A study of impact of Inventory Management on operating efficiency with special reference to The Travancore Cochin Chemicals Ltd.

, Udyogamandal, Cochin
PROJECT REPORT

Submitted in partial fulfillment of the requirements of the degree of

MASTER OF BUSINESS ADMINISTRATION Kannur University By Mr. MUHAMED NIYAS (Reg. No: A9GMBA1066) IV Semester MBA

Under the guidance of

Prof. Lakshmi Saju

Chintech School of Management Studies Chinmaya Institute Of Technology Kannur 2010

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CERTIFICATE

This is to certify that the project report entitled

A study of impact of Inventory Management on operating efficiency with special reference to The Travancore Cochin Chemicals Ltd., Udyogamandal, Cochin.
Is a bona fide record of work done by

MUHAMED NIYAS
(Reg. No.A9GMBA1066)

and submitted in partial fulfillment of the requirements of the degree of Master Of Business Administration of the Kannur University

Place: Kannur Date :

Dr.K.K.FALGUNAN (PRINCIPAL)

CERTIFICATE

This is to certify that the project report entitled

A study of impact of Inventory Management on operating efficiency with special reference to The Travancore Cochin Chemicals Ltd., Udyogamandal, Cochin.
Is a bona fide record of work done by

MUHAMED NIYAS
(Reg. No.A9GMBA1066)

and submitted in partial fulfillment of the requirements of the degree of Master Of Business Administration of the Kannur University

Place: Kannur Date :

Prof. LAKSHMI SAJU

(Asst. PROFESSOR)

DECLARATION Date:
Muhamed Niyas IV semester MBA

I hereby declare that the Project entitled

study of impact of

Inventory Management on operating efficiency with special reference to The Travancore Cochin Chemicals Ltd., Udyogamandal, Cochin

Of Management Study, Kannur. I also declare that this report has not been submitted by me fully or partially for the award of any degree, diploma, or any other similar title or recognition before. is my original work and it was under the supervision of Prof.Lakshmi Saju, Asst. Professor, Chintech School

MUHAMED NIYAS
(Reg. No- A9GMBA1066)

ACKNOWLEDGEMENT
I am very much grateful to Almighty God who led in the right way to complete my project work successfully. A deal of time and much effort have gone into developing and researching this project. Many people have helped directly and indirectly for the completion of this project. I would like to express my sincere thanks to Dr.K.K.Falgunan, Principal, Chinmaya Institute of technology, for supporting and encouraging me and also rendering all kind of help to do the project. I am indebted to thank Prof. Lakshmi Saju, project coordinator for helping me in times of distress and confusion in the course of project work and for her scholarly guidance. My special thanks to Mr. Jiju Francis, Finance Head, Travancore Cochin Chemicals Ltd, for providing me with this permission to undertake studies on recruitment process at Travancore Cochin Chemicals, Udyogamandal, Cochin. I wish to express my sincere thanks to Mr. P.C.Sathyan (Personnel Department HOD) and Mr. Mohanan for their valuable guidance and continuous encouragement given at every stages of the project. Last but not the least; I extend my sincere thanks to my parents, friends and other faculty members for their moral support and cooperation.

INDEX

CONTENT
Title Certificates Declaration Acknowledgement

Chapter 1: Introduction and Design of the Study Introduction Statement of the problem Objective of the study Sample design

Methodology and data collection Tools of analysis Chapter scheme

Chapter 2: Literature Survey Chapter 3: Industry Profile And Company Profile Chapter 4: Analysis and Interpretation Of Data Chapter 5: Findings, Suggestions and Conclusions Bibliography
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CHAPTER-1 INTRODUCTION AND DESIGN OF THE STUDY

INTRODUCTION
India is a country of scarce resources and it is primarily responsibility of each organization whether it is public sector, private sector, or a government department to ensure optimum utilization of resources for production of goods and services. Materials have come to occupy a very vital and critical position in the resource position in the resource position of the country. Inventory accounts for a major portion of the capital locked up in any organization. Reduction of inventories will affect the profitability of the organization. The Indian economy is growing and performance of the manufacturing sector has regained its growth and it is indeed encouraging. The increased demand for basic industrial chemicals such as the Chlor-alkali is a reflection of the growth rate in national economy. The production of Caustic Soda in the country has increased and several manufacturers are undertaking new projects or increasing existing capacities in this sector. So it is likely to increase demand for Caustic Soda and Chlorine products. The main products of company are Caustic Soda, Hydrochloric Acid, and Sodium Hypochlorite. Inventory management is a system of reports maintained by the controlling department which reflect the physical movement of stock and their current balance. It is the process of deciding what and how much of various items are to be kept in stock. It also determines the time and quality of various items to be produced. In the project it is A study of impact of Inventory Management on operating efficiency with special reference to The Travancore Cochin Chemicals Ltd., Udyogamandal, Cochin

STATEMENT OF THE PROBLEM Better inventory management and distribution is one key business area of any company. The company should know what is to be produced and at which warehouse the available stocks are located. Factors influencing inventory demand and the interaction between production planning and control and inventory control are considered as a key parameter of measuring the efficiency of any manufacturing organization. The efficiency objective is given more significance than the cost objective in these organizations. Importance of stocks in an organization, role of stocks in the supply chain and the importance of inventory management plays a vital role in decision making. Improper investment in inventory leads to capital blockage as well as stock out situations. High investment in inventory will result in high interest burden. By improving the inventory management techniques the interest burden can be reduced. Here the problem definition is; How inventory management affect the operating efficiency of The Travancore Cochin Chemicals Ltd.?

OBJECTIVE OF STUDY To find out the impact of inventory management on operating efficiency. To determine changes in inventory position of the company. To find out EOQ and reorder level. To measure turnover, ABC analysis of the Company. To determine various ratios for analyzing inventory level and operating efficiency of company.
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METHODOLOGY AND DATA COLLECTION Research methodology is a way to systematically solve the research problem. There are different types of research and they are descriptive research, analytical research, and exploratory research. In this study I have used the analytical research because the major purpose of analytical research is to analyze the state of affairs as it exists at present. Analytical research includes survey and in-depth analysis of variables. The research plan calls for gathering primary and secondary data. One can visualize the fact that a detailed study is required in each practical situation for better results. Any effort which is directed to such study for better result is known as research. A system of models, procedure and techniques used to find the result of research problem is called research methodology.

RESEARCH DESIGN The research type is used in this study is Descriptive research. A descriptive research is carried out with specific objective and hence it result in definite conclusion. METHODS OF DATA COLLECTION In this research, the collection of data is from various sources and there are two types. 1. Primary Data 2. Secondary Data

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PRIMARY DATA Primary data collection was mainly done through interaction with the officials of different departments such as accounts department and stores department. SECONDARY DATA Secondary data was collected from annual reports, books of accounts, Internet, books, journals, etc. NATURE OF DATA Information for this work has been collected from previous records viz. profit and loss account, stores ledger, and Balance sheet of the past five years. Both primary and secondary data have been used for the study.

