INTRODUCTION

Inventory management is the process of efficiently overseeing the constant flow of units into and out of an existing inventory. This process usually involves controlling the transfer in of units in order to prevent the inventory from becoming too high, or dwindling to levels that could put the operation of the company into jeopardy. Competent inventory management also seeks to control the costs associated with the inventory, both from the perspective of the total value of the goods included and the tax burden generated by the cumulative value of the inventory. Balancing the various tasks of inventory management means paying attention to three key aspects of any inventory. The first aspect has to do with time. In terms of materials acquired for inclusion in the total inventory, this means understanding how long it takes for a supplier to process an order and execute a delivery. Inventory management also demands that a solid understanding of how long it will take for those materials to transfer out of the inventory be established. Knowing these two important lead times makes it possible to know when to place an order and how many units must be ordered to keep production running smoothly. Calculating what is known as buffer stock is also key to effective inventory management. Essentially, buffer stock is additional units above and beyond the minimum number required to maintain production levels. For example, the manager may determine that it would be a good idea to keep one or two extra units of a given machine part on hand, just in case an emergency situation arises or one of the units proves to be defective once installed. Creating this cushion or buffer helps to minimize the chance for production to be interrupted due to a lack of essential parts in the operation supply inventory. Inventory management is not limited to documenting the delivery of raw materials and the movement of those materials into operational process. The movement of those materials as they go through the various stages of the operation is also important. Typically known as a goods or work in progress inventory, tracking materials as they are used to create finished goods also helps to identify the need to adjust ordering amounts before the raw materials inventory gets dangerously low or is inflated to an unfavorable level.

Finally, inventory management has to do with keeping accurate records of finished goods that are ready for shipment. This often means posting the production of newly completed goods to the inventory totals as well as subtracting the most recent shipments of finished goods to buyers. When the company has a return policy in place, there is usually a sub-category contained in the finished goods inventory to account for any returned goods that are reclassified as refurbished or second grade quality. Accurately maintaining figures on the finished goods inventory makes it possible to quickly convey information to sales personnel as to what is available and ready for shipment at any given time. In addition to maintaining control of the volume and movement of various inventories, inventory management also makes it possible to prepare accurate records that are used for accessing any taxes due on each inventory type. Without precise data regarding unit volumes within each phase of the overall operation, the company cannot accurately calculate the tax amounts. This could lead to underpaying the taxes due and possibly incurring stiff penalties in the event of an independent audit.

INVENTORY MANAGEMENT must tie together the following objectives ,to ensure that there is continuity between functions : Companys Strategic Goals Sales Forecasting Sales & Operations Planning Production & Materials Requirement Planning.

Inventory Management must be designed to meet the dictates of market place and support the companys Strategic Plan . The many changes in the market demand , new opportunities due to worldwide marketing , global sourcing of materials and new manufacturing technology means many companies need to change their Inventory Management approach and change the process for Inventory Control .

Inventory Management system provides information to efficiently manage the flow of materials , effectively utilize people and equipment , coordinate internal activities and communicate with customers . Inventory Management does not make decisions or manage operations, they provide the information to managers who make more accurate and timely decisions to manage their operations.

Inventory is defined as the blocked Working Capital of an organization in the form of materials. As this is the blocked Working Capital of organization, ideally it should be zero. But we are maintaining Inventory . This Inventory is maintained to take care of fluctuations in demand and lead time. In some cases it is maintained to take care of increasing price tendency of commodities or rebate in bulk buying.

Traditional Supply Chain solutions such as Materials Requirement Planning, Inventory Control, typically focuses on implementing more rapid and efficient systems to reduce the cost of communicating information between and across the Inventory links in the SCM.COM focuses in optimizing the total investment of materials cost and workload for every Inventory item throughout the chain from procurement of raw materials to finished goods Inventory .

Optimization means providing a balance of supply to meet the demand at a minimum total cost , Inventory level and workload to meet customers service goal for each items in the link of Inventory Chain .

It is strategic in the sense that top management sets goals. These include deployment strategies (Push versus Pull), control policies, the determination of the optimal levels of order quantities and reorder points and setting safety stock levels . These levels are critical, since they are primary determinants of customer service levels.

Keeping in view all concerns, the latest concept of Vendor Managed Inventory is used to optimize the Inventory. We are entering into Vendor Managed Inventory, Annual Rate Contracts with manufacturers or their authorized dealers, who maintain Inventory on our behalf and supply the items as and when required.

VMI reduces stock-outs and optimize inventory in supply chain. Some features of VMI include: Shortening of Supply Chain Centralized Forecasting Frequent communication of inventory, stock-outs and planned promotions Trucks are filled in a prioritized order , e.g. items that are expected to stock out have top priority then items that are furthest below targeted stock levels then advance shipments of promotional items Despite the many changes that companies go through, the basic principles of Inventory Management and Inventory Control remain the same. Some of the new approaches and techniques are wrapped in new terminology, but the underlying principles for accomplishing good Inventory Management and Inventory activities have not changed.

The Inventory Management system and the Inventory Control Process provides information to efficiently manage the flow of materials, effectively utilize people and equipment, coordinate internal activities, and communicate with customers. Inventory Management and the activities of

Inventory Control do not make decisions or manage operations; they provide the information to Managers who make more accurate and timely decisions to manage their operations.

The basic building blocks for the Inventory Management system and Inventory Control activities are: Sales Forecasting or Demand Management Sales and Operations Planning Production Planning Material Requirements Planning Inventory Reduction

The emphases on each area will vary depending on the company and how it operates, and what requirements are placed on it due to market demands. Each of the areas above will need to be addressed in some form or another to have a successful program of Inventory Management and Inventory Control. Inventory is usually a distributors largest asset. But many distributors arent satisfied with the contribution inventory makes towards the overall success of their business: The wrong quantities of the wrong items are often found on warehouse shelves. Even though there may be a lot of surplus inventory and dead stock in their warehouse(s), backorders and customer lost sales are common. The material a distributor has committed to stock isnt available when customers request it. Computer inventory records are not accurate. Inventory balance information in the distributors expensive computer system does not accurately reflect what is available for sale in the warehouse. The return on investment is not satisfactory. The companys profits, considering its substantial investment in inventory, is far less than what could be earned if the money were invested elsewhere.

Meaning Of Inventory Management:

Inventory management means safeguarding the company property in the form of inventories and maintaining it at the optimum level, considering the operating requirements and financial resources of the business. Inventory management emphasizes control over purchases, storage, consumption of materials and determining the optimum level for each item of investments.

Importance of Inventory Management:

Inventory management is concerned with keeping enough products on hand to avoid running out while at the same time maintaining a small enough inventory balance to allow for a reasonable return on investment. Proper inventory management is important to the financial health of the corporation; being out of stock forces customers turn to competitors or results in a loss of sales. Excessive level of inventory however, results in large carrying costs, including the cost of capital tied up in inventory warehouse fees, insurance etc. A major problem with managing inventory is that the demand for a corporations product is to a degree uncertain. The supply of the raw materials used in its production process is also somewhat uncertain. In addition the corporations own production contains some degree of uncertainty due to possible equipment breakdowns and labor difficulties. Because of these possibilities, inventory acts as a shock absorber between product demand and product supply. If product demand is greater than expected, inventory can be depleted without losing sales until production can be stepped up enough to select the unexpected demand. However inventory is difficult to manage because it crosses so many lines of responsibility. The purchasing manager is responsible for supplies of raw material and would like to avoid shortages and to purchases in bulk order take advantages of quantity discounts. The production manager is responsible for uninterrupted production and wants to have enough raw materials and work in process, inventory on hand to avoid disruption in the production process. The marketing manager is responsible for selling the product and wants to minimize the chances of running out of inventory. The financial manager is concerned about achieving an appropriate overall rate of return. Funds invested in an inventory are idle and do not earn a return.

Nature of Inventories
Inventories are stock of the product a company is manufacturing for sale and components that make up the product. The various forms in which inventories that exist in manufacturing company are Raw materials Work-in-process Finished goods

Raw materials
These are those basic inputs that are converted into finished product through the manufacturing process. Raw materials inventories are those units which have been purchased and stored for future production.

Work-in-process
These inventories are semi-manufacture products. They represent products that need more work before they became finished for sale.

Finished goods
These inventories are those completely manufactured products which are ready for sale. Stocks of raw materials and work-in-process facilitate production while stock of finished goods is required for smooth marketing operations. production and consumption of goods. Need to hold inventories Maintaining of inventories involves trying up the companies and incurrence of storage and handling cost. There are three general motives for holding inventories. Transaction motive It emphasizes the need to maintaining inventories to facilitate smooth production and sales operation. Thus, inventories serve as link between the

Precautionary motive
It necessitates the holding of inventories to guard against risk of unpredictable changes in demand and supply force and other factors.

Speculative inventories
It influences the decision to increase or reduce inventory level to take advantage of price fluctuations. The firm should always avoid a situation of over investment or under investment in inventories. The major dangers of over investment in inventories are i. Unnecessary tie up of the funds and loss of profits. ii. Excessive carrying cost. iii. The risk of liquidity. The consequences of under investment in inventories are i. Production hold-ups ii. Failure to meet delivery commitments. Inadequate raw materials. iii. Work-in-process will result in frequent in production interrupts. An efficient inventory management should Ensure a continuous supply of raw materials to facilitate uninterrupted production. Maintain sufficient supply of raw materials in periods of short supply and anticipate price changes. Maintain sufficient finished goods inventory for smooth sales operation and efficient customer service. Minimize the transportation cost on time. Control investment in inventories and keep it at an optimum level

Cost of holding inventories

The determination of inventory cost is essentially an income measurement problem, a means whereby there is rational orderly, systematic interpretation of the effect on the economic progress of the company of expenditures involved acquiring goods or in maintaining and operating productive facilities. Ability to quantify and develop rigorous models of most

managerial problems is dependent on the determination behavior of relevant costs. The practical application of such models is also dependent on ability to obtain the cost data. Relevant inventory costs which change with level of inventory are listed below.

