PROJECT REPORT ON

INVENTORY MANAGEMENT IN MINAR FORGINGS AND

ALLOYS PVT LTD.

Submitted to
AMITY UNIVERSITY
In Partial Fulfillment of the
MASTER OF BUSINESS ADMINISTRATION

Under the guidance of

Mrs. SHAMSI SUKUMARAN

By
MUHAMMED ILYAS.TA
Enrolment No; A31101915111
Batch: 2015-2017

AMITY GLOBAL BUSINESS SCHOOL KOCHI

AMITY GLOBAL BUSINESS SCHOOL KOCHI

CERTIFICATE

This is to certify that, the project entitled INVENTORY MANAGEMENT

IN MINAR FORGINGS AND ALLOYS PVT LTD. has been successfully
carried out by Mr.MUHAMMED ILYAS.TA in partial fulfilment of master of
Master of Business Administration under my guidance during the academic
year 2015-2017.

Signature of faculty guide

(Mrs. SHAMSI SUKUMARAN)

Signature of Director
(Mr. BIJU VITHAYATHIL)

AMITY GLOBAL BUSINESS SCHOOL KOCHI

DECLARATION

I MUHAMMED ILYAS.TA hereby declare that this Project report entitled

INVENTORY MANAGEMENT IN MINAR FORGINGS AND ALLOYS PVT LTD.
submitted to the Amity University in partial fulfilment of the requirements for
the award of Masters of Business Administration is a record of original
project work done during my period of study in Amity Global Business
School, Kochi, under the guidance of Mrs. SHAMSI SUKUMARAN.
I also declare that this report has not been submitted to any other university or
institution for the award of my fellowship, degree or diploma.

DATE:

MUHHAMEDILYAS.TA

ACKNOWLEDGEMENT
This report has been enriched by the inputs of various people. I take the
opportunity to thank each and every one of them. Above all I thank the God
Almighty for his immense grace and blessings at each and every stage of my
project.
I would like to thank Mr. BIJU VITHAYATHIL, Hon. Dean of Amity
Global Business School Cochin to provide the necessary support to complete
the project report and encourage us to further carry out researches in coming
future.
I greatly indebted to my faculty guide Mrs. SHAMSI SUKUMARAN,
lecturer Amity Global Business school Cochin, for his guidelines, corporation
and helpful suggestions in every stage of my project.
I would like to express my thanks to Mrs. BHAGYA BHARATHAN, HR
Manager of BIG BAZAAR Nucleus Mall for their friendly help and
encouragement official recovery.
I would also like to thank my parents, friends, relatives for supporting me in
completing this project.

MUHAMMED ILYAS.TA

SYNOPSIS
This study was conducted to identify INVENTORY MANAGEMENT IN
MINAR FORGINGS AND ALLOYS PVT LTD. Primary as well as
secondary data was collected for this study. The data collection methods are
interaction and discussions with executives in working division, various
records and company prospectus. Simple percentage analysis is used for
calculation.
The purpose of the study is to find out whether the present promotion
strategies are effective and also find out various recommendation and valuable
comments of the respondents

SL. NO
1

TOPICS
Chapter -1

Chapter 2

INDUSTRY PROFILE
COMPANY PROFILE

Chapter-5

REVIEW OF LITERATURE

Chapter -4

RESEARCH METHEDOLGY
NEED TO HOLD INVENTORIES
OBJECTIVE OF STUDY
SCOPE OF THE STUDY
LIMITATION OF THE STUDY

Chapter -3

INTRODUCTION

DATA ANALYSIS AND INTERPRETATION

Chapter-6
FINDINGS
SUGGESSION

CONCLUSION
REFERENCE
ANNEXURE

PAGE NO.

CHAPTER I:
1.INTRODUCTION

INTRODUCTION

Inventoryisalistforgoodsandmaterials,orthosegoodsand
materialsthemselves,heldavailableinstockbyabusiness.Itisalso
usedforalistofthecontentsofahouseholdandforalistfor
testamentarypurposeofthepossessionsofsomeonewhohasdied.In
accountinginventoryisconsideredanasset
Aterminventoryreferstothestockfileoftheproductsafirmis
offeringforsaleandthecomponentsthatmakeuptheproduct.In
otherwords,inventoryiscomposedofassetsthatwillbeshowedin
futureinthenormalcourseofthebusinessoperations.Theassets
whichfirmsstoreasinventoryinanticipationofneedare:
Raw materials
Work in process (semi finished goods)
Finished goods
Therawmaterialinventorycontainsitemthatarepurchasedby
thefirmfromotherandareconvertedintofinishedgoodsthrough
themanufacturing(production)process.Theyareanimportant
inputofthefinalproduct.Theworkingprocessinventoryconsists
ofitemscurrentlybeingusedintheproductionprocess.
Theyarenormallysemifinishedgoodsthatareatvariousstages
ofproductioninamultistageproductionprocess.Afinishedgoods
representedfinalorcompletedproductswhichareavailablefor
sale.Theinventoryofsuchgoodsconsistsofitemsthathavebeen
producedbutareyetbesold.
Inventory,asacurrentasset,differsfromothercurrentassets
becauseonlyfinancialmanagersarenotinvolved.Ratherallthe
functionalareas,finance,marketing,production,andpurchasing
areinvolved.Theviewsconcerningtheappropriatelevelof
inventorywoulddifferamongthedifferentfunctionalareas.

