Beruflich Dokumente
Kultur Dokumente
PROJECT REPORT ON
INVENTORY MANAGEMENT
AT
SINGARENI COLLARIES COMPANY LTD.
MASTER OF BUSINESS ADMINISTRATION
By
N.ANILU
H.T.NO: Y11BU128050
DECLARATION
Name:
Date:
Signature of the student
PH: 08744-245719
Fax: 08744-245401
e-mail:hrd1_crp@scclmines.co
No: CRP/HRD/217/
CERTIFICATE
Chief
GM(HRD)
To
Mr.N.ANILU,
3
MBA student,
SRI NAGARJUNA INSTITUTE OF MANAGEMENT STUDIES,
Cc:
The Principal,
SRI NAGARJUNA INSTITUTE OF MANAGEMENT STUDIES,
ACKNOWLEDGEMENT
The very high degree of informal co-operation received during my discussion on the
topic has been one of the greatest pleasures of working in the organization.
The co-operation I received from the wide cross-section of employees SINGARENI
COLLARIES COMPANY LTD. of makes it difficult to list out individuals for
acknowledgement. However, I particularly indebted to S. Anil kumar for appraising me of the
situation with necessary background and helping me to complete this project.
It is with great pleasure that I express my gratitude
Mr.RAMU under whose guidance and advice this study has been carried out.
Finally I thank to my parents & friends for their continuous support and help in the
completion of my project work
TABLE OF CONTENTS
INDEX
PAGE No.
CHAPTER--1.
INTRODUCTION
1-5
CHAPTER2
REVIEW OF LITERATURE
6-21
CHAPTER3
COMPANY PROFILE
22-64
CHAPTER4
65-81
INTERPRETATION
CHAPTER5
CONCLUSION&SUGGESTIONS
BIBLIOGRAPHY
82-86
87-88
ABSTRACT
The project work entitled inventory management includes study about inventory, its importance and
effectively it should be managed for smooth operations of business. Inventories are assts of the and
require investment and hence involve the commitment of farms resources.
Every firm is required to manage the inventories in such a way as to get the best returns. The
objective of inventory management is to determine the optimum level of the inventory that is the level at
which the interest of the all department are taken care of.
The inventory management seeks to maximize the wealth of the share holders by minimizing the
cost of procuring and maintaining.
The objective behind the inventory management is maintaining sufficient stock of raw materials
ensuring continuous supply to production process for uninterrupted production schedule and minimizing
the total annual cost of maintaining inventories.
Inventories are assets of the firm and hence involve the commitment of firms resources;
managers must ensure that the firm maintains inventories at the correct level.
INTRODUCTION:
The thrust areas of this Millennium for improving efficiency of any business
activity are considered to be Service functions.
competition. Improving quality and reducing cost have become real needs for the success
of any Organization.
The study helps a log to various departments to take steps to control the inventory
process.
Inventory System.
System.
Financial and technical product information must be available through the Inventory
System, as needed to support the functional responsibilities of personnel within the finance and
contracts management departments. Asset criticality must be included with asset descriptive and
financial information, so that the Recovery Management department is supplied with the
information it requires. Recovery actions must be implemented to safeguard critical assets.
METHODOLOGY OF THE STUDY: The following is the methodology of the study. The
collection of data is done in two principle sources. They are as follows:
Primary data.
Secondary data.
PRIMARY DATA
12
The primary data needed for the study is gathered through interview with concerned
officers and staff, either individually or collectively. Some of the information has been verified or
supplemented with personal observation conduct.
SECONDARY DATA
The secondary data needed for the study was collected from published sources such as
pamphlets of annual reports, returns and internal records, reference from text book and journals
of financial management.
LIMITATIONS OF THE STUDY:
The inventory
In the company hold this information in separated areas form regular inventory, of not
properly informed about the procedures for damaged or returned inventory items.
13
INVENTORY MANAGEMENT
Inventory management and its importance:
Inventory management, or inventory control, is an attempt to balance inventory
needs and requirements with the need to minimize costs resulting from obtaining and
holding inventory. There are several schools of thought that view inventory and its
function differently. These will be addressed later, but first we present a foundation to
facilitate the readers understanding of inventory and its function.
14
What is inventory?
Inventory is a quantity or store of goods that is held for some purpose or use (the
term may also be used as a verb, meaning to take inventory or to count all goods held in
inventory). Inventory may be kept in-house, meaning on the premises or nearby for
immediate use; or it may be held in a distant warehouse or distribution center for future
use. With the exception of firms utilizing just-in-time methods, more often than not, the
term inventory implies a stored quantity of goods that exceeds what is needed for the
firm to function at the current time (e.g., within the next few hours).
INVENTORY MANAGEMENT:
Inventories are stock of the product a company is manufacturing for sale and
components that make up the product. The various forms in which in ventures exist in a
manufacturing company are Raw Materials, work in progress, and Finished Goods, the
levels of three kinds of inventories for a firm depends on the nature of business.
RAW MATERIAL:
Raw materials are those basic inputs that all converted into finished product through
the
manufacturing process. Raw materials inventories are those units, which have been
WORK-IN-PROGRESS:
15
Inventories are semi-manufactured products they represent that need more before
they become finished products for sale
FINISHED GOODS:
Finished goods inventories are those completed manufactures products, which are
ready for sale. Stocks of raw materials and work-in-progress facilitate production while
stock of finished goods is required for smooth marketing operations.