TOOLS OF ANALYSIS
The following tools were used for the purpose of analysis:

Determination of stock level Determination of EOQ Inventory turnover ratio ABC Analysis. 1. STOCK LEVELS: In order to minimize the unnecessary blocking of the capital in the material stock and to avoid the interruption in the smooth production process certain levels of stocks are to be determined in advance. The determination of
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levels of stock helps in achieving the objectives of the inventory control. The main stock levels to be determined are: 1. Maximum Stock level 2.Minimum Stock level 3.Average Stock level 4.Re-order level 5.Danger level of buffer stock or safety stock level MAXIMUM STOCK LEVEL:The stock level above which the stock of any raw material is not allowed to go is called as maximum stock level. It depends upon the following factors.
Rate of consumption
Lead time or reorder period
Storage capacity
Availability of working capital
Economic order quantity
Carrying cost or holding cost
Govt. policy
Re-order level Maximum Stock Level= Reorder level + Re-order quantity - (Minimum consumption rate x Minimum lead time)
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 MINIMUM STOCK LEVEL:Minimum stock level is the lowest quantity of any raw material which should always remain as balance in hand i.e. below which the raw material should not be allowed to fall. It depends upon the following factors:
average rate of consumption
average lead time
re-order level It is also called as buffer stock. Minimum Stock Level = Reorder level (Normal consumption x Normal reorder period) AVERAGE STOCK LEVEL:The level which is normally carried by the business looking towards the nature and the requirements of the business. Average Stock Level= (Minimum Stock Level + Maximum Stock Level) /2 OR (Minimum Stock Level + Re order quantity)/2 REORDER LEVEL:The reorder level is that level at which a fresh order should be placed for the purpose of supply of the raw materials. It depends upon:
Lead time
Rate of Consumption
EOQ

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Reorder level=Maximum Consumption Rate x Maximum Lead Time DANGER / SAFETY STOCK LEVEL:This is a level fixed usually below the minimum level. When the stock reaches this level, very urgent action for purchase is indicated. This presupposes that a minimum level contains a cushion to cover such contingencies. Reorder level (Average Rate of Consumption x Average Lead Time)

2. ECONOMIC ORDER QUANTITY:One of the major inventory management problem is to be resolved is how much inventory should be added when inventory is replenished. If the firm is buying raw materials, is has to decide lots in which it has to be purchased on each replenish. If the firm is planning a production run, the issue is how much production to schedule. These problem, are called order quantity problems, and the task of the firm is to determine the optimum or economic order quantity. It is that order quantity lot size which should be purchased by the business so that the inventory cost of the business becomes minimum. ___________ EOQ = Here:2xCxO I

C is annual consumption, O is ordering cost, and I is carrying cost.

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3. TURNOVER RATIOS INVENTORY TURNOVER RATIO Inventory turnover ratio indicates the number of times inventory replaced during a given period normally a year. The ratio establishes the relationship between costs of goods sold and inventory level. The inventory or stock turnover ratio satisfies the efficiency of the firms invernotry management. It is calculated by dividing the cost of goods sold by the average inventory. Inventory turnover ratio = Sales Closing Inventory RAW MATERIAL TURNOVER RATIO:Raw material turnover ratio = Sales Raw material The ratio reflects the rate of utilization of raw material. A higher turnover ratio indicates higher utilization of raw material. However a very high ratio is not good from the organization point of view as the same may lead to bottleneck in production due to stock out of raw material. On the other hard a low turnover of raw material is an indication of accumulation of inventory. The efficiency of utilization of raw material can also be judged from raw material holding period which is determined by dividing the number of days during the year by inventory turn our ratio. RAW MATERIAL HOLDING PERIOD Raw material holding period = 365 Raw material turnover ratio
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The holding period must not be too high or too low. A high holding period leads to accumulation of R.M causing high carrying cost in term of shrinkage in values, pilferage, theft ,administrative cost, were housing charges, lightening, heating etc. whereas too low holding period leads to high ordering cost and there may be interruption in production process. WORK IN PROGRESS TURNOVER RATIO Work in progress turnover ratio = sales

Work in progress A higher turnover ratio indicates lower inventory accumulation and vice versa. Conversion period can also be determined by dividing the number of days in a year by WIP turnover ratio. WORK IN PROGRESS HOLDING PERIOD Work in progress holding period = 365

Work in progress turnover ratio FINISHED GOODS TURNOVER RATIO Finished goods turnover ratio = Sales

Finished goods
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 FINISHED GOODS HOLDING PERIOD Finished goods holding period = 365

Finished goods turnover ratio A high holding period is not good from the organization point of view as the same leads to higher working capital requirements.

4. ABC ANALYSIS It is a system of inventory control. It exercises discriminating control over different items of stores classified on the basis of the investment involved. Usually the items are divided into three categories according to their importance, namely, their value and frequency of replenishment during a period. (i) A Category of items consists of only a small percentage i.e., about 10% of the total items handled by the stores but require heavy investment about 70% of inventory value, because of their high prices or heavy requirement or both. (ii) B Category of items is relatively less important; they may be 20% of the total items of material handled by stores. The percentage of investment required is about 20% of the total investment in inventories. (iii) C Category of items does not require much investment; it may be about 10% of total inventory value but they are nearly 70% of the total items handled by store.

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PRESENTATION OF DATA Tables and charts are used to present the data.

CHAPTER SCHEME

The project report has been presented in the following format: The first chapter deals with the introduction and design of the study which consists of introduction, statement of problem, objectives of the study, Methodology, tools for data collection, tools of analysis and chapter scheme. The second chapter gives a brief description of literature survey. The third chapter includes industry profile and company profile. The fourth chapter states the analysis and interpretation of data. The fifth chapter gives the findings, suggestion and conclusions.

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CHAPTER 2 LITERATURE SURVEY

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Literature Review
Some of the studies in the area have been reviewed by the researcher in the following pages: According to Websters Dictionary (1993), the term inventory actually means a list of items with descriptions and quantities of each. In manufacturing terms, in addition to manufacturing tools, equipment, raw materials, hardware and measurement instruments which are the focus in this article, inventories also include component parts, work-in-process and finished product or goods. Inventories constitute a major element of working capital. It is, therefore, important that investment in inventory is property controlled. Inventory management covers a large number of problems including fixation of minimum and maximum levels, determining the size of inventory to be carried, deciding about the issues, receipts and inspection procedures, determining the economic order quantity, proper storage facilities, keeping check over obsolescence and ensuring control over movement of inventories. The main objective of inventory control is to achieve maximum efficiency in production and sales with the minimum investment in inventory. Inventory comprises of stocks of materials, components, work-in-progress, and finished products and stores and spares.

1. Dr. T.P. Ghosh, Director of Studies, ICAI, C-1, Sector-1, NOIDA201301 The Institute of Chartered Accountants of India.

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Stocks have a clear strategic impact, they have a clear effect on the organizations profit, margins, return on assets and other financial measures of performance, as well as affecting measures of customer service, such as lead time, availability, perceived product value and reliability. Their ability to decouple production and sales is also a factor in long term capacity planning, production and productivity. Stocks give a buffer between production and sales, so that these do not have to match exactly. This gives two considerable benefits. First, smooth operations are much more efficient than variable one, with easier planning, regular schedules, routine workflow, fewer changes etc. Second, the organizations do not have to install enough capacity to match peak sales- with facilities lying idle and giving low productivity during quieter periods. Any variation between production and sales is covered by changes in stock. When production is higher than sales, stock builds up; when sales are higher than production, stock declines. These changes in stock might be simple adjustments to the finished goods, or they might be changes to work in progress caused by varying the speed of operations.

2. Donald waters, Inventory control and management, John Wiley & sons ltd, The Atrium, Southern gate, Chichester, West Sussex PO198SQ, England, Page No. 44.
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Addressing the utility of manufacturing inventory systems in general, Vollmann, Thomas E. berry, William Lee Whybark and David Cla (1997) noted that a key management issue is determining the inventory control systems performance. They also indicated that in manufacturing industry performance is measured by such factors as inventory carrying costs and inventory turnover. But in educational institutions the goal is different. Unlike manufacturing enterprises which employ inventory systems for commercial production, educational manufacturing programs employ them for teaching. Therefore, for educational programs, performance is usually measured in terms of the systems benefits to the users, namely: professors, students, staff etc. Unlike a traditional tool management system, modern tool inventory control systems facilitate the management of tools and integrate the database with other company or school systems. According to Hogan (2000), such a system provides full information on tool allocation, availability, usage, cost etc. Such a system also provides a tracking capability and tool quality support efforts in quality standard requirements. Virtually all the tool inventory systems investigated in this study have full tracking capability.