Thejobofthefinancialmangeristoreconciletheconflictingview
pointsofthevariousfunctionalareasregardingthemaximizingthe
ownerswealth.Thus,inventorymanagement,likethemanagement
ofothercurrentassets,shouldberelatedtotheoverallobjectiveof
thefirm.Itisinthiscontextthatthepresentchapterisdevotedtothe
mainelementsofinventorymanagementfromtheviewpointof
financialmanagement.
Theobjectiveofinventorymanagementisexplainedinsome
detailsections.Sectiontwoisconcernedwithinventory
managementtechniques.Attentionisgivenheretobasicconcepts
relevanttothemanagementandcontrolofinventory.
The Aspects covered are:

Determination of the type of control required

The basic economic order quantity
The reorder point ,and
Safety stocks

As a matter of fact, the inventory management techniques are a part

of production management.But a familarity wiut a familarity with
them is of great help to the finanacial managers in planning and
budgeting inventory.

CHAPTER II
1.Reseaerch Methodology
2.Need to hold Inventories
3.Objective Of The Study
4.Scope Of The Study
5.Limitation Of The Study

RESEARCHMETHODOLOGY
Thedatahasbeengatheredthroughinteractionanddiscussions
withtheexecutivesworkinginthedivision.
Someimportantinformationhasbeengatheredthroughcouple
ofunstructuredinterviewsofexecutive.
Annualreportsandothermagazinespublishedbythe
companyareusedforcollectingtherequiredinformation.

NEEDTOHOLDINVENTORIES
Martinandmilleridentifiedthreegeneralmotivesforholding
inventories
TRANSACTION

MOTIVE:

This refers to the need of maintaining inventory to facilitate

smoothproductionandsalesoperations.
PRECAUTIONARY MOTIVE:
Precautionary motive for holding inventory is to provide a
safeguardwhenthenactuallevelofactivityisdifferthananticipated.
Thisinventoryserveswhenthereisaunpredictablechangesinthe
demandandsupplyforces.
SPECULATIVEMOTIVE:
Thismotiveinfluencesthedecisiontoincreaseordecreasethe

levelsofinventorytotaketheadvantageofpricefluctuations.

OBJECTIVEOFTHESTUDY
Tostudyabouttheorderinglevelsfortheimportant
componentsofinventory.
Tounderstandandmeasureeconomicorderquantityforthe
selectedrawmaterialitems.
Toanalyzeitsinventorymanagementmethodswiththehelp
ofABCanalysis,VED
analysisetc.
ToevaluatetheinventorymanagementpracticesofMINAR
ALLOYS&FORGINGSPVTLTD..
To offer suitable suggestions for the improvement of
inventorymanagementpractices.

SCOPEOFTHESTUDY
Inventory management is a simple conceptdont have too much
stockanddonthavetoolittle.Sincetherecanbeasubstantialcosts
involved in staying above and below the optimal range, careful
inventorymanagementcanmakeahugedifferenceintherightbalance
can be quite a complex and time consuming task without the right
technology.
Inventory management is very important for MINAR ALLOYS
AND FORGINGS PVT LTD. It enables the business to meet or
exceedexpectationsofthecustomersbymakingtheproductsreadily
available.

The scope of the study includes the ABC Analysis of Raw

Materials,workinprogressandfinishedgoodsforfourfinancialyears.
Thisstudyprovidesinsighttothemanagementofhighvalueitems
andalsobringsattentionofmanagementtowardsmovementofA
classitemsoverperiodof4years

LIMITATIONSOFTHESTUDY
Detailstudyaboutallthematerialwasnotpossiblebecauseof
timelimit.
Some of the information was kept confidential by the stories
department.
Studywasconfinedonlytotheselectedcomponentsinthestores
department.

CHAPTERIII
1.REVIEWOFLITERATURE

INDUSTRYPROFILE
Steelisversatileandindispensableitem.Ironandsteelcomprises
oneofthemostimportantinputsinallsourcesofeconomy.This
industryisbothabasicandacoreindustry.Theeconomyofanynation
dependsonastrongironandsteelindustryinthatnationhistoryhas
shownthatcountrieshavingastrongpotentialityforironsteelproducts
haveplayedapredominantroleintheadvancementofcivilizationin
theworld.Thegreatinvestmentthathasgoneintothefundamental
researchinironandsteelindustryhashelpedbothdirectlyand
indirectlymanymodernfieldsoftodaysscienceandtechnology.
Therapidgrowthanddevelopmentofsteelcapacityisindeeda
logicalcorollaryofanyprogramofrapidindustrialization.Steel
formsthebackboneoftheeconomy,especiallyofanyindustrial
country.Ithasbackwardandforwardlinkages,whichmakessteel
indispensible.Thevitalrole,whichsteelindustryplayinthegrowth
anddevelopmentofnationseconomy,isundeniable.
Theimportantofsteelineconomicactivitiescannotbe
overemphasized.Besides,steelprovideslargeemploymentdirectly
anditacknowledgementthatforeverydirectsteelemployee,15
thousandopportunitiesareindirectlyinthelinkageindustries.
Steel, a core sector industry, emerged as the backbone for
industrialization in most of the countries. The index for steel
production and for capita consumption of steel in a country has
becomingmeasuringscalesofeconomicgrowthandreconstruction
ofanation.
Steeloccupiesstrategiespositionin5effortstoattainasolidand
selfreliantindustrybase.Inspiteoftheironandsteelindustrybeinga
capital,laborenergyintensiveindustry,subjectedtorapid,up
predationstheastonishingfactisthat,85%ofthemetalsproducedin
theworld,isaccountedbysteelalone.Hence,steelisidentifiedasan
internationalindustry,withglobalfocusonsteelmakingandsteel
technologies,emphasizingquality,production,andcostreductions.

