Final ABC Inventory

INVENTORY MANAGEMENT
ABCTC. LTD.
1. INTRODUCTION
Coffee is one of the healthy drinks among all the beverages. If we think about refreshment, coffee is the first thing comes to our mind. In rainy and winter seasons the usage of coffee is more and it has become a part of human beings life. Caffeine is a substance found in coffee plants, which stimulates the central nervous system. Before 1200 A.D., the coffee industry had spread along the red sea to Aden and cargo in Ethiopia. Then coffee was sold through Mediterranean Sea. Most pilgrims had started to cultivate coffee in India about 1600 A.D. Large scale coffee cultivation started in Brazil. In 1729 A.D., it produced 200,000 bags and in 1825 A.D., it was 3 million bags. After 80 years, they started coffee export and reached 4 million bags. Brazil coffee market reached surplus because of uncontrolled production and cultivation of coffee. In past 20 years coffee trade from Africa has grown more rapidly than elsewhere and contributed rapidly to the growing surplus. The Central American countries have increased their share to world coffee exports from about 5% in 1990 A.D to about 14% in 1970. This growth had occurred with mild coffees, which command and favorable. The highest consumption of coffee is recorded in the U.S which had about 450 million consumers and the rest of the world about 2450 million consumers Today 25 million people worldwide are provided with direct employment in coffee and considering the formers and the employment effect of coffee related services at least 100 million people depend in coffee as major source of income. The world coffee production in 1999-2000 forecast at the rate of a 107.5 million bag and that is 14% above the revised 1998-99 crop and up 3% on the previous record of 1997-98. Brazils 1998-99 products are forecasted at the rate of 35.8 million bags and Columbia at the worlds production, which is normally 36-37%. North American producing countries including Central America produces 20% of the worlds coffee production. In 1990, world production was 93 million bags. Where worlds domestic consumption was 21.5 million bags and worlds exportable production is 71.5 million bags. In 1990 Arabica captures 75.5% of the world production and rest 24.3% followed by Robusta. Today coffee grown and exported by own to developing countries in the world. It is estimated that in 2002, over 95 million bags of coffee were consumed world wide. Of these, 21.5 million bags were consumed in coffee producing countries themselves while over 73.9 million bags were
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ABCTC. LTD.
consumed in importing in 2001, which is followed by countries like German, France, Japan, UAE, and Italy. Here we have concentrated on coffee, which is considered as traditional drinks especially in south India. People here start their everyday life with a cup of coffee. Not only in south India but in all parts of the world people are so dependent and addicted to coffee that it acts as a daily schedule to everybody everywhere. But this coffee is not grown in all parts of the world but is grown in very few places with right kind or weather, atmosphere and most important of all, the soil of that region. It is usually grown in hill stations with adequate amount of rainfall and such places, which are high above sea level. Therefore in India, Karnataka is such a place, especially South Karnataka that produces the highest amount of coffee in whole India. Most parts of Karnataka such as Chikmagalur district and many parts in Hassan District, and also Coorg. So people here feel proud to be citizen of such place where coffee takes its birth. So that being the main reason, I have concentrated on a organization which has its roots spread very vast in coffee industry and is a major player in worlds import/export of coffee and deals in coffee beans curing activities present in Hassan. Indian coffee industry is defiantly a huge sized industry which plays a very major role in the world market of coffee. India at present is in 8 th place in its contribution of coffee and its plantation in the whole world and 1st place being Brazil. But not all parts of India produce coffee. It is grown mostly in south India and highest part of its growth from the whole India is in Karnataka that is from districts of Hassan, Chikmagalur and Coorg. Rest is grown in states of Tamilnada, Andrapradesh, Kerala and other northern parts such as Sikkim and Nagaland. So as shown in the next table about the quantity of coffee that is produced in the whole India we come to know that the whole output of India is 2.88 lack tones coffee per annum, more than 2 lack tones is grown only in Karnataka and rest in other parts of India as mentioned in the table below. So among 2.06 lack tones of whole Karnatakas coffee production, ABCTCL has a huge contribution to coffee exports among the many competitors in the same business
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ABCTC. LTD.
2. COMPANY PROFILE
Amalgamated Bean Coffee Trading Company Limited is an entrepreneurial venture of its chairman Mr. V G Siddhartha. His passion with the coffee coupled with the opportunity provided by the deregulation of the coffee board in 1993 created the perfect timing for the launch of this company. The visionary chairman Mr. Siddhartha could foresee the demand for Indian coffee abroad and ABC Trading Company Ltd began exporting coffee to coffee-connoisseurs across USA, Europe and Japan. The Coffee Day as brand was born in the year 1994. In the year 2000, coffee day exported more than 27,000 bags of coffee valued at US$60Mn and for second time, in a short span of 7years, retained its position as the largest coffee exporter of India. In the short journey of 13 years, the company has grown into six divisions and has overtaken one milestone after another without looking back. Mr. V G Siddhartha, the chairman has vision to further expand ABC Trading Company Ltd in the domestic and overseas market. 2. a. Background & Inception of the Company: It is one of the biggest organizations in the coffee industry and getting world-class recognition now days. ABCTCL was stated in the 1991 year and owned by Mr. B.G Siddhartha. Registered office of ABCTCL is in Chikmagalur and has its own coffee growing estate which spreads in an area more than 20000 acres in Chikmagalur district. Amalgamated Bean Coffee Trading Company Limited is perhaps one of the too fully integrated coffee companies of Asia, involved in all sectors of Coffee from plantations to retailing to exports. Amalgamated Bean Coffee Trading Company, better known as "ABC", is one of the largest exporters of green coffee from India since 1999. ABC's business mission has its roots in coffee knowledge. This culminates into an incessant effort to adapt to dynamics of the coffee market resulting onto a leadership role. ABC has invested well into a Research and development on coffee quality that supports our domestic promotion of various blends of coffee and augments our export activities. However the corporate office of ABCTCL is situated in Bangalore, which manages all the activities of ABCTCL all over India.
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2. b. NATURE OF THE BUSSINESS CARRIED Plantations Caf coffee day Packaging Express Beverages Fresh & grounds Coffee Day Perfect Export
PLANTATION The management of coffee plantations of ABCTCL. ABC has its seeds sown in the heart of the coffee cradle of India, Chikmagalur. The region is a world wrapped in primeval innocence, where panthers, tigers and elephants roam. Their passion for coffee stems from the august heritage of coffee estates inherited by the promoter's family. What started out with a small group of family-owned estates gradually grew, as more and more estates were included to finally form Amalgamated Bean Coffee Trading Co. Ltd. The plantations nestled in Chikmagalur and Mudigere region of the Western Ghats, are spread over 20000 acres of well-maintained estates up to 4500ft above sea level. This makes us the second largest plantation company in the country. Their estates are the first and at present the only ones in India to be certified by the "Utz Kapeh Foundation" for efficient farm management and full trace ability. These estates provide a natural habitat for several geneses of flora and fauna. They are hosts to innumerable herbs, shrubs and trees like jackfruit, areca nut, orange, pepper, cardamom, etc. The coffees at estate are grown under the dark shades of various forest trees like silver oak, Indian Rose wood and various others. The estates share boundaries with some forest reserves and wild life sanctuaries and hence are also home to a variety of species of wildlife from birds and hares to deer, elephants, and even tigers! Other than the above procurement and storage
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of coffee beans is done in Hassan and Chikmagalur with huge procurement machine and large where houses which can store up to 70,000 bags of coffee. CAF COFFEE DAY One of the most common names here today is one of the greatest achievements of ABCTCL.As known to everyone caf coffee day are the caf shops managed by ABCTCL and present in large number in all parts of India today. The brain behind success of caf coffee day is one person: Mr. Naresh Malhothra, the president of caf coffee day division. Its because of is dream to make people all over the world get wide range of coffee product at affordable prices, we have more than 1174 caf coffee day outlets in India today. They are also trying to cover the whole world market by establishing more and more retail coffee day outlets all over the world. The first step in world caf market was taken in the recent years by establishing the first caf coffee day outlet in Vienna, Austria. The whole caf coffee day management is done by corporate office of ABCTCL in Bangalore through a wide network followed by State Mangers General Mangers City Mangers Caf coffee day outlet Mangers All these has proven caf coffee day to be the most precious jewel of ABCTCL. PACKAGING This is one of the important division or department of ABCTCL. This packaging department includes the process of converting coffee beans into readily consumable coffee products and then packing them in to attractive packages with different quantities. This packaging takes place in a huge plant in Hassan where the head office of ABCTCL is situated. These packed products of both instant and filter coffee are then supplied to its retailer and its own fresh and ground outlets. But marketing manager does the marketing of these packed products from corporate office of ABCTCL, Bangalore. The head office in Hassan produces only that much quantity which is ordered by the Bangalore office as per the requirement.
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However the packed products are only used and marketed in domestic market and exporting of these packed products doesnt take place. EXPRESS GO AHEAD XPRESS YOURSELF! Coffee Day Express is a unique concept of convenient cafe, an idea that feeds a world that's continuously in transit. The Coffee Day Express kiosk is a sanctuary where people can pause for refreshment before getting on with life. Retail custom-made for the 21st century. Catering to a world that needs coffee on the go! At hightraffic locations. With hot and cold beverages and a variety of ready-to-eat snacks. Amalgamated Bean Coffee Trading Company Limited or ABC, as it is better known is a fully integrated coffee company with a rich heritage that stretches over a century. Its endeavors find expression from coffee plantations to innovative retail concepts and even exports. To ensure that it remains a dominant force in the coffee sector, ABC has invested extensively in Research & Development to ensure quality coffee blends. This division of ABCTCL managers the small coffee or caf booths which we see these days in all the public places like shopping malls, bus station, railway station and other places where the general public roam in large numbers. The advantage of these express divisions is people can buy different types of hot and cold coffee in these public places when they hang out there. Apart from that this division manages the food products and other coffee product, which are available in all the caf coffee outlets these days. Usually these divisions to various other retailers who prepare these food products outsource the other food products, which are available in caf coffee day outlets. The rest of the food products are prepared in caf coffee day outlets by the help of well and experienced people; BEVERAGES Beverages in the general sense mean any hot refreshment drinks. So under beverages department of ABCTCL, it deals with coffee machines, which prepare these beverages such as black coffee, regular filter coffee, instant coffee etc. These machines are automated and require some raw materials to be fed in it before the preparation of coffee. After that just by the press of a button people can get different types of coffee ready to drink.
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ABCTC. LTD.
So these department is concerned with selling of such coffee machines which are used in most of the offices and other work places with ready hot coffees for people who work their as and when they require it. These coffee machines create a huge market for ABCTCL, which help in spreading coffee products of ABCTCL all over India. So it is a separate department for selling and maintenance of these coffee machines has managed again with same chain of president and manager who concentrate only in this division. FRESH & GROUND These are retail outlets of coffee day situated in all parts of India mostly in major cities all over India. These outlets provide customer with wide variety of coffee beans and provides both instant coffee and filter coffee options to the customer and customers are given choice to select their favorite variety of coffee beans, which are later, blended and coffee powder is provided to customer as per their required quantity and according to their requirement. Usually all the fresh and ground outlets are mange by the corporate office of ABCTCL, Bangalore. COFFEE DAY TAKE AWAY The Coffee Day Take Away initiative is a virtual revolution in dispensing coffee. For the first time, it makes freshness a part of the vending machine proposition. Only the freshest ingredients are used and strict control is maintained to ensure that every cup delivers the satisfaction of a freshly brewed cup of coffee. Being a part of beverages and fresh and ground division, Coffee Day take away is a brand that has no substitute. Renowned for its aroma & flavor, Coffee Day has grown to be India's largest selling brand of fresh filter coffee powder. Amalgamated Bean Coffee Trading Company Ltd., the name behind Coffee Day Take Away, is one of the largest producers & exporters of coffee in the country. With over 5000 acres of coffee plantations and state-of-the-art curing capacity of 70,000 tons, it has the distinction of exporting more than 13% of India's coffee. The company has been responsible for transforming coffee retailing. With over 300 Coffee Day Fresh 'n' Ground outlets, it caters to over 1, 20,000 customers every week. Taking the filter coffee experience forward. Expanding its beverage portfolio, the company has also launched superior Assam teas under the Tea Day brand.
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ABCTC. LTD.
Through its Coffee Day Take Away vending machine initiative, the company will deliver what the consumer has been missing till now - authentic filter coffee and fine tea made available conveniently. COFFEE DAY PERFECT One of the unique attributes of the product lies in the 57%coffee &43% chicory blend as against the commonly available 53% coffee 47% chicory blend in the market. The blend has been put together by our expert blend master. To provide the consumer a superior coffee chicory blend that he or she has been drinking till date. A superior product than what others have been offering. To be available in every possible retail outlet which ensure convenience and ease in availability? To provide the best quality of coffee chicory blend at value for money prices. Coffee day, rich coffee growing heritage for over 125 years. Superior coffee beans from our own estates in Chickmaglur, Karnataka. The blend has been painstakingly put together by our expert blend master. A unique secret! Well equipped roasting &curing unit @ Hassan, one of the largest of its kind in India.
EXPORT Since it is a export oriented unit, it exports its coffee beans to many parts of the word. ABCTCL exports has been one of the largest coffee export shipping close to half million bags in volume. The clients of ABCTCL include worlds biggest and most discerning roasters MNCs, trading companies and retail chains. But the major market of export of ABCTCL is Europe. About 98% of the whole export of ABCTCL is done to most of the European countries and in these European countries some of the biggest customers of ABCTCL are situated. The rest of the 2% of its exports is carried with USA, Japan and Middle east. These countries import coffee beans from ABCTCL and further process these beans and produce many varieties of coffee for their market.
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ABCTC. LTD.
Even under domestic dealings some of the biggest MNCs like NESTLE are the customers of ABCTCL who create many coffee product and is present in Indian market as well as abroad. Some of the customer to whom ABCTCL exports its coffee are: Sadnalji trading company Ltd.- SPAIN Louis dreyfus trading Ltd.- UK Alsroor Jabbar Ltd. Kuwait Bernharad Rothfos GMBH & company Germany Olan international Ltd. SINGAPORE The above are some of the customers of ABCTCL abroad and have many other customers all over the world. As far as imports are concerned, ABCTCL imports special variety of Arabica coffee from KENYA which is considered as one of the best in the coffee market. These coffee beans are longer in appearance and have a rich taste. Imports of ABCTCL are very few and above mentioned type are imported just to provide variety to consumers in India. 2. C.VISION/MISSION AND QUALITY POLICY Vision is to be present in every space where coffee can be an integral ingredient. We aim to be one of the top three players, worldwide, in the coffee retail segment. Thats a dream we live up to, and make real everyday The mission of Coffee Day is to provide authentic, affordable coffee to our customers. QUALITY POLICY We at the ABCTCL engaged in producing white coffee beans. We strive to be at the forefront of Indian coffee industry by adopting latest technology, disciplined quality management system and continually improving on product quality. First consolidated and pure coffee outlet to find its footprint across the globe Backed by ISO 9002 Certification, and a heritage of over 140 year Asias largest integrated coffee company with the second largest network of coffee estates One of the top coffee exporters in India to United States, Europe and Japan
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ABCTC. LTD.
First company in India to receive UTZ certification
2. d. PRODUCT/ SERVICE PROFILE Obviously the product is coffee beans and coffee can be mainly divided into 2 types Robusta Arabica Arabica named for the Arabs, is the better and more expensive of the two. These trees grow in semitropical climates near the equator, both in the western and eastern hemispheres, at high altitudes. Because ripe Arabica cherries (unroasted beans) fall to the ground and spoil, they must be carefully monitored and picked at intervals, which increases production costs. Robusta trees which are grown exclusively in the eastern hemisphere also thrive in equatorial climates, but at low altitudes. Their cherries require less care since they remain on the tree after they ripen. Robusta beans have twice the caffeine of Arabica, but less flavor. Some supermarkets carry Arabica, but most of their brands are Robusta. Coffee shops generally use Arabica beans, but because their brews are so strong, To describe the taste of Arabica is difficult without using trite words like smooth and mellow. It has a round taste that is both rich and delicate, with good acidity. This does not refer to an actual degree of acidity, but to the sharp and pleasing taste that is neither sour nor sweet. In fairness, although most Robusta coffee is of a lower grade and inferior to Arabica, there is a premium crop that is the top of the line for Robusta beans. Premium Robusta is primarily used in specialty espresso blends, and is never found in canned coffee. Though it only constitutes 5-15% of the blend, it is used because these beans add body to the taste and make a nice creama in the shot of espresso. This additional body distinguishes the blend in a cappuccino or latte. Premium Robusta should only be used for espresso and not other brewing methods. If the coffee is Colombian, it will probably be Arabica on the side or back of the package, since this country produces nothing else. Guatemala, El Salvador, Tanzania and Kenya also produce all Arabica beans.
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ABCTC. LTD.
Only these 2 varieties are grown in India because of the soil. But there are various subdivisions in these two types of coffee beans depending on its size color and shape Again these two types that is Arabica and Robusta are brought in to ABCTCL by two ways Parchment Cherry
PARCHMENT It means bringing the cleaned beans or already separated and dried coffee beans in to ABCTCL. Usually this parchment is done by the estate owners through pulper machines which separate the beans from the cherry which are ripen and the beans are cleanly separated from cherry and all the remains are eliminated as waste and then these beans are dried and then transported to ABCTCL where the further processing of the beans is under taken. CHERRY As the name indicates, it is the raw cherry which is grown in these 2 types of plants. They are directly purchased and brought to ABCTCL in a ripe cherry form and even removing the bean from the cherry is done by ABCTCL, head office, Hassan & Chikmagalur after bringing to ABCTCL. Here the work will be more to this curing works as it is brought in raw form. Arabica is grown from December to March and these four months are considered the best season for growing Arabic and plucking. Most of Arabica beans are exported to USA (New York) Robusta season is from Feb/Mar to May every year and considered best for these beans (coffee). Most of Robusta coffee is exported to U.K (London)
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ABCTC. LTD.
Arabica parchment is plucked in 3 rounds I Round: Plucking of coffee from plants when they are fully ripe and ready to pack. II Round: Plucking of half ripe coffee beans
III Round: - Plucking of cherry
Arabica coffee is strong and doesnt fall down form the plant even due to heavy rains. It has to be plucked. Arabica coffee is more costly than Robusta because of its strong flavors and taste. Robusta coffee is lighter in nature and will easily fall off from the plant due to rains. So more care has to be taken with this breed. 2. e. AREA OF OPERATION Amalgamated bean coffee trading ltd, is trading over all over the India, national and international market, major market of export of ABCTL Europe, about 98% of the whole export of ABCTCL is done most of the European countries. The rest of 2%of its export is carried with USA, Japan and Middle East. Even under domestic dealing some of the biggest MNC like Nestle are customer of ABCTL. Some of the other country like Spain, UK,KUWAIT , GERMANY and SINGAPORE. 2. f. OWNERSHIP PATTERN Mr. B.G Siddartha is the owner and also the promoter and is the chairmen and managing director of ABCTCL. He with is own capital started ABCTCL in 1991 and is successfully managing it today with a wide network of people management. It is a private ltd. Company and does not issue shares to the general public for raising capital. Private placement of shares is to be done and 20% of the shares of ABCTCL were issued to a MNC by Mr. Siddartha
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ABCTC. LTD.
2. g. COMPETITORS As every other industry, even the coffee industry has lots of competitors. But the competitors of ABCTCL are divided into 2 main groups as follows Competitors in procurement or curing Competitors in domestic market The competitors in procurement or curing work of coffee beans are many in the field. These competitors also indulge in import/export of coffee beans as ABCTCL. Some of the competitors in this field for ABCTCL are: Allan coffee curing works Jayanthi group General commodities ltd. Nestle company ltd. ITC ltd. Ned commodities ltd. In domestic market there are lots of retailers who compete with ABCTCL in the domestic market. Even though only 10% of ABCTCLs products are marketed in domestic market, there are lots of competitors even to compete for this 10% of coffee products of ABCTCL. Some of these competitors are: Narsus coffee Hindustan Unilever ltd. (HUL) TATA coffee 2. h INFRASTRUCTURAL FACILITY 1) Availability of adequate water from river Krishna. 2) Self contained residential quarters are constructed for officer & worker. 3) The workers & their dependents are provided with free medical facilities. 4) Good transportation facilities. 5) Formed a co-operative consumer society. 6) Primary School, high school, hospital, under graduation colleges are run by the factory.
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ABCTC. LTD.
2. i. ACHIVEMENT AND AWARDS The success of this organization in its exports is known by the various awards received by ABCTCL such as:-
YEAR 1999-2000 2000 2000-2001
AWARD Top exporter of green coffee Top exporter of coffee to the region: U.S.A Top Exporter Of Coffee To The Region: European Union
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ABCTC. LTD.
2. j WORK FLOW MODEL
Coffee beans
Weighting of coffee beans
Coffee unloading
Moisture checking
Coffee transfer to hulling machine
Polishing coffee beans
Colour sorting
Roasting
Garning
Beans separated from grade base
Packaging
Dispatch
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2. k FUTURE GROWTH AND PROSPECTS Indian coffee is exported to all parts of the world. But except in India it is nowhere
called as Indian coffee and doesnt have a name and popularity. So the goal of ABCTCL is to make the world recognize Indian coffee as Indian coffee and not anything else. So caf coffee day outlets are being planned to open in all parts of the world such as one present in VIENNA, Austria and make the Indian coffee popular.
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ABCTC. LTD.
3. MCKENSYS 7 S FRAME WORK