2. Vollmann, Thomas E. -berry, William Lee-whybark, David Cla, Manufacturing Planning And Control Systems, Mcgraw-hill-irwin, North Ryde (1997).
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CHAPTER 3 INDUSTRY PROFILE

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Chemicals are essential to millions of consumer goods, enabling hi-tech advances in industries as diverse as aerospace, computing, and telecommunications. The chemical industry comprises companies engaged in the conversion of raw materials; oil, natural gas, air, water, metals, that are then used to make a wide variety of consumer goods, as well as inputs for agriculture, manufacturing, construction, and service industries. The chemical industry consists of companies engaged in the processing and refinement of agricultural and industrial chemicals as well as gases. Chemicals are used to make a wide variety of consumer goods, besides being necessary in the agriculture, manufacturing, construction, and service industries. The European Union and the US are home to the worlds largest chemical companies. The chlor-alkali industry forms a significant part of chemical industry. The chlor-alkali process is an industrial process for the electrolysis of sodium chloride solution (brine). Depending on the method several products beside hydrogen can be produced. If the products are separated, chlorine and sodium hydroxide are the products; by mixing, sodium hypochlorite or sodium chlorates are produced, depending on the temperature. Globally, the chemical industry is mainly concentrated in three areas of the world: Western Europe, North America, and Japan. The European community is the largest producer, followed by the US and Japan. The chemical industry, one of the largest in the US is an enterprise worth $674 billion.

INDUSTRY GLOBAL SCENARIO

In 1850, World Chemical Industries managed to produce synthetic dyes which were being used in the textile industries. In 1890, production of Sulphuric Acid, Caustic Soda and Chlorine started at a mess level by the World
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Chemical Industries. Then came two revolutionary chemical products, the first one was Rayon which was made from wood fiber and which changed the total scenario of Textile industry. The second ones impact was even larger. It was Synthetic Fertilizers which led to Green Revolution in agriculture resulting in drastic improvement in agricultural crop yield.

Chemical industry is nearly a $3trillion global enterprise. Globally, the chemical industry is mainly concentrated in three areas of the world: Western Europe, North America, and Japan. The European community is the largest producer, followed by the US and Japan. The recession had hit the chemical industry hard. Shying from a lack of demand, chemical companies shelved their growth strategies. With plants idled or running at historically low rates, the companies looked for avenues to streamlines operations and increase productivity. The global chemical industry is, however, recovering from the recession- hit lows. Caustic soda prices are currently rising globally as tight inventories in the European and US markets support higher regional prices and pull price upwards in other regions. The tight inventories reflect the uneven demand recovery for chlorine and caustic across regions. As trade flows have become more dynamic, caustic prices have become more globalized and supply or demand imbalances in one region affect other regions more quickly than ever before. China will continue to be the driver of global chlor-alkali capacity expansion, adding the most capacity. Regional demand growth, particularly in China, is expected to consume much of this regions production. The global economic recovery will stimulate demand growth for both chlorine derivatives and caustic soda.

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INDUSTRY INDIAN SCENARIO

The chlor-alkali industry forms a significant part of the Indian chemical industry. The key chemicals in the chlor-alkali industry are Caustic soda Chlorine (including liquid chlorine) Soda ash Majority of soda ash is used in the glass industry which accounts for 45% of total consumption. Chemicals and soaps and detergents are other major end uses, accounting for 25% and 11% of global soda ash consumption respectively. Soda ash can also replace caustic soda in certain industries like pulp and paper, water treatment and certain sectors in chemicals.

The main drivers for the export of Alkali Chemicals are Flakes of Sodium hydroxide (Caustic S o d a ), D i s o d i u m C a r b o n a t e Light (Soda Ash), Sodium Hydroxide in Aqueous Solution (Soda Lye) and other Disodium Carbonate. This year India has exported mainly to UAE, Sri Lanka, USA, Oman, Kenya, and Bangladesh. Indian Caustic soda industry has been largely able to meet entire requirement of caustic soda in India. The Indian industry was self-sufficient in its requirement ever since 1975. Caustic soda has been in the list of imports permitted under OGL particularly for actual users since 1980-81. The imports were, however, limited because of the pricing policy of the Indian industry. The capacities installed by the producers in Chinese Taipei, Indonesia, and EU (excluding France) are far higher than the requirement in their own country. Further, with the imposition of anti-dumping duties on a number of other countries, the producers in the subject countries are finding it
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lucrative to export top India. The excess capacities in these countries have put tremendous pressure on the producers to look for markets in these countries. Resultantly, the exporters from Chinese Taipei, Indonesia, and EU (excluding France) have quoted very low prices for exports to India. It would also be relevant to point out that the producers in these countries have at times not directly offered for supplies to India, substantial volumes have been offered by traders in third countries for supply of caustic soda originating in these countries. The offers being by traders, naturally, these traders have taken care of their margins also. The prices quoted by the producers in these countries are, therefore, still lower. The petitioners believe that the prices offered are far below the associated cost of production. Thus, the exporters from Chinese Taipei, Indonesia, and the EU (excluding France) have resorted to dumping of caustic soda in the Indian market.

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COMPANY PROFILE
The Travancore Cochin Chemicals Limited, Udyogamandal is a State Public Sector Undertaking owned by Government of Kerala. Reflecting the quality policy of commitment and excellence TCC has a good track record of operation and healthy industrial relations. A heavy chemical industry engaged in the manufacture and marketing of Caustic Soda, Chlorine, and allied chemicals, TCC is accredited with ISO 9001:2008 certification.

HISTORY
The Travancore-Cochin Chemicals Ltd., popularly known as TCC was established in 1950. The idea of establishing the unit was conceived by M/s Sheshasayee Brothers the then Managing Agents of FACT. After the Second World War, M/s Sheshasayee Brothers were under financial crisis and were unable to make huge investments for modernization. They approached the Divan of Travancore Cochin and he took over the bulk of shares and named as Travancore Mettur Chemicals with FACT and MCIC (Mettur Chemicals andIndustrial Corporation) as partners. In 1951 the partnership was registered as a Public Limited Company, with the State Government contributing the major share of equity and the company was then named as TRAVANCORE-COCHIN CHEMICALS LTD. M/s Sheshasayee Brothers continued to be the managing agents for the next 10 years. Now the Government of Kerala holds 79% shares of the company. Commercial production of Caustic Soda from the plant of 20 TPD capacities was started in 1954 January. TCC is the first unit in India to manufacture Rayon grade Caustic Soda.

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STAGES OF GROWTH
1956 A continuous Caustic Fusion Plant 20 TPD for producing Caustic Soda Flakes. 1958 Chlorine Liquefaction Plant 1960 Capacity enhanced to 30 TPD further to 40 TPD Established new plant for manufacture of Sodium Hydrosulphate 3 TPD capacity 1967 7 TPD Sodium Hydrosulphate, 60 TPD Caustic Fusion Plant, 4 TPD Iron Free Sodium Sulphate 1975 Added another 100 TPD Caustic Soda Membrane Unit thereby increased the production capacity 200 TPD own Water Treatment Plant. (By 1988, many of the old unit were dismantled) 1997 100 TPD Caustic Soda manufacturing unit using Membrane technology capacity 125 TPD 1998 New CCF Plant in place of existing 60 TPD 2005 Addition 25 TPD 2006 Addition 25 TPD At present total installed capacity is 175 TPD Caustic Fusion Plant for 100 TPD

VISION
TCC is committed to supply quality chemicals at competitive prices to customers. Customer satisfaction, concern for environment and safety are given priorities

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MISSION

Utmost level of conservation of all resources including energy
Cost effectiveness in all the operations
Regular upgrading of technologies used in processing
Compliance with laws and statutory regulations

THE OBJECTIVES OF THE COMPANY

The main objectives to be pursued by the company on its incorporation are: To produce and market chemicals and Caustic Soda economically and in an environment friendly manner. To maintain optimum levels of efficiency and productivity and to secure optimum return on investments. To maximize profits from projects taken up. To continuously upgrade the quality of human resources of the company and to promote organization development.

MILESTONES OF THE COMPANY

Moving with the times, TCC keeps up its technology regularly updated and continue to be the competitive strength in the chlor-alkali industry. With expanded plants and higher production capacity, TCC has come out to be the profitable public sector undertaking. Over the years the company has achieved recognition and awards for the remarkable performance in the industry with regard to production, productivity, energy conservation and environmental protection.