GLOBALSTEELSCENARIO:
It is interesting to note that the worlds total crude steel
productiongrewatamuchslowerrateduringthefirsthalfofthe
centuryandthegrowthratepickedupatasignificancerateafter
IIWorldWar,withameagerproductionlevelof28.3MTin
1900, the production crossed the first hundred mark in 1927
(101.8MT).Theproductionin1943was159.6MTandthenit
sharplyfellto111.6MTin1946.Thenthegrowth529.8MTin
1968,650.7MTin1972,703.8MTin1974andthehighestever
productionof764.4MTin1979.Duringthe70sitwitnessed
oneofthemostsevereeconomiccrisisonaccountofpetroleum
oil.Thishadapronouncedimpactonoveralleconomyofthe
worldandparticularlysteelindustry.Theworldproductionof
steel started declining to 644.4 MT in 1982. The production
improvedto683.7MTin1983,710.2MTin1984,719.1MTin
1985,and714.2MTin1986.
Among the top steel producing countries of the world, the
USAmaintainedthepositionasthebiggeststeelproduceruntil
70s, when the Erstwhile USSR taken over the USA and has
remainedonthetopoftheworldsincethen.IntheprocessJapan
alsodevelopeditssteelIndustrysignificantlyandtookoverthe
USAtobecomethefirstbiggestproducerintheworld.

GLOBALPERPECTIVEINSTEEL:
WorldDemand:
Totaldemandforsteelintheworldisexpectedtogrowatan
annualrateof1.7%between1935and2000accordingtoastudy
bychaseeconometrics.Accordingtothisestimate,totaldemand
intheyear2000isexpectedtobe913MTofcrudesteel.The
world growth rate of 1.7% per annum disguises dramatic
differences in steel demand growth. Within the nonsocialistic
world,steeldemandinadvanceindustrialcountriesatawhole
are expected to grow at 0.6 % annual rate following a 2.2%
annual rate between 1974 and 1984. Steel demand in less
developedcountriesasawholeisexpectedtogrowata5.5%
annual rate up to 2000 following a 3.1% annual growth rate
between1974and1984.Withinthecentrallyplannedeconomies
category,theEasternEuropeerstwhileUSSRregionmayhavea
0.3% annual steel demand growth during the period 197484.
SteelDemandrateuptotheendofthiscenturyaftera7.8%per
annumgrowthduring197484.

THEINDIANSTEELSCENARIO:
SteelconsumptioninIndiahasgoneupduringthepastdecade
fromthelevelof10MT(199394).Similarlypigironconsumption
hasgoneupfrom1.4MTtoabout1.8MT.Thepastdecadewasnot
significantonlyforhighergrowthrateofironandsteelconsumption
hasgoneupfrom1.4MTtoabout1.8MT.Thepastdecadewasnot
significantonlyforhighergrowthrateofironandsteelconsumption
inthecountrycomparedtopreviousfewdecades(during196061
steelconsumptioninthecountyhasgoneupfrom3.6MTto8.9MT
only),butsomevitaleventshavealsotakenplacewhichbroughtan
overallchangeintheIndianSteelScenario.
During the 80s decade, all main steel producers have taken a
numberofstepstomodernizethetechnologyandproductsoftheir
steelplants.Anumberofmajorsecondaryproductshaveenteredin
theintegratedsteelproductionactivitiesinabigway.Someofthem
have also entered into sophisticated production area of higher
qualitycoldrolledsheetsandcoatedsheets.Therecentpolicyofthe
governmentofIndiaforliberalizingtheIndianironandsteelsector
fromageoldcontrolandequalizedfreightsystemhaschangedthe
basisstructureoftheindustryThoroughly.Thepolicyofliberalized
import has also put the Indian steel industry open to global

competition.

DEVELOPMENTOFSTEELINDUSTRYININDIA:
ThedevelopmentofsteelindustryinIndiashouldbeviewedin
conjunctionwiththetypeandsystemofgovernmentthathadbeen
ruling thecountry. Theproduction ofsteelin significantquantity
startedafter1900.Thegrowthofsteelindustrycanbeconveniently
studiedbydividingtheperiodintopreandpostindependenceera(or
before1950andafter1950).Thetotalinstalledcapacityduringthe
preIndependenceerawas1.5MT/year,whichhasrisentoabout9
MTofingotbythe70s.Thisistheresultoftheboldstepstakenby
thegovernmenttodevelopthesector.

GROWTHINCHRONOLOGICALTERMS:
1830:JoshiaMarshallHealthConstructedtheFirst
ManufacturingPorto.NovainMadrasPresidency.Howeveritwasa
financialfailure.
1874:JamesErskinefoundedtheBengalIronWorks.
1899:JamshedjiTatainitiatedtheschemeforintegratedsteelplant.
1906:FormationofTISCO.

