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“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

B y

Mr. MUHAMED NIYAS

(Reg. No: A9GMBA1066)

IV Semester MBA

Under the guidance of

Prof. Lakshmi Saju

“A study of impact of Inventory Management on operating efficiency with special reference to The Travancore

Chintech School of Management Studies Chinmaya Institute Of Technology Kannur

2010

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

Dr.K.K.FALGUNAN

Date :

(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

Prof. LAKSHMI SAJU

Date :

(Asst. PROFESSOR)

DECLARATION

Date:

Muhamed Niyas IV semester MBA

I hereby declare that the Project entitled

A study of impact

of

Inventory Management on operating efficiency with special reference to The Travancore Cochin Chemicals

Ltd., Udyogamandal, Cochinis my original work and it was under the supervision of Prof.Lakshmi Saju, Asst. Professor, Chintech School 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.

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

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.

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

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

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

go following factors.

to

is

called as

maximum stock level. It depends upon the

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)

  • 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

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:-

I
I

___________ 2 x C x O

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

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 firm’s 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

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

  • 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.

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.

CHAPTER 2 LITERATURE SURVEY

Literature Review

Some of the studies in the area have been reviewed by the researcher in the following pages:

According to Webster’s 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, NOIDA- 201301 The Institute of Chartered Accountants of India.

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.

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 system’s 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 system’s 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).

CHAPTER 3 INDUSTRY PROFILE

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 world‘s 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

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 one‘s 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 region‘s production. The global economic recovery will stimulate demand growth for both chlorine derivatives and caustic soda.

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 Soda), Disodiu m Carbon ate 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

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.

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.

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

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

incorporation are:

be

pursued by the

company on its

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.

1988-89Best 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.

1993Best 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 I ndia.

2003 – Kerala State Energy Conservation Award (2000) in the category of Large Scale Industry.

2005

– National Energy Conservation Award Chlor-alkali Sector.

2006–Kerala

State

Energy

Conservation

 

Award.

2008

– Best Pollution Control Award from Kerala State Pollution Control

Board.

2009

Kerala

State

Pollution

Control

Award

(3 rd place)

 

QUALITY POLICY

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

DEPAR TMENTS

  • 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

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

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 chlor- alkali 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.

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

CHAPTER-4

ANALYSIS & INTERPRETATION OF DATA

I Consumption levels of inventories

Table no: 4.1

Year

Raw

Work in

Finished

Material

Stores

Total

material

progress

goods

in transit

and

spares

2005-2006

  • 280 0

   
  • 109 413

161

 

963

2006-2007

  • 248 0

   
  • 308 425

  • 64 1045

 

2007-2008

  • 244 17

   
  • 295 400

  • 62 1018

 

2008-2009

  • 535 29

   
  • 247 603

  • 90 1504

 

2009-2010

  • 367 19

   
  • 590 601

  • 55 1632

 

Source: secondary data

Chart no: 4.1.1

Consumption level of raw materials

600 500 400 300 200 100 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year Consumption (in lakhs)
600
500
400
300
200
100
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Consumption (in lakhs)

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.

Chart no: 4.1.2

Consumption level of work in progress

35 30 25 20 15 10 5 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year Consumption (in
35
30
25
20
15
10
5
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Consumption (in lakhs)

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

Chart no: 4.1.3

Consumption level of finished goods

700 600 500 400 300 200 100 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year Consumption (in
700
600
500
400
300
200
100
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Consumption (in lakhs)

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 2009- 10. In the early years the finished goods shows variations and during the year 2009- 2010 it shows an increasing trend.

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 2008-2009 2009-2010 Year
180
160
140
120
100
80
60
40
20
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Consumption (in lakhs)

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.

Chart no: 4.1.5

Consumption of stores and spares

700 600 500 400 300 200 100 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year Consumption (in
700
600
500
400
300
200
100
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Consumption (in lakhs)

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.

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 2008-2009 2009-2010 Year
1800
1600
1400
1200
1000
800
600
400
200
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Consumption (in lakhs)

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.

