INTRODUCTION TO INVENTORY:

In India situation on an average approximately 60-70% of the total product cost is

contributed by raw materials costs which forms the single major component of current
assets. It is even worse in the case of industries which strives on imported components
for its to day functioning. It is no exaggeration that in few Indian industries imported
components are stocked for more than 24 months.
One of the problems of inventory management is maintaining inventory of a given
financial investment, an adequate supply of something to meet an expected demand
pattern is very difficult to achieve. Inventory turnover ratio is a index of business
performance. A soundly managed organization will have higher turnover and vice
versa.
Inventory management deals with the determination of optimal policies and procedures
for procurement of commodities. Since it is quite difficult to image a real work
situation in which the required material will be made available at the point of use
intensively, hence maintaining inventories become almost necessary.
Inventory in wider sense, is defined as any idle resource of an enterprise. It is
a physical stock of goods kept for the purpose of future affairs. a term is generally
used to indicate raw materials in process, finished products, packing, spares and others
stocked in order to meet expected demand or distribution in the future.

Through

inventory of materials is an idle resource it is not meant for immediate use it is

almost essential to maintain some inventories for the smooth functioning of an
enterprise.
For example, let us consider an enterprise that has no inventory of materials at all.
when this enterprise receives a sales order, it will have to order out the raw material
required to complete the order, wait till these arrive and then start production.

This would keep the customers invariably to wait too long for the delivery of the
goods ordered.

Among other disadvantages of not maintaining the inventories, the

enterprise may have to purchase the raw materials at very high prices because of
piece-meal buying: the production costs would also be high because of not being able
to take advantage of batching; the load on manufacturing shops would vary from
period to period depending upon the orders on hand; the company may not be able to
provide adequate customer service in the matter of completion, waiting & price.

MEANING OF INVENTORY :
The dictionary meaning of the word inventory is detailed list of movable goods, but
in management inventory is used to designate the aggregated of those items of tangible
property, which are held for sale ordinary course of business thus the inventory means
stock of items kept in reserve for certain period of times. it includes raw materials,
work in progress or semi finished goods, finished goods and spare parts for the
maintenance of equipment, etc.,
RAW MATERIALS:
These are the basic inputs, which are converted into finished product through
manufacturing process. Raw materials, inventories are those units, which have been
purchased and stored for future production.
WORK IN PROGRESS:
Materials issued to the stop floor which have not yet become finished products, they
are value added materials to the extent of labor cost incurred.
FINISHED GOODS:
Finished goods are those which are ready for sale.
DEFINITIONS OF INVENTORY:
JOHN HAMPTON treats inventories, as Locked up capital. Inventory measured by
rupee value constitutes the major element in the Working Capital (approximately

60% of current assets).Good inventory management is nothing but good financial

management according to S.C.KUCHAL.

INVENTORY MANAGEMENT:
Inventory management involves the control of assets being produced for the purpose of
sale in the normal course of the companys operations.

Inventories include raw

materials inventory, work in process inventory and finished good inventory. The goal
of effective inventory management is to minimize the total costs direct and indirect
those are associated with holding inventories. However, the importance of inventory
management to the company depends upon the extent of investment in the inventory.
Some characteristic of inventory in the broad content of working capital management
are:
A CURRENT ASSET:
It is assumed that inventories will be converted to cash in the current accounting
cycle.
LEVEL OF LIQUIDITY:
Inventories are as first stage in cash cycle.

For the most products this

description is accurate.
LIQUIDITY LAGS:
Inventories are tied to the firms pool of working capital in a prices that involves there
specific lags, namely.
CREATION LAG:
In most cases, inventories are purchased on credit, an account payable. When the raw
materials are processed in the factory, the cash to pay production expenses is
transferred to future times.
Whether manufactured or purchased the firm will hold inventories for same time
period before payments is made. The liquidity lag offers a benefit to the firm.

STORAGE LAG:
Once goods are resale, they will not be immediately converted into cash, thus the firm
will usually pay suppliers, workers and overhead expenses before the goods are
actually sold. This lag represents a cost to the firm.
SALE LAG:
Once goods have been sold, they normally do not create cash immediately. Most sales
occur on credit and become accounts receivable.

The firm must wait to collect its

receivables. This lags alsorepresent a cost to the firm.

Need of the study

Inventories constitute the significant part of current assets in majority of Indian
companies.

On an average, inventories are approximately 60% of current assets in

public limited companies in India. Because of large size of inventories maintained by

the firms, a considerable amount of funds is required to maintain them.

Hence,

management of inventory has gained considerable recognition in the field of financial

management of Indian corporate sector in order to avoid unnecessary investment. A
firm neglect is the management of inventories will lose its long-term profitability and
may fail ultimately. The reduction in excess inventories from a higher degree to lower
carries a favorable impact on a companys profitability. In managing the inventories,
the firms objectives should determine the optimum level of inventory.

But the

optimum stocking of inventories depends upon various factors, eg. Demand time of
ordering, time lag between order and actual receipts, etc, so; the real problem is to
have a compromise between over stocking and under stocking. Efficiently controlled
inventories make the firm flexible and efficient.

OBJECTIVES OF THE STUDY:

To study the inventory management in the organization.

To identify the loop holes if any in the inventory management system.

To apply the modern inventory management techniques like

ABC

HML

VED

SDE

EOQ

JIT
Based on the above to give suggestion

SCOPE OF THE STUDY:

This project can be carried out to over all organization
Inventory management can be measured with different techniques proper
Purchase procedure,
Proper storage,
Perpetual inventory systems &
Establishment of a system of budgets route of slow & non-moving items.

RESEARCH

METHODOLOGY:

The research design is defined as The ways and methods that are followed in analyzing the data
available.
In the above statement it is quite clear that in order to find out the actual position of the
company the various methods of analysis should be made.
Primary Data:
The researcher has collected the primary data from the production manager to
understand the general and specific aspects of inventory management in the company.
Secondary Data:
o Annual Reports,
o Final stock balance,
o Monthly Consumption,
o Journals,
o Magazines.

LIMITATIONS OF THE STUDY:

Time factor is major constraint for the study.
Some of the financial matters are not revealed by the company as they are kept
confidential.
In the present study raw materials like gypsum, clinker, raw meal, limestone,
slag, clay, were selected.
Since the procedure and policies of the company will not allow disclosing
confidential financial information, the project has to be completed with the
available data given to us.

To study about the inventory management of raw material used for cement production
in RAMABAL Industries Limited.

INDUSTRY

COMPANY PROFILE

Theoretical Concept
WORKING CAPITAL MANAGEMENT:
INTRODUCTION
Every business needs funds for two purposes for its establishment and to carry out its dayto-day operations. Long-term funds are required to create production facilities through purchase of fixed
assets such as plant and machinery, land, building, furniture, etc.Investment in these assets represents
that part of firms capital which is blocked on a permanent or fixed basis and is called fixedcapital.Funds
are also needed for short-term purposes for the purchase of raw materials, payment of wages and other
day-to-day expenses, etc.These funds are known as working capital. In simple words, working capital
refers to that part of the firms capital which is required for financing short term or current assets such as
cash, marketable securites, debtors and inventories.funds, thus, invested in current assets keep revolving
fast and are being constantly converted into cash and this cash flow out again in exchange for other
current assets. Hence, it is also known as revolving or circulating capital or short-term capital.
DEFINITION:
Working capital is the amount of funds necessary to cover the cost of operating the
enterprise.
-SHUBIN

Circulating capital means current assets of a company that are changed in the ordinary
course of business from one from to another ,as for example, from cash to inventories ,inventories to
receivables into cash .