Mckensys 7S framework provided a useful frame work for analyzing the strategic attributes of the organization. The Mckensys consulting firm identified strategy as only one of seven element established by best-managed companies. Strategy, structure & system can be considered the hardware of success while skill, style & shared value can be seen as the software. Companies in which these soft element are present are present are usefully more successful at the implementation strategy.
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Structure This defines the basic organization of the company, its departments, reporting lines, areas of expertise and responsibility. The structure represents the hierarchy of the organization and the reporting system. The organization structure is the pattern of relationship among various components or parts of the organization. Structure is thus the basic frame work within which an organization carries outs its orders, decision and general functioning. It defines the unbroken line or chain of command and the span of control. The organization structure of ABCTCLas follows.
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CHART SHOWING ORGANISATION HIERARCHY OF ABCTCL HEADS OFFICE OF HASSAN
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As shown in the chart the organization hierarchy is as follows: At the top of the company there is Mr. B.G Siddhartha who is the sole chairmen and managing director of the company .Mr. Siddhartha manages the whole ABCTCL through a bunch of presidents in all departments and divisions of the company. Here the president of ABCTCL head office is Mr. Rajeev Guptha who is in charge of all the activities of Hassan head office. He controls it form corporate office of Bangalore and the senior general managers in Hassan head office have to act as per the instruction of Mr. Rajeev Guptha. Under Mr. Rajeev Guptha, Hassan head office is totally manage by two senior general managers 1. Mr. H.A VINAY Senior General Manager of Public Relations Finance Accounts Procurement He manages interaction with suppliers or estate owners, all the financial transaction of ABCTCL by terms of payments and other monetary issues by final checking and passing of invoices, maintenance of proper books of accounts from time to time and along with it manages the procurement process of coffee. Under Mr. H.A Vinay there are 2 assistant general managers: Assistant General Manager Procurement: He is in charge of the whole procurement process of coffee after it gets into ABCTCL. He manages executive, superiors and sub-staff who are 10 in number. These people are in charge of agent management of ABCTCL, Hassan and managing the contractual labour required for procurement process. Assistant General Manager Accounts: he is in charge of managing the books of account and preparation of invoices and payment cheques which are to be sending to estate owners who sell their coffee to ABCTCL and also payment of commission to the agent for convincing estate owners to sell their coffee beans to ABCTCL. He also manages a sub-staff who are 4 in number and perform all the accounting work and minor transaction required for accounting.
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Mr. NANJUDA senior general manager of Production Maintenance He manages the production process of coffee, management of garblers (manual labour) and final dispatch of coffee as per the orders. He manages 1 Assistant General Manager of Production who supervises the production process which carries on through huge hulling machines, color sorting machines and roasting machines. This assistant general manager again manages executives and staff who are 15 in number and looks after each and every process and manages contractual labour and garblers who indulge in manual separations of coffee beans and final bagging of coffee and loading it into trucks. However apart from the finance and production department, there is no marketing department in Hassan head office of ABCTCL because it is export oriented unit and all the marketing activities are carried out by marketing managers from Bangalore in corporate office of ABCTCL. Even human resource managers of ABCTCL are from Bangalore office and all the human welfare activities of the employees are carried out from their though regular visits by HR managers to its various branches. Skill A skill is the ability, knowledge, understanding and judgment to accomplish a task. Skills may be defined as what the company does best; the distinctive capabilities and competencies that reside in their organization. The organization selects and assigns personnel performing work affecting product quality based on appropriate education skills and experience. The organization has also a system to assess the competence of its personnel on periodic basis to identify gap in the performance, if any as well as assessing their training needs to bridge the gap.
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Identification of Training Needs Training needs may be new training or re-training these are identified once in a year by department heads of their employees through appraisal system. New employees or an employee who has assigned new jobs are identified and given needed training. Training needs of their employee through appraisal system. New training needs of their employees through appraisal system new employees or an employee who has assigned new jobs are identified for training. Training needs are considered at 3 levels: Individual level Department level Organization level On the job training: These are types of training given to the employees at the working hours. Training regarding grading. Hygiene training. Assistance by senior employees.
Off the job training: These are types of training given to the employees in the leisure hours. Speeches Lectures Visuals training
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Style In ABCTCL most of the decisions are taken by M.D of the firm, they follow Top down Style. In the absence M.D, Directors incharge of respective department takes decision.
M.D Directors incharge of departments. Plant Manager Product incharge Supervisors Workers In ABCTCL they follow Authoritarian style in decision-making. The major decision regarding operation of the firms is taken by M.D. Other decisions involving higher cash flows are participative taken involving partners and other officials.
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Shared values Shared values guide employees towards desired behavior originally called super ordinate goals; the guiding concepts and principles of the organization values and aspirations, often unwritten that go beyond the conventional statements of corporate objectives. The fundamental ideas around which a business is built; the things that influence a group to work together for a common aim. Shared values are what engender trust and link an organization together. Shared values are also the identity by which an organization is known throughout its business areas. These values must be stated as both corporate objectives and individual values. ABCTCL are providing financial facilities to the farmers. The others branches of the firm are involved in many social activities Staff People are considered one of the most important assets of ABCTCL. The whole company is successful through a huge chain of people who mange the functioning of this company. Even in Hassan head office of ABCTCL people management is done to certain extent. There are about 55 people from top to bottom (permanent and temporary staff) which exclude the contractual labour who may differ from 130 to 150 or 200 depending on the work in on season and off season of coffee growth. Pay for the people may vary from Rs.5000 to Rs.85000 (excluding the contractual labour) depending on the persons position in the organization. Labourers are paid depending on their work rate which may also differ seasonally. The recruitment of people until the assistant general manager post and also the pay to them is done directly by the president and other head authorities directly from Bangalore office of ABCTCL and the recruitment and pay for the general staff, sub-staff and the laborers is managed by the senior general managers and assistant general managers in Hassan. Usually experienced people with high skills are selected and qualification must be Charted Accountant (CA) and Master of Business Administration (MBA) of the people who get selected for such high post and HR management is done by HR managers from Bangalore
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throughout the company. Apart from the people within the organization, ABCTCL in Hassan also manages a chain of agent related to it. These agents are situated in most part of Hassan, Chikmagalur and Coorg districts. These agents have the job to convince the estate owners to sell their coffee to ABCTCL and should keep them inform about the advantages and the prevailing prices of coffee as per the bag rate in ABCTCL. There are about 60 to 65 agents of ABCTCL head office, Hassan who are also provided with small warehouses of about 100 baggage capacities and are paid commission for acting as an attractive link between the estate owners and ABCTCL. And these entire agents are personally managed by Hassan head office of ABCTCL. Strategy The integrated vision & direction of the company, as well as the manner in which it derives, articulates, communicates & implements that vision & directors. Its strategy is to expand its installation capacity, achieve end-to-end integration for all its plants to improve margins & reduce cycling of business, achieving greater raw material security, increasing its focus of corporation & high value costumer, to expand market for ethanol. The broad level strategy of the company is to focus towards corporate & industrial buyers. Unlike the traditional mode, dealing with cooperate & industrial buyers has benefits of committed & timely off-takes, reduced price risk, reduced working capital & reduce dependence on brokers. System The decision-making system within the organization can range from management institution to structured computer systems to complex expert system & artificial intelligence. System refers to all the rules, regulation & procedure both formal & informal that complements the company structures. It includes production planning & control systems, cost accounting procedures, planning, budgeting system, capital budgeting systems etc.
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4. SWOT ANALYSIS
Here is the analysis about the Strengths, Weaknesses, Opportunities and Threats of ABCTCL. STRENGTHS: The biggest strength of ABCTCL is that it is the only company in coffee industry with a complete chain of coffee operations. ABCTCL carries its operations right from the growing of coffee to the consumption of coffee by the final consumer.It grows coffee in its own land, procures it, carries productions, exports it, produces ready coffee products and has also conquered the domestic market. All its competitors are indulged only in few activities but ABCTCL manages a complete chain of its operation. Among ABC's biggest strengths are the plantation, located in Chikmagalur and Hassan with a combined installed capacity of 1 million bags. Having our own curing works aids in enabling complete control over grading standards and flexibility. Thus ensuring quality and efficiency. A highly disciplined and dedicated network of over 42 agents who operate throughout the major coffee growing areas of India form the back bone for our coffee procurement chain. Our vertically integrated infrastructure ensures that the coffees never need to leave the able hands of ABC until final dispatch/shipment. Strength may be its size. As it is one of the biggest coffee curing companies, it has even advantage in price stabilization (volatility). WEAKNESS ABCTCL is depend upon more manual labors even though high technology High quality coffee beans cannot be produced in Indian market. They can import the high quality coffee beans.
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OPPORTUNITIES The overseas market demand for coffee is one of the biggest opportunities for ABCTCL. The demand by European countries and many other countries of the world for India coffee has created and also creates huge market in future. Globalization and liberalization has played a very important role in these overseas dealings of ABCTCL. THREATS New entrants in Indian market for coffee is one of the biggest threat for ABCTCL changing quality of coffee and its rates due to natural reasons Change in money value in foreign exchange is also a threat to ABCTCL.
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5. FINANCIAL STATEMENT
Comparative statement Profit and loss account for the year ended 31-3-2011 Particular Previous year 31-3-2010 (crore in Rs) Current year 31-3-2011 (crore in Rs) Increase decrease or Percentage
Incomes Export sales Domestic sales Other incomes 1620334714 746817999 28072809 1944401657 911117959 33968098 468235055 324066943 164299960 5895289 93647011 20% 22% 21% 25%
Increase / decrease in 374588044 stock 2769813566 Expenditure Purchasing expenses Operating and 332043383 & direct 1481336390
3357722769
587909203
22%
1866483851
385147461
26%
408413362
76369979
23%
administration expenses Financial charges Depreciation 130754745 36590922 1980725440 Operating profit Adjustments exceptional items Profit on sale of capital 10856 asset Prior period adjustment Profit before taxation 114032 788963238 143680 871447944 29648 82484706 26% 10.45%
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164750978 46470470 2486118661 871604108
33996233 9879548 505393221 82515982
26% 27% 25.51% 11%
789088126 for
12484
1628
15%
ABCTC. LTD.
Provision for taxation Profit after tax
6300000 782663238 1431160830
7434000 864013944 1681120909 817106965 114300000
1134000 81350706 249960079 168609373 24300000
18% 10.39% 17% 26% 27%
Balance brought forward Transferred reserve Balance carried to
648497592
general 90000000
to 1341160830
1566820909
225660079
16.82%
balance sheet
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BALANCE SHEET
Particulars Previous year 31-3- Current year 31-3- Increase 2010 (crore inRs) Share holder funds Share capital Reserves and surplus 265740666 784847105 1050587771 Loan fund Secured loan Unsecured loan 1144734685 396671952 1541406637 Total Application of funds Fixed assets Gross block Depreciation block Net fixed asset Capital WIP 461181737 119489423 341692314 34333401 956696875 Investments Current assets loans & advances Inventories Sundry debtors Cash & bank balance Advances & deposits 436771036 881680667 81645444 986559644 2386656791 Less: Current liabilities & 607461856 provisions Net current asset Miscellaneous expenditure Total 1779194935 10075244 25S91994408 2152825871 12392550 3189869057 373630936 2317306 597874649 21% 23% 23% 576537767 1110917640 84094807 1223333958 2994884172 741103464 139766731 229236973 2449363 236774314 608227381 133641608 32% 26% 3% 24% 25% 22% 426698514 581088988 152946461 433949238 43260085 1211244772 541907112 119907251 33457038 92256924 8926684 254547897 115208598 26% 28% 27% 26% 26.60% 27% 2591994408 1396576315 487906500 1884482815 3189869057 251841630 91234548 343076178 597874649 22% 23% 22.25% 23% 332175832 973210410 1305386242 66435166 188363305 254798471 25% 25% 24.25% 2011 (crore in Rs) decrease or Percent age
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Interpretation: 1. Income increased in 2011 (Rs 3357722769) as compare to 2010 (Rs 2769813566) is more than 22% increased 2. Expenditure of the company in 2011 (Rs 2486118661) as compare to 2010 (Rs 1980725440) more than 25.51% increased 3. Operating profit of a company in 2011 (Rs 871604108) as compare to 2010 ( Rs 789088126) more than 11% increased 4. Profit after tax of the company in 2011 ( Rs 864013944) as compare to 2010 (Rs 782663238) more than 10.39% increased 5. Sources of fund of the company in 2011 (Rs 1305386242) as compare to 2010 (Rs 1050587771) more than 24.25% increased 6. In fixed asset in a 2011 (Rs 433949238) as compare to 2010 (Rs 341692314) more than 27% increased 7. Current asset of the company in 2011 (Rs 2994884172) as compare to 2010 (Rs 273353852)is more than 25.48% increased 8. Total profit of the company is also increased 13.45% as compare to 2010
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INTERPRETATION OF RATIOS CURRENT RATIOCurrent assets Current ratio= _______________ Current liabilities
Particulars Current assets Current liabilities Current ratio
2009-10 2386656791 607461856 3.92
2010-11 2994884172 741103464 4.04
Current ratio is calculated to establish relationship between the current assets and current liabilities. It is also called as working capital ratio or bankers ratio. The difference between current assets and current liabilities is called working capital. It attempts to measure the firms ability to meet its short term obligation. In any operating concern, the current ratio should be 2:1 it is called as ideal ratio. In ABCTCL current ratio is 4.04:1. It shows that the company is performing well as there is a higher current assets compared to current liabilities. QUICK RATIOQuick Assets Acid Test Ratio= ________________ Current liabilities
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Particulars Quick assets Current liabilities Acid Test Ratio
2009-10 1949885755 607461856 3.20
2010-11 1883966532 741103464 2.54
Liquid ratio is the ratio of liquid asset to current liabilities. It is the more severe and stringent test of a firms ability to meet its current obligations. Liquid assets are those assets which are readily converted into cash. It is wise to keep liquid assets at least equal to current liabilities. The ideal quick ratio is 1:1 for any business concern but ABCTCL has quick ratio of 2.54:1. Here the quick assets are more than quick liabilities so this is a favorable condition. NET PROFIT RATIO Net profit ratio = PAT Net sales x100
Particulars PAT Net sales Net profit ratio
2009-10 782663238 2367152713 0.33
2010-11 864013944 2855519616 0.30
This ratio establishes relationship between net profit and sales which is generally expressed as a percentage. It indicates operational efficiency or inefficiency of an enterprise. High net profit is the index of better operational efficiency. ABCTCL has a net profit of 0.30%
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DEBT EQUITY RATIO Long Term Debt Debt-Equity Ratio= __________________ Shareholders equity
Particulars Long Term Debt Shareholders equity Debt-Equity Ratio
2009-10 1541406637 265740666 0.58
2010-11 1884482815 332175832 0.57
This Ratio shows relative contribution of creditors and owners. It is used to analyze long term solvency of the firm. Debt equity ratio describes the lenders contribution for each rupee of the owners contribution. ABCTCL has a debt equity ratio of 0.57:1
RETURN ON INVESTMENT ROA = EBDIT Total assets Particulars EBDIT Total assets ROA 2009-10 788963238 2591994408 0.30 2010-11 871447944 3189869057 0.27 x100
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This ratio is also known as net worth ratio or return on shareholders funds. Return on investment establishes relationship between after tax and shareholders funds. It is very significant in measuring the overall profitability or operational efficiency of a company. It enables management to know whether the basic objective of the business maximization of profits is achieved or not and the shareholders to decide whether their investment is safe and remunerative. The ABCTCL has a return on investment of 27.00% which is a favorable indication for the company
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6. LEARNING EXPERIENCE
It was a great experience working in the ABC Trading company ltd when its a good opportunities to interact with company experience The company has given full support for me to learn new things, ignoring my mistake Very happy with the S.G.M for his great support, and the way he thought us In corporate every day is special, no one is perfect because every day is new opportunities to learn new things.
The first day of my in-plant training began with a brief introduction of ABC Trading Company Limited history. I started my training under the guidance of Mr. VINAY, he is an Senior General Manager at ABC Trading Company Ltd. He was given an opportunity to refer the organizations records, where in I got to know about the documentation procedures involved in that work and gained a fair idea of the functions in ABC Trading Company Ltd. In every department may be at lower level or at the lower level the concerned people have given all the necessary information I required. This is organization study helped me to relate the theoretical knowledge to the practical experience and I learned how a company work practically.
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1. a. GENERAL INTRODUCTION
Inventories constitute the most significant part of current assets of a large majority of companies in India. On an average, inventories are approximately 60% of current assets in public limited companies in India. Because of the large size of inventories maintained by firms, a considerable amount of funds is required to be committed to them. It is, therefore, absolutely imperative to manage inventories efficiently and effectively in order to avoid unnecessary investment. A firm neglecting the management of inventories will be jeopardizing its long-run profitability and may fail ultimately. It is possible for a company to reduce its levels of inventories to considerable degree, e.g., 10 to 20 percent, without any adverse effect on production and sales, by using simple inventory planning and control techniques. The reduction in an excessive inventory carries a favourable impact on a companys profitability.