Ordering costs
Every order is placed for stock replenishment, certain cost are involved. The ordering cost may vary, dependent upon type item. This cost of ordering includes Paper work cost, typing and dispatching order. Follow-up costs the follow-up required ensure timely supplies include the travel cost for purchases follow-up, telephone telex and postal bills. Cost involved in receiving the order inception, checking and handling to the stores. Any set up cost of machines if charged by supplier, either directly indicated in quotations or assessed thought quotations for various quantities. The salaries and wages to the purchase department are relevant for consideration if the purchasing function is carried out at the same level with existing staff. There are certain costs that remain the same regardless of the size of the lot purchased or requisitioned. This would be retailer ordering from the distributor, from the distributor ordering from a factory warehouse, for the factory warehouse ordering a new production run from the factory, and for the factory ordering raw materials from vendors. These kinds of costs are called preparation or set up costs. If we are ordering to replenish supplies at one stock point from another stock point, our interest is in the incremental clerical costs of preparing orders, following these orders. Expediting them when necessary, etc, a large segment of the total cost of the ordering function is fixed, regardless of the number orders issued. Even then it may be difficult determined satisfactorily the incremental cost, which results from one more order. Quantity discounts and handling and transport cost are other factors, which vary lot sizes. Preparation cost are the incremental costs of planning production, writing production orders, setting machines and controlling the flow orders through the factory. Material handling cost in the plant have an effect on production lot sizes in much the same way that freight costs may effect purchase lot sizes. Besides the preparation costs of production, there are some other production costs, which have a direct bearing on inventory models, however. These are over time premiums and the incremental cost of changing production levels, such as hiring, training, and separation costs.

Carrying costs Carrying costs constitutes all the costs of holding items in inventory for a given period of time. They are expressed either in rupees per period or as percentage of the inventory value per period. Components of these costs include the following Storage and handling cost. Obsolescence and deterioration costs Insurance Taxes The cost of the funds invested in inventories Storage and handling costs include the cost of warehouse space. Obsolescence costs represent the decline in inventory value caused by style changes that make the existing product less salvable. Deterioration costs represent the decline in value caused by changes in the physical quality of the inventory such as spoilage and breakage. Another element of carrying cost is the cost of insuring the inventory against losses due to theft, fire and natural disaster. In addition, a company must pay any personal property taxes required by local and state government on the value of its inventories. Like ordering costs, inventory-carrying costs contain both fixed and variable components. Most carrying costs vary with inventory level, but a certain portion of them-such as warehouse rent and depreciation on inventory handling equipment- are relatively fixed over the short run, inventory model such as EOQ model treat the entire carrying cost as variable. Stock out costs Stocks out costs are incurred when ever a business is unable to fill orders because the demand for an item is greater than the amount currently available in inventory. When a stock out in raw materials occur, for example, stock out costs include the expenses of placing special orders (back ordering) and delays. A stock out in work in progress inventory results in

additional costs of rescheduling and speeding production with in the plant, and it also may result in reduce production costs if work stoppages occur. Final, a stock out in finished goods

inventory may result in the immediate loss of profits of customers decide to purchase the product from the competitor and in potential long-term losses if customers decide to order from other companies in the future.

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Other characteristics of inventory situations

Besides the various types of costs involved, there are other characteristics of the situation that vary among types of inventory and must be captured if the decision model is to be an accurate representation of the physical circumstances. Lead times Obtaining inventory usually requires a lag from the initiation of the process until the inventory starts to arrive. This lead-time may be a few minutes or it may be many months, and depends in part on whether the firm is producing goods for its inventory or is ordering these goods from another firm. To produce goods for its own use, the firm must schedule, set up and adjust manufacturing equipment.

Sources and levels of risk

Uncertainties play a significant role in inventory situations. Uncertainties usually involve lead times and demand times and demand levels, but situations where other variables are uncertain also occur. Where are substantial uncertainties and where the costs of stock out are important Strategies for addressing risk must be formulated?

Static versus dynamic problems

Inventory problems are usually divided into two types based on the characteristics of the goods involved. In static inventory problems, the goods have one-period life; there can be carrying over of goods from one period to the next. Inventory situations where decisions involve the number of news papers to print, the number of greeting cards to purchase or the number of calendars to produce are static inventory problems. In dynamic inventory problems, the goods have value beyond the initial period; they do not lose their value completely over time. Replenishment rate Once goods start to be received from a vendor or from the firms own production processes, there are differences among goods in the rate at which they are received. Small orders from vendors are likely to by receive all at once. For example, assume that a firm has placed in order for 10 cases of paper towels. For such a small order the rate of replenishment is infinite; the firms inventories well go up 10 cases in a very short time as the goods are quickly unloaded.

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For large order from vendors, or for inventory produced with in the firm, the replenishment rate may be slower. Types of inventory Inventories can be classified into five basic types on the basis of their production. These various types of inventories cannot be identified and segregated within the organization. These five types are

1. Management inventory
They are needed because of the time required to move stocks from one place to another place.

2. Lot size Inventories

These are as a result of buying materials in quantities larger than the immediate requirement, with a view to minimizing cost of transportation, buying, receipt and handling and to obtaining quantity discount.

3. Fluctuation Inventories
These are carried to ensure ready suppliers to consumer even when these are irregular and unpredictable fluctuations in their demand.

4. Anticipation inventories
These are usually maintained to meet a predictable but changing pattern of future demand.

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INDUSTRIAL PROFILE
Strategically located kanipakam patanam of Chittoor District in Andhra Pradesh, India, Sai sanjana fruit products is totally Export based food processing unit to process wide varieties of Tropical Fruit Purees, Concentrates, Fresh Fruits and so on.

At Sai sanjana fruit products , we support the local farming community to cultivate fruits / vegetables and improve their economical condition. We firmly believe that this farming community is the source of strength for our organization.

We emphasize on adopting the best practices, proven methodologies and world-class quality food processing benchmarks. In a phased manner, we are poised to help the industry and nation in general and farmers in particular.

We envisage extending our operations through a chain of food processing plants across India with special emphasis on backward integration and making the farmers community as partners in our progress.

Backward Integration As part our Backward Integration model, we support the local farming community through:

Interacting with farmer community Bringing large scale farming land into fruits / vegetable cultivation Imparting technical training under the guidance of experts from research institutes Encouraging to accomplish the best quality and higher fruit yields Training them on advanced fruit / vegetable farming and harvesting techniques Spreading the awareness among them on the latest horticultural techniques Enabling them to mobilize and get the fruits directly to the factory Minimizing the fruit transportation costs through direct purchases Reducing the unnecessary involvement of middlemen like traders, wholesalers, agents, etc.

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Minimizing damages in handling fruits / vegetables Enabling high returns on investment (ROI)

Sai sanjana fruit products has developed state-of-the-art fruit processing facility to process and produce natural tropical fruit puree, fresh fruits and concentrates. Our plant is strategically located within the vicinity of largest fruits / vegetables producing districts like Chittoor, in Andhra Pradesh. Sai sanjana fruit products Processing (India) Private Limited is a fruit processing

company to provide the best-in-class Tropical Fresh Fruits, Vegetables, Pulp / Puree and Concentrates. Our products are processed in world-class food processing plants which follow international heath benchmarks. compliance with Sai sanjana fruit products the quality standards, are in standards.

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We firmly believe that local farming community is the source of strength for our organization. With Backward Integration as the core model, we encourage the local farming community to take up fruits / vegetable cultivation and enable sustainable economical growth.

We emphasize on adopting the best practices, proven methodologies and world-class quality food processing benchmarks. In a phased manner, we are poised to help the industry and nation in general and farmers' community in particular.

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Our Processing Plant

At our fruit processing plant, we have the most modern, world-class and total export oriented fruit processing facility. We have all operations from farm to finished product delivery is computer controlled. Fruit products provided by Sai sanjana fruit products are fully quality driven. We are indeed proud to be associated with them.

CEO of a Fruit Trading Company Mango Puree and Concentrate Our Mango Puree and Concentrates are produced in a more hygienic environment under the surveillance of highest quality standards and food industry benchmarks. Mango Puree is produced by processing fresh fruits specially selected. The fruit processing includes:

Cleaning Washing Draining Sorting Inspection

Mango Puree is then packed, stored and shipped according to the best manufacturing practices. We have different breeds of Mango Puree from India and other countries. The Puree produced by us is used mainly in juices, nectar, baby foods and jelly foods.

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Mango Puree is produced from fully ripened Mango fruits both from India and imported from other countries. We follow stringent guidelines and fruit processing practices without using any additives or food preservatives.

Mango Concentrate is prepared using fresh and mature Mango fruits. The process includes:

Pulp Extraction Enzymatic Deactivation Evaporation Enzyme Addition Puree Concentration Sterilization

The Mango Concentrates produced by Sai sanjana fruit products can be used in beverages, ice-cream, fruit jams, jellies, sauces and cereal bars. Fruit products provided by Sai sanjana fruit products are fully quality driven. We are indeed proud to be associated with them. CEO of a Fruit Trading Company

Mango Puree and Concentrate

Our Mango Puree and Concentrates are produced in a more hygienic environment under the surveillance of highest quality standards and food industry benchmarks. Mango Puree is produced by processing fresh fruits specially selected. The fruit processing includes:

Cleaning Washing Draining Sorting Inspection

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Mango Puree is then packed, stored and shipped according to the best manufacturing practices. We have different breeds of Mango Puree from India and other countries. The Puree produced by us is used mainly in juices, nectar, baby foods and jelly foods.

Mango Puree is produced from fully ripened Mango fruits both from India and imported from other countries. We follow stringent guidelines and fruit processing practices without using any additives or food preservatives.