II Classification of inventories:

Table no: 4.2

Items

Total of 5 years

% of total inventory

Raw material

1674

27.17

Work in progress

65

1.05

Finished goods

1549

25.14

Material in transit

432

7.01

Store s and spares

2442

39.63

Total

6162

100

Source: Secondary data

Chart no: 4.2

Percentage of inventories

27% 40% 1% Raw material Work in progress Finished goods Material in transit Stores and spares
27%
40%
1%
Raw material
Work in progress
Finished goods
Material in transit
Stores and spares
25%
7%

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

III Calculation of Current ratio

The current ratio is calculated using the formulae

Current ratio =

Current Asset

 

Current Liability

Table no: 4.3

 
 

Year

Current asset

Current liability

Current ratio

2005-2006

3576

5859

0.61

2006-2007

3717

5583

0.67

2007-2008

3457

5474

0.63

2008-2009

3636

4701

0.77

2009-2010

4007

4898

0.82

Source: Secondary data

 

Chart no: 4.3.1

 

Current Asset

4100 4000 3900 3800 3700 3600 3500 3400 3300 3200 3100 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010
4100
4000
3900
3800
3700
3600
3500
3400
3300
3200
3100
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Inference:
This graph shows
that the
current asset
during the
year 2009-2010 is
Rs.4, 007
(in
Current Asset (in lakhs)

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.

Chart no: 4.3.2

Current Liability

7000 6000 5000 4000 3000 2000 1000 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year Current Liability
7000
6000
5000
4000
3000
2000
1000
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Current Liability (in lakhs)

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.

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 2008-2009 2009-2010 Year
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
2008-2009
2009-2010
Year
Current Ratio

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.

IV calculation of Quick ratio:

The Quick ratio is calculated using the formulae

Quick ratio =

Liquid Asset

Current Liability

Table no: 4.4

Year

Liquid asset

Current liability

Quick ratio

2005-2006

  • 2609 5859

 

0.45

2006-2007

  • 2672 5583

 

0.48

2007-2008

  • 2439 5474

 

0.45

2008-2009

  • 2132 4701

 

0.45

2009-2010

  • 2375 4898

 

0.48

Source: secondary data

Chart no: 4.4.1

Liquid Asset

3000 2500 2000 1500 1000 500 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year Liquid Asset (in
3000
2500
2000
1500
1000
500
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Liquid Asset (in lakhs)

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.

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
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
2008-2009
2009-2010
Year
Quick Ratio

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.

V Calculation of Inventory turnover ratio

Inventory turnover ratio is calculated using the formulae

Inventory turnover ratio =

Sales

Inventory

Table no: 4.5

Year

Sales

Inventor y

Inve ntor y turnover Ratio

2005-2006

10877

963

11.29

2006-2007

12321

  • 1045 11.79

 

2007-2008

9390

  • 1018 9.22

 

2008-2009

12063

  • 1504 8.02

 

2009-2010

10752

  • 1632 6.58

 

Source: Secondary data

Chart no: 4.5.1

Sales 14000 12000 10000 8000 6000 4000 2000 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year Sales
Sales
14000
12000
10000
8000
6000
4000
2000
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Sales (in lakhs)

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.

Chart no: 4.5.2

Inventory Turnover Ratio

14 12 10 8 6 4 2 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year Inventory turnover
14
12
10
8
6
4
2
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Inventory turnover Ratio

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.

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

No: of da ys

Inventor y turnover ratio

Inventor y conversion period

2005-2006

  • 365 11.29

 

32

2006-2007

  • 365 11.79

 

31

2007-2008

  • 365 9.22

 

40

2008-2009

  • 365 8.02

 

46

2009-2010

  • 365 6.58

 

55

Source: Secondary data

Chart no: 4.6

Inventory conversion period 60 50 40 30 20 10 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year
Inventory conversion period
60
50
40
30
20
10
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Conversion period (in days)

Inference:

This chart shows that inventory conversion period was 31 days during the year 2006- 2007 and it increased up to certain extend each year and it reaches to 55 days in the year 2009-2010

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

Sales

Raw mate rial

Ratio

2005-2006

10877

  • 280 38.84

 

2006-2007

12321

  • 248 49.68

 

2007-2008

9390

  • 244 38.48

 

2008-2009

12063

  • 535 22.54

 

2009-2010

10748

  • 367 29.28

 

Source: Secondary data

Chart no: 4.7

Raw Material Turnover Ratio

60 50 40 30 20 10 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year Raw material turnover
60
50
40
30
20
10
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Raw material turnover ratio

Inference:

This chart shows that the raw material turnover ratio was 49.68 during the year 2006- 2007 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