Meaning of Inventories: An inventory is a stock of goods maintained for the purpose of future production or sales. Inventory consists of those resources of the organization, which include materials or goods in any stage of completion, which is referred to as stock. It refers to all materials, parts, supplies; goods in process or finished products recorded in the books by an organization and kept in its stocks, warehouse or plant for some period of time. It is a list or schedule of material held on behalf of an enterprise. Inventories represent the second largest asset category for companies next only to plant and equipment. The proportion of inventories to total asset generally varies between 15% to 30%.
Nature of inventories: Inventories are stock of the product a company is manufacturing for sale and components that makeup the product. The various forms in which inventories exist in a manufacturing company are: raw materials, work-in-process and finished goods. Raw materials 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 productions.
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Work-in-process inventories are semi-manufactured products. They represent products that need more work before they become finished products for sale. Finished goods 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. Thus, inventories serve as a link between the production and consumption of goods. A fourth kind of inventory, supplies (or stores and spares), is also maintained by firms.
Inventory management Inventory Management is very important area of production management and plays a vital role in the economic operations of a concern. It has been defined a variety of ways and most of the definition stress the importance of control element in achieving cost effectiveness. Irrespective of the range of particular discipline which may have to be applied within the functional fields in meeting the needs of individuals situation. Management of inventory may be defined as the sum total of those activities necessary for the acquisition, storage, disposal or use of materials. Inventory management, impact is an integral part of production, planning and control which, according to Charles A. Kepke, may be defined as the co-ordination of series of function according to a plan which will economically utilize plant, facilities and regulate the orderly movement of goods through their entire manufacturing cycle, from procurement of all materials to the shipping of finished goods at pre-determined rate. Purchase, production and sale departments are mainly concern with the management of inventories. Their officials always try to have large stock of inventories to facilitate production and marketing of the product. It required large amount of investment in inventories, and shall increase the cost of the product by the amount of interest payable on such investment. It is the prime responsibility of the financial executive to have a proper management and control over the investment in inventories so that it should not be unprofitable for the business. For this purpose, financial management should take care of the maximum and minimum limits of stock of inventories in the business to have continuity in production process.
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The scope of inventory management is not restricted to technique of regulating the movement of inventories and it rather covers the entire range of functions, which affects the flow, conversion, quality and cost of inventories. Efficient management of inventory reduces the cost of production and consequently increases the profitability of the enterprise by minimizing the cost associated with holding inventory. Objectives of inventory management. The objectives of inventory management may be discussed under 2 heads a) Operating Objectives. b) Financial Objectives. Operating Objectives: 1) Availability of material The first and the foremost objectives of the inventory management is to make all types of material availability at all times whenever they are included by the production department. It is necessary to maintain a minimum quantity of all types of material to move on the production schedule. 2) Promotion of manufacturing efficiency: The manufacturing efficiency of the enterprise increase if right types of raw material is made available to the production department at the right time. production and improves the moral of workers. 3) Better service to customer. In order to meet the demand of the customer, it is the responsibility of the concern to produce sufficient stock of finished goods to execute the orders received. 4) Control of production level. The concern may decide to increase or decrease the production level in favorable time and the inventory may be controlled accordingly. Proper control of inventory helps in creating and maintaining buffer stock to meet any demand. Production varieties can also be avoided through proper control of inventories. It reduces wastage and cost of
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5) Optimum level of inventories: Proper control of inventories helps management to procure material in time in order to run the plan efficiently. It avoids the out of stock danger. Financial objectives: 1) Economy in purchasing Proper inventory control brings certain advantages and economics in purchasing the raw materials. 2) Optimum investment and efficient use of capital: The prime objective of inventory control from financial point of view is to have an optimum level of investment in inventories. It is the responsibility of financial management to set up the maximum and minimum level of stocks to avoid deficiency or surplus stock position. 3) Reasonable price: Management should ensure the supply of raw materials at a responsibility low price but without sacrificing the cost of production and the maximum the profits of the concern. 4) Minimizing costs: Minimizing inventory costs such as handling, ordering cost and carrying costs etc is one of the main objectives of inventory management. Financial management should help controlling the inventory cost in a way that reduces the cost per unit of inventory. Inventory cost is the part of total cost of production can also be minimized by controlling the inventories costs. Need for inventory management. Material control aims achieving saving in material costs improvement in material handling increased production and larger profit. Timely availability of right type of material resulting in smooth and conditions flow of production. Purchase of stores of appropriate Quality at responsible price. Minimum capital investment in the inventory by fixing stock levels and avoiding overstocking. Economy in buying and holding expenses by evolving an ideal order quality for each item.
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Minimization of risk due to spoilage, obsolescence, theft pilferage by enforcing stock control measures and physical verification in stock. Saving in material consumption by receiving and revising product design. Correct measurement of efficiency in material consumption by calculating material turnover index input output ratios etc. Maintenance of appropriate stock records which furnish the data relating the stock quickly and accurately.
The reasons for keeping stock There are three basic reasons for keeping an inventory: 1. Time - The time lags present in the supply chain, from supplier to user at every stage, requires that you maintain certain amount of inventory to use in this "lead time" 2. Uncertainty - Inventories are maintained as buffers to meet uncertainties in demand, supply and movements of goods. 3. Economies of scale - Ideal condition of "one unit at a time at a place where user needs it, when he needs it" principle tends to incur lots of costs in terms of logistics. So bulk buying, movement and storing brings in economies of scale, thus inventory. Importance of Inventory management. Investment in inventory normally accounts for about 1/3 value of the total assets and for an average manufacturing concern, cost of inventory represents about one half of the product cost. Because inventory constitutes such a significant part of product cost , since the cost is controllable, proper planning, purchasing, handling, accounting and control of inventories is of great significance. Inventory management is now great significance in a view of imperative need for productivity growth. Optimal utilization of all available resources and avoidance of all types of waste especially in case of raw materials is required for an ambitious programmer of economic growth.
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Statement of the problem. The problem selected for the analysis is to study the effectiveness of Inventory Management at ABTCL. The effectiveness of the prevailed system is analyzing simultaneously. The variation of the prices of raw materials are also analyzing with their effects upon the overall working of the unit. Regarding the purchase procedure and vendor rating procedure also seems very difficult for the smooth functioning of the company. The system of purchase and vendor analysis into account for the analysis as these two aspects relates to materials Management.
Objectives of the study 1. To study the inventory management of ABCTCL 2. To know the different levels of inventory 3. To study the carrying cost of inventory 4. To study & identify the investments in inventory 5. To know the inventory turnover ratio
Scope of the study. The study covers information given by the staff of the company, financial reports and other publications of the company. The study confined to Amalgamated Bean Coffee Trading Ltd. only.
Methodology. This section explains how the data is collected that is either from primary and secondary data. It explains what method is used to collect the data, which instrument is used for collection in order to meet the objectives of the project that is studying the inventory management in The Amalgamated Bean Coffee Trading Company Ltd. I have collected the information through Primary Data and Secondary Data.
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The preparation of this report involves several phases and they are as follows. Tools of data collection are as follows 1. Primary data 2 .Secondary data
Primary Data: Information gathered from company officers, from our guide by personal interview that is face to face interview. Secondary Data: Company annual report Text books Web sites
Limitation of the study. 1. The study is purely conducted upon the reference drawn and data which is available as per financial statement of the company and theoretical conclusions arrived at are based on the basis information provided by the company. 2. Limited information available for the study. 3. The time allotted for completing the whole project was only 10 weeks. Its not enough for understanding about the organization in detail. 4. The research conducted based on the five years financial statement
Requirements of Inventory Control Proper co-ordination of all departments includes viz. finance, purchasing, receiving, inspection storage, accounting, and payment. Determining purchase procedure to see that purchases are made after making suitable enquiries at the must favorable terms of the firm.
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Use standard forms placing the order, receipt of goods, authorizing issue of the material etc.
Preparation of budgets concerning materials, suppliers and equipments to ensure economy in purchasing and use of materials.
Storage of all materials and supplies in a well designed location with Proper safeguard. Operation of a system perpetual inventory together with continuous stock checking so that it possible to determine at anytime the amount end value of each kind of material in stock.
NEED TO HOLD THE INVENTORY ABCTCL Inventories holding involve blocking if firms funds and the cost of storage and handling, but every business enterprise has to maintain a certain level of inventories to facilitate uninterrupted production and smooth running of business. In absence of inventories a firm will have to make purchases as soon as it receives orders. It means loss of time and delays in execution of orders, which sometimes may cause loss of customers and business (stock outs). Therefore also the need to maintain inventories to reduce ordering cost and avail quantity discount etc, . There are three main purposes or motive of holding inventories Maintaining inventories involves tying up of the companys funds and incurrence of storage and handling costs. Why ABC hold inventories? In ABC three general motives for holding inventories, 1. Transactions motive 2. Precautionary motive 3. Speculative motive
Transactions motive is main aim maintain inventories is a facilitate smooth production and sales operation. In ABC the hold coffee beans for smooth production coffee .
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In precautionary motive holding of inventories to guard against the risk of unpredictable changes in demand and supply forces. Coffee beans is available only seasonal time of November to may, ABC maintain the inventory available coffee beans that time only. In speculative motive influences the decision to increase or reduce inventory levels to take advantage of price fluctuations. ABC maintain coffee price market fluctuation, in previous above coffee price is very low, in this days coffee price very high. In that basic maintain inventory very sufficient levels.
Objectives of inventory holding in ABCTCL 1. To ensure the timely supply of raw materials finished products and other spares in required quantity for production purpose and to meet frequent varying demands of the customers. 2. To utilize available storage space economically by fixing stock levels. 3. To minimize as far as possible, investment into inventories, inventory carrying cost and likely obsolesce loss. 4. To obtain the economies of large scale buying. 5. To achieve wealth maximization objectives. 6. To know comparative cost and consumption of materials over different periods.
Classification of Inventory Inventory can be classified in terms of its different uses. This will enable us to appreciate the peculiarities and problems in the variety of uses. It also enables us to adopt control techniques to suit the needs. Inventory can be segregated according to usage and point of entry in the operations as raw materials, work-in progress, finished goods . Raw materials Raw materials are the major input into an organization and form the bulk, which gets converted into finished product. As any break in the supply of raw materials will bring down the entire process to a halt. There are two important factors, of ABC to maintain inventory One is the consumption rate and the other is the criticality of the item or lose the weight.
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Work-in- process Inventories are semi manufactured products. They represent products that need more work before they become finished product for sale. Finished Goods Finished goods act as the buffer between the production department and the marketing department. The input rate is quite predictable because of the production schedule, but the consumption of inventory depends on the behavior of the market. The purpose of finished goods inventory is to assure the market a constant supply in the distribution channel. In majority of the organizations, the marketing department controls finished goods inventory. Here also, at the ABC Ltd the supply and distribution department maintains this inventory Purchasing Process Material control means purchasing, storing and consumption of materials in a systematic manner. The main object of cost accounting is to minimize the cost of production. To realize the above objective, there should be proper control of materials. It is also necessary to eliminate the absolute stocks. Since that storage space and storage cost are reduced, further control over material is also necessary to prevent extra expenses on their unnecessary purchase and improper use of material a regular supply of materials helps greatly the production. The following steps are necessary to be followed. For efficient and proper control of materials: Purchasing of materials. Receiving and inspecting of materials. Storing of materials. Issuing of materials. Accounting of materials. Keeping physical and perpetual inventory records.
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1. Purchasing of materials Each and every organization purchasing materials is most important factor for smooth production. In ABC also purchasing materials from following sources Own plantation of ABC Agent of ABC Customer of ABC 2. Receiving and inspecting of materials Materials purchasing from different sources, inspecting materials another most important. ABC can purchasing materials the inspecting materials from different basic i.e. quality of coffee beans, different product basics. 3. Storing of materials. After inspecting the materials, storing materials also important, each manufacturing organization maintain different storage department for materials. In ABC also maintain different storage department different product base. In Hassan storage capacity is 70000 tons. 4. Issuing of materials. Issuing of materials in production department in required quantity for production of the product. In ABC also issued raw materials required quality for the production. 5. Accounting of materials. Accounting of materials is important factor, materials is assets of the firm. Each materials value in the cash. 6. Keeping physical and perpetual inventory records. Organization maintains a book record of inventory is important, day by day in checking inventory and record the book. It helps the organization to verify the inventory issue and received.
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The Costs of Holding Inventories Are As Follows Material Cost: This include the cost of purchasing the goods, transportation and handling charges less any discount allowed by the supplier of goods. In ABC also include material cost include the transportation charge and handling charge etc.
Ordering Cost: This includes the variables cost associated with placing an order for the goods. The fewer the orders, the lower will be the ordering costs for the firm. ABC maintains other cost is clerical staff, receiving, inspecting and storing cost.
Carrying Cost: This includes the expenses for storing and handling the goods. In ABC comprises storage costs, insurance costs, spoilage costs, cost of funds tied up in inventories etc
Inventory process of ABCTCL Inventory process of amalgamated bean coffee trading company ltd is maintain good relationships with their different customer. ABCTCL maintain around 5000 customer, they maintained all customers directly. The ABC can appoint the agent of different area based. The Hassan amalgamated bean coffee maintain around 35 agencies. The can maintained small warehouse department .the storage capacity is 200 bags. The agent can maintain the relationship with their customer. The agent can supplied raw coffee beans to head office of Hassan. The agent can maintain two receipts. There are 1. Sales consignment (store) 2. Purchase invoice (sale) Sales consignment is storing the coffee beans for particular period of time. The customer was the high rate of coffee. That purpose they can stored, agent can filled the name of customer, quantity, type of coffee etc. the storage capacity of Hassan is 70000 tons, adequate space available. Purchases invoice issued sale purpose the customer can sell coffee beans. The agent can filled the purchased invoice the include the information of customer name, agent name,
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quality quantity, and also today rate coffee that all information can filled in the documents. That based issued the cheque customer which bank proffered in the purchase invoice that bank can issue cheque. This all process agent received the commission.
PRODUCTION PROCESS 1. The dried coffee is transferred to hulling machines. These CNC machines carry on the process of DEHASKING, that is removal of the skin from coffee beans and the skin is removed as waste. These machines are 3 in numbers and 1 is imported from Buler Comp, Germany costing Rs. 40 lacks. Other 2 are Indian made & costs Rs. 25 lacks each. 2. Next polishing of coffee beans takes place to bring the smooth texture and shiny look in coffee beans. 3. After that these polished coffee beans enter a colour sorting machine which differentiates green coffee beans from black. Green coffee is more costly and is considered as proper bread with good quality whereas black beans are considered as low quality coffee. Colour sorting machines are imported from USA and are worth Rs.40 lacks. 4. Next the coffee enters the roasting machines and is roasted to get the original look and color of coffee. The roasting machine is worth Rs.80 lacks and is imported from Germany. This roasting process is one of the most important processes in coffee curing where the real color and taste of coffee is emerged. 5. After roasting, GARNING is done by manual labours and defectives are removed. 6. Grading of coffee is done and are separated according to its size, color and appearance and are given quality names such as AAA, AA, PB, BB etc 7. Each different type is loaded and packed into bags and rates are based on bag.
The baggage quantities of each bag are as follows. Unprocessed coffee-50 kgs/bag Processed coffee-75 kgs/bag (domestic dealings)
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Processed coffee-60 kgs/bag (export dealings) Each types of coffee is placed in different places in warehouses and as and when the export orders are placed in Bangalore, coffee is loaded into containers, weighed to know the requirement and the trucks are sent to Bangalore which are checked again and further sent to Chennai port for shipment export etc. PURPOSE OF INVENTORY MANAGEMENT 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. Special terms used in dealing with inventory
Stock Keeping Unit (SKU) is a unique combination of all the components that are assembled into the purchasable item. Therefore any change in the packaging or product is a new SKU. This level of detailed specification assists in managing inventory.
Stock out means running out of the inventory of an SKU.