Excessive level of inventory consumes the finds of a firm, which cannot be, used
for any other purpose and thus, involves an opportunity cost. The carrying costs, such as
the cost of storage and handling insurance also increase in proportion to the volume of
inventory.
Maintaining a liquidates level of inventory is also dangerous. The consequences of
inadequate investment in inventory are production holds up failure to meet delivery
commitments. If inventory is not sufficient to meet the demand of the customers regularly
that may shift to other competitors, which will amount to a permanent loss to a firm.
Ordering Costs.
b)
Carrying Costs.
ORDERING COSTS:
The term Ordering Cost is used in cases of raw materials and includes the entire
costs of acquiring ram materials. Ordering cost is involved in:
CARRYING COSTS:
Carrying costs are involved in maintaining or carrying inventory. The cost of
holding inventory may be divided in to two categories.
Storage cost i.e., tax, depreciation, insurance, and maintenance of the building,
utilities and services.
Insurance of inventory against fire and theft.
Deterioration in inventory because of pilferage, fire, technical obsolescence, style
obsolescence, and price declines.
17
Serving cost-such as labour for holding inventory, clerical and account cost.
The carrying costs and the inventory size are positively related and move in
the same directions, in the level of inventory increases, the carrying cost also increase
and vice-versa.
1. RECEIPT OF MATERIAL:
In stores, material is taken in to stock through five different transactions. As
and when the material is received, IRN (inspection cum receipt note) will be prepared
and material is taken in to receipt through this IRNS, Purchase order status is updated in
different stages of this transaction. All the materials receive through this type are
subjected to quality inspection.
Receipts from sources other than vendor:
Documents as well as material are received at the same time. As and when the
material is received, IRN (inspection cum receipt note) will be prepared and material is
taken in to receipt through these IRNS. No purchase order status is updated different
stages of this transaction.
19
LR booking date must be within order validity date. If document date is not within the
order validity date. System should alert the user that order is already expired and should
block the consignment. Material receipt can be posted only for the valid orders.
Vendor may be sending the material pertaining to different purchase orders (placed
on him) through a single consignment. Consignment may be against different rate
contract suborders or general orders.
There may be different invoices for the quantity delivered against same vendor,
same purchase order, same schedule and same item.
21
After quality inspection is over, accepted is over, accepted material is shifted to the
concerned issue section. If the total quantities of all items are rejected in IRN, IRN will
be filed in the physical documents file of that purchase order. Vendor is intimates may be
dispatched to him with freight TO BE PAID condition. This IRN is also removed from
the list of pending IRNs.
Taking material into stock:
Issue section clerk verifies the material and its quantity with the mentioned in the
IRN i.e., whether item received and item given in IRN are one and the same or not. He
counts the material and its count is verified with the same IRN. If required, IRN and the
material will be sent back to the receipt section. If issue clerk satisfies with the material
and its quantity, stock of respective item is updated. This IRN is also removed from the
list of pending IRNs. Till then from the receipt of material, item is said to be under
inspection.PO status is also updated with the updating of stocks.
Locating the material in the section:
If the material is procedure for any specific use or if the material is urgently
required, respective mine/department is informed to draw the material.
22
23
Issue of material:
Material is issued from stores to mines/department and to other stores.
Material is issued to mines/department against SIV (stores indent voucher)
Where material is issued to other stores against ISTN (Inter stores transfer note)
SIV s are prepared section wise i.e. different SIV s should be for different stores
sections even SIV is from same department SIV raised mine/department consists of
details-SIV number. SIV date, Mine/department which raises the indent, Type of indent
i.e. Capital/revenue/sale account, finance code, Item code of the material, Required
quantity item wise charge code wise cost centre.
User department will raise an indent for the require d quantities of the required
material. It is to be approved by agent/project officer of the mine, HOD of the material. It
is the description of the stores in charge which decides what not be issued. Total quantity
not exceeds the quantity requisitioned. User department indicates the category of material
in indent I.e. whether it is capital or revenue or sale account, to enable the accounts
department to decide to which account this consumption is to be posted. Same material in
different indents may be indicated against different accounts.
User department indicates the charge code for every item in indent to represent
the equipment to which the respective item is going to be used i.e. dumper number, dozer
number. This charge code concept is relevant in OC and UGMM. For underground
consumption, if there is no need to mention equipment, there is no change code. All the
25
equipment in the mine is given a charge code by the respective department. Quantity
requisitioned for an item in the indent may be split up for the use of number of
equipment. So, charge code wise requirement should be raised for every item in indent, if
change code concept is relevant.
In the case of critical items or the items which are to be monitored closely, stores
in charges will write the quantities to be issued against each item on the approved indent
and approves the indent in the capacity of issuing authority. Regarding all other the
material, he will approve the indent as issuing authority. Materials will be issued to the
concerned as per advise of stores in charge (as in the case of critical items). While issuing
the material, it is required to maintain the details of the following for each item issued in
the indent.
another department with the advice of stores in charge or after obtaining the approval
from the department for which the material is reserved. Material can also be issued to
workers reporting to contractors on sale account basis i.e. Helmets, shoes etc. material
can also be issued to company employees on sale account basis i.e. CF lamps, dinner sets
etc.