Mango Concentrate is prepared using fresh and mature Mango fruits. The process includes:

Pulp Extraction Enzymatic Deactivation Evaporation Enzyme Addition Puree Concentration Sterilization

The Mango Concentrates produced by Sai sanjana fruit products can be used in beverages, icecream, fruit jams, jellies, sauces and cereal bars. The lack of mango market development globally opens a large untapped opportunity for India to make an organized entry in the fresh mango and mango pulp market. India is well positioned to capitalize on this opportunity with a very large national production of mangos, including leading varieties like Alphorns. India has the potential to create a longterm global market position and to capitalize on the fast growth of mango as a preferred ingredient for the natural package food industry. Additionally, mango is a preferred fresh fruit within the Indian domestic market, as well as globally. Mango is in strong demand within the worldwide retail sector. The total market value of Indian mango and mango pulp represents 25% of the value of agricultural and processed food products exported by India. Moreover, the consumption growth for mangos in the United States

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and Europe has average 1015% per year during the last 5 years. Collectively, these factors indicate a strong opportunity to position Indian mango and mango products to meet a growing international demand. India is the worlds largest supplier of mangos, having an annual production of 10.5 million metric tons in 2003. This accounts for 41% of the estimated worldwide mango production of 25.56 million metric tons in 2003. Despite this large mango production, India is a minor exporter of mango and mango products at this time. During the fiveyear period from 19982002, exports of fresh mangos from India averaged approximately 42.4 thousand metric tons, or only about 0.4% of mango production during this time frame. Data on exports of Indian mango pulp and juice products are more limited. Data from 1995 indicated that India exported 37.7 thousand metric tons of mango pulp. Data from 2001 indicated that India exported 3.2 thousand metric tons of mango juice, but also imported 2.2 thousand metric tons of mango juice. Collectively, these observations indicate that, despite being by far the worlds largest mango producer, India exports less than 1% of its mango crop as fresh mangos or processed mango products. These observations with mango are consistent with aggregate data available on Indian fruit and vegetable exports. One barrier to efficient development of the Indian mango industry is an exceedingly complex supply chain. Within the value chain, a number of buyers and other aggregators operate at local Minds and APMC to assemble larger lots from the many small producers in any given region. Associated with this inefficient aggregation process is the application of numerous commissions as fresh agricultural products trade hands. Numerous stakeholders in India have expressed concern that this overly complex value chain is a hindrance to effective marketing of Indian mangos and mango products. A recent report from the Indian Ministry of Food Processing Industries further details the overly complex supply chain and its contribution to costs and postharvest losses. This report concludes that it is imperative to streamline the mango supply chain in order to reduce wastage and raw material costs. (Sources: India Ministry of Food Processing Industries and Rambo bank Report).

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INDIA MANGO & MANGO PULP INDUSTRY DEVELOPMENT:

Through partnerships with mango growers, processors, export organizations, and Indian government organizations, among others, PFIDF&V is working to strengthen the small and medium mango grower base by providing capacity building at all levels. Education and training in Good Agricultural Practices and other sanitary standards, as well as employment of certification systems, will lead to better yields, pesticide use in accordance with regulations, and a more efficient supply chain. PFIDF&V partnerships will also help identify and facilitate resources necessary for enhancing the mango supply chain such as cold storage facilities, improved packing and grading facilities, testing facilities, and logistics management. Furthermore, A further approach will target reduction of waste in the fresh mango chain by developing high value mango products and enhancing processing capacity for the domestic market. Ultimately, these steps will help stabilize prices, increase farmer incomes, and development the farmer base at commercial and social levels.

MANGO PULP INDUSTRY HOPES

Mango pulp production to reach 75,000 tons by 2010 Mango is raised in 36,000 hectares in Krishna Giri district Mango pulp processed annually is 50,000 tones Farmers have to go to Bangalore, as there is no testing facility in Krishnagiri Farmers are not getting fair price, even if there is a rise in prices in global market

MANGO MARKET DEVELOPMENT

PFID-F&V India has continued to forge and strengthen public and private partnerships to the point that, now, just over one year from project start-up, notable results are beginning to show in the form on increasing contributions from partnership members.

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Dr. Thiagarajan, MSU/PFID-F&V, together with our two India-based coordinators, recently met with the Agricultural Product Export Development Authority (APEDA) as well as the Federation of Indian Chambers of Commerce (FICCI) and the National Institute of Marketing Boards (NIAM) to follow up on each of their commitments to promote the Indian Mango Industry. During this visit, both the Maharashtra State Horticulture Mission and the National Horticulture Missions approvals were secured to begin the critical selection of 100 GAP demonstration farms, identification of trainers to participate in train-the-trainer courses and program implementation, as well as the initial survey and audits of the nucleus demonstration farms in Maharashtra.

A PROPOSAL IS BEING PREPARED & SUBMITTED TO APEDA

Support employment of agric-officers to supervise, inspect and monitor the 100 demonstration farms To support controlled atmosphere trials of mango for both domestic and export market purposes To support training of extension agents from four key mango growing states in India to replicate mango demonstration model farms in these states To support GAP certification costs for a sub-set of mango producers To support the interface of project marketing activities with companies such as ITC, Reliance, ShopRite, and Metro to provide market access for these demonstration farms. The India team is also engaged in discussion with ITC to cosponsor a packaging conference on innovations for both fresh and processed mango industries. The goals of this packaging conference are to expose domestic producers, processors and retailers to modern food packaging solutions, and to strength market linkages among mango producers and processors with Indiabased supermarkets as well as key players in the export market. Other opportunities to explore with groups like ITC, ShopRite and similar partners are establishment of a direct contract program which would include promotion, direct shipment from packing houses to stores, proper packaging, and early contracting.

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GOALS OF INDIA MANGO MARKET DEVELOPMENT

Currently, only 1% of the total mango production in India is exported. One reason contributing to this poor export performance is that overseas buyers have stricter standards than are currently accepted within the Indian domestic market. PFIDF&V will facilitate the development and implementation of quality and safety standards which will meet the demands of the export market. PFIDF&V will partner with relevant Indian organizations in establishing a global image for the Indian mango starting with the establishment of quality standards and Good Agricultural Practices (GAPs) standards for India. PFID partnerships in India can facilitate the development of a distribution network in European and other countries where the value realizations for mango and mango pulp are the highest. PFID partnerships can assist mango growers and processors in developing an "India" brand image for fresh mango and processed mango products that meet consumer preferences. The predominant mango varieties grown in India make this product unique in country and abroad. After demonstrated success in developing a strengthening the market development of mangoes, PFID India liaisons can easily adapt this approach to the further development of other fruit and vegetable products in India

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COMPANY PROFILE
History Of Saisanjana Fruit Products Processing (P) Ltd :
The division combines people with vast experience in agric-trading with the saisanjana fruit

products processing (p) ltd Groups credibility to justify its premier standing in the trading arena. The division was set up in 1967 and since then has handled a wide range of products - such as Sesame Seeds, Processed Fruits, Food grains, Aqua etc. Saisanjana fruit products processing (p) ltd began its fruit processing operations in early

70s.However fruit processing operations have been given a special thrust since the last season with an emphasis on developing strategic partnerships across the value chain especially fruit procurement and processing. Saisanjana fruit products processing(p) ltd has established it's presence as a reliable and competitive exporter to Coca Cola, USA, Western Europe, Far East, Middle East etc. BACKGROUND OF SAISANJANA FRUIT PRODUCTS PROCESSING(P) LTD Situated at Chittoor in Andhra Pradesh, the mango belt in India saisanjana fruit products

processing(p) ltd is a 100% Export Oriented Unit (EOU) processing Tropical Fruit Purees, Concentrates and Fresh Fruits saisanjana fruit products processing(p) ltd was started keeping

in mind the local farming community wealth. The farming community is an integral part and forms the backbone of the organization. In its effort to be a forerunner in the chosen areas of business in terms of best practices in quality and technology, FIL plans to benefit armors, the industry and the nation in a phased manner. saisanjana fruit products Processing(P) Ltd believes in empowering farmers by providing

technical assistance from research institutes in the saisanjana fruit products industry to support the farmers in achieving better quality and higher yields by developing the gardening and harvesting techniques. Further to educating farmers with latest horticultural techniques, Saisanjana fruit products Processing (P) Ltd is encouraging farmers to mobilize the fruits directly to the factory, thereby minimizing the fruit handling damages and high value

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realizations. The first phase has been completed, by setting up of state-of-the-art fruit processing plant to produce natural tropical fruit puree and concentrates. Generally speaking, countries export goods primarily to satisfy international demand for the goods that are intensively produced within its boundary. Countries may also export to dispose its surplus good that are not consumed domestically, in that sense a country can import goods which cannot be produced domestically in exchange of exported goods and reap the benefit of trade through comparative advantage. The seller of such goods and services is referred to an "exporter" who is based in the country of export. Make Use this Exporter Directory to boost your Agro Business from India. Agri Exchange provides the facility to the importers to track the presence of the exporters of the product of their interest in the exporters Directory which is accessible by the Agri business houses round the globe. Do register in this exporters Directory to boost your Business

Company details

Contact Person Company Name Year of Establishment India MART Member Since Company Profile Contact Information Address Website

:Mrs. Dhanajaya Naidu Andulri :Sai Sanjana Fruit Products :2005 :2012 :Manufacturer of white guava pulp, alphonso mango pulp etc. :Door No. 16- 479, Old Employment Street Chittoor - 517 002, Andhra Pradesh, India :www.indiamart.com/company/5087884

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PRODUCT PROFILE
Mango Puree and Concentrate Our Mango Puree and Concentrates are produced in a more hygienic environment under the surveillance of highest quality standards and food industry benchmarks. Mango Puree is produced by processing fresh fruits specially selected. The fruit processing includes:

Cleaning Washing Draining Sorting Inspection

Mango Puree is then packed, stored and shipped according to the best manufacturing practices. We have different breeds of Mango Puree from India and other countries. The Puree produced by us is used mainly in juices, nectar, baby foods and jelly foods.

Mango Puree is produced from fully ripened Mango fruits both from India and imported from other countries. We follow stringent guidelines and fruit processing practices without using any additives or food preservatives.

Mango Concentrate is prepared using fresh and mature Mango fruits. The process includes:

Pulp Extraction Enzymatic Deactivation Evaporation Enzyme Addition Puree Concentration Sterilization

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The Mango Concentrates produced by saisanjana fruit products can be used in beverages, icecream, fruit jams, jellies, sauces and cereal bars.

Guavas Puree and Concentrate

Guavas are grown in many tropical and subtropical regions. Guava pulp is available in sweet or sour taste, off-white or pink color, with the seeds in the centre of the pulp or hard pulp. It all depends on species. Guava is known to be low in calories and high in Vitamin C which is a powerful antioxidant and anti-inflammatory agent. Guava is also very delicious and is considered with high consumer acceptability because it is having unique aroma and flavor. With rich vitamins A and C, and high levels of dietary fiber, guava is considered as one of the Super Fruits by nutritionists. At saisanjana fruit products processing plants, Guava Puree is aseptically processed, manufactured from the best quality Guava fruits free of insects and diseases. Generally Guava Puree is creamy in texture and confirms to highest industry food quality standards. We use different Guava breeds from India and other countries. We have white as well as pink Guava Puree. All the puree is free from stone cells. Our Guava Puree is extensively used in food products juices, nectars, baby foods and jelly foods.