TISCO started production

194050:FormationofMysoreIronSteelLtd.,atBhadravathiin
Karnataka.

SWOTANALYSISOFINDIANSTEELINDUSTRY:
STRENGTHS:
Indiahasbeenbestowedwithhighreservesofbasicrawmaterials
forsteelmaking.Thecountryhasabout12BTofironore;25BT
of cookingcoal;11.6BT ofmanganese ore;9.75MT of flux
gradeslimestoneand1.7BTofdolomite.Excepthighashcontent
incoal,allmineralsareofmostsuitablequalityandhencethen
Indiahasbeencomfortablyplacedwhencomparedtoanyother
countryintheworld
India has large number of qualified and experienced
metallurgists,engineersandtechnicians,whocanengineer,adopt
andassimilatecosteffectivetechnologiesformakingandshaping
ofsteel
Maintaininganedgeincostandqualitycompetitivenessinthe
exportmarkets,lowlaborcost(15%ofthesteel)andwelltrained
humanresourceaswellasgoodqualityinputs,isoneofthemajor
strengthsoftheIndianSteelIndustry.

WEAKNESSES:
Highcapital,laborandenergyintensive.Industryestablishment
involveslonggestationperiod.
Slowgrowthrateindomesticaswellasinternationaldemand..
Totaldependenceofscrap,resultinginhugscrapimportsfurther
uptrendinscrappricestoreduceprofitability
Poor capacity utilization of steel units due to inadequate
infrastructurefacilitiesandinadequateshorttermandlongterm
planning
Highandrisingpowercostsandlowavailabilityofpowerare
becomingaburdentosteelindustry

OPPORTUNITIES:
PercapitaconsumptionofsteelinIndiaislessthan30kg,whichis
lessthanonefifthoftheworldaverage,thismeanshugepotential
forsteelconsumptionaswellaslatentdemand.
Presently the sector is almost entirely open with no licensing,
pricingdistributionandimportcontrol.Therearenorestrictionon
capacities
Thegovernmenthasmadechangesintheindustrialpolicy.Steel
productionwhichhasearlierrestrictedforpublicsectoralso.Further
therearenorestrictionsoncapacities.

 Huge export potential to South East Asian Countries, Gulf and

neighboringcountriesexistbeingcostandqualitycompetitive.

THREATS:
Worldsteelindustryisploughedbyrecessionduetothefollowing
reason: matured markets for used industries like automobiles,
appliance, and continuous effort to cut costs, capacities, jobs and
strivingformorecorporateexports.
Severethreatoftechnicalobsolescesduetorapiddevelopmentin
secondarysteelmakingtechnologies,existsinIndiansteelindustry.
Diseconomiesofscaleofoperationbyvariousministeelplantsand
inadequate investment opportunities for modernization and up
gradation due to high cost of inflation and rising interest and
financingrateposingamajorthreattotheindustryasawhole.

TYPESOFSTEELPLANTSININDIA:
Themajortypesofsteelplants:
1. IntegratedSteelPlants.
2. MiniSteelPlants.
3. RerollingSteelPlants.
4. Alloy&SpecialSteelPlants.

1.INTEGRATEDSTEELPLANT:
ThecharacteristicsofIntegratedSteelPlantareasfollows:
Havelargeinstalledcapacities.
Arehighlycapitalintensive.
Arelaborsintensive?
Haveallfacilitiesincludingrawmaterialresources,water
supply.Townshipfacilitiesetc.,allunderoneadministrative
control.
All operations (from procurement of raw materials and
processing to finished products) under administrative
control.
Independentofprocessingunits.
Sourceofearningforeignexchange.
IntegratedSteelPlantsinIndiaaretheonesetatRourkela,
Bhilai,Durgapur,Bokaro,andIISCOandTISCOandVSP.

PRODUCTSFROMINTEGRATEDSTEELPLANTS
FlatProducts(Sheets,Platesetc)
Structuralproducts
WireandProducts
Blooms,billetsandslabs.
Railway track materials(rails,sleeper,bars)
Pig iron.

2. MINISTEELPLANTS:
ThecharacteristicsofMiniSteelPlantsareasfollows:
Lowgestation,lowinvestmentcost,lowBEP.
Effectiveinstallationandutilizationofelectricarefurnace
andcontinuouscastingunits
Can be set up at market centers or near raw material
resources
Environmentalpollutioninnegligible

3.REROLLINGSTEELPLANTS:
ThecharacteristicsofRerollingSteelPlantsareasfollows
Smallinstalledcapacities.
Needspecialtypesofplants&equipmentlikehighfrequency
inductionfurnace,meltingunitsetc.,
Theyneedspecialtypeoftechnologyateverystage.
E.g.:melting,rolling,finishingetc.,
4.ALLOY&SPECIALSTEELPLANTS:
ThecharacteristicsofAlloy&SpecialSteelPlantsareasfollows
Smallinstalledcapacities.
Needspecialtypesofplants&equipmentlikehighfrequency
inductionfurnace,meltingunitsetc.,

 They need special type of technolgy at every stage Eg : melting,

Rolling,finishing etc...