26
Miscellaneous issue:
27
Quantity Discount :
29
Often firms are given a price discount when purchasing of a good. These also
frequently result in inventory in excess of what is currently needed to meet demand.
However, is the discount is sufficient to offset the extra holding cost incurred as a result
of the excess inventory, the decision to buy the large quantity is justified. The above
different transaction mentioned under system study is to be properly maintained in the
data base for inventory management. The inventory management techniques are here
under.
Controlling Inventory:
RISK AND COST OF HOLDING INVENTORIES
The holding of inventories involves blocking of firms funds and incurrence of a
capital and other cost.
The various costs and risk involve in holding inventories are:
inventories.
The funds may be arrange from own resources or from outsiders. But in both cases, the
firm insures the cost. In the former case, there is an opportunity cost of investment while
in later case the firm has to pay interest pay to the outsiders.
STORAGE AND HANDLING COSTS: Holding of inventories also involves cost on
storage as well as handling materials. The storage cost includes the rental of the Go
down, Insurance charges etc.
RISK AND PRICE OF DECLINE: There is always a risk of reduction in the prices of
inventories by the suppliers in holding inventories. This may be due to increased market
of centralizing purchases.
To minimize loss through deterioration, pilferage, wastage and damages.
To ensure perpetual inventory control so that materials show in stock ledgers should be
Read of consumption: It is the average consumption of materials in the factory. The rate
of consumption will be decided on the basis of past experience and production plans.
Nature of material: The nature of material also affects the minimum level; if a material
is required only against the special order of customer then minimum stock level can be
required for such material. Minimum stock level can be calculated with the help of
following formula:
32
NEED OF INVENTORY:
About 10% of total cost of production of SCCL Limited represents inventory cost.
Inventories are maintained basically for the operational smoothness which they can be
affected by uncoupling successive stages of production. Whereas the monetary value of
the inventory serves as a guide to indicate the size of the investment made to achieve this
operational convenience.
34
against production component like castings in steel plants, support material in case of
coal industry.
The cost of ordering included:
1. Paper work costs, typing and dispatching an order.
2. Follow up costs the follow up required to ensure timely supplied includes the travel
cost of purchase follow-up, the telephones, telex and postal bills etc.
3. Costs involved in receiving of the order, inspection, checking and handling in the stores.
4. Any set up cost of machines charged by a supplier, either directly indicated in quotations
or assessed through quotations for various quantities.
5. The salaries and wages of the purchase department.
This cost includes:
1.
2.
3.
4.
5.
6.
Interest on capital.
Insurance of tax charges.
Storage costs, labour costs, provision of storage area and facilities like bins racks
Transport bills and homely charges.
Allowance for deterioration or spoilages.
Salaries of stores staff obsolescence.
The inventory carrying cost varies and a major portion of this is accounted for by
the interest on capital. SCCL is paying 20% interest in Bank loans.
store will be on high side. As such we must be in position to keep the material with better
economics for these five months taking lead time into account for procurement of
material to get optimum production. In the current financial year production trend reveals
that the production is improving and showing good performance throughout the year
unlike earlier years in underground mines.
Accounting for materials:
The accounting for direct material begins with the issuance of the purchase
requisition and ends only when the finished product has been shipped to the customer.
In the course of this cycle the other two elements of cost direct labour and factory
overheads become part of material cost to the extent that they are applied to production
and included in inventory values.
Acquiring raw materials from Vendors:
37
Four basic documents are involved in acquiring materials from vendors. They are:
Purchase requisition, the purchase order, the receiving report and the Vendors invoice.
After due consideration of purchase requisition a vendor is selected and a
purchase order is send to the vendor by the purchasing agent. Ultimately the merchandise
and the vendors invoice are received and the receipt of merchandise is recorded on a
receiving report.
If the vendors invoice, the purchase order and the receiving report are found to be
in agreement, a voucher for payment is approved. At this time the receipt of the
merchandise is recovered in the General Ledger as follows:
Dr. Raw materials inventory.
Cr. Accounts payable.
Purchase Orders:
A purchase order is prepared from the purchase requisition, with sufficient copies
to meet the requirements of the company organization structure. Usually at least four are
prepared. The original for the vendor and copies for the purchasing department files, the
accounts payable department and the receiving department.
The copy for the latter department may have the quantity ordered blocked out so
that the count of material at receiving wi1l not be influenced by the quantities shown on
the purchase order. The purchase order is a vital document in the materials accounting
process for when it is accepted by the vendor, it becomes a contract. As a contract it must
38
be complete and specific. Therefore, fol1owing the listing of items ordered would be
stated the required delivery date, packing and shipping instruction, billing instruction,
and terms of payment. It is customary to include clauses and conditions as to warranty,
patent infringement, and contractors liability when services are to be performed etc. such
clauses may be inserted as required or be printed on the face or back of the order with a
definite and well marked statement that they are a part of the contract. These clauses are
very useful controlled devices from the point of preventing costly legal entanglements.
Receiving Reports:
When material is received, the quantity is determined by counting, weighting or
other measurement by the receiving department. This is done to assure that payment is
made only for goods actually received.
39
The matching of purchase orders, receiving records, and vendors invoices assures
that payments are not made for goods and services not received and that the items of the
invoice are in agreement with those specified in the purchase order. The entire process
aids in the control of costs, for any payment for goods and services must ultimately be
reflected in the accounts as a cost of the current period or of a future period.