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New old stock" (sometimes abbreviated NOS) is a term used in business to refer to merchandise being offered for sale which was manufactured long ago but that has never been used. Such merchandise may not be produced any more, and the new old stock may represent the only market source of a particular item at the present time.
Inventory management of ABCCL Inventories constitute the most significant part of current assets of large majority of companies . The large size of inventories maintained by firm, a considerable amount of funds is required to be committed them. It is, therefore, absolutely imperative to manage inventories efficiently and effectively in order to avoid unnecessary investment. A firm neglecting the management of inventories will be jeopardizing its long-run profitability and may fail ultimately. In Amalgamated bean coffee they can maintain inventory very sufficient level. They can by the buy the coffee various agent of ABC, own plantation of ABC and also customer ABC. In ABC they can buy the four different variety of product. There are 1. Arabica cherry 2. Arabica parchments 3. Robusta cherry 4. Robusta parchment
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Table showing different types & sub divisions of coffee beans. Arabica parchment Arabica Cherry Robusta Parchment Robusta Cherry
Types
S U B D I V I S I O N S
AAA AA A B C PB BB Bits EB
AA A AB C PB BB Bits
AAA = AA PB = =
Triple A Double A P Berry

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BB EB
= =
Black Berry Elephant Berry
This table is showing different varieties of coffee. In this basic they stored different store sections. The storage capacity ABC of is 70000 tons. They maintain coffee beans very good quality, different storekeeper
Functions of inventories in ABCTCL Since inventories exist because of differences in supply and demand process rates, any meaningful purpose of their existence will be rooted in either the desirability or the necessity that these two rates differ. Within this general framework, functions of inventory can be defined. Protection Against Stock outs To the extent that supply or demand process fluctuates unpredictably there is the risk of running out of stock and suffering the associated customer strife, disruption of operations, expediting costs, etc., insurance against such stock outs is provided by so called buffer stocks. The need for such stocks increases as the time between the occurrence of the random fluctuation and the consumption for it increases and also of course, as the fluctuations increase. Operations Smoothing Demand processes are typically subject to foreseeable rate change. This fluctuation is usually synchronous with the season of the year or with the phenomenon of the business cycle. Although such fluctuations can be accommodated in other ways, such as changing production rates, there is usually the alternative of producing and storing in anticipation of peak demand. Just as with buffer stocks smoothing stocks may also accommodate known fluctuations in supply.
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Lot Size Economy Even if it were possible to maintain supply and demand processes which were equal and
time invariant, usually it would not be desirable to do so. This is because of supply of goods at a constant rate implies a large number of delivers with a small number of items per delivery. This would disregard the economies associated with a small number of deliveries and a large number of items per delivery. If the supply process involves shipment and receipt of goods from an outside supplier, the economy basically arises from lower shipping and delivery costs. In some cases, this may consist of a suppliers offer of a quantity discount on large orders. Control System Economy
An often-overlooked purpose for carrying larger inventories is that less control effort is required. For ex: it may be cheaper to carry larger stocks and review stock levels less frequently. Market Speculation
Price fluctuations of supply may dictate premature acquisition. Anticipation of a future increase in selling price suggests a delay in disposing of stock on hand. Conversely, declining market price as a motivation for creating a negative inventory. Such market advantages are certainly not confined to material prices. A pending increase in labor costs may make it advantageous to stock finished goods
Stores management Purchase Requisition: When a different coffee beans need department they should initiate through requisition. Depending upon the requisition the material is confirmed. Indenting Of Material: In case of any items required the concerned department will raise indent (Stock position of materials is available in stores ledger and any interested person can refer to it) through computer with specified material code, number and description and required quantity. Related clerks will verify these indents. If the same material is found with the stock, check the same whether these stock belonging to any other user department. If not it is filled with stock quantity and reduces the order quantity.
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If material belongs to other user department confirmation is obtained whether stock of material is required them or not, then forward the indent to store purchase officer. Goods inward: Purchased materials which contains the detail of material description purchase order number along with the Delivery Challan number, bill number, mode of transport, delivery schedule etc are received in stores. Inspection and Test Status: When the materials received the user department arranges for the inspection of that material. After inspection the user department puts approval or rejected remark and returns to the stores department. When user department puts approval, bill is passed. If the goods are rejected by the user department it has specify the reason for rejection and returned to supplier. As regard to chemical material, chemical analysis report is sent to chemical department for analysis, if material are as per required standards it is accepted and if not same will retuned. Weigh Bridge Function: Bulk material is weighted in companys weigh bridge and weighment slip will be issued. All the details of delivery, invoice and unloading contractor will appear on weighment slip. Weighment slip is prepared in triplicate. The first copy will be examined by stores. The second copy will be attached to lorry receipt which in turn will be hanged over by the driver to the accounts department. The third copy will be retrained by weigh bridge people. The weighment slips are done only when essential. Issue: Material are to be issued through Material Requisition Slip(MRS). The MRS contains information such as slip number and date, department, section, purpose where material issued, material code number with description etc. Requisitions to be signed only by the authorized thereafter material is issued. All the above details are filled by the user department. The material issued from stores mainly stores go down. The issue feeding data is done on a day to day basis for updating the stock.
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Periodical inspection: The general conditions of the stored items shall be inspected at least once in months i.e. twice in a year. Bill passing: Bill passing procedure starts with the receipt of arrival of goods. The receipt clerk puts stamps on backside of bills. The bills are checked by the bill checking clerk. The bills are checked with the concern order. All the clauses are considered while passing the bill such as rate, sales tax, delivery schedule, excise duty, delivery of material and quantity of material.
Shelf Life: The shelf life will be identified with the date of receipt and expected date of expiry. Such items date will be stored computer for ready reference. Any item crossing its expiry the concerned person will verify date and if necessary the expiry date will be extended and the new date will be incorporated in the computer. Storage of materials: The materials in the store department are kept at appropriate store rack. Some materials like oil, lubricants, and paints are stored in separate containers/bullets/tanks etc. kept at appropriate location.
STORES DEPARTMENT This department basically consists of the incoming materials procured from the supplier to manufacture a product. The materials before reaching into the process or stores, materials are inspected on various aspects by different inspection departments. FUNCTIONS 1. Receive materials as per the delivery challan/invoice/credit reports. 2. Ensure identification, inspection status, supplier identification on the components agent code/material code in delivery challan/invoice. 3. Ensure quantity as per the delivery challan/invoice. 4. Prepare receipt memo.
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5. Storing & comparing material in specialized locations. 6. Issuing materials as per indents to shops/sub contractors. 7. Disposal of non-conformity/scrap materials. 8. To maintain particular material in the department 9. Inspecting call. 10. Control of customer property. 11. Handling, clearing, storage, packing and delivery 12. Preparation of invoice and delivery Chalan 13. Customer satisfaction
Factors Affecting Stock Investment Level These factors can be put in two categories: General and Specific. General Factors: These factors include those factors, which affect directly or indirectly level of investment in any asset. These are as follows: Nature of Business Size and scale of Business Expected Sales Volumes Price Level Changes Availability of Funds Management view Point
Specific Factors: These factors are directly related with investment in stock. Following are the main factors: Seasonal Character of Raw Materials: If supply of raw material used in the firm is seasonal, the firm will require more funds for the purchase of raw material during season. Usually, raw materials are available at cheaper rates during is production season.
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Length and Technical Nature of the production process: If production process is lengthy and of technical nature, higher investment is required in raw material. In the technical nature production process, quality control of raw material is given more emphasis.
Terms of Purchase: If some concessions or discount in price or facilities of credit are provided by suppliers on purchase of raw materials in huge quantity then the firm is inspired for excessive purchase of goods and hence comparatively more investment is required in inventory.
Nature of End Product: Nature of end product also influences investment in inventory. If the end product is a durable good, high investment will be required because durable goods can be stored for a long period. On the other hand, perishable goods cannot be stored for a long period. Hence, investment in inventory of such products is low.
Supply Conditions: If the supply of raw material is regular and there is no possibility of interruption in future, high investment in inventories is not required.
Time Factor: The lead time of raw material time token in production process and sale of product also influence investment in inventories. Longer the period, higher will be the investment in inventories.
Loan Facilities: If raw materials are purchased on credit or loan from the bank or other financial institution can be obtained on the security of raw material, lesser investment would be required. In the absence of such loan facility, higher investment would be required.
Price Level Fluctuations: If there are expectations of price rise in future then raw materials may be store in high quantity and so more investment would be required. On
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the contrary, if the prices of raw materials are expected to go down in future, then comparatively lesser investment would be required.
Other factors: Price control, rationing, change in taxation and export policy of governments etc. also influence investment in inventories.
Factors determining the optimum level of inventory: It is the period within which inventory completes the cycle of production and sales. When the turnover rate is high, investment in inventories tends to be low. Type of product
Durable products are more susceptible to inventory holding as the risk of perishablity and obsolesce is less. So perishable goods are not stocked in large amounts. Thus, the type of product influences the inventory. Coffee beans stored in long time in specified stored location. Market structure
Under the conditions of imperfect competition, demand is uncertain and stocks must be held if the firm wants to take advantage of profitable sales opportunities. The optimum level of inventory will depend upon the variability of sales and the cost revenue relationship. Level of inventory rises with increase in difference between price and marginal cost. Thus market structure influences the level of inventories. Economies of production runs
Also determine the inventory level. Modern machinery is very costly and the cist of idle machine time is considerable. Therefore every business firm likes to maintain sufficient stock of raw materials to ensure uninterrupted production.
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Financial position of the firm
Financial position of the firm has significant influence on inventory levels. A financially sound company may buy materials in bulk and hold them form future use. A firm starved of funds cannot maintain large stock
Essentials of Inventory Control System For an efficient and successful inventory control there are certain important conditions that are as follows: Classification and Identification of inventories: The usual inventory of manufacturing firm includes raw-material, stores, work-in-progress and component etc. To facilitate prompt recording the dealing, each item of the inventory must be assigned a particular code number and it must be classified in suitable group or sub-divisions. ABC analysis of material is very helpful in this context. Standardization and simplification of inventories: In order to facilitate inventory control, the inventory line should be simplified. It refers to the elimination of excess types and sizes of items. Simplification leads to reduction in classification of inventories and its carrying costs. Standardization, on the other hand, refers to the fixation of standards of raw material to be purchased and specification of the components and tools to be used. Setting the Maximum and Minimum limits for each part of inventory: The third step in this process is to set the maximum and minimum limits of each item of the inventory. It avoids the chances of over-investment as well as running a short of any item during the cost of producing. Reordering point should also be fixed beforehand. Economic Order Quantity: It is also a basic inventory problem to determine the quantity as how much to order at a time. In determining the EOQ, the problem is one to set a balance between two opposite costs, namely, ordering costs and carrying costs. This quantity should be fixed beforehand.
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Adequate storage Facilities: To make the system of inventory control successful and efficient one, it is also essential to provide the adequate storage facilities. Sufficient storage area and proper handling facilities should be organized.
Adequate Reports and Records: Inventory control requires the maintenance of adequate inventory record and reports. Various inventory records must contain information to meet the needs of purchasing, production, sales and financial staff. The typical information required about any class of inventory may be relating to quantity on hand, location, quantities in transit, unit cost, code for each item of inventory, reorder point, safety level etc. Statements forms and inventory records should be so designed that the clerical cost of maintaining these records must be kept a minimum.