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1988-89 Best pollution control award under group Heavy Inorganic Industries in Kerala, from Kerala State Pollution Control Board. 1989 Award for Best Performance in Safety in India under Chemical Industries group from National Safety council.

1989-90 Prize for Productivity from Kerala State Productivity Council.

1993 Best Performance Award for Energy Conservation in the State of Kerala under group Chemical and Fertilizers above 3000 KVA from Government of Kerala. 1994-95 Best Performance Award for the Productivity in the State of Kerala under group Large Industries from Kerala State Productivity council. 1995-96 Best Performance Award for the Productivity in the State of Kerala under group Large Industries from Kerala State productivity Council. 1998 Best Performance Award for Energy Conservation in the State of Kerala under group-major Industries from Energy management Centre,Government of Kerala. 1998 Performance Award for Energy Conservation under group Chlor-alkali Sector
from Ministry of Power, Government of India. 2003 Kerala State Energy Conservation Award (2000) in the category of Large Scale Industry.
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2005 National Energy Conservation Award Chlor-alkali Sector. 2006Kerala Award. 2008 Best Pollution Control Award from Kerala State Pollution Control Board. 2009 Kerala State Pollution Control Award (3rdplace) State Energy Conservation

QUALITY POLICY
The company is committed to enhance customer satisfaction by providing products and related services complying with a continually improving Quality Management System.

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DEPARTMENTS
Operations Department Materials Department Marketing Department Technical Department HRD / Training Department Finance Department Engineering Department Projects Department

PRODUCT RANGE
The major products of the company are the following Caustic Soda Lye Caustic Soda Flakes Chlorine Hydrochloric Acid Sodium Hypochlorite

CUSTOMERS

Hindustan Lever Limited, Cochin, Kerala
Indian Rare Earths Ltd., Udyogamandal, Kerala
Tamil Nadu Paper Mills Limited, Pugalur, Tamilnadu
Pigments India Ltd., Chalakudy, Kerala
Indian Oil Corporation, Ernakulam, Kerala
Mysore Paper Mills Ltd., Bhadravathy, Karnataka
Fertilizers & Chemicals Travancore Ltd., Ernakulam, Kerala
Travancore Titanium products Ltd., Trivandrum, Kerala
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Kerala Minerals & Metals Ltd., Kollam, Kerala
Hindustan Zinc Ltd (All units)
Hindalco Ltd., Ernakulam, Kerala
Hindustan Newsprint Limited, Kottayam, Kerala
Kerala Chemicals & Proteins Ltd., Cochin, Kerala
Hindustan Organic Chemicals Ltd., Ambalamugal, Kerala
Kerala Water Authority, Trivandrum, Kerala
Hindustan Insecticides Ltd., Udyogamandal, Kerala
Cochin Minerals & Rutiles Ltd., Aluva, Kerala
National Thermal Power Corporation (All Units)
Binani Zinc Limited, Edayar, Kerala
Steel Authority of India Ltd. (All Units)
Karnataka Soaps & Detergents, Mysore, Karnataka
Nuclear Fuel Corporation Hyderabad, Andhra Pradesh
Kudramukh Iron Ore Ltd., Mangalore, Karnataka
GTN Textiles, Hyderabad, Andhra Pradesh
Kochi Refineries Ltd., Ernakulam, Kerala

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TCC AT PRESENT
TCC is in the industry over six decades. TCC comes under chemical industry. TCC is the only chlor-alkali industry in Kerala. In India there are 38 chloralkali units. The industry is known as mother industry as it provides its finished products not for final consumption but for further production. The company has helped in attracting user industries due to the assurance in availability of raw materials. TCC owns 109 acres of land and around 776 people are working in TCC in three shifts. The plants are utilizing full capacity.

FUTURE PLANS
TCC is in the process of setting up a power project of its own. Electricity is one of the raw materials for the company. It contributes to about 60% of the production cost. The company would go for cheaper source of power and insulate itself from the future tariff hikes of the electric supply utility. A hydel power project is under consideration of the company at present. Due to high demand of the products, the company is planning to increase the production capacity 50 TPD. In addition to the usual products, TCC is planning to produce Sodium Chlorite and Sponge Iron. These products have high demand in the market. The main by-product of the company is Hydrogen. TCC is planning to supply this Hydrogen to FACT. The company is also planning to start a distilled water system within the company. The IT sector of the world is developing in fast. TCC is going to become to become part of it. The company is planning to start an IT park and community center with the co-operation of panchayat authority. The construction works are in progress. Two projects, hydel and coal based are under consideration at present.
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PRODUCT PROFILE

CAUSTIC SODA
Item: CAUSTIC SODA LYE
Item: CAUSTIC SODA FLAKES
CHLORINE
Item: LIQUID CHLORINE
HYDROCHLORIC ACID
Item: HYDROCHLORIC ACID
SODIUM HYPOCHLORITE
Item: SODIUM HYPOCHLORITE (INDUSTRIAL)
Item: SODIUM HYPOCHLORITE (DOMESTIC)

RAW MATERIALS;
BARIUM CARBONATE FLOCULENT SULPHURIC ACID HYDRATED LIME POWDER SODA ASH SUGAR FURNACE OIL SODIUM BISULPHATE COMMON SALT HDPE INTER BAG FOR FILLING NaOH FLAKES HDPE BAG FOR EKO-CLEAN

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CHAPTER-4 ANALYSIS & INTERPRETATION OF DATA

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I Consumption levels of inventories

Table no: 4.1 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Raw material 280 248 244 535 367 Work in progress 0 0 17 29 19 Finished goods 109 308 295 247 590 Material in transit 161 64 62 90 55 Stores and spares 413 425 400 603 601 Total 963 1045 1018 1504 1632

Source: secondary data Chart no: 4.1.1 Consumption level of raw materials

600
Consumption (in lakhs)

500 400 300 200 100 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference: This graph shows that the consumption level of raw material from 2005-2006 shows a diminishing trend up to 2007-2008. A positive increase in consumption during the year 2008-2009 also falls during the year 2009-2010.
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Chart no: 4.1.2 Consumption level of work in progress

35
Consumption (in lakhs)

30 25 20 15 10 5 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
Work-in-progress is a work that has been started but not yet completed. This graph shows that the work in progress shows nil during the year 2005-06 and 2006-07, and 17 in the year 2007-08, 29 in the year 2008-09, and 19 in the year 2009-10

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Chart no: 4.1.3 Consumption level of finished goods

700
Consumption (in lakhs)

600 500 400 300 200 100 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This graph shows that the finished goods was 109 in the year 2005-06, 308 in the year 2006-07, 295 in the year 2007-08, 247 in the year 2008-09, and 590 in the year 200910. In the early years the finished goods shows variations and during the year 20092010 it shows an increasing trend.

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Chart no: 4.1.4 Consumption of material in transit

180 160 140 120 100 80 60 40 20 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This graph shows that the material in transit was 161 during the year 2005-2006 and then it shows a diminishing trend and reaches 64 in 2006-07, 62 in 2007-08, 90 in 2008-09, and 55 in 2009-10. The up and down variations shows the lowest value in the year 2009-2010.

Consumption (in lakhs)

41

Chart no: 4.1.5 Consumption of stores and spares

700
Consumption (in lakhs)

600 500 400 300 200 100 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This graph shows that the stores and spares are high in two consecutive years from 2008-2009 and 2009-2010 with 603 and 601 respectively and it was 413 in 2005-06, 425 in 2006-07, and 400 in 4007-08.

42

Chart no: 4.1.6 Consumption of total inventories

1800 1600 1400 1200 1000 800 600 400 200 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This graph shows that during the early years the total consumption of inventories shows slight fluctuations and from 2008-2010 it shows an increasing trend at very high rates. The total inventory was 963 during the year 2005-06, 1045 in the year 2006-07, 1018 in the year 2007-08, 1504 in the year 2008-09, and 1632 in the year 2009-10.