MATERIALS
Introduction:
Materials are a very important factor of production. It includes physical
commodities used to manufacture the final end product. It is the starting point from
which the first operations start. It is the first and the most important element of cost.
Materials account for nearly 60 percent of the cost of production as is clear from analysis
of the financial statement of a large number of private and public sector organizations.
Proper control of materials is necessary from the time orders for purchase of
materials are placed with supplies until they have been consumed, the object of material
control is to attack material cost on all fronts so that cost of material may be reduced. In
other words, efforts are to be made to reduce the cost of material when it is purchased,
stored and used.
Meaning of Material Control:
Material control can be defined as a comprehensive frame work for the
accounting and control of material cost design with the object of maintaining material
supplies at a level
40
over the purchasing, storing and using of material so as to have minimum possible cost of
materials, matt, curry and frank state in their book Cost Accounting as follows :
Because materials constitute such a significant part of product cost and since this
cost is controllable, proper planning, purchasing, handling and accounting are of great
importance
Need for Material Control:
No system of costing can be considered as complete without a proper control of
materials as materials constitute a major portion of cost of production. The following are
the various objectives of material control:
1. Availability of materials :
There should be continuous availability of all types of materials in the factory so
that the production may not be held up for want of any material. Minimum quantity of
each material is fixed to permit production to move on schedule.
reasonably
low price. Quantity is not being sacrificed at the cost of the lower price. The material
purchased should be of that quantity alone which is needed.
4. Risks of spoilage and obsolescence :
41
Risks of spoilage and obsolescence of the materials must be avoided. For this
purpose, a maximum quantity of each material is determined and a proper method of
issue of materials is followed. The materials received earlier should be used earlier.
5. Information about availability of materials :
Information about availability of materials should be made continuously
available to the management so that planning of production may be done. The store
keeper can supply this information because he keeps an up-to-date record of every item
of stocks under a proper system of material control.
6. Material can be easily misappropriated :
Material can be easily misappropriated by employees because generally
misappropriation of cash is considered to be serious than misappropriation in kind.
Therefore, this requires an internal check on material which is a part of material control.
7. Invoices :
the items of materials ordered have been received and properly checked to avoid excess
payment to suppliers.
Essential of material control:
The entire procedure of material control can be divided in to three stages-purchase
control, stores control and issue control. These three types of materials control have been
discussed in detail in this chapter. Here for the sake of convenience various essentials
relating to material control are given in brief:
1.
There should be proper co-operation and co-ordination among the departments involved
in purchasing, receiving and inspection, storage, sales, production and accounting so that
there may be no inadequate availability of materials which may disrupt production and
lose sales.
42
2.
3.
4.
5.
There should be proper inspection of materials when they are received by the receiving
department.
6.
Standard forms for requisitions, orders, issue, transfer of materials from one job to the
other and transfer of materials from job to the stores should be used.
7.
The storage of materials should be well-planned to avoid losses from theft, carelessness
damage, deterioration, evaporation and pilferage.
8.
9.
A system of internal check should be introduced to ensure that all transactions involving
materials are checked by properly authorized and independent persons.
10. Minimum, maximum and re-ordering levels for each type of materials should be fixed to
ensure that is no shortage of materials and that there is no overstocking.
11. Ordering quantity for each type of material should also be fixed to reduce the ordering
costs and carrying costs of materials.
43
12. A careful choice should be made of the method of valuing the material issues because it
effects the cost of jobs or processes and the value of the closing stock of material in the
stores.
13. Adequate records to control materials during production should be maintained to ensure
that there is minimum possible wastage.
What to purchase?
2.
When to purchase?
3.
Where to purchase?
4.
5.
44
Regular/
Special
Date.
Date by which
Materials are
Serial
Description of
No
Articles
Required
Stores
Quantity
Code No.
Remarks
Required
Requested by .
Approved by .
For use in purchase Department
1. ..
2. ..
3. ..
Other action ..
Purchase officer
Dated
To (suppliers)
Yours quotation number . Dated . Has been accepted.
Please supply the following the items of store in accordance with the instructions
mentioned there in and terms and conditions listed on the reserve of this purchase
orders.
Serial Description Quantity
No.
Terms of Delivery
Rate
Total
Delivery
cost
Date
Remarks
45
Term of payment
Packing and Dispatch Instruction
Discount Allowed
purchase officer
No.
..
STORES
RECEIVED NOTE:
Quantity Date
Date.
Amount Remarks
No.
Received by .
..
Store keeper .
.
Stores Ledger posted by ..
Inspected by
46
Coasted by
Re-ordering Level
It is the point at which if stock of a particular material in store
approaches, the storekeeper should initiate the purchase requisition for fresh supplies of
that material. This level is fixed somewhere between the maximum and minimum levels
47
in such a way that the difference of quantity of the material between the re-ordering level
and the minimum level will be sufficient to meet the requirements of productions up to
the time the fresh supply of the material is required.
Re-ordering level can be calculated by applying the following formula.
Ordering level= minimum level + Construction during the time required to get the
fresh delivery.
Another formula given by WHELDON book Cost Accounting is as follows:
Re-ordering level = Maximum consumption x Maximum re-order period.
b) Economic Ordering Quantity
The total costs of a material usually consist of:
Total acquisition cost + total ordering + total carrying cost.