Our Guava Puree is aseptically processed which is creamy in texture with a pink color and powerful flavor.

We manufacture Guava Concentrate using fresh, hygienic and mature Guava fruits. At our processing plants, Guava fruits are processed aseptically as:

Cold Extractor Grinding Enzymatic Deactivation Evaporation Enzyme Addition Puree Concentration Sterilization

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At saisanjana fruit products, we produce pink guava concentrate as well as white guava concentrate. These are mainly used in beverages, ice-creams, jams, jellies, sauces, cereal bars, etc.

While processing tomato paste, skin and seeds are removed, then water content is removed through evaporation. Our automated processes ensure to retain the flavor, color and richness of the fruit. This process converts tomato paste / puree to concentrate. The processed Tomato Puree /Concentrate are then packed into customized aseptic containers.

Manufacturing Practices (GMP) to maintain good quality and consistency.

Our Tomato Puree or Concentrate is widely used in:

Food Soups Stews Sauces Curries Chutneys Ketchups Casseroles Vinaigrettes Any other dish where the tomato flavor is required

Our Products images

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Papaya Puree and Concentrate Papaya Puree and Concentrate are derived from fresh, full ripen and red / yellow papaya fruits which are free from insects and bacteria. Our products are prepared by special thermal treatment free from any food additives or food preserve.

Though Papaya fruits are majorly available in Central and South America, they are also cultivated in other parts of the world. Papaya fruits are available with black seeds, yellow or red color based on the variety. Papaya fruits are normally bell-shaped as one end is smaller compared to other side. Their outer skin is smooth and leathery. It changes from green to yellow as it ripens. Fully ripened Papaya fruits are juicy, sweet in taste, resembles Cantaloupe Fruits in flavor. These fruits contain valuable digestive properties for total diet. Papaya fruits are considered as one the best nutritious fruits by dieticians. Alphorns Mango Pulp: The range of alphonsa mango pulp offered by us is extracted from the fresh, delicious and quality mangoes that are hygienically processed and are stored at the required temperature to provide the real taste of mango. The natural taste and the flavor are the key factors for the high demand for our mango pulp. The frozen mango pulp that we offer provides juicy and sweet taste, which makes it ideal to be served as, slices for dessert or as ice-creams, juice, and milkshakes and so on. Offering Quality Alphonsa Mango Pulp

The range of alphonsa mango pulp offered by us is extracted from the fresh, delicious and quality mangoes that are hygienically processed and are stored at the required temperature to provide the real taste of mango. The natural taste and the flavor are the key factors for the high demand for our mango pulp. The frozen mango pulp that we offer provides juicy and sweet taste, which makes it ideal to be served as, slices for dessert or as ice-creams, juice, milkshakes and so on.

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offering Mango Pulp Kesar Alphorns. The product is manufactured from ripe, sound, hand-picked, selected Kesar / Alphonso mangoes, free from damage, soils and cuts. Ripe mango fruits are washed, inspected, sliced and carefully pulped. The pulpy mass is pasteurized, hot filled in OTS cans and sealed hermetically. The filled cans are then retorted and cooled immediately, The whole operation is carried out with great care to retain maximum level of natural flavor and taste. Refractometric Brix @ 20 C ( Brix ) : 24.0 to 26.0 Acidity : ( % as Anhydrous Citric Acid ) : 0.45 - 0.55 pH as Natural : 3.50 - 4.20 Consistency ( Sec) Ford cup no: 8 : 18.0 - 25.0 Brix- Acid Ratio : 50-70 Co lour : Orangish Yellow Flavor & Taste : Characteristic of Natural Ripe Kesar/ Alphonso Mango, Free from Off- flavor. Appearance : Smooth, Uniform, Homogenous, No Foreign matter. Packing : Packed in cartons /Trays of 12 x A 2 1/2 Cans of 850 gms. net in each carton/ tray OR Packed in trays of 6 x A 2/1/2 Cans of 850 gms. net in each tray OR Packed in Cartons of 24 x A 2 1/2 Cans of 850 gms. net in each carton. Storage : Storage at dry Warehouse conditions at ambient temperature.

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Mango Pulp We are the leading exporter supplier and manufacture in India, We have our own Manufacturing Unite for Spices in South India. We are exporting , supplying all varieties of Mango Pulp with good quality and bulk quantity Mango pulp is the inner fleshy yellow, sweet part of the mango. Pulp of mango can be easily extracted by peeling any variety of mango and then crushing it. In order to extract mango pulp, crush using your hands or put the pieces in a mixer or food processor and blend to a pulp. Health Benefits Mango has high iron content, so pregnant women and people suffering from anemia are

advised to consume it regularly. Thus, fresh mango pulp can be consumed. It combats acidity and improves digestion. Mango is rich source of Vitamin A and Vitamin E which helps hormonal system function efficiently. Selenium is also present in mangoes which provide protection against heart disease. Mango Pulp We offer aseptic kesar mango puree in 220 kgs. Aseptically packed drums, 850 gms. Tins and 3. 1 kgs. Tins. The product is manufactured from ripe, sound, hand picked, selected kesar mangoes, free from damage, soils and cuts. Ripe mango fruits are washed, inspected and sliced and carefully pulped. The pulpy mass is heated, cooled and filled aseptically in pre-sterile aseptic bag. The whole operation is carried out with great care to retain maximal level of natural flavor and taste. Simultaneously ensuring "commercial sterility". Item: aseptic kesar mango puree (16 brix)

Crop: 2011/2012 season Packing: aseptically packed 220 kg net wt bag in drum Please contact for specifications and price with your requirements

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Mango Pulp We at subasri are having nearly 1000 acres of alphonsoa mango plantation in karnataka and all our farmers are doing organic farming since 2006 and certified for both npop and nop standards. We are having good certified processing unit to meet the us and german requirements. As per the spec more... We at subasri are having nearly 1000 acres of alphonsoa mango plantation in karnataka and all our farmers are doing organic farming since 2006 and certified for both npop and nop standards. We are having good certified processing unit to meet the us and german requirements. As per the spec required. (available in 215kg aseptic packing).

Mango Pulp Offering Mango Pulp. All mango pulps conform to highest international standards. Every care is taken to retain the natural characteristics of taste, colour, nutritional value and flavour of the fruits. Mango Pulp is widely used in production of juices, drinks, nectars, fruit cheese, jams. Offering Mango Pulp. All mango pulps conform to highest international standards. Every care is taken to retain the natural characteristics of taste, colour, nutritional value and flavour of the fruits. Mango Pulp is widely used in production of juices, drinks, nectars, fruit cheese, jams and in various other kinds of foods & beverages. Totapuri mango-pulp is the most popular variety with the food and beverage industry worldwide, for its sweet-tart taste. Very popular in the Middle-East region. Product : Totapuri Mango Pulp (2011Crop) Packing : 6 OTS cansX3.1Kgs = 18.6 Kgs per carton Quality : Export Material, De Fresh Mango Pulp

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We are the one of the best supplier of Mango pulp with good quality and more varieties, We able to supply any bulk varieties all over the World Health Benefits Mango has high iron content, so pregnant women and people suffering from anemia are advised to consume it regularly. Thus,

fresh mango pulp more... We are the one of the best supplier of Mango pulp with good quality and more varieties, We able to supply any bulk varieties all over the World

HEALTH BENEFITS:
Mango has high iron content, so pregnant women and people suffering from anemia are advised to consume it regularly. Thus, fresh mango pulp can be consumed. It combats acidity and improves digestion. Mango is rich source of Vitamin A and Vitamin E which helps hormonal system function efficiently. Selenium is also present in mangoes which provide protection against heart disease. Totapuri Mango Pulp & Alphansa Mango Pulp We Supplies Fruit concentrate of Mango and we have carefully tied up with Manufacturer in Dharamapuri and Krishnagiri Belt which is the hub for Tamil Nadu mango Pulp Industry. Apex has an edging system to select the processors from where the Products are sourced. We evaluate their purchasing mechanism, Processing Capacity and strength. We also work with certified manufacturers. We have a strict evaluating mechanism which gives us the consistency in the output. We exported to South Asian countries and Europe Markets. Specification:

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T. S. S. ( Brix) : Min 18-24 Acidity (% as C/A) : Min 0. 5 PH : < 4. 00 Brix Acid Ratio : 32 Ascorbic Acid (ppm): Min 200 Additives : Nil Pesticide residue : Absent Color : Golden yellow Flavor : Characteristic Taste : Characteristic Our Packaging: 3. 1KGS Cans or 215 KGS Drums Loadability3. 1KGS> 1000 Cartons in 20 Feet Container->

Totapuri Mango Pulp We produce fine quality of Totapuri mango Pulp in 3.1 K.G.s tins.

We are a leading exporter and supplier of fresh lemon from India. We offered range is considered as prime source of citrus acid and comes under the house of citrus fruits. It is highly appreciated by our clients for its sweet aroma, tempting colour and flavour. It is widely used by our customers for cooking purposes and can also be consumed in the form of juice. Offered 32

lemons are tested on several quality parameters by our expert quality controllers so that only qualitative range of fruits can be delivered to our clients and it can be availed at reasonable price range.

About Company Contact Person Company Name Year of Establishment IndiaMART Member Since Company Profile : Mrs. Dhanajaya Naidu Andulri : Sai Sanjana Fruit Products : 2005 : 2012 : Manufacturer of white guava pulp, alphonso mango pulp etc.

Need for the study

o To avoiding wastage o To avoid shortage of material o To avoid lack of material o To manage inventory effectively o To meet unexpected demands of material

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OBJECTIVE OF THE STUDY

o To classify the raw material for the better control o To recommend proper inventory management o To suggest suitable measures to improve the inventory management system o To study the effective utilization of inventory o To maintained large size of inventory of raw materials and work in process for efficient and smooth production and finished goods for uninterrupted sales operation o To maintain a minimum investment in inventory to maximize profitability o To study which item is having the high percentage of usage in the processing of finished goods. o To study the major raw materials being used in chittoor co- operative sugar limited

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SCOPE OF THE STUDY

The present study aims at the following Highlight the need for and nature of inventory. Underline need for investing in current assets and elaborate the concept of inventory management. Focus on the need for analyzing investment in inventory. Discuss the process of managing inventory.