Consumption (in lakhs)

43

II Classification of inventories: Table no: 4.2 Items Raw material Work in progress Finished goods Material in transit Stores and spares Total Source: Secondary data Total of 5 years 1674 65 1549 432 2442 6162 % of total inventory 27.17 1.05 25.14 7.01 39.63 100

Chart no: 4.2

Percentage of inventories

27% 40%

Raw

material

Work in progress Finished 1% goods

Material in transit Stores and spares

7%

25%

Inference:
This pie chart shows that among the total inventory 39.63% belong to stores and spares, 27.17% belongs to raw material, 25.14% belongs to finished goods, 7.01% belongs to materials in transit and 1.05% belongs to work in progress during the last 5 years from 2005-2010
44

III Calculation of Current ratio The current ratio is calculated using the formulae Current ratio = Current Asset Current Liability

Table no: 4.3 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Source: Secondary data

Current asset 3576 3717 3457 3636 4007

Current liability 5859 5583 5474 4701 4898

Current ratio 0.61 0.67 0.63 0.77 0.82

Chart no: 4.3.1

Current Asset

4100 4000 3900 3800 3700 3600 3500 3400 3300 3200 3100 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This graph shows that the current asset during the year 2009-2010 is Rs.4, 007 (in lakhs) which is much higher than its previous year 2008-2009 as Rs.3, 636 (in lakhs) and the early years was much lower and those years show some fluctuations.
45

Current Asset (in lakhs)

Chart no: 4.3.2 Current Liability

7000
Current Liability (in lakhs)

6000 5000 4000 3000 2000 1000 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This graph shows that the current liability shows a decreasing trend which was 5859 during the year 2005-2006, reduced to 4898 during the year 2009-2010.

46

Chart no: 4.3.3 Current Ratio

0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
The current ratio shows the ability of the firm to pay off its debt and the healthy current ratio is 1. Here current ratio is 0.82 during the year 2009-2010 which is not healthy and as compared to early years it is satisfactory that it is recovering at slow pace.

Current Ratio

47

IV calculation of Quick ratio: The Quick ratio is calculated using the formulae Quick ratio = Liquid Asset Current Liability

Table no: 4.4 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Source: secondary data

Liquid asset 2609 2672 2439 2132 2375

Current liability 5859 5583 5474 4701 4898

Quick ratio 0.45 0.48 0.45 0.45 0.48

Chart no: 4.4.1

Liquid Asset

3000
Liquid A et (in lakhs) ss

2500 2000 1500 1000 500 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This chart shows that the liquid assets shows fluctuations were in it was at its maximum during the year 2006-2007 with Rs. 2, 672 (in lakhs) and during the year 2008-2009 it was at its minimum ; Rs. 2, 132 (in lakhs). During the year 2009-2010 the liquid asset is Rs. 2, 375 (in lakhs) which shows a positive movement.
48

Chart no: 4.4.2

Quick Ratio

Quick Ratio
0.485 0.48 0.475 0.47 0.465 0.46 0.455 0.45 0.445 0.44 0.435 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This chart shows that quick ratio is 0.45 during the year 2005-2006, 0.48 in the year 2006-07, 0.45 in the year 2007-08, 0.45 in the year 2008-09, and 0.48 in the year 2009-10.

Quick Ratio

49

V Calculation of Inventory turnover ratio Inventory turnover ratio is calculated using the formulae Inventory turnover ratio = Sales Inventory

Table no: 4.5 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary data
Chart no: 4.5.1

Sales 10877 12321 9390 12063 10752

Inventory 963 1045 1018 1504 1632

Inventory turnover Ratio 11.29 11.79 9.22 8.02 6.58

Sales
14000 12000
Sales (in lakhs)

10000 8000 6000 4000 2000 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This chart shows that sales show a fluctuation during the last 5 years. During the year 2005-2006 sales was Rs. 10, 877 (in lakhs) which increased to Rs. 12, 321 (in lakhs) during the year 2006-2007 and again decreased to Rs. 9, 390 (in lakhs) during the year 2007-2008 and followed by an increase to Rs. 12, 063 (in lakhs) during the year 2008-2009 and again reduced to Rs. 10, 752 (in lakhs) during the year 2009-2010.
50

Chart no: 4.5.2

Inventory Turnover Ratio

14
Inventory turnover Ratio

12 10 8 6 4 2 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This chart shows that the inventory turnover ratio was 11.79; at its maximum during the year 2006-2007 and after wards shows a decreasing trend and reaches 6.58 during the year 2009-2010 which is the lowest in the period of 5 years.

51

VI Calculation of Inventory conversion period: Inventory conversion period is calculated using the formulae Inventory conversion period = No: of days (365) Inventory turnover Ratio Table no: 4.6 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 No: of days 365 365 365 365 365 Inventory turnover ratio 11.29 11.79 9.22 8.02 6.58 Inventory conversion period 32 31 40 46 55

Source: Secondary data Chart no: 4.6

Inventory conversion period

60
Conversion period (in days)

50 40 30 20 10 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This chart shows that inventory conversion period was 31 days during the year 20062007 and it increased up to certain extend each year and it reaches to 55 days in the year 2009-2010

52

VII Calculation of Raw material turnover ratio: Raw material turnover ratio is calculated using the formulae Raw material turnover ratio = Sales Raw material Table no: 4.7 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010
Source: Secondary data

Sales 10877 12321 9390 12063 10748

Raw material 280 248 244 535 367

Ratio 38.84 49.68 38.48 22.54 29.28

Chart no: 4.7

Raw Material Turnover Ratio

Raw material turnover ratio

60 50 40 30 20 10 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This chart shows that the raw material turnover ratio was 49.68 during the year 20062007 and it reduced to 38.48 during the year 2007-2008 and again reduced to 22.54 during the year 2008-2009 and after wards in 2009-2010 it increased to 29.28

63

VIII calculation of Raw material holding period: Raw material holding period is calculated using the formulae Raw material holding period = No: of days (365) Raw material turnover ratio

Table no: 4.8 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Source: Secondary data

Raw material turnover ratio 38.84 49.68 38.48 22.54 29.28

Raw material holding Period 9.26 7.24 9.35 15.97 12.29

Chart no: 4.8

Raw Material Holding Period

18 16 14 12 10 8 6 4 2 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This line chart shows that the raw material holding period was high during the year 2008-2009 with 15.97 and currently it reduced to 12.29 in the year 2009-2010

Holding period (in days)

64

IX Calculation of Work in progress turnover ratio: Work in progress turnover ratio is calculated using the formulae Work in progress turnover ratio = Sales Work in Progress Table no: 4.9 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary data Sales 10877 12321 9390 12063 10748 Work in progress 17 29 19 Ratio 552.4 415.9 565.6

Chart no: 4.9 Work in Progress Turnover Ratio

ratio
Work in progress turnover

600 500 400 300 200 100 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This chart shows that the work in progress turnover ratio during the years 2005-2007 was nil and there after it shows variations as 552.4 in the year 2007-2008, 415.9 in the year 2008-2009, and 565.6 in the year 2009-2010
65

X Calculation of Work in progress holding period: Work in progress holding period is calculated using the formulae Work in progress holding period = No: of days (365) Work in progress turnover ratio

Table no: 4.10 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary data Work in progress turnover ratio 0 0 552.4 415.9 565.6 Work in progress holding Period 0 0 0.65 0.86 0.63

Chart no: 4.10 Work in Progress Holding Period

1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2005-2006 2006-2007 2007-2008 year 2008-2009 2009-2010

Inference:
This line chart shows that the work in progress holding period was 0.65, 0.86, 0.63, during the year 2007-2008, 2008-2009, 2009-2010 respectively.
66

Holding period (in days)

XI calculation of Finished goods turnover ratio: Finished goods turnover ratio is calculated using the formulae Finished goods turnover ratio = Sales Finished goods

Table no: 4.11 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Source: Secondary data

Sales 10877 12321 9390 12063 10748

Finished goods 109 308 295 247 589

Ratio 99.78 40 31.83 48.83 18.25

Chart no: 4.11

Finished Goods turnover Ratio

ratio
Finished goods turnover

120 100 80 60 40 20 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This chart shows that finished goods turnover ratio was 99.78 during the year 20052006 and it reduced to 18.25 during the year 2009-2010 simultaneously.