Intelligent and Experienced Personnel: An important requirement of successful inventory control system is the appointment of qualified and experienced staff in purchase and stores department. Mere establishment of procedures and the maintenance of records would not give the desired results as there is no substitute for sincere and devoted as well as experienced hands. Hence, the whole inventory control structure should be manned with trained, qualified, experienced and devoted employees.
Coordination: There must be proper coordination of all departments involved in the process of inventory control, such as purchase, finance, receiving, approving, storage and accounting departments. These all departments have different outlook and objects in inventory management but financial manager has to coordinate them all.
Budgeting: An efficient budgeting system is also required. Preparation of budgets concerning materials, supplies and equipment to ensure economy in purchasing and use of material is also necessary.
Internal Check: Operating of a system of internal check is also vital in inventory management so that all transactions involving material supplies and equipment purchase are properly approved and automatically checked.
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TOOLS AND TECHNIQUE OF INVENTORY MANAGEMENT Inventory management requires an efficient control system for inventories. Proper inventory control not only help in solving the acute problem of liquidity but also increases profit and cause substantially reduction in the working capital of the concern. The following are important tools and techniques of inventory management. ABC Classification Level setting Two bin system Material requirement planning Physical verification of stock Just-In-Time (JIT) technique
The amalgamated bean coffee maintain three tool and techniques there are 1. ABC classification 2. Material requirement planning 3. Level setting
1. ABC (Always better control) CLASSIFICATION An organization uses different kinds of material in its production or trading activities. Some store materials may be costly, slow moving whereas, others may be less expensive and fast moving. In most inventories, a small proportion of items account for a very substantial usage and large proportion of items for a very small usage. ABC analysis advocates a selective approach to inventories which calls for greater concentration of effort on inventory items accounting for the bulk of usage value. This approach calls for classifying inventories into three broad categories A, B & C Depending on usage value. ABC approach is also known as always better control. This approach to the inventory management determines degree of control to be exercised in respect of materials kept in storage. The items included in group A involve the largest investment. Therefore, inventory control should be the most vigorous and intensive and most sophisticated inventory control techniques
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should be applied to these items. C group consists of items of inventory which involves relatively small investment although the number of items is fairly large. These items deserve minimum attention. B group stands midway. It deserves less attention than A but more than C. it can be controlled by employing less sophisticated techniques. ABC analysis consists of the classification of materials into categories, A B & C on the basis of their value. Items of high value and comparatively less in number are included in A category. Generally, they constitute about 70% of the total value and about 15% of the total number. Items low value and large in number are included in C category. Generally, they account for about 70% of the total value and about 60% of the total number. Items of moderate value and moderate in number are included in B category. They account for about 20% of the total value and about 25% of the total number. Items of A category are subject to strict control with regard to purchase, storage and use. Items of B category are not subject to much control. The objective of this analysis is to reduce the investment of inventory, the cost of inventory control and also loss of inventory. In ABCTCL is classified the goods in ABC analysis, there are A category AAA AA B category BB EB C category PB
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2. Material requirement planning It is fairly recent technique that has been introduced to control inventories, it is based on computer technology, material requirement is planning mainly helps in ensuring arrival of materials are held in inventory. Material requirement and plans and control goods on order and helps in determining, when specific materials will be needed to meet the previously production schedules. In ABCTCL not made any proper material requirement planning, because the product can available only in seasonal base that base they can planned only seasonal base material requirement plan. The material stored Hassan, when the beans increase that base they planned material requirement planning. Material requirement planning is designed to answer the three questions. There are What is needed? How much is needed? When it is needed? This also three question answer the MRP that base makes the planning of coffee beans 3. Level setting It involves setting-up of inventory levels such as, maximum level, minimum level, re-order level, danger level, and average stock level. The above levels are calculated when a store-keeper places an indent for fresh stock and also to avoid over-stocking of any material. At the same time to ensure follow-up to sufficient materials to production process. The main purpose of fixing the levels is to control the investment on inventories. In ABCTCL also maintain level of setting in materials of plastic bag and gunny bag for packaging of coffee beans (a) Minimum level This is the limit below which the stock should not be allowed to fall. It is fixed on the basis of average consumption and average lead-time required for measuring the item. The main purpose of fixing this level is to ensure adequate check for continuous production and sales of coffee beans.
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Minimum level=Re-order level (ROL) (Normal consumption * Normal Re-order period) (b) Maximum level This is the limit or level beyond which the stock of an item should not exceed. This level is fixed for avoiding over-stocking of material and its associated risks. ABCTCL is covered only store bag in when season coffee bean started Maximum level=Re-order quantity (ROQ)-(Minimum consumption * minimum order period) (c) Re-Order level It is the point fixed between maximum and minimum level at which the storekeeper has to initiate action to obtain fresh supplies bags. The point will be usually be slighted higher than the minimum stock to cover such emergencies as abnormal usage or unexpected delay in supply. Re-ordering level depends on lead time, rate of consumption and economic order quantity. When the demand coffee is high that the time reorders the bag Re-order level=maximum consumption * maximum reorder period
(d) Danger level It is the level below the minimum level. When the stock reaches this danger level, urgent purchase action is necessary. As the normal lead-time is not available, it is necessary to resort unorthodox purchase procedure resulting in higher purchase cost. Danger level=minimum consumption * emergency reorder period (e) Average stock level It is the stock level between the minimum level and maximum level of stock. ABCTCL is stored bags in mini maxi level
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Average stock level=maximum level + minimum level 2 Other tools and techniques of inventory management are as follow
4. Economic order quantity (EOQ) It can be described as the basis for how much to bye. It is the oldest and most widely known inventory model. It dates back to 1915. The purpose of using EOQ model is to find that particular quantity of order with minimum total inventory costs. EOQ is the technique which solves the problem of the material manager. EOQ is the order size at which the total cost, comprising ordering cost and carrying cost, is the least. EOQ will fix at a level where the total of ordering cost will be minimum. EOQ can be calculated by a mathematical formula:EOQ= WHERE, A = annual consumption of unit O= ordering cost per order C= carrying cost per unit per annum 5. Just-in-time (JIT) The concept JIT means that, virtually no inventories are held at any stage of production and the exact numbers of units are brought to each successive stages of production at the right time. It is also called, zero inventories. 6. Bin cards and stores ledger : (a) Bin card Bin is the place, rack or cupboard where materials are stored. Each bin has a card to show the position of the stock in the bin. It is known as bin card. It as contains number, materials issue, material requisition numbers, balance of stock and remark.
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The bin card thus indicates ready stock position of an item at any movement. Entries are made usually by store personnel (b) Stores ledger Stores ledger contains the same columns which a bin card has but, in addition the amount of columns pricing receipt and issue of materials are provided. Stores ledger shows at any time, the value on bond. The ledger is maintained in stores as well as cost office to provide a cross check on the stores personnel. Entries in the stores ledger are supported by goods received note, material requisition, etc. 6. Inventory valuation First in first out (FIFO) This method assumes that materials are used in the order in which they are received in stores. Hence the price of the first lot is charged to all issues till the stock lasts. In other words, the issues are priced in the chronological order of receipt. As a result, closing stock will be valued at latest purchase price. Advantages: Simple method to understand and operate Material cost represent actual cost, which should be charged to product or process Stock value closer to current price Disadvantage: In fluctuating price and too many purchase and issues, this method will involve more calculation It overstates profits at the time of raising prices If price changes frequently, comparison of one job with the other will not serve useful purpose. Similar jobs will have different costs of price changes Adjustment for rejection and return becomes complicated. The method is useful in case of slow moving or less frequently used materials of bulk items and high unit cost
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Last in first out (LIFO) This method assumes that the last receipt of stock is issued first. Hence issued are valued at current prices, while stock remains at historical cost. The method has advantage under inflationary condition of the market. Using the sane data of the earlier illustration, the issue prices and closing stock valuation of the material will be as follows. Advantages It is a cost method that prices goods sold in a systematic and realistic manner. It provides a better matching of current cost with current revenues. It results in real income in time of raising prices by maintaining net income at a lower level than other costing methods Disadvantages Stock-value does not represent current market prices Unfair comparison of job cost when price changes too frequently Like FIFO, this method also involves too many calculations, if frequency price changes occur and purchase are made in small lots Weighted average price method Under this method the materials or goods issued to production or for sale and closing inventories are valued at the weighted average price Merits of this method: It is easy to operate in the sense that a new average price is to be calculated only when a new lot is purchased, and not at the time of every issue It evens out sharp fluctuations in purchase price of inventories As this method recovers that total cost from total production, there will not be any profit or arising out of pricing fair value Under this method, closing inventories represent fair value As all jobs are charged at the average price under this method, comparison of similar jobs becomes easy and reliable
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De-merits of this method The average price is required to be calculated to four or five decimal places, if accuracy is desire. This makes the calculation difficult. When purchases are frequent, new average prices have to be calculated often. This makes this method complicated Under this method, the closing inventories do not reflect the current market prices. In spite of the above drawbacks, this method is generally considered to be the best for pricing issues of material which are subject to wide fluctuation.
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2. ANALYSIS OF DATA
INVENTORY TURNOVER RATIO For efficient management of inventory the management must try to allocate limited funds to each component of inventory in an optimal manner. Turnover of inventory directly affects the profitability of the firm. Higher the turnover the larger the profits. A higher turnover also indicates that the firm has conducted more business with proportionately less amount of inventories, which results in saving of inventory cost. A high inventory turnover may result a very low level of inventory which results in frequent stock-outs the firm may be living from hand to mouth. Thus too high and too low inventory turnover ratios should be investigated further. Cost of goods sold Inventory turnover ratio= _________________________ Average inventory at cost Average stock Average stock here means the average of opening stock and closing stock. This can be calculated by using the formula giving below Average stock = (opening stock + closing stock) / 2 INVENTORY CONVERSION PERIOD The ratio indicates the number of days taken to convert the inventory in to sales. This is very use full in deciding the organizations efficiency. The ratio helps the organization to know its efficiency to improve and also to show the financial capacity of the organization. No of days in year Inventory conversion period = ______________________ Inventory turnover ratio
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INVENTORY TO WORKING CAPITAL It helps to measure the short-term solvency of any company. This ratio indicates the proportion of capital tied up in inventory or stock. This can be calculated by using the formula given below Inventory Inventory to working capital ratio = _________________ * 100 Net working capital
INVENTORY TO TOTAL ASSET This percentage reflects the position of the inventory in the percentage of total asset, which helps the firm to make the proper utilization of the resource profitably. As the inventory blocks the funds and reduce the profitability of the organization. It is the relation between the inventories to total asset. Total inventory Inventory to total asset = _______________ Total asset Total assets = Fixed assets + current assets * 100
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INVENTORY TURNOVER RATIO TABLE NO: 1 showing turnover ratio of past 5 years Year Sales Average (crore in Rs) 2006-07 2007-08 2008-09 2009-10 2010-11 1211982196 1514977744 1893722180 2367152715 2855519616 251212117 301515146 345151146 376893933 416959566 4.82 5.02 5.4 6.20 6.85 inventory Turnover ratio
Graph showing turnover ratio of past 5 years Graph no:1
Inventory Turnover Ratio