Total acquisition cost through buying is usually unaffected irrespective of
the quantity of material ordered at one time unless quantity discounts are available.
Ordering cost :
It is the cost of placing orders for the purchase of materials and includes:
1. Cost of staff posted in the purchasing department, inspection section and payment
department.
2. Cost of stationary, postage and telephone charges.
The quantity to be ordered should be such which minimize the carrying and ordering
costs. The order for the material to be purchased should be large enough to earn more
trade discount and to take advantage of bulk transport, but at the same time it should not
be too large to incur too heavy a payment on account of interest, storage and insurance
costs. If the price to be paid is stable, the quantity to be ordered each time can be
ascertained by the following formula.
Q = 2CO/1
Where Q = Quantity to be ordered.
C = Consumption of material concerned in units during the year.
49
This means a level at which normal issues of the material are stopped and issues are
made only under specific instruction. The purchase officer will make special arrangements to
get the materials which reach at their danger levels so that the production may not stop due to
shortage of materials.
Danger level = Average consumption x Max. Re-order period for emergency
purchases.
Average Stock Level:
The average stock level is calculated by the following formula:
Average stock level = Minimum stock + of re-order quantity.
Or (Minimum stock level + Maximum stock level).
Stores (or material) Records:
The bin card and the stores ledge are the two important stores records that are
generally kept for making a record of the various items of stores.
BIN CARD:
A bin card makes a record of the receipt and issue of the materials and kept for
each item of stores carried. Quantity of stores received is entered in receipt column and
the quantity of stores issued is recorded and issue column of the bin card and a balance of
the quantity of stores is taken after every receipt or issue, so that the balance at any time
can be readily seen. These cards are maintained by the store-keeper and the storekeeper is
answerable for any difference between the physical stock and the balance shown in the
bin card. These cards are used not only for recording receipt and issue of stores but also
assist the storekeeper to control the stock. For each item of stores, maximum quantity,
maximum quantity and ordering are stated on the card. By seeing the bin card, the
storekeeper can send the material requisition for the material in time.
Stores ledger:
50
This stores ledger is kept in the costing department and is identical with the bib
card except the receipts, issue and balance are shown along with their money values. This
contains an account for every item of stores and makes a record of the receipts, issues and
the balances, both in the quantity and value. Thus, this ledger provides information for
the pricing of materials issued and the money value at any time of each item of stores.
Bin No..
Maximum Quantity..
Code No..
Minimum Quantity..
SCCL
Receipt
BIN
CARD
Issues
Ordering Quantity
Balan
Goods on Order
ce
Go
D od
a s
rec
nt
eiv
it
Note
Da
ed
No.
te
No
te
No
.
Issues
Requisit
ion
Quan
Quant
tity
ity
No
Quan
Date of Rema
tity
checkin
an
rks
of
date
of
Good
recei
ved
or
de
r
51
Minimum Quantity..
Code No
Maximum Quantity..
Bin No..
Ordering Quantity
Receipt
Date
Issues
Balance
REMARKS
G.RNO Qty Rate Amt S.no Qty Rate Amt Qnty Rate Amt
52
Stores Ledger
2. Maintained by storekeeper.
3. Normally posted just before the 3. Always posted after the transaction takes
transaction takes place.
place.
periodically.
53
54
55
The SCCL is engaged in coal mining in four districts of Andhra Pradesh namely,
Khammam, karimnagar, adlibbed and Warangal. In overall India it spreads to 6% of
geographical area producing 10% of total coal.
The operation areas of SCCL are as follows:
KHAMMAM DISTRICT Kothagudem, yellandu and managuru
ADIALABAD DISTRICT Bellampalli, Mandamari and Srirampur
KARIMNAGAR DISTRICT Ramagundam I, II, III
WARANGAL DISTRICT Bhoopalpally.
The coal reserves stretch over 350 square kms. Of pranahis Godavari valley of above
districts of Andhra Pradesh with proven deposits of 8,575 million tons of coal.
SCCL now operates forty two (42) underground mines and thirteen (13) open cast
mines in these four districts.
MILE STONES OF TECHNOLOGY INTRODUCTION:
1948:
1951:
1953:
1954:
1975:
1979:
1981:
1983:
1986:
1989:
1994:
2002:
PERCENTAGE OF OUTPUT IN
2007 08
15%
69%
Sl. No.
1
2
16%
CATEGORY
Top executives
31-03-08
6
2512
Executives
Supervisory staff
Secretarial staff
2352
Technical staff
9668
18781
5298
3936
Rated)
8
19335
16733
10
Apprentices
Total
MAN
7
78628
POWER OF SCCL:
Vision, Mission and Principles Guiding Sustainable Development
58
Vision:
Vision shall bring into view untapped potentials and unutilized opportunities that await
exploitation as well as problems and challenges that may impede progress. The vision
must identify catalytic forces that can be harnessed.
It must express aspirations, determination and commitment for self realization.
Though planning and prediction over long time horizon is difficult, desired end results
To supply reliable and qualitative coal in adequate quantities and strive to satisfy
customers needs by sharing their experience customizing our product.
To emerge as a model employer and maintain harmonious industrial relations with
the legal and social frame work of the state.
60
The company earned profit of Rs 17.76 crore and 26.64 crore in 1993-94 respectively.
By March 1994, sccl became out of the BIFR purview. The company for success took
following remedial measures/reforms.