67

XII Calculation of Finished goods holding period: Finished goods holding period is calculated using the formulae Finished goods holding period = No: of days (365) Finished goods turnover ratio Table no: 4.12 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary data Chart no:4.12 Finished goods turnover ratio 99.78 40 31.83 48.83 18.25 Finished goods holding Period 4 9 11 7 20

Finished Goods Holding Period

25
Holding Period (in days)

20 15 10 5 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This chart shows that the finished goods holding period was 4 during the year 20052006 and it increased to 11 during the year 2007-2008 and finally it reaches to 20 in the year 2009-2010.
68

XIII Calculation of Debt equity ratio; Debt equity ratio is calculated using the formulae Debt equity ratio = Outside Fund Share Holders fund

Table no: 4.15 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Outside fund 5000 5162 4837 4987 5249 Shareholders fund 2131 2131 2131 2131 2131 Ratio 2.35 2.42 2.27 2.34 2.46

Source: Secondary data

Chart no: 4.13.1 Outside Fund

2009-2010 2008-2009
Year

2007-2008 2006-2007 2005-2006

4600

4700

4800

4900

5000

5100

5200

5300

Out side fund (in lakhs)

Inference:
This chart shows that the outside fund or debt or external fund was Rs. 5, 000 (in lakhs) in the year 2005-2006, and increased to Rs. 5, 162(in lakhs) in the year 20062007, reduced to Rs. 4, 837(in lakhs) in the year 2007-2008, again increased to Rs. 4, 987 (in lakhs), and then increased to Rs. 5, 249 (in lakhs) in the year 2009-2010.
69

Chart no: 4.13.2 \ Shareholders Fund

2009-2010 2008-2009
Year

2007-2008 2006-2007 2005-2006 0 500 1000 1500 2000 2500

Share holders fund (in lakhs)

Inference:
This chart shows that the shareholders fund remains the same at Rs. 2, 131 (in lakhs) during the years from 2005-2010.

70

Chart no: 4.13.3 Debt Equity ratio

2009-2010 2008-2009
Year

2007-2008 2006-2007 2005-2006 2.15 2.2 2.25 2.3 2.35 2.4 2.45 2.5

Debt equity ratio

Inference:
This chart shows that debt equity ratio was 2.35 during the year 2005-2006, 2.42 in the year 2006-2007, 2.27 in the year 2007-2008, 2.34 in the year 2008-2009, and 2.46 in the year 2009-2010 which is the maximum in the 5 year span.

71

XIV Calculation of Net profit ratio: Net profit ratio is calculated using the formulae Net profit ratio = Net profit x 100 Sales Table no: 4.14 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary data Net profit 523 49 28 -281 -249 Sales 10877 12321 9390 12063 10752 Ratio 4.81 0.40 0.29 -2.33 -2.32

Chart no: 4.14.1 Net Profit

600 500
Net Profit (in lakhs)

400 300 200 100 0 -100 -200 -300 -400 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:
This chart shows that the net profit during the year 2005-2006 was Rs. 523 (in lakhs), in the year 2006-2007, net profit reduced to Rs. 49 (in lakhs), again in 2007-2008 net profit reduced to Rs.28 (in lakhs) and afterwards in 2008-2009 net profit changes to net loss of Rs. 281 (in lakhs), and further in 2009-2010 net loss increased to Rs. 249 (in lakhs).

72

Chart no: 4.14.2 Net Profit Ratio

6 5 4
Net Profit Ratio

3 2 1 0 -1 -2 -3 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Inference:
This chart shows that the net profit ratio during the year 2005-2006 was 4.81 and in 2006-2007, it reduced to 0.40, in 2007-2008 again reduced to 0.29, and in the year 2008-2009, net profit ratio shift to -2.33, and further in 2009-2010, again reduced to 2.32.

73

XV Calculation of EOQ of common salt: Economic Ordering Quantity is calculated using the formulae Economic Ordering Quantity = 2 C O I

Table no: 4.15 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Annual consumption 90308 99393 72669 81465 83937 Carrying cost 158 142 118 139 85 Ordering cost 1250 1250 1300 1350 1350 EOQ 1195 1265 1265 1257 1632

Source: Secondary data

Chart no: 4.15.1 Annual Consumption of Common Salt

2009-2010 2008-2009
Year

2007-2008 2006-2007 2005-2006 0 20000 40000 60000 80000 100000 120000

Consumption (in MT)

Inferemce:
This chart shows that the annual consumption of common salt shows variations in the last 5 years and the lowest consumption is in the year 2007-2008 with 72, 669 MT and the maximum is in the year 2006-2007 with 99, 393 MT. during the year 20092010 the annual consumption of common salt is 83,937 MT.

74

Chart no: 4.15.2 Carrying Cost of Common Salt

2009-2010 2008-2009
Year

2007-2008 2006-2007 2005-2006 0 50 100 Cost (in lakhs) 150 200

Inference:
This chart shows that the carrying cost of common salt goes on decreasing over the years and the cost in 2005-2006 was Rs. 158 (in lakhs) and it reduced to Rs. 85 (in lakhs) during the year 2009-2010.

75

Chart no: 4.15.3 Ordering Cost of Common Salt

2009-2010 2008-2009
Year

2007-2008 2006-2007 2005-2006 1200 1220 1240 1260 1280 1300 1320 1340 1360

Cost (in lakhs)

Inference:
This chart shows that the ordering cost of common salt goes on increasing and in the year 2005-2006, the ordering cost was Rs.1, 250 (in lakhs), in 2007-2008, it increased to Rs. 1, 300 (in lakhs), and again in 2008-2010 the ordering cost is Rs. 1, 350 (in lakhs).

76

Chart no: 4.15.4 EOQ of Common Salt

EOQ of Common Salt

2009-2010 2008-2009
Year

2007-2008 2006-2007 2005-2006 0 500 1000 EOQ 1500 2000

Inference:
This chart shows that the economic ordering quantity of common salt was shown variations in the year 2005-2006, 2006-2007, 2007-2008, 2008-2009 as 1, 195 MT, 1, 265 MT, 1, 265 MT, 1, 257 MT respectively. During the year 2009-2010 it increased to 1, 632 MT.

77

XVI Calculation of EOQ of Aluminium Sulphate: Economic Ordering Quantity is calculated using the formulae Economic Ordering Quantity = I Table no: 4.16 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Annual consumption 3 7 11 6 8.02 Carrying cost 18135 88105 22354 30259 31006 Ordering cost 1250 1250 1300 1350 1350 EOQ 1 1 1 1 1 2CO

Source: Secondary data

Chart no: 4.16.1 Annual Consumption of Aluminium Sulphate

2009-2010 2008-2009
Year

2007-2008 2006-2007 2005-2006 0 2 4 6 Consumption (in MT) 8 10 12

Inference:
This chart shows that the annual consumption during 2005-2006 was 3 MT, in 20062007 the consumption increased to 7 MT, in 2007-2008 the consumption further increase to 11 MT, in 2008-2009 it reduced to 6 MT, and in 2009-2010 again increased to 8.02 MT.

78

Chart no: 4.16.2 Carrying Cost of Aluminum Sulphate

Carrying cost of Aluminium Sulphate

2009-2010 2008-2009
Year

2007-2008 2006-2007 2005-2006 0 20000 40000 60000 80000 100000

Cost (in lakhs)

Inference:
This chart shows that the carrying cost of Aluminium Sulphate was Rs.18, 135 (in lakhs) in the year 2005-2006, then it increased to Rs. 88105 (in lakhs) in the year 2006-2007, then it reduced to Rs. 22, 354 (in lakhs) in the year 2007-2008, and further increased to Rs. 30, 259 (in lakhs) in 2008-2009, and Rs. 31, 006 (in lakhs) in 2009-2010.

