0C. r-
&.3 CORRELATION ANALYSIS

Correlation refers to the relationship between any two or more variables1 3he correlation e:presses the relationship or interdependence of two set of variables upon each other in such a way that the change in value of one variable are in sympathy with the change in another variable1 Correlation co efficient is a numerical measurement showing degree of correlation between two variables1 Correlation analysis helps to indicate the degree of relationship between two variables1 3here are so many methods used for measuring correlation1
D02r00 ! 5 rr0:)./ ,
Correlation e:ists in various degrees. +erfect positive correlation
if it is perfect correlation , an increase in one variable is always followed by a corresponding and proportional increase
+erfect negative correlation.%t is negative perfect correlation , if a decrease in one variable is always followed by a corresponding and proportional increase1
C rr0:)./ , ! r .80 5 ,50r,

3he present section aims at analyCing the correlation co efficient under the following combination of variables to study the relationship e:isting between them1 11/elationship between inventory and current assets1 21/elationship between raw materials and current assets1 61/elationship between raw materials and inventory1
&.3.1 RELATIONS"IP #ET4EEN INVENTORY AND CURRENT ASSETS

3he relationship between inventory and current assets is e:plained by the following table1
TA#LE NO &.3.1:: TA#LE S"O4ING RELATIONS"IP #ET4EEN INVENTORY AND CURRENT ASSETS. Mear
WU: X:
WY2
MUy Xy
MY2
WM
200? 0B 200B 0A
2!11! 271B1
711 61!!
29117 111B
?A1!9 109110
291B 11?
?1B12! 102
16919B 17B
200A 10 2010 11 2011 12
29179 601AA 6B1??
219A 11?! A172
?12 6102 A019 9?011A
10A177 11?169 11B1A 761167
612B 1112B 12196
101? 1221A 17A17 101116?
B1B2 1A192 120126 29B12A
1!912?
Correlation co efficient Er<U ZWML[ZWY2V[ZMY2 ZWMU29B12A ZWY2U16B1B ZMY2U101116? rU 29B12AL[16B1B V [ 101116? U 2A212?L111?B V 6?!19 U 190 I,!0r0,50
3he table shows the relationship between inventory and current asset1 %t shows that correlation between these two variables is1901 this indicates that these two variables have positive correlation1 3hat is inventory and current asset are changed in the same direction1
@ere : represent inventory1 y represent current asset1 W represents difference of : values from assumed mean of : values M represents difference of y values from assumed mean of y values : represents the average of : values1
y represents the average of y values
&.3.2 RELATIONS"IP #ET4EEN RA4 MATERIAL AND CURRENT ASSETS

3he relationship between raw material and current assets is e:plained by the help of following table1
TA#LE NO &.15 : TA#LE S"O4ING RELATIONS"IP #ET4EEN RA4 MATERIAL AND CURRENT ASSETS.
Mear
200? 0B 200B 0A 200A 10 2010 11 2011 12
W
611B9 !91!A 711?7 !B1?? 9B109 211A
WU: X:
1?172 21BA 216? 119 1B19B
WY2
6091A7 B167 7191 16?2 6!B1A! 9?011A
y
?A1!9 109110 10A177 11?169 11B1A 761167
MUy Xy
291B 11? 612B 1112B 12196
MY2
?1B12! 102 101? 1221A 17A17 101116?
WM
!?0109 1!A ?1?? 91BB 269169 ?0B16
Correlation co efficient Er<U ZWML[ZWY2V[ZMY2 ZWMU ?0B16 ZWY2U 9?011A ZMY2U101116? U ?0B16L[9?011A V [ 101116? U ?0B16\271B V 611B U 1B9 ;or'ing note.
X:U Z:L n
Z:U nU 7
N:U !A16B
WU :
N:
XyU ZyL n
ZyU 61617 nU 7
NyU 10912?
MU y
Ny
I,!0r0,50 3he table shows the relationship between raw materials and current asset1 %t shows that correlation between these two variables is 1901 3his indicates that these two variables have positive correlation1 3hat is raw materials and current asset are changed in the same direction1
@ere : represent raw material1 y represent current asset1 W represents difference of : values from assumed mean of : values M represents difference of y values from assumed mean of y values X: represents the average of : values1
Xy represents the average of y values.
&.3.3 RELATIONS"IP #ET4EEN INVENTORY AND RA4 MATERIAL