ALLOYSPECIALSTEELS:
The consumption of alloy steels in India has increased over
periodoftime.Indevelopedcountriestheconsumptionofalloysteel
about46%ofthatoftotalsteelconsumption.
ThepresentageofconsumptionofalloysteelinIndiahasbeenin
the range 46% of mild steel during 1994 98 period in line with
international norms, it is seen that imports ofalloy steels has been
slowlyincreasedandisaround100000tonsperyearforthelasttwo
years,whichisabouttenpercentageofindigenousproduction.
Thealloysteelisgenericnameandgenerallysubdividedintothe
followinggrades:
Cold bearing quality
Ball bearing quality
Leaded free cutting quality
Spring steel,electrode quality steel
Carbon construction steel
Alloy construction steel
Thedemandforsteelandmetalinfuturewillbedrivenquality.The
processofproducingqualitysteelproductsstartsfromtheselectionof
rawmaterials.

CONCLUSION:
Overallindustrialdevelopmentofthecountrywillnecessarilycall
for a sound infrastructure development particularly in the area in
transport, communication, and civil construction etc., this call for

substantialconsumptionofsteel,particularlynonflatproducts.

COMPANY PROFILE
We, MINAR ALLOYS & FORGINGS PRIVATE LIMITED is certified by
ISO 9001:2000 and were honored by the supreme tag from Bureau of Indian
Standard. The Company established in the year 2003. The company
manufactures Quality M. S. Ingots. The company have an annual turn over of
Rs. 245 million during the last financial year 2008-09 and the company stands
one of the top amongst its Competitors because of its technically superior and
quality products. Within a short span of time the company has grown beyond
our expectation because of its continual development and tremendous
potentialities.
We also have another units viz., M/s. Minar ISpat (P) Ltd. Kozhikode,
Kerala manufacturing Quality M. S. Ingots & TMT Re-Bars and M/s.
Anappuram Steels (P) Ltd. Palakkad mainly engaged in wholesale supply of
various types of Steels all over Kerala for the past fifteen years and hence we
have wide market net work in the Steel field which is an additional attractions
to our business.

COMPANY PROFILE

Name of the company

PVT.LTD

: MINAR ALLOYS AND FORGINGS

Nature of the company

: MANUFACTURERS OF M.S. INGTS

Managing Directors

: SH.A. MOHAMMED SHAFI

Annual Production
And turn over

: 24 Cr.

No. of staff working

:130 Nos.

Working hours

: 20 Hrs/Day

Type of Product

: M.S. INGOTS

Buyers

: INSIDE KERALA

Address

: 8/6145C ,NIDA, KANJIKODE

PALAKKAD,KERALA

Phone No

: 0491-2566974/Fax No: 0421-2569988

Email id

: minaralloys@hotmail.com

Bankers

: SBT

Auditor

: Shivdas Chettoor

OUR VISION
"To be a globally respected corporation that provides best-of-breed
business solutions, leveraging technology, delivered by best-in-class
people."

OUR MISSION
"To achieve our objectives in an environment of fairness, honesty,
and courtesy towards our clients, employees, vendors and society
at large."

OUR QUALITY POLICY

MINAR ALLOYS & FORGINGS PVT.LTD IS committed
to Customer Satisfaction through continual improvement
of all our products and adequate co-ordination of
activities

OBJECTIVES OF THE COMPANY

Improving customer satisfaction
Ensure safe and environmental friendly processes through
active involvement of all employees.
Create awareness amongst the employees
Encouraging our suppliers and contractors to adopt good quality.
MINAR ALLOYS AND FORGINGS is dedicated and committed
to excel to achieve excellence in its readymade garment

manufacturing operations by integrating its initiatives towards

quality environment and social accountability.
OBJECTIVES OF THE STUDY:
The general objectives of the study are to gain practical
knowledge and to know the overall function of the various department
of the organization. These are the specific objectives of the industrial
training program.
To study the overall organization and management of the
company.
To study the quality and quantity of the organization.
To study the various functions of the organization while
exporting the product.
STRENGTH:
Advanced machinery and its technology
Motivation.
Proper Management.
Production level.
Timely Shipment.

MANUFACTURING PROCESS
Raw Material

Chemical &
Physical Test
Follow Procedure Control of
Non- Confirming Product

Store in Raw Material Yard

Cut to sizes as per requirement

requirementCut to sizes as per

Feeding into Re Heating Furnace

Rolling roughing mill.Intermediate mill

finishing mill
Test physical dimension
If not accepted

Rejection

If not
accepted
Rejection

Controling
Cutting to Regulate Length &
Straightening
Sampling inspection for
chemical & physical properties

Finished goods

ORGANISATION CHART

MANAGING DIRECTOR

General
Manager

Production
Department

Purchase Manager

Supervisor

Employees

Purchase
Department

Finance DepartmentSales Department

Finance Manager

Personnel
Department

Sales Manager Personnel Manager

Workers

DATA ANALYSIS

DATAANALYSIS
TechniqueofInventoryManagement:
Mainproblemsininventorymanagementaretoanswer:
WhatareIndusproblemsinmanaginginventories?
Which inventory policy optimum for Indus?
Why? Show calculations. What should be the
overlevel?
Toanswerthesefollowingtechniquesareused:
* ABCanalysis
* EconomicOrderQuantity
* VEDAnalysis
* ReOrderLevel
* Safetystock
* InventoryTurnoverRatio
ABCAnalysis
* Itisbasedonpropositionthat
* Managerialitemsandeffortsarescareandlimited.
* Someitemsofinventoryaresomeimportantthanothers.
ABCAnalysis
ABCanalysisclassifiesvariousinventoryintothreesetsor
groupsofprioritytheallocatesmanagerialeffortsinproportionof
TheprioritythemostimportantitemareclassifiedintoclassA,
ThoseofintermediateimportanceareclassifiedasclassBand
remainingitemsareclassifiedintoclassC.
Thefinancialmanagerhastomonitortheitemsbelongingto
monitortheitemsbelongingtodifferentgroupsinthatorderof
priorityanddependingupontheconsumptions.
Theitemswiththehighestvaluesisgivenpriorityandsoonand

aremorecontrolledthenlowvalueitem.Thererationallimitsare
as
%oftotalcostof
Category
%ofitems
materials
A
B
C
follows.
Procedure