61
The process of turning around a sick company which commenced in 2002-03 reached its
logical conclusion when sccl, totally wiped out its accumulated losses and entered the
financial year 2008-09 with a net profit of 80.45 crore after issuing divided of 86.70 crore
Sl.no PARTICULARS
UNITS
PRE-97
(96-97)
POST97(02
GAIN/REDUCTION (%)
-03)
62
Coal production
M.tonnes
28.73
33.24
(+) 16%
Coal dispatches
M.tonnes
28.83
323.37
(+) 16%
Tonnes
0.98
1.51
(+) 54%
Man power
Nos.
1,14,486
97,053
(-) 15%
No. of strikes
Nos.
310
35
(-) 83%
Turn over
Rs in
2114
3689
(+) 75%
Corers
7
Gross investment
Rs.
3339
4115
(+)23%
Rs
345.66
679.86
(+) 97%
Rs
24,402
30,195
(+) 110%
shift
9
2001 -02:
Best management award in the state
63
management foundation.
2005-2006:
Coal India award for fly ash utilization from ministry of environment& forests,
power, science,& technology.
Golden peacock innovation management award from world environment
management foundation.
Strengths:
Weaknesses:
64
Limited financial viable reserves, amenable for open cat mining, high stripping ratios in
projects.
Difficult geo-mining conditions like steepness, existence of clay bands incompatible roof
and low grade of coal.
Adverse low and order conditions arising out of racial activities.
m.t.s
406.04
Man power
nos
75573.00
Turn power
Rs.crs
4499.68
Share capital
Government of AP
Government of India
Other
Total
Rs.crs
Rs.crs
Rs.crs
Rs.crs
:
:
:
885.60
847.56
0.04
:
1733.20
65
Rs.crs
46040.00
Accumulative profit
Rs.crs
15151.00
Rs.crs
216258.00
Rs.crs
6633.40
Rs.crs
0.38:10
Contribution to exchequer
Government of AP
Government of India
Rs.crs
Rs.crs
:
:
70164.00
15139.00
66
AREA
UG MINES
OC MINES
TOTAL
DISTRICT
Kothagudem
Khammam
Yellandu
Khammam
Manuguru
Khammam
Bellampalli
Adlibbed
Mandamarri
Adlibbed
Ramakrishnapuram
Adlibbed
Srirampur
10
Adlibbed
67
The following are pending projects with Govt. of India for approval as on 31.03.08
Slno
Capacity
Capital
Date of
(m.t.p.a)
(Rs in crs)
Sanction
1.
Peddampeta shaft
1.483
297.69
29.12.03
2.
Jallaram shaft
2.285
470.29
20.10.04
3.
2.160
380.85
18.06.05
4.
1.575
333.71
23.02.07
These were the projects which were pending by the government of India
68
Product
years
rate
Open cast
725
17.8
40
15
Under
150.3
16.2
75
20
ground
Target
Off-take
% achieved
Power
28.98
28.39
98%
Cement
4.90
5.15
105%
Hw. Plant
0.50
0.50
100%
Others
3.00
3.45
115%
Collieries
0.12
0.14
117%
Total
37.50
37.63
100%
PRODUCTION PROJECTIONS:
69
Operating
Region
X Plan
X1 Plan
X11 Plan
2001
2006-07
2011-12
2016-17
Bellampalli
505
605
8.0
8.7
Ramagundam
16.1
17.6
13.3
11.4
Kothagudem
12.4
12.5
13.8
15.1
Total
34.0
36.6
35.1
35.3
Open Cast
52%
48%
44%
29%
Under ground
48%
52%
56%
71%
70
71
1.
COMPONENTIAL ANALYSIS:
Years
Store &spares
Stores
transit
2004-2005
2388600
(38.91%)
248511
(3.81%)
626992
(9.60%)
3264472
(50.00%)
6528575
(100.00%)
2005-
2373870
(38.91%)
257711
(4.22%)
418158
(6.85%)
3050108
(50.00%)
6099847
(100.00%)
2006-2007
2073870
(38.91%)
245264
(4.75%)
252284
(4.89%)
2577190
(50.00%)
5154178
(100.00%)
2007-
1818429
353864
165622
233806
5154178
2008
(38.80%)
(7.56%)
(3.54%)
(3.54%)
(100.00%)
2008-
2211537
265971
499440
2977071
5954019
2009
(37.14%)
(4.46%)
(8.38%)
(50.00%)
(100.00%)
2009-
2288500
275861
517131
3081629
6163121
2010
(37.00%)
(4.5%)
(8.5%)
(50.00%)
(100.00%)
2010-2011
818407
148407
6914
973320
1946642
(38.82%)
(8.10%)
(3.08%)
(50.00%)
(100.00%)
2006
in Stores of coal
Stock FAS
Total
The compon
72
COMPONENTIAL ANALYSIS:
INTERPRETATION:
The investment in stores and spares, stores in transits, stock of coal and stock of finished
goods were registered at 38.91%, 3.81%, 9.60%, 50% respectively during the year 2004-
2005.
During the year 2010-2011 investment in stores and spares, stores in transit, stock of coal
and stock of finished goods were registered at 38.82%, 8.10%. 3.08%, 50.00%
respectively.
On average the investment in stock of finished goods is more when compare with other
components current assets.