3he relationship between inventory and raw material is e:plained by the help of following table1
TA#LE NO &.3.3: TA#LE S"O4ING RELATIONS"IP #ET4EEN INVENTORY AND RA4 MATERIAL.
Mear
WU: X:
WY2
MUy Xy
MY2
WM
200? 0B 200B 0A 200A 10 2010 11 2011 12
2!11! 271B1 29179 601AA 6B1??
711 61!! 219A 11?! A172
29117 111B ?12 6102 A019 16B1B
611B9 !91!A 711?7 !B1?? 9B109
1?172 21BA 216? 119 1B19B
6091A7 B167 7191 16?2 6!B1A! 9?011A
BA167 171?2 916? 1109 1??1B 2?71!?
1!912 ?
Correlation co efficient Er<U ZWML[ZWY2V[ZMY2 ZWMU 2?71!? ZWY2U 16B1B ZMY2U 9?011A rU 2?71!?L[16B1BV[ 9?011A
U 1A0 ;or'ing note.
X:U Z:L n
Z:U 1!9127 nU 7
N:U 2A127
WU :
N:
XyU ZyL n
ZyU nU 7
NyU !A16B
MU y
Ny
I,!0r0,50 3he table shows the relationship between inventory and raw materials1 %t shows that correlation between these two variables is 1A01 this indicates that these two variables have high positive correlation1 3hat is inventory and raw materials are changed in the same direction1 @ere : represent raw material1 y represent inventory1 W represents difference of : values from assumed mean of : values M represents difference of y values from assumed mean of y values X: represents the average of : values1 Xy represents the average of y values
&.& INVENTORY CONTROL TEC"NIHUES

&.&.1 A#C ),):*-/-
5ne of the widely used techniques for Control of inventories is the #BC"#lways Better Control$ analysis1 3he ob&ective of #BC Control is to vary the e:penses associated with maintaining appropriate Control according to the potential savings associated with a proper level of such Control1 3he #BC analysis uses this principle to divide inventories in 6 classes according to funds usage1 E#< itemsI which represent about 10G of the total inventory range and account for almost ?0G of the usage value, call for a light Control system1 5rder quantities and order points are carefully determined1 Close attention is paid to record accurately and variables can be reviewed periodically1 EB< items which constitute about 20G of the total inventory ranges and account for 20G of the annual usage value, requires normal Controls1 Hariables can be reviewed periodically1 EC< items are the remaining ?0G of the inventory which involve only about 10G of the usage value relatively loose Controls and less frequent reviews sufficient in their case1#BC analysis is also called proportional parts value analysis or demand supply method1
@ere *roup # consist of inventory ranging between /s A,AA,AA,AAA to /s AA,AA,AAB *roup B consist of inventory ranging between /s AA,AA,AAA to /s AA,AAB *roup C consist of inventory ranging between /s AA,AAA to /s 1
TA#LE NO &.&.1:TA#LE S"O4ING A#C ANALYSIS

Gr '+ N'1C0r ! /.01O ! /.01-
A # C
6 3>> 20=21
0.02>O 1.>3O ?>.13O 100
I,!0r0,50 I, A#C ),):*-/- AB116G of inventory belongs to group C, 11B6G of inventory belongs to group B and 0102BG of inventory belongs to group #
&.&.2
FSN A,):*-/-
8>4 stands for fast moving , slow moving and non moving1 @ere classification is based on the pattern of issues from stores and is useful in Controlling obsolescence1 3he carry out 8>4 analysis , the is later , is ta'en to determine the number of months , which have elapsed since the last transactions1 3he items are usually grouped in periods of 12 months1 8>4 #nalysis is helpful in identifying active item which need to be reviewed regularly and surplus items which have to be e:amined further1 4on moving items may be e:amined further and their disposal can be considered1
TA#LE NO &.&.2:TA#LE INDICATING FSN ANALYSIS Gr '+ F S N N'1C0r ! /.012210 66AA B?!! O ! /.011716AG 2619BG 901A2G
1!676
*roup 8 inventory ranging between 1 year to 2 year1 *roup > 2 year to 7 year1 *roup 4 #bove 7 year I,!0r0,50
100
@ere 901A2G of inventory belongs to group 4, 2619BG of inventory belongs to group > and 1716AG of inventory belongs to group 81
D/)2r)1 &.&.1:D/)2r)1 -8 G/,2 FSN
5.0 FINDINGS 9 RECOMMENTATION