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LIMITATIONS OF THE STUDY

o The information used primarily from historical annual reports available to the public and same does not indicate the current situation of the firm. o Detailed analysis could not be carried for the project work because of the limited time span. o Since financial matters are sensitive in nature the same could not be acquired easily o The study is based on the data given by the finance department which has its own limitations. o The information is collected only the secondary data o An extensive analysis was not possible is short of time o The study may not be detailed in all respect

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2. REVIEW OF LITERATURE
Inventory Management is concerned with keeping enough product on hand to avoid running out while at the same time maintaining a small enough inventory balance to allow for a reasonable return on investment. Proper inventory management is important to the financial health of the corporation. Excessive level of inventory, results in large inventory carrying cost, including the cost of capital tied up in inventory warehouse fees, insurance etc. Inventory is needed for the definite consumption demand of materials, and to take care of the uncertainty involved in the usage or availability of the materials. Some times other authors described as the decoupling function of the inventory of materials is maintained at the different stages of production. The inventory taking care of the normal consumption requirements i.e., depending upon the average consumption rates and average lead times for procurement/manufacture of the material, inventories are kept at the appropriate times is called the normal inventory and the inventory taking care of a production process, however continuous it maybe, is bound to have some interruptions; it may also have imbalances in the consumption and production rates of the materials at different stages. These interruptions and imbalances make it necessary to keep stocks of inventory between the different stages of the operations the aspect of this uncertainty is called the safety stock or buffer stock of inventory

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2.1 MEANING OF INVENTORY MANAGEMENT:

Inventory management means safeguarding the company property in the form of inventories and maintaining it at the optimum level, considering the operating requirements and financial resources of the business. Inventory management emphasizes control over purchases, storage, consumption of materials and determining the optimum level for each item of investments.

2.2 IMPORTANCE OF INVENTORY MANAGEMENT:

Inventory management is concerned with keeping enough products on hand to avoid running out while at the same time maintaining a small enough inventory balance to allow for a reasonable return on investment. Proper inventory management is important to the financial health of the corporation; being out of stock forces customers turn to competitors or results in a loss of sales. Excessive level of inventory however, results in large carrying costs, including the cost of capital tied up in inventory warehouse fees, insurance etc. A major problem with managing inventory is that the demand for a corporations product is to a degree uncertain. The supply of the raw materials used in its production process is also somewhat uncertain. In addition the corporations own production contains some degree of uncertainty due to possible equipment breakdowns and labor difficulties. Because of these possibilities, inventory acts as a shock absorber between product demand and product supply. If product demand is greater than expected, inventory can be depleted with out losing sales until production can be stepped up enough to select the unexpected demand. However inventory is difficult to manage because it crosses so many lines of responsibility. The purchasing manager is responsible for supplies of raw material and would like to avoid shortages and to purchases in bulk order take advantages of quantity discounts. The production manager is responsible for uninterrupted production and wants to have enough raw materials and work in process, inventory on hand to avoid disruption in the production process. The marketing manager is responsible for selling the product and wants to minimize the chances of running out of inventory. The financial manager is concerned about achieving an appropriate overall rate of return. Funds invested in an inventory are idle and do not earn a return.

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Nature of Inventories Inventories are stock of the product a company is manufacturing for sale and components that make up the product. The various forms in which inventories that exist in manufacturing company are Raw materials Work-in-process Finished goods Raw materials These are those basic inputs that are converted into finished product through the manufacturing process. Raw materials inventories are those units which have been purchased and stored for future production. Work-in-process These inventories are semi-manufacture products. They represent products that need more work before they became finished for sale.

Finished goods These inventories are those completely manufactured products which are ready for sale. Stocks of raw materials and work-in-process facilitate production while stock of finished goods is required for smooth marketing operations. production and consumption of goods. Need to hold inventories Maintaining of inventories involves trying up the companies and incurrence of storage and handling cost. There are three general motives for holding inventories. Transaction motive It emphasizes the need to maintaining inventories to facilitate smooth production and sales operation. Precautionary motive It necessitates the holding of inventories to guard against risk of unpredictable changes in demand and supply force and other factors. Speculative inventories Thus, inventories serve as link between the

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It influences the decision to increase or reduce inventory level to take advantage of price fluctuations. The firm should always avoid a situation of over investment or under investment in inventories. The major dangers of over investment in inventories are iv. Unnecessary tie up of the funds and loss of profits. v. Excessive carrying cost. vi. The risk of liquidity.

The consequences of under investment in inventories are iv. Production hold-ups v. Failure to meet delivery commitments. Inadequate raw materials. vi. Work-in-process will result in frequent in production interrupts. An efficient inventory management should Ensure a continuous supply of raw materials to facilitate uninterrupted production. Maintain sufficient supply of raw materials in periods of short supply and anticipate price changes. Maintain sufficient finished goods inventory for smooth sales operation and efficient customer service. Minimize the transportation cost on time. Control investment in inventories and keep it at an optimum level Cost of holding inventories The determination of inventory cost is essentially an income measurement problem, a means where by there is rational orderly, systematic interpretation of the effect on the economic progress of the company of expenditures involved acquiring goods or in maintaining and operating productive facilities. Ability to quantify and develop rigorous models of most

managerial problems is dependent on the determination behavior of relevant costs. The practical application of such models is also dependent on ability to obtain the cost data. Relevant inventory costs which change with level of inventory are listed below.

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Ordering costs Every order is placed for stock replenishment, certain cost are involved. The ordering cost may vary, dependent upon type item. This cost of ordering includes Paper work cost, typing and dispatching order. Follow-up costs the follow-up required ensure timely supplies include the travel cost for purchases follow-up, telephone telex and postal bills. Cost involved in receiving the order inception, checking and handling to the stores. Any set up cost of machines if charged by supplier, either directly indicated in quotations or assessed thought quotations for various quantities. The salaries and wages to the purchase department are relevant for consideration if the purchasing function is carried out at the same level with existing staff. There are certain costs that remain the same regardless of the size of the lot purchased or requisitioned. This would be retailer ordering from the distributor, from the distributor ordering from a factory warehouse, for the factory warehouse ordering a new production run from the factory, and for the factory ordering raw materials from vendors. These kinds of costs are called preparation or set up costs. If we are ordering to replenish supplies at one stock point from another stock point, our interest is in the incremental clerical costs of preparing orders, following these orders. Expediting them when necessary, etc, a large segment of the total cost of the ordering function is fixed, regardless of the number orders issued. Even then it may be difficult determined satisfactorily the incremental cost, which results from one more order. Quantity discounts and handling and transport cost are other factors, which vary lot sizes. Preparation cost are the incremental costs of planning production, writing production orders, setting machines and controlling the flow orders through the factory. Material handling cost in the plant have an effect on production lot sizes in much the same way that freight costs may effect purchase lot sizes. Besides the preparation costs of production, there are some other production costs, which have a direct bearing on inventory models, however. These are over time premiums and the incremental cost of changing production levels, such as hiring, training, and separation costs. Carrying costs

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Carrying costs constitutes all the costs of holding items in inventory for a given period of time. They are expressed either in rupees per period or as percentage of the inventory value per period. Components of these costs include the following Storage and handling cost. Obsolescence and deterioration costs Insurance Taxes The cost of the funds invested in inventories Storage and handling costs include the cost of warehouse space. Obsolescence costs represent the decline in inventory value caused by style changes that make the existing product less salvable. Deterioration costs represent the decline in value caused by changes in the physical quality of the inventory such as spoilage and breakage. Another element of carrying cost is the cost of insuring the inventory against losses due to theft, fire and natural disaster. In addition, a company must pay any personal property taxes required by local and state government on the value of its inventories. Like ordering costs, inventory-carrying costs contain both fixed and variable components. Most carrying costs vary with inventory level, but a certain portion of them-such as warehouse rent and depreciation on inventory handling equipment- are relatively fixed over the short run, inventory model such as EOQ model treat the entire carrying cost as variable.

Stock out costs

Stocks out costs are incurred when ever a business is unable to fill orders because the demand for an item is greater than the amount currently available in inventory. When a stock out in raw materials occur, for example, stock out costs include the expenses of placing special orders (back ordering) and delays. A stock out in work in progress inventory results in

additional costs of rescheduling and speeding production with in the plant, and it also may result in reduce production costs if work stoppages occur. Final, a stock out in finished goods

inventory may result in the immediate loss of profits of customers decide to purchase the product from the competitor and in potential long-term losses if customers decide to order from other companies in the future.

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Other characteristics of inventory situations Besides the various types of costs involved, there are other characteristics of the situation that vary among types of inventory and must be captured if the decision model is to be an accurate representation of the physical circumstances. Lead times Obtaining inventory usually requires a lag from the initiation of the process until the inventory starts to arrive. This lead-time may be a few minutes or it may be many months, and depends in part on whether the firm is producing goods for its inventory or is ordering these goods from another firm. To produce goods for its own use, the firm must schedule, set up and adjust manufacturing equipment. Sources and levels of risk Uncertainties play a significant role in inventory situations. Uncertainties usually involve lead times and demand times and demand levels, but situations where other variables are uncertain also occur. Where are substantial Uncertainties and where the costs of stock out are important Strategies for addressing risk must be formulated.

Static versus dynamic problems

Inventory problems are usually divided into two types based on the characteristics of the goods involved. In static inventory problems, the goods have one-period life; there can be carrying over of goods from one period to the next. Inventory situations where decisions involve the number of news papers to print, the number of greeting cards to purchase or the number of calendars to produce are static inventory problems. In dynamic inventory problems, the goods have value beyond the initial period; they do not lose their value completely over time. Replenishment rate Once goods start to be received from a vendor or from the firms own production processes, there are differences among goods in the rate at which they are received. Small orders from vendors are likely to by receive all at once. For example, assume that a firm has placed in order for 10 cases of paper towels. For such a small order the rate of replenishment is infinite; the firms inventories well go up 10 cases in a very short time as the goods are quickly unloaded.

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For large order from vendors, or for inventory produced with in the firm, the replenishment rate may be slower. Types of inventory Inventories can be classified into five basic types on the basis of their production. These various types of inventories cannot be identified and segregated within the organization. These five types are

1. Management inventory
They are needed because of the time required to move stocks from one place to another place.

2. Lot size Inventories

These are as a result of buying materials in quantities larger than the immediate requirement, with a view to minimizing cost of transportation, buying, receipt and handling and to obtaining quantity discount.