8 7 6 5 4 3 2 1 0 2006-07 2007-08 2008-09 2009-10 2010-11 4.82 5.02 5.4 6.85 6.2
Inventory Turnover Ratio
Analysis: The inventory turnover ratio in 2006-07 4.82% in 2007-08 increased 5.02% in small change in 2008-09 5.4% in 2009-10 increased 6.2% in 2010-11 increased 6.85%.
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Interpretation: The inventory turnover ratio in 2006-07 was low when compare to other years, because the inventories that was maintained by the factory was very high. Where as in the inventories was maintained at a high rate and there was fast moving of materials. In the year 2010-11 inventory turnover ratio was 6.85%. INVENTORY CONVERSION PERIOD TABLE NO:2 Showing the inventory conversion period of past 5 years Year No of day in year Inventory ratio 2006-07 2007-08 2008-09 2009-10 2010-11 365 365 365 365 365 4.82 5.02 5.4 6.20 6.85 turnover Inventory conversion period 75.72 72.70 67.59 58.88 53.28
Graph showing the inventory conversion period of past 5 years Graph no: 2
Inventory conversion period

80 70 60 50 40 30 20 10 0 2006-07 2007-08 2008-09 2009-10 2010-11 Inventory conversion period 75.72 72.7 67.59 58.88 53.28
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Analysis: In 2006-07 inventory conversion period is 75.72, 2007-08 was small change in period 72.70, and in 2008-09 was decrease the period 67.59. In 2009-10 was decrease the period 58.88, 2010-11 also decrease the period 53.28. Interpretation: Inventory conversion period at the amalgamated bean coffee trading company ltd. Is improving year by year. But again in the year 2010-11 it was decrease to 53.28 days here in the year 201011 the conversion process was very good as it took only 53.28days to convert raw materials into finished products. INVENTORY WORKING CAPITAL TABLE NO:3 Inventory working capital ratio past 5 years Year Inventory (crore in Net working capital Inventory Rs) 2006-07 2007-08 2008-09 2009-10 2010-11 214410770 268013463 335016829 436771036 576537767 (crore in Rs) 1088867300 1209852556 1423355948 1779194935 2152825871 to
working capital ratio 19.69% 22.15% 23.53% 24.54% 26.78%
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Graph showing the inventory working capital ratio past 5 years. Graph: 3
Inventory to working capital ratio