3he percentage of current asset to inventory sundry debtors,cash and ban',loan and advances have decreased in the year 2011 20121 %nventory turnover ratio shows a fluctuating trend over the years1 %t has been decreased to 21A! in the year 2011 12 which is not good for the company
%nventory conversion period of %,+ has increased to 12! days in the year 2011 2012 which indicate the conversion of inventory to sales is lower
3he material holding period is low in the year 200? 0B1 %t indicates that stoc' is fast moving and in the year 2011 2012 is very high which is not in favour to the company1
3he ratio of material consumption to turnover is ma:imum 199? in 2011 2012 which is not good for a company 3he debtors turnover ratio shows increasing from the year 2011 12 which indicate efficient management of debtors by the company13he e:tension of credit and collection of accounts receivable is efficient
%nventory to current asset ratio is fluctuating1 ,ow ratio is good to the company and it was shown in 200A 101 But in 2011 12 the ratio increases which is not goodto the company1
3he ratio to inventory to wor'ing capital shows an increasing trend which is favorable to the company1%t is ma:imum in the year 2011 2012 has a favourable effect on the company1
3he creditors turnover ratio is high in the year 2011 121 3his is favorable to the company 1 3he analysis of input output ratio shows that above shows the tendency is fluctuating year by year1 3his is not favorable to the company ;or'ing capital turnover ratio is highest in the year 2011 2012 which is 01!6 which indicate better performance
Correlation analysis shows the relationship between various variables li'e inventory and current asset, relationship between raw material and current asset, relationship between raw material and inventory1 %t shows a positive correlation which has a favourable effect1
#s per #BC analysis # category 0102BG, B category constitute 11B6G and C category constitute AB116G of the total number of items1
#s per 8>4 analysis 8 category of items constitute 2619B G , > category constitutes 2619BG and 4 category constitutes 901A2G of the total number of items1
5.1 SUGGESTIONS
Company have to shift some items of *roup B to *roup # and C to B for more Control over the inventory which can reduce the inventory cost1 3he %tems of 4onmoving group "901A2G$ can be reduced to have more Control over the inventory +erpetual inventory system and periodic review system should be considered seriously and also ensure that materials are chec'ed by authoriCed persons %t will be more better if the firm try to decrease the %nventory Conversion +eriod through efficient management of them1 -fficient management of the debtors and creditors have to be maintainted which is favourable for the development of the company1 3he higher turnover ratio indicates efficient management of inventory because more frequently the stoc' sold, so efficient steps have to be introduced to improve the inventory ratio
6.0 CONCLUSION
3his pro&ect on (3he study on inventory managementK gave me an opportunity to understand the level of inventory management in the %nstrumentation ,imited +ala''ad1 3his research will help the organiCation to ma'e necessary measure to the inventories1 3his will certainly bring down the causes of inventory problems and help
the management of inventories1 3he high turnover ratio indicates efficient management of inventory because more frequently the stoc' sold1 >o the organiCation should try to improves the inventory turnover ratio1 %nstrumentation ,td 2erala /a&asthan was established by 1A9! has ! units two at 2ota, one at 0apura , one at +ala''ad1 3he inventory system followed by the instrumentation is satisfactory which is mainly due to the efficiency of employees1 3he current study helped me to understand the current inventory control measures practiced by %,+1 3he cordial and corporate relationship between management and employees is the secret behind the success of this public sector company1
#I#ILIOGRAP"Y
#OOKS
2han )1% and 0ain +2, Basic financial management, 3he )c*raw @ill publishing company limited, 4ew Delhi1,20001 #swathappa = 21>hridhara Bhat,productions and 0perations )anagement,@imalaya +ublising @ouse,>econd edition,200B