3. Fluctuation Inventories
These are carried to ensure ready suppliers to consumer even when these are irregular and unpredictable fluctuations in their demand. 4. Anticipation inventories These are usually maintained to meet a predictable but changing pattern of future demand.

5. Cycle Inventories
These result from managements attempt to minimize the total cost of carrying and ordering inventory. They arise from ordering in batches or lots, rather from needed basis. Inventories can be further classified into production inventories maintenance repair and operation (MRO) inventories, in-process inventories and finished goods inventories.

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Production inventory consists of raw materials parts and components which are used in the production process forming parts of the final product. Maintenance, repair and operation supplies which are used in the production of goods or services but do not become part of the product. In-process inventories are semi-finished materials, parts and assemblies found at various stages in the production operation.

Finished goods inventory consists of completed products ready for sale.

2.3 TECHNIQUES OF THE INVENTORY

1) ABC ANALYSES

MANAGEMENT

The ABC method is an analytical method of stock control which aims at concentrating efforts on those items where attention is needed most. It is based on the premise that a small number of the items in inventory may typically represent the bulk money value of the total materials used in production process. While a relatively large number of items may represent a small portion of the money value of stores used and that small number of items should be subject to the greatest degree of continuous control. Under this system, the materials stocked may be classified into a number of categories according to their importance i.e., their value and frequency of replenishment during a period. The first category, we may call it the group of A items, may consist of only a small percentage of total items handled but its combined value may be a large portion of the total stock value. The second category, naming it as group of B items, may be relatively less important. In the third category consisting of C items, all the remaining items of stock may be included which are quite large in number but their value is not high.

Categories of ABC analysis In ABC analysis the items are classified in three main categories based on their respective consumption value. 1. Category A items:

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The items, which are most costly and valuable, are classified as A nearly 10 percentage of the total number of items stored will account for 70 percentage of total value of all items stocked. 2. Category B items: The items having average consumption value are classified as B nearly20 percentage of total number of items will account for 20 percentage of total value. Statistical sampling is general useful to control them. 3. Category C items: The items having low consumption value are put in category C nearly 70 percentage of total number as items will account for 10 percentage total values. Generally these items are slow and non-moving items in the stores, which are frequently used for production process but with more quality. 2) VED CLASSIFICATION This analysis is based on criticality of inventory, it is used to determine the criticality of the 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 essential ,then it is given E classification and if it is not essential the part is given D classification for V items, a large stock of inventory is generally maintained ,these item have immediate effect on production more attention paid for this item. 3) ECONOMIC ORDER QUANTITY The economic order quantity is that inventory level, which minimizes the total of ordering cost and carrying costs. It is the question, how much to order the quantity when inventory is replenished. If the firm is buying raw materials, the question is to purchase the quantity of; each replenishment and if it has to plan for production run, it is how much production to schedule. It may be solved through EOQ.

COST OF HOLDING INVENTORIES The determination of inventory costs is essentially an income measurement problem, a means whereby there is a rational, orderly, systematic interpretation of the effect on the economic progress of the company of expenditures involved in acquiring goods or in

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maintaining and operating productive facilitates. Ability to quantify and develop rigors models of most managerial problems is dependent on the determination of the behavior of relevant costs. The practical application of such models is also dependent on ability to obtain the cost data. Relevant inventory costs which change with the level of inventory are listed below. Ordering cost: Every timer an order is placed for stock replenishment, certain costs are involved. The ordering cost may vary, dependent upon the type of item. However, an estimate of ordering cost can be obtained for a given range of items. 1. Paper work costs, typing and dispatching an order. 2. Follow up costs-the follow-up required to ensure timely to ensure timely supplies include the travel cost for purchase followup, telephone, telex and postal bills. 3. Cost involved in receiving the order inspection, checking and handling to the stores. 4. Any set up cost of machines if charged by the supplier, either directly indicated in quotations or assessed through quotations for various quantities. 5. The salaries wages to the purchase department are relevant for consideration if the purchasing function is carried out at the same decreases significantly, obviously a proportional amount of personnel will be transferred to other departments.

Carrying Costs: Carrying costs constitute all the costs of holing items in inventory for a given period of time. They are expressed either in rupees per unit per period or as a percentage of the inventory value per period. Components of this cost include the following. 1.Storage and Handling costs: It includes the cost of warehouse space. 1. Obsolescence and deterioration costs:Obsolescence costs represent the decline in inventory value caused by technological or style changes that make the existing product less salable. Deterioration costs represent the decline in value caused by changes in the physical quality of the inventory, such as spoilage and breakage. 2. Insurance: The inventory against losses due to the theft, fire, and natural disaster. 3. Taxes: A company must pay any personal property taxes and business taxes required by local and state governments on the value of its inventory.

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4. The cost of funds invested in inventories: It is measured by the required rate of return on these funds. Because inventory investments are likely to be of average risk the overall weighted cost of capital should be used to measure the cost of these funds. 5. Storage and Handling costs: It includes the cost of warehouse space. EOQ for an item is arrived on the following assumptions 1. .Demand is continuous at a constant rate. 2. The process continues infinity. 3. No constraints are imposed on quantities ordered, storage capacity, budget etc., 4. Replenishment is instantaneous. 5. All costs are time invariant. 6. Units are not available. EOQ for an item is arrived by the following formula EOQ=

2 * AD * Co CH

Where EOQ=economic order quantity Co=cost of ordering an order AD= annual consumption of an item CH=cost of carrying one unit/year 4) HML CLASSIFICATION The high and 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 not the annual consumption value. The item of inventory should be listed to the descending order of unit value and it is up to the management to fix limits for the three categories. For example, the the management may decided that all units with unit value of Rs.2000 and above will be H items, Rs 1000 to 2000 M items and less than Rs. 1000, l items. The HML analyses is useful for keeping control over consumption at department levels for deciding the frequency of physical , and for controlling purchases.

5) SDE CLASSIFICATION

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The SDE classification is based upon the availability of items and is very useful in the context of scarcity of supply. In this analysis, S refers to scarce items, generally imported, and those which are in short. D refers to difficult items, which are available indigenously but are difficult items to procure. Items which have to come form distance places or for which reliable suppliers are difficult to come by, fall in to D category. E refers to items which are easy to acquire and which are available in the local strategies The SDE classification. Based on problems faced in procurement, is vital to the lead-time analyses and in deciding on purchases strategies.

6) MINIMUM-MAXIMUM TECHNIQUE The minimum maximum system is often used in connection with manual inventory control system. 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, a 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 reduce the stock the stock substantially below the minimum level, the order quantity will be higher than the calculated EOQ. The effectiveness of a minimum system is determined by the method and precision with which the minimum and maximum parameters are established 7) 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 in to two bins. One bin contained 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, an order for replenishment is placed, and although the system itself possesses a high degree of atomic, in practice, we need, for such a system, 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 staff and there is need to take physical count of inventory levels.

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3. RESEARCH METHODOLOGY
3.1 NEED FOR THE STUDY
The choice of area of the study for the project work was given after initial study of company's operations and the system of working. Though the company has several departments; the prime area was finance. After scrutinizing various financial aspects, It is that inventories which consists an integral part of Inventory Management System at Foods and Inns Ltd.,. The company did not follow any scientific Inventory management system and hence there raised a need to devise a system which could considerably reduce the cost and thus constituting towards profitability. The store is maintained by storing raw materials in racks and is replenished whenever it is necessary. The stock reviewed occasionally according to its importance in the Production process. Orders placed according to the production requirements.

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NEED FOR THE STUDY

o To avoiding wastage o To avoid shortage of material o To avoid lack of material o To manage inventory effectively o To meet unexpected demands of material

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OBJECTIVE OF THE STUDY

o To classify the raw material for the better control o To recommend proper inventory management o To suggest suitable measures to improve the inventory management system o To study the effective utilization of inventory o To maintained large size of inventory of raw materials and work in process for efficient and smooth production and finished goods for uninterrupted sales operation o To maintain a minimum investment in inventory to maximize profitability o To study which item is having the high percentage of usage in the processing of finished goods. o To study the major raw materials being used in chittoor co- operative sugar limited

53

SCOPE OF THE STUDY

The present study aims at the following Highlight the need for and nature of inventory. Underline need for investing in current assets and elaborate the concept of inventory management. Focus on the need for analyzing investment in inventory. Discuss the process of managing inventory.

54

LIMITATIONS OF THE STUDY

o The information used primarily from historical annual reports available to the public and same does not indicate the current situation of the firm. o Detailed analysis could not be carried for the project work because of the limited time span. o Since financial matters are sensitive in nature the same could not be acquired easily o The study is based on the data given by the finance department which has its own limitations. o The information is collected only the secondary data o An extensive analysis was not possible is short of time o The study may not be detailed in all respect

55

STATISTICAL TOOLS
Correlation method
Using the correlation analysis we can find whether there is any relationship between the variables. Correlation and regression analysis show how to determine the nature and strength of the relationship between variables. The correlation analysis is used to determine the degree of the relationship between the variables.

Correlation formula: XY - (X) (Y) ------------N R = ----------------------------------------------- X 2 - (X) 2

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

Y 2 - (Y) 2
-----------

56

3.4 RESEARCH DESIGN:

Research Design is the arrangement of conditions for collections and analysis of data in a manner that aims to combine relevance to research purpose with economy in procedure.

Research Design, stands for advanced planning of the methods to be adopted for collecting the relevance data and the techniques to be used in the analysis.

RESEARCH METHODOY / TOOLS FOR DATA COLLECTION:

DATABASE: The study is based on both primary and secondary data, which were obtained from the following sources.

A) PRIMARY DATA: The primary data was collected by preparing questionnaire and also by personnel interviews with a few officials.

B) SECONDARY DATA: Secondary data is the data obtained from the published sources such as organizational literature, files, periodicals, brochures, manuals and textbooks.

FIELD WORK:

This was undertaken individually to collect the various information regarding the study by visiting the following sections.

57

I- Machine/Work shops: Information regarding the production process in wheel shop, Axle shop and Assembly shop were obtained.

II- Stores Deport: Information regarding the stocking of materials, receipt and issues to workshops, inventory, and control procedures in various branches inside the Depot was obtained.

III- Accounts Department: Rest of the information was obtained from accounts department through personnel interviews with section officials.