73
AVERAGE
STOCK
(CLOSING
STOCK)
RATIO
(0%)
DIFFERENCE
2004-2005
27436267
626890
43.8
7.9
2005-2006
29490271
418158
70.5
26.7
2006-2007
31418375
252284
124.5
54
2007-2008
31786580
165622
191.9
67.4
2008-2009
34137306
499440
68.3
-123.6
2009-2010
37905500
517131
73.0
4.7
2010-2011
44996800
691400
65.0
-8
YEARS
CHANGE
74
INTERPRETATION:
From the above table it can be observed that inventory turn over ratio times during the
year 2004 - 2005 and it gradually increased to 191.9 times in the year 2006-2007. It
indicates that the stock has been turned into sales very quickly and it decreased to 65 in
It may also be of interested to see average time taken for clearing the stocks. This
can be possible by calculating inventory conversion period. This period is calculating by
dividing the number of days by inventory turnover this formula may be as.
INVENTORY CONVERSION PERIOD= DAYS IN A YEAR 365 / INVENTORY
RATIO
Years
Net sales
Average
stock
Ratio
ICP (days)
2004-2005
27436267
626890
43.8
2005-2006
29490271
418158
70.5
2006-2007
31418375
252284
124.5
2007-2008
31786580
165622
191.9
2008-2009
34137306
499440
68.3
2009-2010
37905500
517131
73.0
2010-2011
44996800
691400
65.0
76
INTERPRETATION:
The inventory conversion period was 8 days during the year 2004 2005 and
declined to 2 days during the year 2007-2008. This indicates the stock has been
very quickly converted in to sales. In 2010-2011 it has been increased to 5 days
during the year 2010-2011 slowly converted into sales.
The lowest inventory conversion period was record at 2 days in the year 2007
2008 and the highest inventory conversion period was 8 days recorded in 2004
2008
77
Inventory
Current
Ratio(%)
assets
2004-2005
3264472
6690713
49
2005-2006
2575477
6516630
39
2006-2007
2291134
5781012
40
2007-2008
2095494
87787878
24
2008-2009
2667621
10342620
26
2009-2010
2512300
9528510
26.36
2010-2011
2462109
1983452
12.41
78
INTERPRETATION:
During the year 2004- 2005 the ratio was 49% and it gradually declined to 24% and there
is a net decreased to the extent of 33% and slowly increased in the year 2009 -2010.
The lowest inventory over current assets was recorded at 24% during the year 2007-2008
and the highest inventory over current assets ratio was at 49% during the year 20042005.
YEARS
INVENTORY
TOTAL
RATIO
ASSETS
(%)
2004 2005
3264472
264228842
12.35%
2005-2006
2575477
25999873
9.90%
2006 2007
2291134
24132888
9.49%
2007 2008
2095494
26347993
7.95%
2008 2009
2667621
28500692
9.36%
2009 2010
2512300
26694068
10.62%
2010 2011
2462100
32800025
13.32%
80
INTERPRETATION:
During the year 2004 2005 the ratio 12.35% and it decreased to 7.95% in the year
2007 2008
and then started increasing up to 13.32% during the year 2010 2011.
The lowest inventory over total assets ratio was recorded at 7.95% during the year 2007
2008 and the highest inventory ratio at 12.35% during the year 2004 2005.
CURRENT RATIO:
In order to know the current ratio the percentage of current assets to current
liabilities to calculated and which is presented in the following table.
81
Current Assets
Current ratio = --------------------------------Current liabilities
YEARS
CURRENT
CURRENT
CURRENT
ASSETS
LIABITIES
RATIO
2004 2005
6690713
13047044
0.513
2005 -2006
6516630
8549887
0.762
2006 2007
5781012
6865103
0.842
2007 2008
87787878
8009667
1.096
2008 2009
10342620
8075040
1.140
2009 2010
9528510
8214010
1.160
2010- 2011
19834527
1550688
1.279
CURRENT RATIO
82
From the above table it can be understood that the percentage of current assets over
current liabilities ratio i.e. current ratio showing a increased trend till 2009 2010.
INTERPRETATION:
During the year 2004 2005 the ratio was 0.513 and has increased to 1.279 in the year
2010 2011.
The lowest current ratio was recorded at 0.513 during the year 2004 2005 and the
highest current ratio was recorded at 1.279 during the year 2010 2011.
QUICK RATIO:
83
The quick ratio is the relationship between quick assets to current liabilities quick
ratio is more rigorous test of liabilities. Quick ratio is more rigorous test of liability
position of a firm it computed by applying the following formula.
Quick Assets
Quick ratio = ------------------------------Current Liabilities
YEARS
QUICK ASSETS
CURRENT
LIABILITIES
QUICK RATIO
2004-2005
3426241
130447044
0.263
2005-2006
3941153
8549887
0.460
2006-2007
3489878
6865103
0.508
2007-2008
6683284
8009667
0.834
2008-2009
7674999
80705040
0.950
2009-2010
6277310
8214010
0.764
2010-2011
2597867
1550688
0.167
QUICK RATIO:
84
INTERPRETATION:
From the above table it can be understood that the percentage of Quick assets of over
current liabilities ratio i.e. quick ratio showing a increasing trend till 2008-2009 and it
was decreased to 0.167 in the 2010-2011.
During the year 2004-2005 the ratio was 0.263 and it gradually increased to 0.167 in the
year 2010-2011.