COMPONENTS OF WORKING CAPITAL:

Working capital is a category of resources that includes cash, inventory, and receivables,
minus whatever a company owes in the short term. It comes straight from the balance sheet, and its
often calculated according to the following formula.
Working capital= Current Assets-Current liabilities

Components of working capital includes

1) Cash
2) Marketable securities
3) Inventory
4) Receivable
CASH:
Cash is one of the current assets of a business. It is needed at all times to keep the business going.
A business concern should always keep sufficient cash for meeting its obligation .Any shortage of cash
will hamper the operation of a concern and any excess of it will be unproductive. Cash is the most unproductive of all the assets. While fixed Assest like machineary , plant, etc, and current assets such as
inventory will help the business in increasing its earning capacity, cash in hand will not add anything to
the concern.
Cash itself does not produce goods& services. It is used as a medium to acquire other assets.
It is the other assets which are used in manufacturing goods or providing services. The idle cash be
deposited in bank to earn interest.

MARKETABLE SECURITES:
The basic characteristics of marketable securities affect the degree of their marketability
/liquidity. To be liquid, security must have two basic charecterstics: a ready market and security of
principal. Ready marketability minimizes the amount of time required to convert a security into cash.
A ready market should have both breadths in the sense of a large number of participants
scattered over a wide geographical area as well as depth as determine by its ability absorb the
purchase/sale of large amounts of securities.
INVENTORY:
The dictionary meaning of inventory is stock of goods. The word Inventory is
understood differently by various authors. In accounting language it may mean stock of finished goods
only. In a manufacturing concern, it may include raw materals, work in process and stores, etc. To
understand the exact meaning of the world inventory, we may study it from the usage side or from the
side of point of entry in the operations. Inventory includes the following things:
1. Raw material
2. Work-in-progress
3. Consumables
4. Finished goods
5. Spares
RECEIVABLES:
Receivables represent amounts owed to the firm as a result of sale goods or services in
the ordinary course of business. These are claims of the firm against its customers and form part of its
current assets. Receivables are also known as accounts receivables, trade receivables, customer
receivables or book debts. The receivables are carried for the customers. The period of credit and extent
of receivables depends upon the credit policy followed by the firm.
The purpose of maintaining or investing in receivables is to meet competition, and to increase the sales
and profits.

TYPES OF INVENTORY:
Inventory can be classified in to five basic types on the basis of their
production. These various types of inventories cannot be identified and
segregated within the organization. As such types will not be represented in all
organization.
Management Inventory:
There are needed because of the time required to move stocks from one place to
another.
Lost Size Inventory:
These are s a result of buying materials in quantities larger than the immediately
requirement, with a view to minimizing cost of transportation, buying, receipt
and handling and to obtaining quantity discount
Fluctuation Inventory:
These are carried to ensure ready suppliers to consumer even when these are
irregular and unpredictable fluctuation in their demand.
Anticipation Inventory:
These are usually maintained to meet a predictable but changing pattern of
future demand.
Cycle Inventory:
These result from management attempt to minimize the total cost of carrying and
ordering inventory. They arise from ordinary in batches or lots, rather from
needed basis.

PURPOSE OF INVENTORIES:
The overall goal of inventory management is to feed the production with right quantity
of raw materials with right quality at right time. The purpose of holding inventories is
to allow the firm to separate the processes of purchasing, manufacturing and marketing
of its primary products. The goal is to achieve efficiencies in areas where costs are

involved and to achieve sales at competitive prices in the market place.

With in this

broad statement of purpose we can identify specific benefits that accrue from holding
inventories.
Avoiding Lost Sales:
Without goods in hand which are ready to sold, most firms would lose business.

In

most cases, a firm must be prepared to deliver goods on demand.

Gaining Quantity Discounts:
In return for making bulk purchases, many suppliers will reduce the price of supplies
and component parts.

The willingness to place large orders allow firm to achieve

discounts on regular prices. These discounts will reduce the cost of goods sold and
increase the profits earned on a sale.
Reducing Order Costs:
Each time places on order, it incurs certain expenses. Forms have to be completed;
approvals have to be obtained and goods that arrive must be accepted, inspected and
counted. Later an invoice must be processed and payment made. Each of these costs
will be very with the number of orders placed. By placing fewer orders, the firm will
pay less to process each other.
Achieving Efficient Production Runs:
Each time a firm sets up workers and machines to produce an it, start up costs are
incurred.

This are then absorbed has production begins.

The longer the runs the

smaller the cost of begin producing the goods.

Reducing the risk of production shortages:
Manufacturing firms frequently produce goods with hundreds even thousands of
components.

If any of these are missing the entire production operation can halted,

with consequent expenses. To avoid starting a producing run and then discovering the

shortage of a vital raw materials or other component, the firm can maintain larger than
needed inventories.
These benefits arise because inventories provide a buffer between purchasing,
producing and marketing of goods. Raw Materials and other inventory items can be
purchased at appropriate times and in proper amounts manufacturing process can occur
in sufficiently long production runs and with pre-planned schedules to achieve
efficiency and economics.
The sales force can respond to customer needs and demands based on existing finished
goods.

To allow each area to function effectively, inventory separates the area to

function efficiency and economics.

REASONS FOR CARRYING INVENTORIES :

The need of management to make decisions regarding inventory arises because of
alternative courses of action (Strategies) available to any firm or organization. Thus a
set of decision rules are sought which satisfy an objective function (such as
available facilities, availability of finance etc.,) imposed by the firm policy.
Hence it becomes essential for an enterprise (firm) to have inventory because of the
following reasons.
1. It helps in smooth and efficient running of business.
2. It provides adequate service to customers.
3. It reduces the possibility of duplicating of orders.
4. It helps in maintain economy by absorbing some of fluctuations when the demand
for an item fluctuates or is seasonal.
5. It helps in minimizing the loss due to deterioration, obsolescence, damage or
pilferage etc.,

6. It acts as a buffer stock when raw materials are received late and shop rejections are
too many.
7. Takes advantage of price discounts by bulk purchasing.
8. It reduces the cost of product because of an added advantage of batching and long,
uninterrupted production runs.
9. It improves the manpower, equipment and facility utilization, by better planning and
scheduling .

Need for carrying inventories:

It helps in smooth and efficient running of business.
It provides adequate service to customers.
It reduces the possibility of duplicating of orders.
It helps in maintaining economy by absorbing some of fluctuations when the
demand for an item fluctuates or is seasonal.
It helps in minimizing the loss due to deterioration, obsolescence, damage or
pilferage etc.
It acts as a buffer stock when raw materials are received late (and shop
rejections are too many.)
Takes advantage of price discounts by bulk purchasing

Need to Hold Inventory :

Maintaining inventories involves tying up of the companys funds and in currency of
storage and handling costs. There are three general motives for holding inventories.
Transaction motive:
Emphasizes the need to maintain inventories to facilitate smooth the production and
sales operations.

Precautionary motive:
It necessitates holding of inventories to guard against the risk of unpredictable
changes in demand and supply forces and other factors.
Speculative motive:
It influences the decision to increase or reduce inventory levels to take advantage of
price fluctuations.
The major dangers of over investment in inventories are:
Unnecessary tie up of the funds and loss of profit.
Excessive carrying cost.
The risk of liquidity.
The consequences of under investment in inventories are:
Failure to meet delivery commitments inadequate raw materials
Work-in-process will result in frequent in production interrupts.
An efficient inventory management should:
Ensure a continuous supply of raw materials to facilitate.
Maintain sufficient supply of raw materials in periods of short supply and
anticipate price changes.
Maintain sufficient finished goods inventory fro smooth sales operation and
efficient customer service.
Minimize the carrying cost on time.
Control investment in inventories and keep it at an optimum level.
METHODS OF MATERIAL ISSUES:
FIRST IN FIRST OUT (FIFO):

The materials which are received first are issued first and, therefore there flow of cost
of materials should be in the same order. Issues are priced at the same basis until the
first batch received is used up after which the price of the next batch received becomes
the issue price.
Upon this batch being fully used for pricing and so on. In other words, the materials
issued are priced at the oldest cost price listed in the store ledger account and
consequently the materials in hand are valued at the price of the latest purchase.
In

they are First Out method for issuing of raw materials from stores to the

production/manufacturing unit.
LASTIN FIRST OUT (FIFO):
The materials which are received last are issued first and, therefore there flow of cost
of materials should be in the same order. Issues are priced at the same basis until the
last batch received is used up after which the price of the next batch received becomes
the issue price.
Upon this batch being fully used for pricing and so on. In other words, the materials
issued are priced at the oldest cost price listed in the store ledger account and
consequently the materials in hand are valued at the price of the latest purchase.
In RAMABAL they are last Out method for issuing of raw materials from stores to the
production/manufacturing unit.
HIGHEST IN FIRST OUT (HIFO):
In this method, issues are always valued at the highest price of the receipt. This rate continues either
until the material at that high price is exhausted, after which the next highest price is used or until a new

batch of materials is received at a rate which is higher than the previous high rate. Closing stock under
this method always remains at the minimum cost. This method however has not been widely adopted.