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3.5 LIMITATIONS OF THE STUDY

Time factor is the major limitation. For ABC analysis consumption of raw materials is only taken and for EOQ main raw materials are only considered.

Some of the information is kept confidential and has not been disclosed by the executives.

This study is further limited to Raw material & Packing material only.

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4. DATA ANALYSIS AND INTERPRETATION

TABLE 4.1 ABC ANALYSIS ON THE YEAR 2007-2008

ITEMS Concentrate (in units) Co2 Gas (in kegs) Preforms (Nos.) Closures(Nos.) Sugar(in kegs) Labels and sleeves(nos.) Pulp (in kgs) Carton trays (nos.) Wt chemicals Syrup chemicals(kegs)

QTY 45800

QTY VALUE 1.6

VALUE 73280

% 45.49

CUMLATIVE% 45.49

ABC ANALYSIS A

5906 165 72 95 69

6 74 149 74 97

35436 12210 10728 7030 6693

21.99 7.57 5.65 4.36 4.15

67.48 75.05 81.7 86.06 90.21

A B B B C

42

130

5460

3.389

93.59

81 150 8

39 21 378.75

3159 3150 3030

1.96 1.955 1.88

95.55 97.514 99.44

C C C

60

TABLE 4.1.1 SHOWING THE ABC ANALYSIS FOR MATERIAL & COMPONENTS

S NO 1 2 3

ABC ANALYSIS A B C

TOTAL 2 3 5

CHART 4.1 SHOWING THE ABC ANALYSIS

A B C ANALYSIS
7 6 5 4 3 2 1 0 A B CATEGORY C

INFERENCE Above table showing the details for stores differential that material are classified in A B C. Above 21.99% material given A. than above the 4.36% to below 21.99% material value is B. than below 4.36% material adding value is C.

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TABLE 4.2 ABC ANALYSES ON THE YEAR 2008-2009

QTY VALUE 1.6 ABC ANALYSIS A

ITEM Concentrate (in units) Co2 Gas (in kegs) Preforms (Nos.) Closures(Nos.) Sugar(in kegs) Labels and sleeves(nos.) Pulp (in kgs) Carton trays (nos.) Wt chemicals Syrup chemicals(kegs)

QTY 55600

VALUE 898960

% 41.7

CUMLATIVE% 41.7

10675 200 80 105 75

6 75 150 75 97

64050 1500 12000 7875 7275

30.1 7.04 5.64 3.71 3.42

71.8 78.84 84.48 88.19 91.61

A B B B B

45

140

6300

2.96

94.57

10 160 83

380 21 39

3800 3360 3237

1.8 1.6 1.52

96.37 97.97 99.49

C C C

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TABLE 4.2 .1 SHOWING THE ABC ANALYSIS FOR MATERIAL & COMPONENTS
S NO 1 2 3 ABC ANALYSIS A B C TOTAL 2 4 5

CHART 4.2 SHOWING THE ABC ANALYSIS

A B C ANALLYSIS
6 5 4 3 2 1 0 A B CATEGORY C

INFERENCE

Above table showing the details for stores differential that material are classified in A B C. Above 30.1 % material given A. than above the 3.42% to below 30.1% material value is B. than below 3.42% material adding value is C.

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TABLE 4.3 ABC ANALYSIS ON THE YEAR 2009-2010

QTY VALUE 75 ABC ANALYSIS A

ITEM Concentrate (in units) Co2 Gas

QTY 4506

VALUE 337950

% 48.06

CUMLATIVE% 48.06

85500 (in kegs) Preforms (Nos.) Closures(Nos.) Sugar(in kegs) Labels and sleeves(nos.) Pulp 490 (in kgs) Carton trays 153 (nos.) Wt chemicals 96 15675 72 1600

1.6

136822

19.5

67.56

6.2 380 150

97185 27360 24000

13.1 3.9 3.5

80.66 84.56 88.06

B B B

277

77.5

21467.5

3.15

91.21

39.5

19355

2.8

94.01

98

14994

2.5

96.51

150

12480

1.9

98.41

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TABLE 4.3.1 SHOWING THE ABC ANALYSIS FOR MATERIAL & COMPONENTS

S NO 1 2 3

ABC ANALYSIS A B C

TOTAL 2 3 5

CHART 4.3 SHOWING THE ABC ANALYSIS

A B C ANALYSIS
7 6 5 4 3 2 1 0 A B CATEGORY C

INFERENCE

Above table showing the details for stores differential that material are classified in A B C. Above 19.5% material given A. than above the 3.15% to below 19.5% material value is B. than below 3.15% material adding value is C

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TABLE 4.4 ABC ANALYSIS ON THE YEAR 2010-2011

ABC ANALYSI S A

ITEM Concentrate (in units) Co2 Gas (in kegs) Preforms (Nos.) Closures(Nos.) Sugar(in kegs) Labels and sleeves(nos.) Pulp (in kgs) Carton trays (nos.) Wt chemicals Syrup chemicals(kegs)

QTY

QTY VALUE 77.9624

VALUE

CUMULATIVE %

9904 39105 0 67150 1850 1950 950

772139.6

28.1

28.1

1.6576 6.543 98 76.5 155

648204.5 439362.5 181300 149175 147250

23.57 15.97 6.6 5.42 5.35

51.5 67.47 74.07 79.49 84.84

A A B B B

5050

23

116150

4.22

89.06

280 750 1310

386 129 40.0786

108080 96750 52502.9

3.93 3.52 1.91

92.29 96.51 98.42

C C C

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TABLE 4.4.1 SHOWING THE ABC ANALYSIS FOR MATERIAL & COMPONENTS
S NO 1 2 3 ABC ANALYSIS A B C TOTAL 3 4 3

CHART 4.4 SHOWING THE ABC ANALYSIS

A B C ANALYSIS
5 4 3 2 1 0 A B CATEGORY C

INFERENCE Above table showing the details for stores differential that material are classified in A B C. Above 15.97% material given A. than above the 3.93% to below 15.97% material value is B. than below 3.93% material adding value is C.

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TABLE 4.5 ABC ANALYSIS ON THE YEAR 2011-2012

QTY VALUE 75 ABC ANALYSIS A

ITEM Concentrate (in units) Co2 Gas (in kegs) Preforms (Nos.) Closures(Nos.) Sugar(in kegs) Labels and sleeves(nos.) Pulp (in kgs) Carton trays (nos.) Wt chemicals Syrup chemicals(kegs)

QTY 18005

VALUE 1350375 922388. 6 455657. 6 288800 131750 131175

% 36.82

CUMULATIVE % 36.82

554520 69460 1900 1700 1325

1.6634 6.56 152 77.5 99

25.15 12.42 7.87 3.59 3.57

61.97 74.26 82.26 85.85 89.42

A B B B B

1400

67

93800

2.55

91.91

3565 633 1829

24 130 39.7

85560 82290 72611.3

2.33 2.24 1.97

94.3 96.54 98.58

C C C

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TABLE 4.5.1 SHOWING THE ABC ANALYSIS FOR MATERIAL & COMPONENTS
S NO 1 2 3 ABC ANALYSIS A B C TOTAL 2 4 4

CHART 4.5 SHOWING THE ABC ANALYSIS

A B C ANALYSIS
6 5 4 3 2 1 0 A B CATEGORY C

INFERENCE Above table showing the details for stores differential that material are classified in A B C. Above 25.15% material given A. than above the 3.57% to below25.15 % material value is B. than below 3.57% material adding value is C.

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High and medium and low classification To classification on the raw material in the bases of the quantity value above 100 Rs is high and 50 to 100 are medium and below 50 are low

TABLE 4.6 THE CLASSIFICATION HIGH AND MEDIUM AND LOW ON THE YEAR 2006-2007
ITEM Concentrate (in units) Co2 Gas (in kegs) Performs (Nos.) Closures(Nos.) Sugar(in kegs) Labels and sleeves(nos.) Pulp (in kgs) Carton trays (nos.) Wt chemicals Syrup chemicals(kegs) 96 320 150 22 12480 7040 H M 153 98 14994 M 15675 72 1600 277 6.2 380 150 77.5 97185 27360 24000 21467.5 L H H M QTY 4506 85500 QTY VALUE 75 1.6 VALUE 337950 136822 CLASSIFICATION M L

490

39.5

19355

70

TABLE 4.6.1 SHOWING MATERIALS &COMPONENTS

S NO 1 2 3 H M L CLASSIFICATION H M L TOTAL 3 4 3

CHART 4.6 SHOWING THE H M L CLASSIFICATION

H M L CLASSIFICATION
4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 H M L

INFERENCE

The above table showing the detailed for stores material differentiation the material classified in high and medium and low the above quantity value is 100Rs is high classification and above 50Rs to 100Rs is medium and below 50Rs is low her high classification of material is low consumption and low classification of materials is high consumption and medium classification of raw material is consumption is medium

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TABLE 4.7 THE CLASSIFICATION HIGH AND MEDIUM AND LOW ON THE YEAR 2010-2011

ITEM Concentrate (in units) Co2 Gas (in kegs) Preforms (Nos.) Closures(Nos.) Sugar(in kegs) Labels and sleeves(nos.) Pulp (in kgs) Carton trays (nos.) Wt chemicals Syrup chemicals(kegs)

QTY 4506

QTY VALUE 75

VALUE 337950

CLASSIFICATION M

85500 15675 72 1600 277

1.6 6.2 380 150 77.5

136822 97185 27360 24000 21467.5

L L H H M

490

39.5

19355

153 96 320

98 150 22

14994 12480 7040

M H M

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TABLE 4.7.1 SHOWING MATERIALS &COMPONENTS

S NO 1 2 3

H M L CLASSIFICATION H M L

TOTAL 4 3 3

CHART 4.7 SHOWING THE H ML CLASSIFICATION

H M L CLASSIFICATION
4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 H M L

INFERENCE The above table showing the detailed for stores material differentiation the material classified in high and medium and low the above quantity value is 100Rs is high classification and above 50Rs to 100Rs is medium and below 50Rs is low her high classification of material is low consumption and low classification of materials is high consumption and medium classification of raw material is consumption is medium