>hashi121*upta and /121>harma,)anagement #ccounting,2alayani publishers,11th edition,200? Dr1>141)aheswari,8inancial )anagement,>ultan Chand = sons,Ath edition,200! D1Chandra Bose,%nventory )anagement,+rentice hall of %ndia +rivate ,imited, 4ew Delhi1
4E#SITES
http.LLwww1ilpgt1inL http.LLwww1business dictonary1comL http.LLwww1entrepreneur1inL http.LLwww1wi'ipedia1comL
ANNE@URE
#ALANCE S"EET OF ILP LTD FOR T"E PERIOD 200=%2012
Parti#u$ars SO*RCE O+ +*NDS %&"% 1I, R+2 %&"" 1I, R+2 %&"& 1I, R+2 %&&' 1I, R+2 %&&( 1I, R+2 %&&) 1I, R+2
R&+&(3&+ ',- S4(.54+ L$', %4,-+7 +&/4(&5$', I,*&( 4,8* '//$4,*+ TOTA, APP,ICATI ON O+ +*NDS +i-e. Assets #($++ )5$/9 '* /$+* L&++: D&.(&/8'*8$ , N&* )5$/9 A-3',/& $, /'.8*'5 A;/ < /'.8*'5 =$(9 8, .($0(&++ Current Assets,,oa ns an. A.van#es I,3&,*$(8&+ S>+*&? =$(9 S4,-(> D&)*$(+ C'+@ < )',9 )'5',/&+ O*@&( /4((&,*
8!670631!
1467860867! 7
1!688687603!
1"602683624 1"6346!26 ! !40
1068!67"6!2 3
46876"26171 8769!600627 8 936"863267" 4
!62268"6408 776296"9629 1 976306"464! "
468"637634! 726"967!6219 936446996!99
469"6"96117 "8630632672 9 8962968!609 1
36276896"3! !26196286402 716816706!77
26796!"68"" 4069"6!8673 8 !46"1692612 7
196176286!" 0 146736046!8 8 46446236972
1"6736146!1 0 1464"621638 1 262"6936129
1"6"26""6!33
1"6126"9633 1 136916"4691 " 2621604641!
1!69961"6003
1!6816!8683 0 1363!68369" 7 264!67468"3
146186706"!9 264369!6874
136"46846!82 26346316421
336796!!2
!86336"04
163263"0
NIL
NIL
NIL
3867468"623 " NIL
3069961!63" 1
2"6!"6436831
2!6816816!3 4
246146806240
1"6!9602687 8
NIL "!608621639 " 7262469264" 4
NIL "36836916414
NIL "362063160! "
NIL 4!6346326084
NIL 31648679689 7
10643644! 16426746143
436906709 4268!690!
760"6996"71 "!63!69"9
46746006!"! 9067"6040
2"610641! 8768763""
26!96376300 8767164!1
'++&* L$',+ < A-3',/&+ 136"3621640 ! 11869964"6" 2! L&++: C4((&,* 58')858*8&+ < P($38+8$,+ C4((&,* L8')858*8&+ P($38+8$, 296416046!1 " "861268"9 30609617638 ! N&* /4((&,* '++&* TOTA, 8!690629624 0 '/,0(,/%,)0 226!"6196!4 8 3!60"60"0 2269162!6"0 8 9464!637672 3 '),/&,0 , 1 0 1862!62!6710 306!76941 186!!6836"!1 9069967163"! '/, ,'',1'' 186776"1613 2 246336749 19601694688 1 876086806"7 " (',%',(1,&' " 96016!"6"!2 3764!62!! 96996016907 "964763961!" )",(",)&,1)) !6936376801 !067168!2 "6446096"!! !261"61762" 4 1 ,0",'%,"% ) 1362!678689 2 11763"6"363 31 116426846131 1096!!6!!601 " 1164368"63" 2 10"61067!6! !7 868363069!8 7964"64160"3 760!63!6393 !86"062"691 9
PRO+IT AND ,OSS STATEMENT O+ I,P ,TD +OR THE PERIOD %&&)2%&"%
Parti#u$ars
200772008
200872009
200972010
201072011
201172012
T4(,$3&( 7!6376"76779 9167460!6!39 1006216"7697"
10169"6346"3 2
10268461768!"
769362162!" L&++: EA/8+& -4*> 106336146"09 86186446312 760261860"! 76716876701 9469069"6!98 "!6046!36170 A//(&*8$, ; 1D&/(&*8$,2 *$ +*$/9 836!!6"16227 936196496911 9462464"6931 "6496236447 162167!6704 16286026"2! 2622619688" 116!863"6"8"2 162!67"6440 O*@&( (&3&,4&+ 706"36787 446136341 8460"6333 16036!46872 1026"!69"648! T$*'5 Inputs EA.&,-8*4(& $, ?'*&(8'5 E?.5$>&& (&?4,&('*8$, < )&,&%8* S&(38/& < +4)/$,*('/*8,0 "860"69964"4 3168"6346!77 4"6496"76919 !167!6996044 486776376"98 1"6426016808 86496476329 96086746779 126"96!06823 146726!26314 36186196""7 "!63"6!43 16026196429 26306!0634! 264769"6!"! "62760"6172 O*@&( +&(38/&+ 46"46!867!7 "6336816184 !68167"6249 !6716226722 296836207 D&.(&/8'*8$, 296006"1! 286106394 286396373 296"!69"0 !26816921 I,*&(&+* 9634640! 316416179 2461"6799 !162269"8 268860!7 P($38+8$, 1639689" 262960"! 36016824 46446489 9467"680629" T$*'5 P($%8*; 15$++2 )&%$(& 8,*&( 4,8* 4"60!6!26122 206916406!39 "36!"6236949 216716!36244 216126416"73 7361363464!7 726!4642671" 2161!6226401 768961"6189 ""69"6926""1 8!6276776193 9"62!67"6130 936"96"!6117
'-B4+*?&,* I,*&( 4,8* '-B4+*?&,*+ P($%8*; 15$++2 '%*&( 8,*&( 4,8*'-B4+*?&,* "6346!26!39 1"6026836244 1"6416336"73 146806406401 196246874 EA*(' $(-8,'(> 8*&? B'5',/& $% .($%8*; 15$++2 /'((8&- *$ )'5',/& +@&&* NIL NIL !264"6"39 26316"4! "6846216000 46!"688.000 !6"86706000 "6716086000 "6346826000
160469!6189
1"6346!26!39
1"6026836244
1!6886876034
1467860867!"
8!6706314