CLASSIFICATION AND CODIFICATION:

Good store keeping proper classification and codification of various items stores
in stock.

Classification and materials:

Materials of similar nature are suitably classified in major groups.
Codification of materials:
Codification is the procedure of assignment distinctive symbols for each item of
store. Such symbols may be number or alphabetic or a combination or the two.
These symbols are know as codes. Thus each materials is also know by a code in
addition its own name.

Advantages:
Systematic grouping of similar items for correct identification of each and every
item.

The usage of long description is simplified and possible confusion avoided.

Avoid duplication stock of the same item being held under different name,
description, brand name, part number and different stores.

Enable reduction in sizes and varieties.

Ensures accuracy in posting of receipts and issue in appropriate records.
CLASSIFICATION OF INVENTORY:

Classification of inventory is the first step to determine optimum inventory

levels. As already as seen one way to classify them as raw materials, machinery
spares, semi finished, work in progress and finished goods. Another ways to classify
each of the above as ABC, VED etc.,
ABC
HML
VED
FSN
TWO-BIN
SDE
EOQ
MAXMIUM MINIMUM
TWO-BIN SYSTEM
ABC Analysis:
This analysis is based on the annual consumption value. It is based on Paretos
law. Under this analysis all items of stores are classified into three main
categories A, B and C.
10% of the total number of items account for about 70% of the total
consumption value. These items are called A items. 20% of the total number of
items account for about 20% of the total consumption value these items are
called B items. The remaining number of items account for the balance 10% of
the total issue value, these items are called C items.
Procedure:
The procedure of classifying the items into A , B and C categories is described in
the following steps.

a. Calculate rupee annual issues for each item in inventory by multiplying

the until cost by the number of units issued in a year. It is assumed that
the issues and consumptions are the same.
b. Sort all items by rupee annual issues in descending sequence.
c. Prepare a list from these ranked items showing item number, unit cost,
annual units issued and annual rupee value of units issued.
d. Starting at the top of the list, compute a running total, item issue value
and the rupee consumption value.
e. Compute and print for each item the cumulative percentages for the item
count and cumulative annual issues value.
f. 10 percent of the top number of items account for about 70 percent of the
total consumption value. These items are called A items. 20 percent of
the number of items account for 20 percent of the total consumption value.
These items are Called B

items.

The remaining number of items

account for the balance 10 percent of the total issue value. These items are
called C items.
DIFFERNCE BETWEEN A, B AND C CLASS ITEMS:
S.N

A Items

B Items

C Items

o
1.

High

Moderate

Low consumption

Consumption

Consumption value

value

Moderate Control
Low safety stocks
Once in three months

Loose control
High safety stocks
Bulk ordering once in

Value
2.
3.
4.

Very strict control

Very Low safety stocks
Frequent ordering or
weekly deliveries

6 months.

5.

Accurate forecast in

Estimates based past

Rough estimates for

6.

materials planning
Minimization of waste

data on present plans

Quarterly control

planning
Annual review over

and surplus(review

over surplus and

surplus and obsolete

7.

every 15 days)
Maximum efforts to reduce

obsolete items
Moderate effort

lead time
Economic Order Quantity:

material
Minimum clerical
efforts.

The inventory problems in which demand is assumed to be fixed and completed

predetermined are usually referred to as the EOQ or lot size. It is also termed as reorder quantity. When the size of order increases, the ordering cost will decrease
whereas the inventory
Carrying costs will increase. Thus in the production process there are two opposite
costs, one encourages the increase in the order size and the other discourages.
It involves two types of costs:
Carrying cost
Ordering cost

a. Ordering cost:
Ordering cost is referred to as the cost of placing an order and securing the supplies. Ordering
cost depends upon the number of orders placed and a number of items ordered at a time. Higher will be
the ordering cost when frequent orders are placed. Similarly, lesser the ordered quantity, Higher the
ordering cost.

b. Carrying cost:
Carrying cost or holding cost refers to the cost of keeping the materials which includes capitcost,
cost of storage and cost of deterioration and redundancy. Larger the volume of inventory, higher the
inventory carrying cost and vice versa.
EOQ is that size of order which minimizes total cost of carrying inventory and cost of
ordering.
Q =

(2*D*S)/H

Where D= annual demand

Where S= carrying cost
Where H= holding cost
EOQ can be calculated with the help of a mathematical formula.
Following assumption are applied in the calculation.
1. Demand for the product is constant and uniform through out the Period.

2. Lead time (time from ordering to receipt) is constant.

3. Price per unit of product is constant.
4. Inventory holding cost is based on average inventory.
5. Ordering cost is constant.
6. All demands for the product will be satisfied (no back orders are allowed).
T.C = DC + [ (D/Q) *S] + [ ( Q/2)*H]
Where

T.C = Total cost

D = Annual demand
C = Purchase cost per unit
Q = Quantity to be ordered
S = Cost of placing on order
H = Holding Cost per unit of average Inventory per annum
From the figure we can say that total cost is minimum at the point where cost of
ordering is equal to holding cost.
((D*S)/Q) = (Q/2)*H
D*S = ((Q*Q)/2)*H
Q^2 = (2*D*s)/H
Q =

(2*D*S)/H

MAXIMUM VALUE

AVG
STOCK

RE-ORDERING
POINT

SAFETY STOCK

EOQ

Lead Time

TIME

The graph showing the procurement & consumption cycle

INVENTORY TURN OVER RATIO:

It is a ratio of materials consumed during a period to the average stock of materials
during the period. It indicates the efficiency of the firm in producing and selling its
products.
(Materials consumed)
Inventory turn over ratio = ------------------------------(Average inventor
VED CLASSIFICATION:
This analysis is based on criticality of inventories. It is used to determine the
criticality of ban item and its effect on production and other services. It is specially
used for classification of spare parts. If a part is vital, it is given `V`classification, if
it is essential, then it is given `E` classification and if it is not essential, the part5 is
given `D`classification. For `V`items, a large stock of inventory is generally
maintained, these items have immediate effect on production and more attention paid
for these items.
HML CLASSIFICATION:
The High, Medium and low (HML) classification follows the same procedure as is
adopted in ABC classification. Only difference is that in HML, the classification unit
value is the criterion and the annual consumption value. The items of inventory should
be listed in the descending order of unit value and it is up to the management to fix
limits for three categories. For example, the management may decide that all units
with unit value of Rs.2000 and above will be H items, Rs.1000 to Rs.2000M items and
less than Rs.1000, L items.