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TABLE 4.8 THE CLASSIFICATION HIGH AND MEDIUM AND LOW ON THE YEAR 2011-2012
ITEM Concentrate (in units) Co2 Gas (in kegs) Preforms (Nos.) Closures(Nos.) Sugar(in kegs) Labels and sleeves(nos.) Pulp (in kgs) Carton trays (nos.) Wt chemicals Syrup chemicals(kegs) 96 320 150 22 12480 7040 H M 153 98 14994 M 15675 72 1600 277 6.2 380 150 77.5 97185 27360 24000 21467.5 L H H M QTY 4506 QTY VALUE 75 VALUE 337950 CLASSIFICATION M

85500

1.6

136822

490

39.5

19355

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TABLE 4.8.1SHOWING MATERIALS &COMPONENTS

S NO 1 2 3 H M L CLASSIFICATION H M L TOTAL 4 4 2

CHART 4.8 SHOWING THE H M L CLASSIFICATION

H M L CLASSIFICATION
4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 H M L

INFERENCE

The above table showing the detailed for stores material differentiation the material classified in high and medium and low the above quantity value is 100Rs is high classification and above 50Rs to 100Rs is medium and below 50Rs is low her high classification of material is low consumption and low classification of materials is high consumption and medium classification of raw material is consumption is medium

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INVENTORY TURNOVER RATIOS:

It denotes the speed at which the inventory will be converted into sales, thereby contributing for the profits of the concern. When all other factors remain constant, greater the turnover of inventory more will be efficiency of its management. This ratio is calculated as follows:

Inventory Turnover Ratio

TABLE 4.9

Cost of GoodsSold AverageStock heldduringthePeriod

RATIO YEAR COST OF GOODS SOLD AVERAGE STOCK IN % 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 16,82,44,220 3,26,16,707 11,52,46,375 25,75,46,899 38,10,97,458 44,38,68,320 23,41,47,888 13,75,97,979 8,30,65,437 18,24,64,927 26,42,10,401 26,57,05,437 0.71 0.23 1.38 1.41 1.44 1.67

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CHART 4.9 SHOWING THE INVENTORY TURN OVER RATIO

TURN OVER RATIO 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0
2006-2007 2007-2008 2008-2009 2009-2010 2010-201\1 2011-2012

Ratio

Year

INFERNCE: The inventory turnover ratio indicates the efficiency of the firm in producing and selling its products. A low inventory turnover implies excessive inventory levels than required for production. The company have high ratio of inventory except in the 2006-07 i.e. 0.23 it is not good. That is all stock stored in gowdons.

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THE RAW MATERIAL TO INVENTORY TURNOVER RATIO

Raw material to inventory ratio = raw materials / inventory TABLE 4.10 YEAR 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 RAW MATERIALS 20474.2 20474.2 20474.2 20474.2 20474.2 20474.2 INVENTORY 219662803.7 96849740.27 110043159.00 304641449.5 281582198.3 332338380 Ratio in % 0.009320741 0.02114017 0.018605609 0.006720753 0.007271127 0.006160649

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CHART 4.10 SHOWING RAW MATERIAL IN TO INVENTORY RATIO

INVERNTORY RATIO
0.025 0.02

Ratio

0.015 0.01 0.005 0

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Year

INFRENCE From the analysis of above data it is infers that the raw material quantum is constant is each and every year. But the % of raw material to inventory a little up and down movements in each and every year. Due to changes in variable expenditure in production point

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DAYS IN INVENTORY
The number of days inventory is also knows as average inventory period and inventory holding period. A high number of days inventory indicates that there is a lach of demand for the product being sold. A low day in inventory ratio may indicated that the company is not keeping enough stock on hand to meet demands

Number of day inventory = 365days / inventory turnover ratio

Table showing the inventory turnover days TABLE 4.11 YEAR 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 COSTOF GOODS SOLD 168244220 32616707 115246375 257546899 381097458 443868320 AVERAGE INVENTORY 234147888 137597979 83065437 182464927 264210401 265705437 RATIO IN % 0.71 0.23 1.38 1.41 1.44 1.67 TURNOVER DAYS 53 68 79 112 150 135

80

CHART 4.11 SHOWING THE INVENTORY IN DAY

INVERNTORY TURN OVER DAYS 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Ratio

Year

INFERENCE The inventory turnover ratio trend over a period for six years was analllyzed and it was found the inventory turn over ratio has fluctuated every year. And has increased in the following year from 2006to 2012 this shows that an idle turnover ratio was maintained and this is considered as positive indicator of operating efficiency and good from the point of the view of liquidity. The average inventory turnover days will come around days 99.5

81

THE INVENTORY TO CURREN ASSET TURNOVER RATIO

Inventory to current ratio = inventory / current assets TABLE 4.12 YEAR 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 INVENORY 219662803.70 96849740.27 110043159.00 304641449.50 281582198.30 314228729.9 CURRENT ASSETS 226868511 114579993 131888616 313864100 301353353 332338380 RATIO IN % 96.82 84.53 83.4 97.1 93.44 94.6

82

CHART 4.12 SHOWING THE INVENTORY TO CURRENT RATIO

CURRENT TURN OVER RATIO 100 95 90 Ratio 85 80 75

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Year

INFERENCE From the analysis of inventory to current assets ratio it is infers that the ratio of inventory to current assets is 2010 is, 2011, and 2012. Respectively it is increased is inventory position in current assets

83

SHOWING THE INVENTORY TO FIXED ASSETS TURNOVER RATIO Inventory to fixed assets ratio = inventory / fixed assets YEAR 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 INVENORY 219662803.70 96849740.27 110043159.00 304641449.50 281582198.30 314228729.9 FIXED ASSETS 115561613 115561613 115955117 118336877 128679423 130066672 RATIO IN % 190.1 84.49 94.9 257.4 218.8 241.5

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CHART 4.13 SHOWING THE INVENTOY TO FIXED ASSETS RATIO

FIXED ASSETS RATIO

300 250

Ratio

200 150 100 50 0

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Year

INFERENCE From the analysis of above data it is infers that the ratio of inventory to fixed assets it is decreasing from 2007 to 2009 in 2007 it increased to 257.4% in 2008 is decreased to 218.8% and in 2012 it is increased to 241.5%

85

FINDING THE CO RELATIONSHIP BETWEN PURCHASES AND SALES TABLE 4.14

YEAR 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 SALES 201486573.36 130517436 96920394 124629656 369059519 359736526 PURCHASES 117582913 118292431 109672342 147368921 345673267 290573567

AIM To determine whether there is co- relationship between purchases of raw material and sales TABLE 4.15 YEAR SALES IN CROSS 20.148 13.05 09.92 12.46 36.90 35.97 X=119.44 PURCHASES IN CROSS 11.75 11.82 10.96 14.73 34.65 29.05 Y= 122.96 X2 405.6 170.30 98.40 155.25 1361.61 1293.84 (X)2=3484.35 Y2 138.06 139.71 120.12 216.97 1200.65 843.90 (Y)2=2659.66 XY 236.64 154.25 10.08 183.53 1278.58 1044.92 XY=2908.008

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 N=6

86

FORMULA XY - (X) (Y) ------------N R = ----------------------------------------------- X 2 - (X) 2

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

Y 2 - (Y) 2
-----------

2908.8 (119.4) (112.96) --------------------6 R = ------------------------------------------------------------------- 3484.35 (119.44) 2 ----------6 2659.41- (112.16) 2 ---------6

659.35 R = ----------------734.5

R = 0.89

CONCLUSION There is high positive co- relation between sales and purchases of raw material

87

5.1 FINDINGS
It is found that the inventory turnover ratio going on increasing from 2007-08 is 0.23% to in 2008-09 is 1.67%, it leads to the gross profit ratio going on decreasing The inventory to current assets ratio is 2007,us 96.82% in 2008 is 84.53% , in 2009 is 83.4% ,in 2010 is 97.1%, in 2011 is 98.44% and is 2012 is 94.6% It is found that the ratio of inventory to fixed assets in 2007 is 190.1% , in 2008 is 83.49%, in 2009 is 94.9% , in 2010 is 257.4% , in 2011 is 218.8% and in 2012 is 241.5% From high and medium and low classification method mainly three raw material items were classified high but it is utilization has is lees , remaining four materials were classified as both medium and low classification but low classification items are

consumption is very high. The inventory turnover ratio indicates that conversion of the inventory of the cash is very fast through the study. It is increasing trend. The inventory turnover ratio has been increasing for the year 2007-08 to 2010-11 Show it is shows the effective and efficiency of the company inventory management system

88

5.2. SUGGESTIONS
It is suggested that , there is increasing in the inventory turnover ratio, so it control its cost of production point for the enjoying of high Gross profit ratio The organization should control cost, for increasing raw material to inventory ratio The organization may have to increase gradually the ratio of inventory to fixed asset The organization may have to maintain sufficient portion of cash in current assets, becos3e is high ratio of inventory to current assets From the study A B C analysis of raw material the company was good show the company may be use these method for the their proper utilization and control of raw material Inventory should be given in accordance the change of technology Regular feedback should be taken from the inventory management The finance department has to maintain the same procedure to develop inventory management The company has to concentrate on research and development so that it can use the inventory efficiently and reduce wastages Company it should strive for getting the right goods to the place at the right time for the least cost. may has to

89

5.3 CONCLUSION
Sai sanjana Industry needs inventory for smooth running of its activities. It serves as a link between production and distribution processes. There is generally a time lag between the recognition of a need and its fulfillment. The unforeseen fluctuations in demand and supply of goods also necessitate the need for inventory. It also provides cushion for future poses fluctuations.

The investment in inventories constitutes the cost of significant part of current assets/working capital in most of the undertakings. Thus, it is very essential to have proper control as and when required and to minimize investment in inventors.

The Sai sanjana maintain high closing balances of inventory it leads to over expenditure so company should control over expenditure to maximize profits.

90

BIBLIOGRAPHY
I. M. PANDEY (2005), financial management, ninth edition vikas publishing house pvt ltd. S. N. MAHESWARI (2006), financial and management accounting, fifth edition, sultan chand and sons, New Delhi. C. R. KOTHARI, research methodology and techniques. Second edition, new Agency international pvt ltd. BAKER. R .P & HOW WELL. A.C, the preparation of reports, New York Ronald press. S.P. GUPTHA (1995), statistical methods, sultan chand and, co New Delhi. P.RAMMURTY (2005), production and operation management, new agency international pvt ltd AHUJA H.L, economic environment of business, macroeconomic analysis, chand&company ltd, New Delhi, 2005.

WEB SITES
www. Google.com www. Saisanjanafoods.com

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