79

Chart no: 4.16.3 Ordering Cost of Aluminium Sulphate

Ordering cost of Aluminium Sulphate

2009-2010 2008-2009
Year

2007-2008 2006-2007 2005-2006 1200 1220 1240 1260 1280 1300 1320 1340 1360

Cost (in lakhs)

Inference:
This chart shows that the ordering cost of Aluminium Sulphate goes on increasing and in the year 2005-2006, the ordering cost was Rs.1, 250 (in lakhs), in 2007-2008, it increased to Rs. 1, 300 (in lakhs), and again in 2008-2010 the ordering cost is Rs. 1,350 (in lakhs).

80

Chart no: 4.16.4 EOQ of Aluminium Sulphate

EOQ of Aluminium Sulphate

2009-2010 2008-2009
Year

2007-2008 2006-2007 2005-2006 0 0.2 0.4 0.6 EOQ 0.8 1 1.2

Inference:
This chart shows that the EOQ of aluminium Sulphate is 0.6 during the year 20052006, 0.45 in the year 2006-2007, 1.13 in the year 2007-2008, 0.73 in the year 20082009, and 0.72 in the year 2009-2010.

81

XVII Calculation of EOQ of Barium Carbonate: Economic Ordering Quantity is calculated using the formulae Economic Ordering Quantity = I Table no: 4.17 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Annual consumption 673 724 617 486 437 Carrying cost 1310 1814 1876 3755 3205 Ordering cost 1250 1250 1300 1350 1350 EOQ 35 31 29 18 19 2CO

Source: Secondary data

Chart no: 4.17.1 Annual Consumption of Barium Carbonate

2009-2010 2008-2009
Year

2007-2008 2006-2007 2005-2006 0 100 200 300 400 500 600 700 800

consumption (in MT)

Inference:
This chart shows that the annual consumption of Barium carbonate in the year 20052006 is 673 MT and then increased to 724 MT in 2006-2007, and decreased simultaneously to 617 MT in 2007-2008, 486 MT in 2008-2009, and 437 MT in 20092010.
82

Chart no: 4.17.2 Carrying Cost of Barium Carbonate

2009-2010 2008-2009
Year

2007-2008 2006-2007 2005-2006 0 500 1000 1500 2000 2500 3000 3500 4000

Cost (in lakhs)

Inference:
This chart shows that there is a vast change in the carrying cost of Barium carbonate and the cost in the year 2005-2006 is Rs. 1, 310 (in lakhs), in the year 2006-2007 is Rs. 1, 814 (in lakhs), in the year 2007-2008 is Rs. 1, 876 (in lakhs), in the year 20082009 is Rs. 3, 755 (in lakhs), and in the year 2009-2010 is Rs. 3, 205 (in lakhs).

83

Chart no: 4.17.3 Ordering Cost of Barium Carbonate

2009-2010 2008-2009
Year

2007-2008 2006-2007 2005-2006 1200 1220 1240 1260 1280 1300 1320 1340 1360

Cost (in lakhs)

Inference:
This chart shows that the ordering cost of Barium Carbonate goes on increasing and in the year 2005-2006, the ordering cost was Rs.1, 250 (in lakhs), in 2007-2008, it increased to Rs. 1, 300 (in lakhs), and again in 2008-2010 the ordering cost is Rs. 1, 350 (in lakhs).

84

Chart no: 4.17.4 EOQ of Barium Carbonate

2009-2010 2008-2009
Year

2007-2008 2006-2007 2005-2006 0 5 10 15 20 EOQ 25 30 35 40

Inference:
This chart shows that the economic ordering quantity of barium carbonate during the year 2005-2006 is 35, then reducing to 31 in 2006-2007, again reducing to 29 in 2007-2008, again reducing to 18 in the year 2008-2009, and then increasing to 19 in the year 2009-2010.

85

XVIII Calculation of Reorder level of common salt: Reorder level is calculated using the formulae Reorder level = Average daily consumption x lead time in days + reorder level Table no: 4.18 Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary data Average daily consumption 54.54 34.67 28.16 54.49 45.96 Lead time in days 16 58 241 66 94 Reorder level 20874.64 22010.86 26786.56 23596.34 24320.24

Chart no: 4.18.1 Average Daily Consumption of Common Salt

60
consumption (in MT)

50 40 30 20 10 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This chart shows that the average daily consumption of common salt was 54.54 MT, 34.67 MT, 28.16 MT, 54.49 MT, and 45.96 MT during the year 2005-2006, 20062007, 2007-2008, 2008-2009, and 2009-2010 respectively.

86

Chart no: 4.18.2 Lead time in Days

300
Lead time (in days)

250 200 150 100 50 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This line chart shows that the lead time of common salt was 16 days in the year 20052006, 58 days in the year 2006-2007, 241 days in the year 2007-2008, 66 days in the year 2008-2009 and 94 days in the year 2009-2010.

87

Chart no: 4.18.3 Reorder level of Common Salt

30000
Reorder level (In MT)

25000 20000 15000 10000 5000 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year

Inference:
The reorder level of common salt was 20, 874 MT in the year 2005-2006,; 22,010 MT in the year 2006-2007,; 26,786.56 MT in the year 2007-2008,; 23,596 MT in the year 2008-2009, and 24, 320 MT in the year 2009-2010.

100

XIX Calculation of Reorder level of Aluminium Sulphate: Reorder level is calculated using the formulae Reorder level = Average daily consumption x lead time in days + reorder level

Table no: 4.19

Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Seconary data Average daily consumption 0.04 0.04 0.03 Lead time in days 11 20 29 Reorder level 5.44 5.8 5.87 -

Chart no: 4.19.1 Average Daily Consumption of Aluminium Sulphate

0.05
Consumption (in MT)

0.04 0.03 0.02 0.01 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This chart shows that the average daily consumption of Aluminium Sulphate was .04 MT, .04 MT, and .03 MT. during the year 2005-2006, 2006-2007, 2007-2008 respectively. During the years 2008-2010 the usage is recorded as nil.

101

Chart no: 4.19.2 Lead time in Days

35 30
Lead time (in days)

25 20 15 10 5 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This line chart shows that the lead time of Aluminium Sulphate was 11 days in the year 2005-2006, 20 days in the year 2006-2007, and 29 days in the year 2007-2008. In the year 2008-2009 and 2009-2010, the idle time is 0.

102

Chart no: 4.19.3 Reorder Level of Aluminium Sulphate

7
Reorder level (in MT)

6 5 4 3 2 1 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
The reorder level of Aluminium Sulphate was 5.44 MT in the year 2005-2006,; 5.8 MT in the year 2006-2007,; and 5.87 MT in the year 2007-2008. There is no reorder level in the year from 2008-2010.

103

XX Calculation of Reorder level of Barium Carbonate: Reorder level is calculated using the formulae Reorder level = Average daily consumption x lead time in days + reorder level

Table no: 4.20

Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Average daily consumption 1 1.369 0 0.09 0.12 Lead time in days 16 16 0 17 15 Reorder level 66 71.904 0 51.53 51.8

Source: Secondary data

Chart no: 4.20.1 Average Daily Consumption of Barium Carbonate

1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0

Consumption (in MT)

2005-2006

2006-2007

2007-2008 Year

2008-2009

2009-2010

Inference:
This chart shows that the average daily consumption of Barium Carbonate was 1 MT, 1.369 MT, 0 MT, 0.09 MT, and 0.12 MT during the year 2005-2006, 2006-2007, 2007-2008, 2008-2009, and 2009-2010 respectively.

104

Chart no: 4.20.2 Lead time in Days

18 16 14 12 10 8 6 4 2 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
This line chart shows that the lead time of Barium Carbonate was 16 days in the year 2005-2006, 16 days in the year 2006-2007, 17 days in the year 2008-2009 and 15 days in the year 2009-2010.