The HML analysis is useful for keeping control over consumption at departmental
level for deciding the frequency of physical verification, and for controlling
purchases.
SDE CLASSIFICATION:
The SDE analysis is based upon the availability of items and is very useful in the
context of scarcity of supply. In this analysis. `S`refers to sacrceitems generally
imported and those which are in short supply.Drefers to difficult items to which are
available indigenously but are difficult items to procedure. Items which have to come
from distinct places or for which reliable suppliers are difficult to come by fall into
DCategory. E refers to items which are easy to acquire and which are available in
the local markets.
The SDE classification, based on problems faced in procurement, is vital to the
lead time analysis and in deciding on purchasing strategies.
FSN ANALYSIS:
FSN stands for Fast moving Slow moving & Non-moving. Here, classification is based
on pattern of issue from stores and is useful in controlling obsolescence.
To carry out an FSN analysis, the date of receipt or the last date of issue, whichever is
later, is taken to determine the number of months, which have lapsed since the last
transaction. The items are usually grouped in periods of 12 months.FSN analysis is
helpful in identifying active items which need to be received regularly and surplus
items which have to be examined further.
Non-moving items may be examined further and their disposal can be considered.
MINIMUM-MAXIMUM TECHNIQUE:

The Minimum-Maximum system is often used in connection with manual inventory

control systems. The minimum quantity is established in the same way as any re-order
point.
The maximum is the minimum quantity plus the optimum lot-size. In practice,
requisition is initiated when, a withdrawal reduces the inventory below the minimum
level, and the order quantity is the maximum minus the inventory status after the
withdrawal. If the final withdrawal reduces the stock level substantially below the
minimum level, the order quantity will be higher than the calculated EOQ.
The effectiveness of a minimum-maximum system is determined by the method and
precision with which the minimum and maximum parameters are established.
TWO-BIN SYSTEM:
One of the oldest systems of inventory control is the Two-bin system which is mainly
adopted to control C group inventories. In the Two-bin system, stock of each item is
separated into Two-bins. One bin contains Stock, just enough to last from the date a
new order is placed until it is received in inventory.
The other bin contains a Quantity of stock, enough to satisfy probable demand during
the period of replenishment. To start with, the stock is issued from the first bin. When
the first bin is empty, order replenishment is placed, and the stock in the second bin is
utilized until the ordered material is received.
Such a method is appropriate to ideal condition in which the rate of consumption is
fairly constant and for items, the lead time of which is fairly established and regular.
Although the system itself possesses a high degree of automacy, in practice, we need
to allow for variations in the rate of consumption as well as lead time. However, for
such systems.

The most desirable quantity to re-order is the EOQ. Since the quantity to re-order is
fixed in advance, initiation of replenishment action can be delegated to the lower level
staff and there is need to take physical count of inventory levels.
NEED TO HOLD INVENTORY CONTROL:
Demand inventories have a tendency to grow beyond economic limits, tie-up funds and
increase the cost of maintenance or carrying cost.
Non-availability of inventory involves cost of stock outs, reordering costs and
additional transit cost.
Central core idea for material management is inventory control.
To minimize the locking of funds or working capital commitments.
To determine the working capital operating cycle is essential.
Depending upon the operating cycle the company requirements for locked up funds
will follow.

The length of operating cycle depends upon the nature of business,

production policies, manufacturing process, terms of purchase and conditions of sales

and demand.

Objectives of inventory control:

The following purpose should be kept in mind in developing and maintaining a system
of inventory control
Effective use of financial resources available to business i.e. to maintain the
investment in inventory at the lowest level consistent with operating requirements .
Avoidance of the "out-of-stock" danger i.e., to provide a supply of required materials
with out any delay for efficient and uninterrupted operations .Reduction to a minimum
of the risk through obsolescence .

Economy in purchasing as affected by quantity buying and favourable raw material

market.
Storage of inventory with a minimum of handling time and cost and to protect thefrom
losses by theft:, fire and damage .
Services to customers i.e., maintaining sufficient stocks of finished products to meet
reasonable expectations of customers for prompt delivery of their orders . Accurate
and regular material reports to management by keeping perpetual inventory and other
up to date records

Essential requirements of inventory control:

Essential to an adequate control of inventory are the following requirements:
There should be proper co-ordination and co-operation between various concerned,
viz.,

purchasing,

departments

receiving,

inspections,

storage,

issues

and

cost

departments .
Purchasing should be centralized under the control of a competent manager .
There should be proper planning of materials requirements .
There should be proper classification of materials with codes, materials satisfactorily
storage control procedures .
There should be planned storage control and issues so that there will be delivery of
materials upon requisition to departments in the right quantity at the time they are
needed .
Appropriate records should be maintained to control issues and utilization of stores in
production
The system of perpetual inventory should be operated so that it is possible to
determine at any time the amount and value of each item of material in stock.

Maximum, minimum and re - ordering levels of stocks should be fixed

There should be a system of regular reporting to management regarding materials
purchase, storage and utilization .
There should be an efficient system of internal audit and internal checks
PURPOSE OF INVENTORY CONTROL:
The need of controlling inventory is expressed as below
1. To improve customer services.
2. Permits purchase and transaction economies.
3. Transportation economies.
4. Hedge against price fluctuations.
5. Production economies.
6. Hedge against demand uncertainties
7. Protects against demand and lead time uncertainties.

FACTORS INFLUENCING INVENTORY CONTROL:

1. To control the inventory
2. How much to buy at one time?
3. When top buy this quantity?
Following four fundamental factors govern for these questions.
Requirements break down time wise.

Quantity in stock or an order.

Procurement time or lead time.
Obsolescence.

FACTORS TO BE CONSIDERED WHEN ESTABLISHING THE

CONTROL LEVELS:
Average consumption or production requirements
Reordering periods-the time between raising an order and receiving delivery of goods
Storage space available
Market conditions
Economic order quantity
Likely life of stock-bearing in mind the possibility of loss through deterioration or
obsolescence and
The cost of placing orders including generating and checking the necessary paper work
as well as physical checking handling procedures.
The key issue for a business is to identify the fast and slow movers with the objectives of establishing
optimum stock levels for each category and, thereby minimize the cash tied up in stock

TOOLS OF THE ANALYSIS:

ABC analysis.
Economic Order Quantity
Inventory Turn over Ratio

DATA ANALYSIS AND INTERPRETATION

CLASS ITEMS (2013-14)
Description

Uom

Qty

Rate

Value

JUNCTION

SF

235352

95

22358440

SF

9673

19722

190770906

YD

8528

16250

138580000

YD

792

24726

19582992

BOX THREE
WAY
SYNJUNCTION
BOX THREE
WAY
PLASTIC FAN
FOR MOTOR
FRAME
132KH / 132M
COSMO

Interpretation:
It is observed that in the year 2013-14 10% items fall under A class items namely
Junction Box Three Way , Syn-Junction Box Three Way, Plastic Fan for Motor Frame

132KH / 132M , based on their consumption values which constitutes70%of the total
consumption value.

B CLASS ITEMS (2013-14)

Description

Uom

Qty

Rate

Value

MESH

YD

271

71812

19464643

KG

261875

95

24878125

KG

700

60338

4223100

KG

5292

2103

11129076

EVA

YD

75

79212

5940900

AQUACE W-08

KG

93

106564

9910452

130 V

ME

960

14435

13857394

RUBBER
GLASS FUSE
SIZE : 10 AMPS
PORCELIEN
BABBIN TREAK
INSULATOR

INDUCTION
BULBS
Interpretation:
It is observed that in the year 2013-14 20% items fall under B class items namely
mesh,rubber,Glass Fuse Size : 10 Amps,ip,eva.paking cortons,130 V Induction Bulbs
based on their consumption values i.e., which constitutes20%of the total consumption
value.