A Project On Inventory Management

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A STUDY ON INVENTORY MANAGEMENT IN INSTRUMENTATION LTD, PALAKKAD

SUMMER PLACEMENT PROJECT

Pr !. C.VINOT"A ,M#A, M.P"IL$

MASTER OF #USINESS ADMINISTRATION

GURUVAYURAPPAN INSTITUTE OF MANAGEMENT

COIM#ATORE % 6&1 105

% RAIJA.K.R,student of G'r'()*'r)++), I,-./.'.0

/#%0#121/ /-* 45.126780279

Guruvayurappan Institute of Management 2

RAIJA.K.R /eg 4o. 1235F0256

Guruvayurappan Institute of Management 3

1.0.4 OBJECTIVE OF THE STUDY

THEORETICAL FRAME WOR

2.0 3.0 4.0 !.0 ".0

REVIEW OF LITERATURE RESEARCH METHODOLO#Y

Guruvayurappan Institute of Management 4

3%3,3he percentage of current asset to

!1111 !1112 !1116

Current #sset /elationship Betweeen /awmaterial #nd

Current#sset /elationship Between %nventory #nd

Guruvayurappan Institute of Management !

3%3,5rganiCation Chart 5f 3he +urchase

11211 11212 11216 1121! 11217 11219

1121? !1111 !1112

Guruvayurappan Institute of Management "

Guruvayurappan Institute of Management 7

DEDICATED TO GOD ALMIGHTY MY DEAR PARENTS AND FRIENDS

Guruvayurappan Institute of Management 8

Guruvayurappan Institute of Management 9

1.0.2 NEED FOR T"E STUDY

1.0.3 SCOPE OF T"E STUDY

Guruvayurappan Institute of Management 10

1.0.& O#JECTIVE OF T"E STUDY

1.1 INDUSTRY PROFILE

Guruvayurappan Institute of Management 11

Guruvayurappan Institute of Management 12

1.1.1 INSTRUMENTATION INDUSTRY IN INDIA

Guruvayurappan Institute of Management 13

1.2 COMPANY PROFILE

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1.2.1 VISION )anufacture and supply quality products to customer1

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1.2.& S4OT A,):*-/-

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1.2.5 LOCATION OF T"E FIRM

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1.2.6 ISO CERTIFICATION

1.2.= VARIOUS DEPARTMENTS

1.2.> MAJOR CLIENTS

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1.2.? TRADE UNIONS

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1.2.10.2 CUSTOMER%EDUCATION PROGRAMME

1.2.10.3 MANUFACTURING FACILITIES

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1.2.10.& RESEARC" AND DEVELOPMENT

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1.2.10.6 INFORMATION TEC"NOLOGY CENTRE

1.2.10.= PURC"ASE DEPARTMENT

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Chart 11211.Or2),/B)./ , 58)r. ! .80 +'r58)-0 ;0+)r.10,. is as follows