Lead time (in days)

105

Chart no: 4.20.3 Reorder Level of Barium carbonate

80
Reorder level (in MT)

70 60 50 40 30 20 10 0 2005-2006 2006-2007 2007-2008 Year 2008-2009 2009-2010

Inference:
The reorder level of Barium Carbonate was 66 MT in the year 2005-2006,; 71.904MT in the year 2006-2007,; 2009-2010. 51.53 MT in the year 2008-2009, and 51.8 MT in the year

106

XXI Banking of ABC items according to usage value: Table no: 4.21.1 Items Common salt Aluminium sulphate Barium carbonate Max floc T floculent Floculent Hydrated lime powder Soda ash Sodium bisulphate Sulphuric acid Sugar Furnace oil HDPE carboy for Ecko clean 20LT HDPE bag for caustic soda flakes 60 x 90 CM HH HDPE liner 65cm x 100cm x 200G PP multi filament twine 840 / 1 x 2 (kg) Units 83937.74 8.025 437.250 150 675 10.15 335.41 51.15 640.15 4750 2935.861 40 386250 Unit cost 1769.41 7397.89 17428.829 188.7 108.7 6986.2 4684.70 20045.03 2063.80 31.02 23823.87 132.34 12.919 Total cost 148520777.59 59368.13 7620755.83 28305 73403.13 70910 4925396.94 1025303.65 1321146.85 147390 69943577.28 5293.60 4990010.98 0.3 2 .4 8 5 7 % of total cost 61 0.2 4 Ranking 1 9 3

29 .02 2

2 11 4

387900 300.810

4.636 167.46

1798679.5 50374.67 240580693.15

0.7 0.2 100

6 10

Source: Secondary data

ABC analysis of inventory items

Category A B C % of items 15 35 50 % 0f value 80 15 5
107

Table no: 4.21.2 ABC analysis plan

Items in order of ranking Common salt Furnace oil Barium carbonate HDPE bag for caustic soda flakes 60 x 90 CM Soda ash HH HDPE liner 65cm x 100cm x 200G Sodium bi sulphate Floculent Aluminium sulphate PP multi filament twine 840 / 1 x 2 (kg) HDPE carboy for Ecko clean 20 LT 6 50 Items % of no: total items 2 20 3 30 Value Cumulative value Cumulative % of Category Percentage total value 61 90 A 90 94 96 7 B

148520777.59 148520777.59 69943577.28 7620755.83 4990010.98 218464354.87 22608511.07 23107512.17

4925396.94 1798679.5

236000518.62 237799198.12

98 98.7

1025303.65 73403.13 59368.13 50374.67

238824501.77 238897904.90 238957273.03 239007647.70

99.1 99.4 99.6 99.8

5293.60

239012941.30

100

Source: Secondary data

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Inference:
CATEGORY A B C NO:OF ITEMS 2 3 6 11 % OF ITEMS 18.18 27.27 54.54 100 % OF VALUE 90 7 3 100

From the above table, it can be seen that 54.54% of the items come under the category of C class. 27.27% of the items are B category and the remaining items come under the category of A category. It is because most of the raw materials and spare parts using for the production process are relatively cheaper.

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CHAPTER -5 FINDINGS, SUGGETIONS AND CONCLUSION

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FINDINGS
The c o n s u mp t i o n level of raw material shows an increasing trend from 280 (in lakhs) in 2005-06 to 535 (in lakhs) in 2008-09 and a decrease to 367 (in lakhs) in 2009-10.

T h e work in progress shows slight variations and it also shows that the current plant layout is very much effective. There is an increase in stock of finished goods and it is due to reduced sales and it will affect the blockage of working capital also. The level of material in transit is getting reduced at a greater pace and is due to the reduced sales.

The stores and spares is increasing over years and strict inventory controls are needed in stores and spares and otherwise leads to blockage of working capital.

The major portion of inventory held in the raw material, finished goods, and stores and spares during the span of 5 years. It is found that the reorder quantity fixed for Common Salt was 20000 MT, Aluminium Sulphate - 5 MT, Barium Carbonate - 50 MT. Here all these reorder levels are not maintained when calculated in terms of daily consumption and lead time. Also the EOQ also change over time.. .

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 From the analysis it is found that the Inventory turnover ratio shows a decreasing trend and it was 8.02 in 2008-09, and 6.58 in 200910. The inventory conversion period shows an increase from 46 days in 2008-09, and 55 days in 2009-10. Working capital was -1065 (in lakhs) in 2008-09, and -891 (in lakhs) in 2009-10. Net profit -281(in lakhs) in 2008-09, and -249 (in lakhs) in 2009-10. Net profit ratio was -2.33 in 2008-09, and -2.32 in 2009-10 Current asset was 3636 (in lakhs) in 2008-09, 4007 (in lakhs) in 200910. Inventory to current asset ratio was 41.36 in 2008-09, and 40.73 in 2009-10. Debt equity ratio was 2.34 in 2008-09, and 2.46 in 2009-10.
Most of the raw materials and inventory using for the production process

are relatively cheaper; as a result 98.35% of the items come under the category of C class. A category items accounts for 18.18%, B category items accounts for 27.27% and the remaining 54.54% accounts for C category items.
At the end of financial year 2009-10, 80% of total value of inventory is

contributed by A category, 15% by B category and 5% by C category. When calculating operating efficiency on the basis of sales, net profit, and working capital, we can find that sales show variation over the
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period of 5 years, net profit moves to negative, and working capital also shows negative values in the span of 5 years. We also found that the inventory control is not maintained and there exist overstocking of finished goods, stock and spares, raw material.

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SUGGESTION
The company should implement new inventory control such as just in time or SAP so that the unnecessary blocking of raw material and finished goods can be avoided. The company should adopt new marketing strategies to capture market. The increased consumption level of stores and spares is one of the reason for the shortage of working capital and it must be reduced Inventory turnover ratio showing a decreasing trend and conversion period also increases. So the company must adopt strategies in order to increase sales. The imbalance between current asset and current liability (working capital) is being reduced and it shows a good signal The company should give considerable importance to A category items and the costs of such items should be controlled, so that costs of final products can reduce. The management should try to avoid under stocking and over stocking of inventory and finished goods must be issued without delay after getting the order.

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CONCLUSION
In today's competitive business environment, inventory management has proven to be one of the most critical aspects in each and every organization. A study was undertaken on the topic A study of impact of Inventory Management on operating efficiency with special reference to the Travancore Cochin Chemicals Ltd, Udyogamandal, Cochin. It is an in depth study of inventory to evaluate the performance of the company in logistics management. The organizations are holding the stocks to allow for variations and uncertainty in supply and demand - they give a buffer between the suppliers and customers, maintaining customer service even when there are problems in the supply chain. Stocks do not exist in isolation, so the management has to consider its impact on other parts of the organization. There are no clear lines between the inventory management and procurement, supply chain management, warehousing and broader operations. So, the company has to set inventory management in its overall importance and explicitly recognizing its importance. It is evident that the investment in inventory should be fair; it should not be over investment or under investment. Excess investment in inventory may leads to capital blockage in the form of inventory and under investment in inventory leads to stock out situations.

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BIBLIOGRAPHY

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BIBLIOGRAPHY
BOOKS
1) KOTHARI C.R. Research Methodology, New Age International publishers New Delhi. 2) David J Piasecki, Inventory Management Explained: A Focus on Forecasting, Safety Stock and Ordering Systems, Ops Publishers. 3) D. Chandra Bose, INVENTORY MANAGEMENT, Himalaya Publications, New Delhi. 4) Tony wild, Best Practice in Inventory Management, Penquin Publishers, USA.

Journals
The Quarterly news letter of Travancore Cochin Chemicals Limited, Volume 9, Issue 3, September- December 2009.

WEBSITES 1) 2) 3) 4)
http://www.inventoryops.com http://www.tcckerala.com/ http://www.effectiveinventory.com http://inventoryexplained.com

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