The average ratio was recorded at 0.984 in the review period.
PROPRITORY RATIO:
85
This ratio established the relationship between share holder funds and
total assets,
Share holder funds
Proprietary ratio =---------------------------------------------Total assets
YEARS
SHARE HOLDER
FUNDS
TOTAL ASSETS
RATIO
2004-2005
18546545
26428842
0.70%
2005-2006
19685760
25999873
0.76%
2006-2007
20650380
24132888
0.85%
2007-2008
21240369
26347993
0.81%
2008-2009
21237960
28500692
0.74%
2009-2010
22490980
26694068
0.84%
2010-2011
23451056
32800025
0.71%
86
INTERPRETATION:
During the year 2004 2005 the ratio was 70% and it was increased in the year 2006
2007 at ratio was 85% and was declining 74% during the year 2008 2009 and again it
had decreased to 71% in 2010 2011.
The lowest inventory was recorded at 70% during the year and the highest ratio recorded
at 85% during the year 2006 2007.
87
FINDINGS
The total component of inventory recorded in the year 2004 2005 is 32, 64,472 and has
declined to 9, 73,320 (Rs .in 000) by the year 2010 2011.
88
The component analysis has shown a declining trend and its total is 19, 46,642 (Rs.
In000) during the year 2010 2011.
The inventory turnover ratio has shown a fluctuating trend and by the year is 2010 2011
it is 65%.
The inventory conversion period has been 8 days during the year 2010 2011 and
presently it is 5 days i.e. 2010 2011.
The percentage of inventory over the current asset during the year 2004 2005 is 49%
and has decline and to 12.41% during the year 2010 2011.
Percentage of inventory over total assets if 12.35% during the year 2004 2005 this has
decline to 13.32% by the year 2010 2011
The current ratio was 0.513 during the year 2004 2005 increased to 1.160 by the year
2010 2011.
The quick ratio is 0.263 recorded in 2004 2005 and has been 0.167 by the year 2010
2011.
Proprietary ratio is 0.70 during the year 2004 2005 and has been 0.71 by the year 2010
2011.
SUGGESTIONS
Provision of internet facility from one store in SCCL to have effective online
communication.
Stock transfers from one store to others to be done effectively.
Disposal action for obsolete and non moving items to be takes up on priority.
Identification of buyers to be done.
Implementation of buy back clause incorporated in the earlier equipment purchase order
has taken up with the suppliers and returning of the unconsumed spare parts to be done.
Such items are to be identified.
89
Linking up alternate part numbers and elimination of duplicate code numbers so that
effective utilization of available items could be done and unnecessary purchases could be
avoided.
Orders are being placed annually for the total requirement for one-year period. Instead of
this orders may be placed periodically especially for A Class items periodically.
More number of items is to be covered under (RCD).
To have reliable supplies there should be provision for price variations clause in rate
contract orders.
Alternative part numbers.
The possible for establishing spare parts depots by OEM (original equipment
manufacturer) exploded are to avoid excess inventory to make the material available at
right time.
The investment on raw material should be made as per the requirement. Unnecessary
investment may block up the funds.
Neither too high nor too low inventory turnover ratios may reduce profit and liquidity
position of the industry. So, proper balance should be made to increase profits and to
ensure liquidity.
The raw material should be acquired from the right source at right quality and at right
cost.
The process that was being used by SINGARENI COLLERIES with the purchasing
department should undergo changes, so that, it seeks enhance the celerity of the delivery
of a product without compromising its quality by improving the utilization of materials,
labour and equipment.
To reduce the work, the purchasing department may enter the purchasing order into
database and did not send a copy to anyone. When the merchandise arrived, the receiving
clerk would enter the database and determine whether the order agreed with the
electronic purchase order.
90
CONCLUSION
The following conclusions have been drawn.
The overall, the inventory management in SCCL is up to mark where by adequate
supplies of material and stores, minimization in operations.
It has kept down the investment in inventories, inventory carrying cost a obsolescence
losses to the minimum through purchasing economics by the measurement of
requirements on the basis of recorded experience.
It also enables the management to make cost and consumption comparisons between
operations and periods.
It is also noted that most of the vendors supplying material to SCCL are the same, SCCL
management explore to possibility to arrive supply chain management concept with
regular vendors to reduce lead for requisition possibility and placement of final orders.
During the period of study the current liabilities of SCCL are more than the current
assets. A high proportion of current assets of SCCL are in the inventories, which is a slow
91
moving item. Hence SCCL is sufficiently liquid. Its short-term solvency should be
improved more.
During the period of study the current are more than quick assets, because of lack of
funds the current liabilities of SCCL are more than quick ratio of SCCL is below standard
norm throughout the period of study. Though the slow moving items are removed from
current assets there is less improvement is short-term solvency and liquidity of SCCL.
Hence, SCCL is in-sufficiently liquid.
Suring the period of equity of SCCL increased from 1607.71 to 1733.20, but
compensating this, the debt of the company also increased from 951.49 to 1557.82.
92
Books referred
Author
Shashl.k.Gupta
Management Accounting.. R.K.Sharma
Financial Management
Theory & practice.... Prasanna Chandra
Financial Management. - Khan & join
REFERRED WEBSITES
www.scclmines.com
WWW.ACCOUNTINGFORMANAGEMENT.COM
93