C CLASS ITEMS (2013-14)

Description

Uom

Qty
347

Rate
43489

Value
15090683

THREADS
LABLES

RL
PCS

12500

22

275000

ARCHCOCKIES

PRS

37579

64

2405056

LACE

PRS

3160

821

2594360

PAKING

SET

215

4556

979540

HEALPATCH

PRS

3490

670

2338300

STRIPS

PRS

3610

128

462080

WOVENTAPES

YD

5401

530

2862530

STRIGHT CUTS

ME

49

4092

200492

TOUNGE

PCS

2567

247

634049

LOOPS
CUTTING

YD

2567

247

634049

LOGOS

PCS

103

12381

1275243

SOCKLINAR

PCS

55

15164

834020

HEAL

PRS

215

710

152650

COUNTERS
TUFFLEX

SET

33172

43

1426396

SHEETS
LAMINATION

YD

5805

195

1131975

PAKING

PRS

24183

16

386928

CORTONS
COUNTERS

PRS

10450

304

440800

EYLETS

SET

62621

11

688831

Interpretation:
It is observed that in the year 2013-14 70% items fall under C class items based on
their consumption value i.e., which constitutes 10% of the total consumption value.

TABLE 1
PERCENTAGE OF VALUE OF ABC ANALYSIS FOR
THE YEAR ENDED 2013-14
Items
A
B
C
Total

Items (%)
10
20
70
100

Values
371292338
89403690
34812982
495509010

Value (%)
74.93
18.04
7.03
100

GRAPH - 1

Interpretation:
In the year 2013-14 there are 10% items which constitutes 74.93% in the total value
that come under A category, 20% items which constitutes 18.04% in the total value
that come under the B category, 70% items which constitutes 7.03of total value that
come under C category.

A CLASS ITEMS (2014-15)

Description

Uom

Qty

Rate

Value

JUNCTION

SF

315160

110

33567600

BOX THREE
WAY

SYN-

SF

6018

58427

351613686

YD

11221

16900

189634900

YD

1034

30805

31852370

JUNCTION
BOX THREE
WAY
PLASTIC FAN
FOR MOTOR
FRAME
132KH / 132M
COSMO

Interpretation:
It is observed that in the year 2014-15 10% items fall under A class items namely
Junction Box Three Way, syn-Junction Box Three Way, Plastic Fan for Motor Frame
132KH / 132M , cosmo and based on their consumption value which constitutes 70% of
the total consumption value.

B CLASS ITEMS (2014-15)

Description

Uom

Qty

Rate

Value

MESH

YD

271

71812

19461052

KG

261875

49

12831875

KG

700

61681

43176700

6292

2103

13232076

RUBBER
GLASS
FUSE SIZE :
10 AMPS

PORCELIEN KG
BABBIN
TREAK
INSULATOR
EVA

YD

434

61437

26663658

PAKING

YD

127

106564

13533628

130 V

ME

3420

3935

13457700

INDUCTION
BULBS
Interpretation:
It is observed that in the year 2014-15 20% items fall under B class items namely
mesh,rubber,

Glass

Fuse

Size

10

Amps,

PORCELIEN

BABBIN

TREAK

INSULATOR , eva, paking,130 V Induction Bulbs based on their consumption value

i.e., which constitutes 20% of the total consumption value.
C CLASS ITEMS (2014-15)
Description

Uom

Qty
294

Rate
32488

Value
9551472

THREADS
LABLES

RL
PCS

12500

ARCHCOCKIES

PRS

37579

64

2405056

LACE

PRS

3260

815

2656900

COUNTERS

PRS 3480

HEALPATCH

PRS

3620

612

2215440

STRIPS

PRS

4610

684

3153240

WOVENTAPES

YD

5401

985

2619485

STRIGHT CUTS

ME

49

50123

2456027

TOUNGE

PCS

4567

247

1128049

LOOPS
CUTTING

YD

9530

240

2287200

LOGOS

PCS

843

12381

10437183

SOCKLINAR

PCS

120

16264

1951680

HEAL

PRS

4326

710

3071460

COUNTERS
TUFFLEX

SET

33172

43

7426396

SHEETS
LAMINATION
PAKING

YD
PRS

7890
64183

170
16

1341300
1026920

CORTONS
EYLETS

SET

76348

14

1068872

80

2472

197760

AQUACE
08

W-

KG

22

320

2750000

1113600

Interpretation:
It is observed that in the year 2014-15 70% items fall under C class items
based on their consumption value which constitutes 10% of the total consumption
value.

TABLE -2
PERCENTAGE OF VALUE OF ABC ANALYSIS FOR THE YEAR
ENDED 2014-15
Items
A
B
C
Total
GRAPH - 2

Items (%)
10
20
70
100

Values
606668556
142356689
58858040
807883285

Value%
75.09
17.62
7.29
100

Interpretation:
In the year 2014-15 there are 10% items which constitutes 75.09 % in the total
value that come under A category, 20% items which constitutes 17.62% in the total
value that come under the B category, 70% items which constitutes 7.29% of total
value that come under C category.

A CLASS ITEMS (2015-16)

Description

Uom

Qty

Rate

Value

JUNCTION

SF

265160

132

35001120

SF

6018

58427

351613686

YD

14892

16900

251674800

YD

1034

30805

31852370

BOX THREE
WAY
SYNJUNCTION
BOX THREE
WAY
PLASTIC FAN
FOR MOTOR
FRAME
132KH / 132M
COSMO

Interpretation:
It is observed that in the year 2015-1610% items fall under A class items namely
Junction Box Three

Way,syn- Junction Box Three

Way,Plastic Fan for Motor Frame

132KH / 132M ,cosmo based on their consumption value which constitutes 70% of the
total consumption value.

B CLASS ITEMS (2015-16)

Description

Uom

Qty

Rate

Value

MESH

YD

268

62812

16833616

KG

261875

62

16236250

KG

700

61681

43176700

9292

2103

19541076

RUBBER
GLASS
FUSE SIZE :
10 AMPS

PORCELIEN KG
BABBIN
TREAK
INSULATOR
EVA

YD

623

41437

25815251

PAKING

YD

960

10656

10229760

130 V

ME

3420

3935

13457700

INDUCTION
BULBS
Interpretation:
It is observed that in the year 2015-1620% items fall under

B class items namely

mesh,rubber,Glass Fuse Size : 10 Amps,PORCELIEN BABBIN TREAK INSULATOR

,eve,paking,130 V Induction Bulbs

based on their consumption value i.e., which

constitutes 20% of the total consumption value.

C CLASS ITEMS (2015-16)
Description

Uom

Qty
347

Rate
32488

Value
11273336

THREADS
LABLES

RL
PCS

125000

ARCHCOCKIES

PRS

47579

LACE

PRS

4260

COUNTERS

PRS

HEALPATCH

PRS

STRIPS
WOVENTAPES

42
64

3045056
815

3471900

320

1113600

3620

612

2215440

PRS

4610

684

3153240

YD

5401

985

2619485

STRIGHT CUTS

ME

56

50123

2806888

TOUNGE

PCS

4567

247

1128049

LOOPS
CUTTING

YD

8430

304

2562720

LOGOS

PCS

943

12381

11675283

SOCKLINAR

PCS

140

15264

2136960

HEAL

PRS

4326

710

3071460

COUNTERS
TUFFLEX

SET

33172

43

7426396

SHEETS
LAMINATION
PAKING

YD
PRS

6890
74183

190

1309100
1780392

CORTONS
EYLETS

SET

76348

14

1068872

AQUACE
08

W-

KG

3480

5250000

134

24

2340

313560

Interpretation:
It is observed that in the year 2015-1670% items fall under C class items based
on their consumption value which constitutes 10% of the total consumption value.

TABLE -3
PERCENTAGE OF VALUE OF ABC ANALYSIS FOR THE YEAR
ENDED 2015-16
Items
A
B
C
Total
GRAPH 3

Items (%)
10
20
70
100

Values
670141976
145290353
67421737
882854066

Value%
75.90
16.46
7.63
100

Interpretation:
In the year 2015-16there are 10% items which constitutes 75.90 % in the total
value that come under A category, 20% items which constitutes 16.46% in the total
value that come under the B category, 70% items which constitutes 7.63% of total
value that come under C category.