510
1020
7085

7085
1020
510

(I)Itemswiththehighestvalueisgiventoppriorityandsoon.
(II)Thereaftercumulativetotalsofannual
valueconsumptionareExpressedas
percentageoftotalvalueofconsumption.
(III)Thenthesepercentagevaluesaredividedintothreecategories.
ABCanalysishelpsinallocatingmanagerialeffortsinproportion
toimportanceofvariousitemsofinventory.
ABCAnalysis
Rawmaterial(atclosingstock)
YEAR
2012
2013
2014
2015
2016

AMOUNTOFRAW
MATERIALS
274.94
582.11
1858.17
2031.85
1768.52

Interpretation:
Theabovegraphshowstheamountofrawmaterialsatcost.In2012
thecostofmaterialis274.94rsincreasedinthisyearandin2013
2014.Itismoreincreasedto1858.17rsandin2015itisincreasedto
rs2031.85andin2016itisdecreasedto1768.52.

Stockinprocess(atclosingstock):

YEAR
2012
2013
2014
2015
2016

AMOUNTOFSTOCKin
PROCESS
2006.20
82.67
122.82
110.96
NILL

Interpretation:
Theabovegraphshowsthatworkinprogressatcost.In2012the
costofmaterialis2006.20rsincreasedinthisyearandin2013itis
decreasedtors82.67intheyear2014itisincreasedto122.82andit
isalsomaintainedintheyear2015andin2016itis

finishedgoods(atclosingstock):

YEAR
2012
2013
2014
2015
2016

AMOUNTOFFINISHED
GOODS
2704.08
6717.44
15019.79
16880.69
7443.66

Interpretation:
Theabovegraphshowstheamountoffinishedgoodsatcost.In
2012thecostofmaterialis2704.08rs.Itisincreasedtors6717.44
intheyear2013..Itisincreasedintheyear2001415thecostof
goodsisrs1,6880.69andintheyear2016itisdecreasedto
7443.66.

Stores,spares&consumables(closingstock):

AMOUNTOFCOSTOFSTORESAND
YEAR SPARES
2012
673.25
2013
1628.44
2014
3617.38
2015
3539.05
2016
973.02

Interpretation:
Theabovegraphshowstheamountofstoresandsparesatcost.In
2012theconsumableisrs673.25anditishighlyincreasedtors
1628.44intheyear2013.Theformmaintainsgoodsinproperway
rs3617.38intheyear2014anditisdecreasedtors3539.05inthe
year2015andintheyear2016itisdecreasedto973.02.

Rawmaterialconsumed:
YEAR
2012
2013
2014
2015
2016

AMOUNT
65875.45
68699.73
172305.70
16,9697.36
38607.65

Interpretation:
Theabovegraphshowsconsumptionofrawmaterials.The
consumptionofrawmaterialintheyear2012isrs65875.45the
consumptionofrawmaterialincreasedintheyear201314inthers
172305.70.AnditisdecreasedtoRs16,969,736,368intheyear
2009anditdecreasedtoRs3,8607.65intheyear2016.ss

Economicorderquantity:
During20122013:
Thefirmrequiresbelowgivenunitsofmaterialformanufacturing
ofsteel.Thefollowingarethedetailsoftheiroperationduring
20122013.
PARTICULARS
Billets/Blooms

28,889Qty(mt)

Orderingcostper
order
Carryingcost

Rs.2000

Purchasepriceper
unit

10%
400

1.CalculationofEOQ:
Totalunitsrequired(A)=28889
Theorderingcostperorder(O)=Rs.2000
Carryingcostperunit(C)=10%
(i.e.)10%ofRs.400=Rs.40
EOQ

=2AO/C
=2*28889*2000
=Rs.1699.67

2.Numberofordersfortheyear=A/EOQ
=2889/1699.67
=16.99~17orders
3. Totalannualcost=carryingcost+orderingcost

= 1445000+34000
= Rs.1479000
Carryingcost=ordersize*averageinventory
ordersize=A/nooforders
=28889/17
= 1699.67
Averageinventory=ordersize/2

=1700/2
=Rs.850
Carryingcost=1700*850
=Rs.1445000

Orderingcost=costperorder*nooforders
=2000*17
=Rs.34000

EOQDURING20132014
Thefirmrequiresbelowgivenunitsofmaterialfor
manufacturingofsteel.Thefollowingarethedetailsoftheir
operationduring20132014.
PARTICULARS
Billets/Blooms

123596Qty(Mt)