30 25 20 15 10 5 0 2006-07 2007-08 2008-09 2009-10 2010-11 19.69 Inventory to working capital ratio 22.15 23.53 24.54 26.78
Analysis: In 2006-07 inventory working capital is 19.69% in 2007-08 was increased 22.15% in 2008-09 was increased 23.53% in 2009-10 is increased 24.54% in 2010-11 increased 26.78. Interpretation: The above table shows the percentage of working capital locked up in inventories. In the year 2006-07 it was 19.69% of the working capital and next year it was increased to 22.15% and again it was increase in 2008-09 it was 23.53%. in 2009-10 it was increase 24.54% in 2010-11 also increase the working capital ratio is 26.78
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INVENTORY TO TOTAL ASSET TABLE NO: 4 Table showing the total asset ratio of past 5 years Years Total inventory (crore Total asset= current asset + Total in Rs) 2006-07 2007-08 2008-09 2009-10 2010-11 214410770 268013463 335016829 436771036 576537767 fixed asset (crore in Rs ) 1318995039 1465550043 1724176521 2155220650 2586775109 inventory to
total asset ratio 16.2% 18.28% 19.43% 20.25% 22.28%
Graph showing total inventory to total asset ratio of past 5 years Graph no: 4
Total inventory to total asset ratio