TABLE - 3

COMPARISON OF ABC ANALYSIS FROM 2013-14 TO 2015-16

CLASS

2013-14

2014 -15

2015-16

A
B
C

74.93
18.04
7.03

75.09
17.62
7.29

75.90
16.46
7.63

GRAPH - 3

Interpretation:
From the table, in the years 2013-14there are 10% items which
constitutes 74.93%,75.09% ,75.90% in the total value that come under A category,
20% items which constitutes18.04%,17.62%, 16.46%

in the total value that come

under the B category, 70% items which constitutes

7.03%,7.29%, 7.63% of total

value that come under C category.

Porcelien Babbin Treak Insulator

(2013-14)

MONTHS

OPENING

APRIL 11
MAY 11
JUNE 11
JULY11
AUGUST 11

STOCK
2.036
3.166
4.506
4.996
5.253

CONSUMPTION CLOSING
4.59
4.42
9.11
13.80
15.62

STOCK
3.166
4.506
4.996
5.253
6.916

SEPTEMBER11
OCTOBER 11
NOVEMBER 11
DECEMBER 11
JANUARY 12
FEBRUARY12
MARCH 12
TOTAL

6.916
5.36
4.166
5.386
6.196
4.465
5.336
57.782

13.30
12.80
8.90
8.40
10.75
9.30
10.88
121.841

5.36
4.166
5.386
6.196
4.465
5.336
8.036
63.782

INVENTORY TURN OVER RATIO

=

(materials consumed during the period)

(Average inventory during that period)

= (121.841)

=2.01

(60.78)

JunctionBoxThree w ay&CU insulated Round type Lugs Size:1.5sqrmm(2013-14)

MONTHS

OPENING

STOCK
APRIL 11
365.258
MAY 11
470.568
JUNE 11
510.548
JULY 11
595.147
AUGUST 11
580.493
SEPTEMBER11
625.365
OCTOBER 11
584.369
NOVEMBER11
405.258

CONSUMPTION
860.107
883.399
900.777
796.345
1238.68
804.616
803.931
697.606

CLOSING
STOCK
470.568
510.548
595.147
580.493
625.365
584.369
405.258
425.256

DECEMBER11

425.256

959.608

654.256

JANUARY 12
FEBRUARY12
MARCH 12
TOTAL

654.256
525.254
418.308
6160.08

1236.088
1037.457
1197.564
11416.23

525.254
418.308
705.256
6500.078

INVENTORY TURN OVER RATIO

(11416.23)
(6330.44)

= 1.803

Glass Fuse Size : 10 Amps

(2013-14)

MONTHS

OPENING

APRIL 11
MAY 11
JUNE 11
JULY 11
AUGUST 11
SEPTEMBER11
OCTOBER 11
NOVEMBER11
DECEMBER 11
JANUARY 12
FEBRUARY12

STOCK
644.363
701.598
698.324
729.651
690.254
658.984
582.348
540.365
598.365
659.258
695.235

CONSUMPTION
1079.725
1445.652
1390.009
1404.192
1199.073
1079.056
944.856
803.018
950.311
1007.046
1235.077

CLOSING
STOCK
701.598
698.324
729.651
690.254
658.984
582.348
540.365
598.365
659.258
695.235
743.215

MARCH 12
TOTAL

743.215
7941.96

1423.830
13961.837

1106.365
8403.962

13961.837
INVENTORY TURN OVER RATIO = -------------8172.96
= 1.708

Plastic Fan for Motor Frame 132KH / 132M

(2013-14)

MONTHS

OPENING

CONSUMPTION CLOSING

APRIL 11
MAY 11
JUNE 11
JULY 11
AUGUST 11
SEPTEMBER11
OCTOBER 11
NOVEMBER 11
DECEMBER 11
JANUARY 12
FEBRUARY12
MARCH 12
TOTAL

STOCK
70.346
1257.365
1289.354
1285.654
1105.684
1142.369
956.367
895.324
958.314
1085.354
1145.689
1313.258
12505.08

1530.533
1838.631
1863.476
1856.022
1511.587
1619.982
1252.256
1026.156
1257.226
1438.610
1662.221
1915.654
18772.349

STOCK
1257.365
1289.354
1285.654
1105.684
1142.369
956.367
895.324
958.314
1085.354
1145.689
1313.258
1236.365
13671.1

INVENTORY TURN OVER RATIO =

(18772.349)
(6936.09)

Elmex Connector size:2.5 sqmm

MONTHS

2.70

(2013-14)

OPENING

STOCK
APRIL 11
-------MAY 11
5250
JUNE 11
-------JULY 11
--------AUGUST 11
-------SEPTEMBER11 ---------OCTOBER 11
---------NOVEMBER 11 --------DECEMBER 11 --------JANUARY 12
-------FEBRUARY12 -------MARCH 12
--------TOTAL
5250

CONSUMPTION CLOSING
726.858
973.192
935.738
945.288
807.192
726.407
636.067
540.589
639.732
677.938
831.431
958.503
9398.926

INVENTORY TURN OVER RATIO

STOCK
---------4650
----------------------------------------------------------------------------------------------4650

(9398.926)
(4900)

130 V Induction Bulbs

MONTHS

OPENING

1.790

(2013-14)

CONSUMPTION CLOSING

STOCK
APRIL 11
15.890
MAY 11
15.820
JUNE 11
14.470
JULY 11
21.365
AUGUST 11
25.107
SEPTEMBER11 29.859

22.602
21.781
44.854
68.017
76.924
65.478

STOCK
15.820
14.470
21.365
25.107
29.107
43.530

OCTOBER 11
NOVEMBER 11
DECEMBER 11
JANUARY 12
FEBRUARY12
MARCH 12
TOTAL

63.016
43.743
41.327
52.985
45.765
53.638
600.132

39.912
29.912
20.292
26.038
18.259
28.259
312.071

43.530
39.912
29.315
20.292
26.038
18.259
299.857

600.132
INVENTORY TURN OVER RATIO =

-----------------305.96

1.96

TABLE -5
INVENTORY TURN OVER RATIO IN 2013-14
MATERIALS

2013-14

PORCELIEN BABBIN TREAK

2.01

INSULATOR
JUNCTION BOX THREE WAY

1.80

GLASS FUSE SIZE : 10 AMPS

PLASTIC FAN FOR MOTOR FRAME

1.70
2.70

132KH / 132M
HEAL PATCH
130 V INDUCTION BULBS

1.79
1.96

GRAPH - 5

Interpretation:
From the above, in the year 2013-14Inventory turn over ratio of
Plastic Fan for Motor Frame 132KH / 132M is 2.70compare to other materials.
PORCELIEN BABBIN TREAK INSULATOR (2014-15)

MONTHS

OPENING

STOCK
APRIL 12
8.036
MAY 12
10.543
JUNE 12
22.532
JULY 12
18.358
AUGUST 12
20.456
SEPTEMBER12 19.548
OCTOBER 12
21.356
NOVEMBER 12 16.845
DECEMBER 12 14.245
JANUARY 13
12.546
FEBRUARY13
15.125
MARCH 13
17.251
TOTAL
196.841

CONSUMPTION CLOSING
STOCK
10.543
22.532
18.358
20.456
19.548
21.356
16.845
14.245
12.546
15.125
17.251
28.036
216.841

7.431987
7.162097
14.74902
22.36593
25.29475
21.53127
20.7216
14.38417
13.58949
17.42294
15.0489
17.63785
197.34

INVENTORY TURN OVER RATIO

197.34
=

---------206.841

= 0.97

Junction Box Three Way (2014-15)

MONTHS

OPENING

CONSUMPTION CLOSING

APRIL 12

STOCK
705.078

1393.153

STOCK
599.828

MAY 12
JUNE 12
JULY 12
AUGUST 12
SEPTEMBER12
OCTOBER 12
NOVEMBER 12
DECEMBER 12
JANUARY 13
FEBRUARY13
MARCH 13
TOTAL

599.828
453.156
651.543
375.88
1164.528
1767.678
451.278
412.728
722.748
298.858
38.693
7684.548