Orderingcostperorder

2200

Carryingcost

10%

Purchasepriceperunit

Rs420

1.CalculationofEOQ:
Totalunitsrequired(A)=123596mt
Theorderingcostperorder(O)=Rs.2200
Carryingcostperunit(C)=10%
(i.e.)10%ofRs.2000=Rs.42
EOQ=2AO/C

= 2*123596*2200/42
=

Rs.3598.354

2.Number of Orders for the year

=A/EOQ
=123596/3598.354
=34.79~35 orders

3. Total annual cost

=Carrying cost +ordering cost

= 6245669+77000
= Rs.6322669

Carrying cost = Order size average inventory

Order size =

A/no of orders

= 123596/35
=

3531.31

Average inventory

= order size/2
= 3531.1/2
= Rs.1768.655

Carrying cost

= 3531.31*1768.655
= Rs.6245669

Ordering cost

= cost per order * no of orders

= 2200 *35

= Rs.77000
EOQDURING20142015
Thefirmrequiresbelowgivenunitsofmaterialfor
manufacturingofsteel.Thefollowingarethedetailsoftheir
operationduring20142015.

PARTICULARS
Billets/Blooms
Orderingcostperorder
Carryingcost
Purchasepriceperunit

106,066,Qty(Mt)
Rs2400
10%
Rs440

CalculationofEOQ:
Totalunitsrequired(A)=106066mt
Theorderingcostperorder(O)=Rs.2400
Carryingcostperunit(C)=10%
(i.e.)10%ofRs.2000=Rs.44
EOQ

=2AO/C
= 2*106066*2400/4
= Rs.3401.59

Numberofordersfortheyear=A/EOQ
=106066/3401.59
=31.18~32orders

Totalannualcost=carryingcost+orderingcost
=5.493154+76800
=Rs.5569954

Carryingcost=ordersize*averageinventory
Ordersize=A/nooforders

=106066/33/2

=3314.56
Averageinventory=ordersize/2

=3314.56/2

=Rs.1657.28
Carryingcost=3314.56*1657.28
=Rs.5493154
Orderingcost=Costperorder*nooforders
=2400*32
=76800


EOQDURING20152016
Thefirmrequiresbelowgivenunitsofmaterialfor
manufacturingofsteel.Thefollowingarethedetailsoftheir
operationduring20152016.
PARTICULARS
Billets/Blooms

184,661

Orderingcostperorder

3000

Carryingcost

12%

Purchasepriceperunit

Rs500

CalculationofEOQ:
Totalunitsrequired(A)=184,661mt
Theorderingcostperorder(O)=Rs.3000
Carryingcostperunit(C)=12%
(i.e.)12%ofRs.500=Rs.50
EOQ

=2AO/C
= 2*184,661*3000/50
= Rs.4,707.37

Numberofordersfortheyear = A/EOQ
= 184661/470.37
=39.23~39orders

Totalannualcost =

carryingcost+orderingcost
= 11209639+117000
= Rs.11326639.

 Carrying cost = order size *average inventory

Order size

= A/no of orders
= 184661/39
=

4734.90

Average inventory = order size/2

= 4734.90/2
= Rs.2367.45

Carrying cost

= 4734.90*2367.45
= Rs.11209639

Ordering cost

= cost per order * no of orders

= 3000 * 39
= 117000

VEDANALYSIS
Theformula: costofgoodssold
Averagevalueofinventory
YEAR COST OFGOODS AVGVALUE
SOLD
OF
INVENTORY
2012
70340.33
4076.86

INVENTORY
TURNOVER
RATIO
17.25

2013

75687.45

4800.64

15.76

2014

184082.21

12583.99

14.63

2015

190053.62

16067.13

11.83

2016

419760.92

10185.20

41.21

RAWMATERIALCONSUMED:

60
40
20
0

2012 2013 2014 2015 2016

Interpretation:
Theabovegraphshowsinventoryturnoverratiooftheform.The
ratiocanbecontinuouslydecreasedfromtheyear201215.The
turnoverratiooftheformis17.25intheyear2006.Thedecreased
turnovershowsgoodconsumptionofrawmaterial.Theratiowillbe
decreasedto11.83intheyear2015butitisincreasedintheyear2016
is41.21.

STOCKLEVELS
During20122013
Thecompanyrequires28889unitsofbillets/bloomstomanufacture
ofsteelfortheyear201213.EOQis1700units.Thecompanymakes
safetystockequalto30dayrequirementandthenormalleadtimeis
1020days.Thecompanyworksfor300daysinayear.
a.Reorderlevel= leadtime*Averageusage+safetystock
= (10*96.29)+2888.9
= 3851.9
Safetystock=usage*periodofsafetystock/totalworking
Days in a year
=28889*30/300
=2888.9

Averageusage = usage/totalworkingdaysinayear
=28889/300
=96.29
b.Minimumstocklevel= reorderlevel(Averageusage*Average
leadtime)
=3851.9(96.29*10+20/2)

=2408
c.Maximumstocklevel=reorderlevel+reorderingquantity
(Minimumusage*minimumleadtime)
=3851.9+1700(96.29*10)
=5551.9962.9

=4589
d.Dangerlevel
=Averageusage*Maximumreorderperiod
for emergency purchases
=96.29*20
=1925.8
e.Averagestocklevel = (Minimumstocklevel+Maximum
stocklevel)
=2408+4589/2