25 22.28 20 16.2 15 Total inventory to total asset ratio 18.28 19.43 20.25
10
0 2006-07 2007-08 2008-09 2009-10 2010-11
Analysis: The inventory to total assets percentage is fluctuating every year. In the year 2006-07 it was 16.2% and thereafter it was increased in 2007-08 and 2008-09 it was 18.28% and 19.43% in 2009-10 it increased to 20.25% in 2010-11 it was increased to 22.28%.
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Interpretation: When this ratio is decreasing in the yearly basis which shows that the share of the inventories is decreasing from total assets which shows that more of the inventories are converted into sales and it is favorable to the factory.
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FINDINGS
The following are some of the findings as per me by working in ABC Trading Co. Ltd Inventory Turnover Ratio is good (6.85%) when compared to previous year 2009-10 (6.20) Inventory Conversion Period is Good (53.28%) then previous year 2009-10 (58.88) Total inventory percentage (26.78%) in working capital of the firm is quite good which Is positive sign for firm Total Inventory to Total Asset Ratio is good (22.28%) when compared to previous year 2009-10 (20.25) Inventory holding period of the firm is quite good by analyzing the five years Data of the company. It is the aim of ABCTCL to make Indian coffee popular all over the world It has the biggest plantations of its own which is more than 20,000 Acres in Chikmagalur District, where no other coffee exporting company in India has
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SUGGESTIONS
The following are some of the suggestions as per me by working in ABC Trading Co. Ltd. Inventory percentage to that of sales should be properly co-ordinated and maintained by the firm. Work in progress in total inventory must be low for the well being of the firm, so firm must take JIT approach. New improved machines can be installed to carry on the process of bagging, separation. For loading the bags into trucks, tread mill kind of machines can be used which reduces the effort and number of manual labour. A good office automation process may be carried out by replacement of outdated computers and a improved internet network within the organization.
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CONCLUSION
Inventory management is one of the basic important functions of every business. An average manufacturing organization in India has more than 60% of its current asset invested in inventories. Therefore, by following proper efficient inventory management principles, the company can certainly reduce the cost of inventory and can improve its bottom line and thereby, become competitive, which in turn will improve its market share.
As mentioned earlier and also by going through the whole company profile and other data, it is clear that ABCTCL as a very big name and share in the whole coffee market of the world and is one of the fully integrated coffee companies of Asia. Its exports make ABCTCL as a second largest origin exporter in the world. Their client list includes some of the worlds biggest and most discerning roasters, MNCs, trading company and retail chains.
By working in such a successful organization, it is been helpful in gaining lot of knowledge about inventory management. This is not surprisingly because of the rich, unique blend of elements, vast, fine estates, exacting quality control over processing, absolute commitment and integrity and most significantly, a sense of dynamism of striving for the extraordinary and lots more to offer, ABC is one of the most professional in its nature. They continuously strive to identify customer needs & constantly work on ways to present Indian coffee to the world market and we can say that the competition for ABCTCL comes not from within India but from other coffee nations such as Brazil, Columbia and Kenya. Even though there is competition from so many countries, this company tries very hard & is also successful to grab a huge share in the world market.
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BIBLIOGRAPHY
SOURCES OF INFORMATION Personal interaction with staff of ABCTCL, Hassan & Senior General Manager Mr. H.A Vinay Text books Financial management- Prasanna Chandra Financial management- I.M Pandey Websites: www.abctradingltd.com www.coffeeday.com www.coffeeday.com/exports/about-us.html
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ANNEXURE
Profit and loss account for the year ended 31-3-2011 Particular Previous year 31-3-2010 (crore in Rs) Current year 31-3-2011 (crore in Rs)
Incomes Export sales Domestic sales Other incomes Increase / decrease in stock 1620334714 746817999 28072809 374588044 2769813566 Expenditure Purchasing & direct expenses Operating and administration expenses Financial charges Depreciation 1481336390 332043383 130754745 36590922 1980725440 Operating profit Adjustments for exceptional items Profit on sale of capital asset Prior period adjustment Profit before taxation Provision for taxation Profit after tax 10856 114032 788963238 6300000 782663238 1431160830 Balance brought forward Transferred to general reserve Balance carried to balance sheet 648497592 90000000 1341160830 12484 143680 871447944 7434000 864013944 1681120909 817106965 114300000 1566820909 789088126 1866483851 408413362 164750978 46470470 2486118661 871604108 1944401657 911117959 33968098 468235055 3357722769
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Balance sheet Particulars Previous year 31-3-2010 Current year 31-3-2011 (crore in Rs) 332175832 973210410 1305386242
(crore inRs) Share capital Reserves and surplus 265740666 784847105 1050587771 Loan fund Secured loan Unsecured loan 1144734685 396671952 1541406637 Total Application of funds Fixed assets Gross block Depreciation block Net fixed asset Capital WIP 461181737 119489423 341692314 34333401 956696875 Investments Current assets loans & advances Inventories Sundry debtors Cash & bank balance Advances & deposits 436771036 881680667 81645444 986559644 2386656791 Less: Current liabilities & 607461856 426698514 2591994408
1396576315 487906500 1884482815 3189869057
581088988 152946461 433949238 43260085 1211244772 541907112
576537767 1110917640 84094807 1223333958 2994884172 741103464
provisions Net current asset Miscellaneous expenditure 1779194935 10075244 2152825871 12392550
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Final ABC Inventory

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INVENTORY MANAGEMENT

First company in India to receive UTZ certification

III Round: - Plucking of cherry

YEAR 1999-2000 2000 2000-2001

2. j WORK FLOW MODEL

Weighting of coffee beans

Coffee transfer to hulling machine

Polishing coffee beans

Beans separated from grade base

3. MCKENSYS 7 S FRAME WORK

CHART SHOWING ORGANISATION HIERARCHY OF ABCTCL HEADS OFFICE OF HASSAN

164750978 46470470 2486118661 871604108

33996233 9879548 505393221 82515982

26% 27% 25.51% 11%

Provision for taxation Profit after tax

6300000 782663238 1431160830

7434000 864013944 1681120909 817106965 114300000

1134000 81350706 249960079 168609373 24300000

18% 10.39% 17% 26% 27%

Balance brought forward Transferred reserve Balance carried to

Particulars Current assets Current liabilities Current ratio

2009-10 2386656791 607461856 3.92

2010-11 2994884172 741103464 4.04

Particulars Quick assets Current liabilities Acid Test Ratio

2009-10 1949885755 607461856 3.20

2010-11 1883966532 741103464 2.54

Particulars PAT Net sales Net profit ratio

2009-10 782663238 2367152713 0.33

2010-11 864013944 2855519616 0.30

Particulars Long Term Debt Shareholders equity Debt-Equity Ratio

2009-10 1541406637 265740666 0.58

2010-11 1884482815 332175832 0.57

Stock out means running out of the inventory of an SKU.

Triple A Double A P Berry

Black Berry Elephant Berry

Financial position of the firm

Graph showing turnover ratio of past 5 years Graph no:1

Inventory Turnover Ratio

Inventory Turnover Ratio

Inventory conversion period

working capital ratio 19.69% 22.15% 23.53% 24.54% 26.78%

Inventory to working capital ratio

total asset ratio 16.2% 18.28% 19.43% 20.25% 22.28%

Total inventory to total asset ratio

0 2006-07 2007-08 2008-09 2009-10 2010-11

1396576315 487906500 1884482815 3189869057

581088988 152946461 433949238 43260085 1211244772 541907112

576537767 1110917640 84094807 1223333958 2994884172 741103464

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