1430.727
1458.97
1289.795
2006.222
1303.191
1302.081
1129.873
1554.243
2002.021
1680.309
1939.626
18490.21

453.156
651.543
375.88
1164.528
1767.678
451.278
412.728
722.728
298.858
38.693
163.488
7167.180

(18491.59)
INVENTORY TURN OVER RATIO = ------------------(7641.996)
=

2.419552

GLASS FUSE SIZE : 10 AMPS (2014-15)

MONTHS

OPENING

CONSUMPTION CLOSING

APRIL 12
MAY 12
JUNE 12
JULY 12

STOCK
1106.004
2165.892
2155.256
2894.139

1748.762
2341.438
2251.315
2274.287

STOCK
2165.892
2155.256
2894.139
4025.852

AUGUST 12
SEPTEMBER12
OCTOBER 12
NOVEMBER 12
DECEMBER 12
JANUARY 13
FEBRUARY13
MARCH 13
TOTAL

4025.852
2984.784
2548.099
1020.662
1453.125
2880.896
2145.685
2458.459
27838.85

1942.068
1747.685
1530.328
1300.602
1539.17
1631.054
2000.383
2306.096
22613.183

INVENTORY TURN OVER RATIO =

2984.784
2548.099
1020.662
1453.125
2880.896
2145.685
2458.459
2344.352
36467.12

22613.183
32152.99

0.7

PLASTIC FAN FOR MOTOR FRAME 132KH / 132M

MONTHS

OPENING

CONSUMPTION CLOSING

STOCK
APRIL 12
MAY 12
JUNE 12
JULY 12
AUGUST 12

(2014-15)

STOCK

1236.365
1142.316
1258.316
1190.369
1335.816

2478.920
2977.924
3018.166
3006.093
2448.232

1142.316
1258.316
1190.369
1335.81
1150.816

SEPTEMBER12 1150.816
OCTOBER 12
1230.816
NOVEMBER 12 1198.256

2623.792
2028.207
1662.003

1230.816
1198.256
1190.256

DECEMBER 12
JANUARY 13
FEBRUARY13
MARCH 13
TOTAL

1190.256
1258.816
1349.816
1239.816
14796.755

2036.256
2330.024
2692.204
3102.674
30404.5

1258.816
1349.816
1239.816
252.346
14792.575

INVENTORY TURN OVER RATIO = 30404.5

14792.575
=2.05

ELMEX CONNECTOR SIZE:2.5 SQMM (2014-15)

MONTHS

OPENING

APRIL 12
MAY 12
JUNE 12
JULY 12
AUGUST 12
SEPTEMBER12
OCTOBER 12
NOVEMBER 12
DECEMBER 12
JANUARY 13
FEBRUARY13
MARCH 13

STOCK
--------------4650
-------------------------------------------------------------------------

TOTAL

4650

CONSUMPTION CLOSING
1177.9
1576.2
1515.9
1531.6
1307.2
1176.1
1030.2
875.8
1036.4
1098.2
1346.7
1552.4
15222.903

STOCK
------------------3950
-------------------------------------------------------------------------------------3950

INVENTORY TURN OVER RATIO =

(15222.903)
(4300)

3.27

130 V INDUCTION BULBS

MONTHS

OPENING

CONSUMPTION CLOSING

STOCK
APRIL 12
28.462
MAY 12
65.702
JUNE 12
86.922
JULY 12
81.107
AUGUST 12
72.859
SEPTEMBER12 61.717

36.6
35.2
72.6
110.1
124.5
106.05

STOCK
65.702
86.922
81.107
72.859
61.717
54.912

OCTOBER 12
NOVEMBER 12
DECEMBER 12
JANUARY 13
FEBRUARY13
MARCH 13
TOTAL

102
70.8
66.9
85.8
74.1
86.8
972

36.152
34.762
39.292
42.082
59.082
59.082
693.671

54.912
36.152
34.762
39.292
42.082
59.082
669.839

INVENTORY TURN OVER RATIO

979.166

(2014-15)

681.755
=

TABLE -6

INVENTORY TURN OVER RATIO IN (2014-15)

MATERIALS
PORCELIEN BABBIN TREAK

2014-15
0.97

INSULATOR
JUNCTION BOX THREE WAY
GLASS FUSE SIZE : 10 AMPS
PLASTIC FAN FOR MOTOR

2.41
0.73
2.05

FRAME 132KH / 132M

HEAL PATCH
130 V INDUCTION BULBS

3.27
1.43

GRAPH - 6

1.43

Interpretation:
From the above, in the year (2014-15) Inventory turn over ratio
of Elmex Connector size:2.5 sqmm is 3.27 compare to other materials.
PORCELIEN BABBIN TREAK INSULATOR (2015-16)
MONTHS

OPENING

STOCK
APRIL 13
28.036
MAY 13
13.166
JUNE 13
97.506
JULY 13
67.996
AUGUST 13
23.246
SEPTEMBER13 67.916
OCTOBER 13
24.836
NOVEMBER 13 82.166
DECEMBER13 53.386
JANUARY 14
26.196
FEBRUARY14
81.446
MARCH 14
51.336
TOTAL
617.232

CONSUMPTION CLOSING
14.870
14.330
29.510
44.750
50.610
43.080
41.460
28.780
27.190
34.860
30.110
35.290
394.84

STOCK
13.166
97.506
67.996
23.246
67.916
24.836
82.166
53.386
26.196
81.446
51.336
95.076
684.272

INVENTORY TURN OVER RATIO

= (materials consumed during the period)
(Average inventory during that period)
= (394.84)
(650.897)
= 0.60

JUNCTION BOX THREE WAY ( 2015-16)

MONTHS

OPENING

STOCK
APRIL 13
163.488
MAY 13
381.508
JUNE 13
1142.338
JULY 13
1895.147
AUGUST 13
2980.498
SEPTEMBER13 1984.078
OCTOBER 13
2566.908
NOVEMBER 13 2412.018
DECEMBER13 2155.898
JANUARY 14
1492.988
FEBRUARY14
275.198
MARCH 14
168.308
TOTAL
17618.38

CONSUMPTION CLOSING
2861.980
2931.170
2997.190
2649.650
4121.420
2677.170
2674.890
2321.120
3192.910
4112.790
3451.890
3984.610
37984.79

INVENTORY TURN OVER RATIO =

STOCK
381.508
1142.338
1895.148
2980.498
1984.078
2566.908
2412.018
2155.898
1492.988
275.198
168.308
38.698
17493.59

(37984.79)
(17555.98)

=2.31

GLASS FUSE SIZE : 10 AMPS ( 2015-16)

MONTHS

OPENING

CONSUMPTION CLOSING

STOCK
APRIL 13
2344.363
MAY 13
1397.993
JUNE 13
2526.543
JULY 13
2360.723
AUGUST 13
4116.963
SEPTEMBER13 7345.903
OCTOBER 13
10087.963
NOVEMBER 13 11673.773
DECEMBER13 12117.963
JANUARY 14
11529.623
FEBRUARY14 8697.953
MARCH 14
9743.271
TOTAL
82243.03

STOCK
1397.993
2526.543
2360.723
4116.963
7345.903
10087.963
11673.773
12117.963
11529.623
8697.953
9743.271
9734.837
91333.51

4057.400
5432.500
5223.400
5276.700
4505.900
4054.900
350.600
3017.600
3571.100
3784.300
4641.200
5350.500
52466.1

52466.1
INVENTORY TURN OVER RATIO =

--------------------86788.271

5.97

PLASTIC FAN FOR MOTOR FRAME 132KH / 132M ( 2015-16)

MONTHS

OPENING

STOCK
APRIL 13
252.346
MAY 13
146.346
JUNE 13
481.346
JULY 13
476.346
AUGUST 13
561.846
SEPTEMBER13 905.666
OCTOBER 13
308.666
NOVEMBER 13 356.666
DECEMBER13 526.166
JANUARY 14
580.166
FEBRUARY14
273.666
MARCH 14
247.166
TOTAL
5116.392