=3496
During20132014
Thecompanyrequires123596unitsofbillets/bloomsto
manufactureofsteelfortheyear201314.EOQis3335units.The
companymakessafetystockequalto30dayrequirementandthe
normalleadtimeis1020days.Thecompanyworksfor300daysina
year.
a.Reorderlevel

leadtime*Averageusage+safetystock
= (10*412)+12360
= 16480

Safety stock

= Usage * period of safety stock /total working

Days in a year
= 123596*30/300

= 12360
Average usage = usage/total workimg days in a year
= 123596/300

= 412
b. Minimum stock level = re-order level (Average usage *Average
lead time)
= 16480 (412*10+20/2)
= 10300
c. Maximum stock level = re-order level + re-ordering quantity(Minimum usage * minimum lead time)
= 16480+3335-(412*10)
= 19815-4120
= 15695
d.Dangerlevel=Averageusage*Maximumreorder
periodforemergencypurchases

=412*20
=8240
e.Averagestocklevel =(Minimumstocklevel+Maximum
stocklevel)
=10300+ 15695/2
=13000

During20142015
Thecompanyrequires106066unitsofbillets/bloomsto
manufactureofsteelfortheyear201415.EOQis3257units.The
companymakessafetystockequalto30dayrequirementandthe
normalleadtimeis1020days.Thecompanyworksfor300daysina
year.
a.Reorderlevel =

leadtime*Averageusage+safetystock

=(10*354)+10606.6
=141476
Safetystock =
usage*periodofsafetystock/total
workingDaysinayear
=

106066*30/30

10606.6

Averageusage

=usage/totalworkingdaysinayear

=106066/300
=354
b.Minimum stock level
usage*Average

= re-order level (Average

lead time)
= 14147-(354*10+20/2)
=8837

c.Maximum stock level

= re-order level+re-ordering quantity(minimum usage* minimum lead time)

= 1417+ 3257-(354*10)
= 13864

d.Danger level

= Average usage *Maximum re-order

Period for emergency purchases
= 354*20
= 708

e. Average stock level

= (minimum stock level +maximum

stock level)
= 8837+13864/2
= 11350

During20152016
Thecompanyrequires184661unitsofbillets/bloomsto
manufactureofsteelfortheyear201516.EOQis6155units.The
companymakessafetystockequalto30dayrequirementandthe
normalleadtimeis1020days.Thecompanyworksfor300daysina
year.
a. Reorder level = lead time *Average uasage+safety stock
= (10*615.53)+18466.1
= 24621.4
Safety stock

= Usage * period of safety stock/

Total working days in a year
= 184661*30/300
= 18466.1

Average usage

= usage/total working days in a year

= 184661/300
= 615.53

b. Minimum stock level = re-order level ( Average usage*

Average lead time)
= 24621.4 (615.53*10+20/2)
= 15389

c. Maximum stock level = re-order level + re-ordering

Quantity-(Minimum usage*
Minimum lead time)
= 21621.4 + 6155-(615.53*10)
=24521.1
d. Danger level

= Average usage * Maximum

re-order period for emergency
purchases
= 615.53* 20
= 12310.6

e. Average stock level

= (Minimum stock level +

Maximum stock level)
= 15389 +24521.1/2
= 27649.55

FINDINGS&SUGGESTIONS
Thecompanyishavinggoodsalesfortheirproductsduringall
theyearsofthestudy.
Theinventoryturnoverratioisonadecliningtrendyearafter
year in the period of the study. It indicates inefficiency of
managementinturningoftheirinventoryintosales.
The company should adopt sophisticated techniques to
manageitsinventoryinabettermanner.
The EOQ calculated is suggesting that the company should
obtainitsinventoryrequirementsbyplacingordersfrequently
toitssuppliersratherthanonetimereplenishment.
Company should take measures for maintenance of proper
storesandsparessoastoavoidthefrequentbreakdownofthe
machinery.
There is a need to develop good communication system
between various departments like marketing, planning,
procurement,andproductionanddistributionsfunctions.
ThecompanyshouldfollowsJustinTimetechnique,theirby
itcandoawaywithwaitingtimeforareceiptofmaterials.

CONCLUSION

Inventorymanagementhastodowithkeepingaccuraterecords
offinishedgoodsthatarereadyforshipment.Thisoftenmeans
postingtheproductionofnewlycompletedgoodstotheinventory
totalsaswellassubtractingthemostrecentshipmentsoffinished
goodstobuyers.Whenthecompanyhasareturnpolicyinplace,
thereisusuallyasubcategorycontainedinthefinishedgoods
inventorytoaccountforanyreturnedgoodsthatarereclassifiedor
secondgradequality.Accuratelymaintainingfiguresonthefinished
goodsinventorymakesitpossibletoquicklyconveyinformationto
salespersonnelastowhatisavailableandreadyforshipmentatany
giventime.
Inventorymanagementisimportantforkeepingcostsdown,while
meetingregulation.Supplyanddemandisadelicatebalance,and
inventorymanagementhopestoensurethatthebalanceis
undisturbed.HighlytrainedInventorymanagementandhighquality
softwarewillhelpmakeInventorymanagementasuccess.TheROI
ofInventorymanagementwillbeseenintheformsofincreased
revenueandprofits,positiveemployeeatmosphere,andonoverall
increaseofcustomersatisfaction.