CONSUMPTION CLOSING
STOCK
146.346
481.346
476.346
561.846
905.666
308.666
356.666
526.166
580.166
273.666
247.166
228.666
5092.712

5236.000
6290.000
6375.000
6349.500
5171.180
5542.000
4284.000
3510.500
4301.000
4921.500
5686.500
6553.500
64220.68

INVENTORY TURN OVER RATIO =

50404.5
240.572

= 2.64

ELMEX CONNECTOR SIZE:2.5 SQMM ( 2015-16)

MONTHS

OPENING

CONSUMPTION CLOSING

STOCK
APRIL 13
-------MAY 13
3950
JUNE 13
-------JULY 13
--------AUGUST 13
-------SEPTEMBER13 ---------OCTOBER 13
---------NOVEMBER 13 --------DECEMBER13 --------JANUARY 14
-------FEBRUARY14
-------MARCH 14
--------TOTAL
3950

1757.279
2352.845
2262.280
2285.364
1951.526
1756.197
1537.782
1306.936
1546.661
1638.999
2010.125
2317.326
22723.315

INVENTORY TURN OVER RATIO =

STOCK
---------3650
----------------------------------------------------------------------------------------------3650

(22723.315)
(3800)

5.326

130 V INDUCTION BULBS

( 2015-16)

MONTHS

OPENING

CONSUMPTION CLOSING

APRIL 13

STOCK
59.082

55.650

STOCK
55.820

MAY 13
JUNE 13
JULY 13
AUGUST 13
SEPTEMBER13

55.820
44.470
41.365
52.107
65.107

53.630
110.441
167.476
189.408
161.230

44.470
41.365
52.107
65.107
63.530

OCTOBER 13
NOVEMBER 13
DECEMBER13
JANUARY 14
FEBRUARY14
MARCH 14
TOTAL

63.530
30.912
40.912
27.292
26.038
78.259
451.702

155.163
107.710
101.758
130.462
112.690
132.072
1477.682

30.912
40.912
27.292
26.038
78.259
80.259
516.071

1477.682
INVENTORY TURN OVER RATIO

-----------------481.042

3.018

TABLE -7

INVENTORY TURN OVER RATIO IN 2015-16

PORCELIEN BABBIN

2015-16
0.60

TREAK INSULATOR
JUNCTION BOX THREE

2.16

WAY
GLASS FUSE SIZE : 10 AMPS

5.97

MATERIALS

PLASTIC FAN FOR MOTOR

2.64

FRAME 132KH / 132M

HEAL PACH
130 V INDUCTION BULBS

5.34
3.01

GRAPH -7

Interpretation:
From the above, in the year 2015-16Inventory turn over ratio
of Glass Fuse Size : 10 Amps is 5.97 compare to other materials.

TABLE -8

COMPARISONS OF INVENTORY TURN OVER RATIO IN 2011 -14

MATERIALS

2013-14

2012 -13

2013 -14

PORCELIEN BABBIN

2.01

0.97

0.60

TREAK INSULATOR
JUNCTION BOX

1.80

2.41

2.16

THREE WAY
GLASS FUSE SIZE :

1.70

0.73

5.97

10 AMPS
PLASTIC FAN FOR

2.70

2.05

2.64

1.79
1.96

3.27
1.43

5.34
3.01

MOTOR FRAME
132KH / 132M
HEAL PATCH
130 V INDUCTION
BULBS
GRAPH - 8

Interpretation:
From the above table, in the years 2011 -14 Inventory turn over ratio of
Plastic Fan for Motor Frame 132KH / 132M ,heal patch, Glass Fuse Size : 10
Amps are 2.70, 3.27 ,5.97 compare to other materials.

ECONOMIC ORDER QUANTITRY

EOQ FOR CEMENT PRODUCTION (2006-07)

2006-07

PORCELIEN JUNCTION GLASS

PLASTIC 130

BABBIN

BOX

FUSE SIZEFAN FORINDUCTION

TREAK

THREE

: 10 AMPS MOTOR

INSULATOR WAY

BULBS

FRAME
132KH

132M
ANNUAL

121.841

11416.23

13961.83

18772.34 600.13

(tons)
ORDERING

290

311

262

345

143

COST
CARRYING

195

287

244

357

149

COST
EOQ (units)

19

157

173

190

34

CONSUMPTION

EOQ FOR CEMENT PRODUCTION (2014-15)

2013-13

PORCELIEN JUNCTION GLASS

PLASTIC 130

BABBIN

BOX

FUSE

FAN FORINDUCTION

TREAK

THREE

SIZE

:MOTOR BULBS

INSULATOR WAY

10 AMPS FRAME
132KH

132M
ANNUAL

197.34

18490.21

22613.18 30404.5

972

(tons)
ORDERING

326

312

270

352

152

COST
CARRYING

225

294

258

342

154

COST
EOQ (units)

24

198

218

250

46

CONSUMPTION

EOQ FOR CEMENT PRODUCTION (2008-09)

2008-09

PORCELIEN JUNCTION GLASS PLASTIC 130

BABBIN

BOX

FUSE

FAN FORINDUCTION

TREAK

THREE

SIZE

:MOTOR

10

FRAME

AMPS

132KH

INSULATOR WAY

BULBS
/

394.84

37984.79

132M
52466.1 64220.68 1477.682

(tons)
ORDERING

367

332

289

397

168

COST
CARRYING

232

312

269

376

154

COST
EOQ (units)

35

284

317.64

336

57

ANNUAL

CONSUMPTION

FINDINGS:
The company is following ABC analysis with minimum effectiveness.
It is also found out that the number of orders increased with increase in
Consumption.
The inventory turnover ratio is in increasing trend, it is due to proportional
increase in inventory and production levels.
It is finding out that the consumption levels depends on seasonal fluctuations in sales.
The company is maintaining sufficient stocks of finished products to the reasonable expectations
from customers for prompt delivery of their order and thus efficiently serving the customers
needs.
Ramabal ., the raw materials cost is the major part of the total cost of production (around 75%).
The orders are placed on annual contract basis with monthly delivery schedules for all the raw
materials. But due to transportations problems (such as general strikes, floods etc.,).sometimes
faced the shortage of raw materials resulting in loss of production.
In this EOQ, they are not following fixed order period system.
Slag raw material is not moving regularly.
Overall inventory turnover ratios are 19.00 in 2013-14, 20.93 in 2014-15&18.93 in 2015-16.

SUGGESTIONS:
It

is

advised

to

continue

with

the

current

standards

regarding

ABC

classification.
It is better to go for JIT purchases, the other alternatives in order to reduce the
ordering cost i.e., increasing order size in order to reduce the number of orders.
It is better to maintain the inventory, based on the demand.
Sometimes company faces the shortage of raw materials resulting in loss of
production. This gives an edge to competitors and there is a possibility of loss
of good will due to the failure of the company to meet the delivery
commitments. So it is maintaining it at the optimum level.
By implementing the SAP in the management to get advantages like reduction of
lead-time

on-time

shipment,

reduction

in

cycle

time,

better

customer

satisfaction, improved supplier performance, increased flexibility and improve

decision making capabilities.

CONCLUSION
After analyzing the inventories of Ramabal industries during the last
three financial years it is clear that, inventories of the company is not stable. the
company by strictly following inventory management techniques like EOQ, ABC
analysis can increase its profits. However the management needs to focus more on the
inventories.

BIBLIOGRAPHY

K.ASWATHAPPA & K.SRIDHARA BHAT (1999), Production and Operations

Management. Himalaya Public House, Mumbai.
I.M.PANDEY (1999), Financial Management Vikas Publishing House
Pvt.Ltd. New Delhi
M Y KHAN & P K JAIN, Management Accounting. Tata MC Graw Hill
Publishing Company Limited, New Delhi.
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