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

Raw mate rial turnover ratio

Raw material holding Period

2005-2006

  • 38.84 9.26

 

2006-2007

  • 49.68 7.24

 

2007-2008

  • 38.48 9.35

 

2008-2009

  • 22.54 15.97

 

2009-2010

  • 29.28 12.29

 

Source: Secondary data

Chart no: 4.8

Raw Material Holding Period

18 16 14 12 10 8 6 4 2 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year
18
16
14
12
10
8
6
4
2
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Holding period (in days)

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

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

Sales

Work in progress

Ratio

2005-2006

10877

  • - -

 

2006-2007

12321

  • - -

 

2007-2008

9390

  • 17 552.4

 

2008-2009

12063

  • 29 415.9

 

2009-2010

10748

  • 19 565.6

 

Source: Secondary data

Chart no: 4.9

Work in Progress Turnover Ratio

600 500 400 300 200 100 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year Work in progress
600
500
400
300
200
100
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Work in progress turnover ratio

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

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

Work in progress turnover ratio

Work in progress holding Period

2005-2006

  • 0 0

 

2006-2007

  • 0 0

 

2007-2008

  • 552.4 0.65

 

2008-2009

  • 415.9 0.86

 

2009-2010

  • 565.6 0.63

 

Source: Secondary data

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 2008-2009 2009-2010
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
2008-2009
2009-2010
year
Holding period (in days)

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.

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

Sales

Finished goods

Ratio

2005-2006

10877

109

99.78

2006-2007

12321

308

40

2007-2008

9390

295

31.83

2008-2009

12063

247

48.83

2009-2010

10748

589

18.25

Source: Secondary data

Chart no: 4.11

Finished Goods turnover Ratio

120 100 80 60 40 20 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year Finished goods turnover
120
100
80
60
40
20
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Finished goods turnover ratio

Inference:

This chart shows that finished goods turnover ratio was 99.78 during the year 2005- 2006 and it reduced to 18.25 during the year 2009-2010 simultaneously.

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

Finished goods turnover ratio

Finished goods holding Period

2005-2006

99.78

4

2006-2007

40

9

2007-2008

31.83

11

2008-2009

48.83

7

2009-2010

18.25

20

Source: Secondary data

Chart no:4.12

Finished Goods Holding Period 25 20 15 10 5 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year
Finished Goods Holding Period
25
20
15
10
5
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Holding Period (in days)

Inference:

This chart shows that the finished goods holding period was 4 during the year 2005- 2006 and it increased to 11 during the year 2007-2008 and finally it reaches to 20 in the year 2009-2010.

XIII Calculation of Debt equity ratio;

Debt equity ratio is calculated using the formulae

Debt equity ratio =

Outside Fund

Share Holder’s fund

Table no: 4.15

Year

Outside fund

Shareholders fund

Ratio

2005-2006

  • 5000 2131

 

2.35

2006-2007

  • 5162 2131

 

2.42

2007-2008

  • 4837 2131

 

2.27

2008-2009

  • 4987 2131

 

2.34

2009-2010

  • 5249 2131

 

2.46

Source: Secondary data

Chart no: 4.13.1

Outside Fund

2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 4600 4700 4800 4900 5000 5100 5200 5300 Out side fund
2009-2010
2008-2009
2007-2008
2006-2007
2005-2006
4600
4700
4800
4900
5000
5100
5200
5300
Out side fund (in lakhs)
Year

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 2006- 2007, 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.

Chart no: 4.13.2 \

Shareholders Fund

2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 0 500 1000 1500 2000 2500 Share holders fund (in lakhs)
2009-2010
2008-2009
2007-2008
2006-2007
2005-2006
0
500
1000
1500
2000
2500
Share holders fund (in lakhs)
Year

Inference:

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

Chart no: 4.13.3

Debt Equity ratio

2009-2010 2008-2009 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
2009-2010
2008-2009
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
Year

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.

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

Net profit

Sales

Ratio

2005-2006

523

10877

4.81

2006-2007

49

12321

0.40

2007-2008

28

9390

0.29

2008-2009

-281

  • 12063 -2.33

 

2009-2010

-249

  • 10752 -2.32

 

Source: Secondary data

Chart no: 4.14.1

Net Profit

600 500 400 300 200 100 0 -100 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 -200 -300 -400
600
500
400
300
200
100
0
-100
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
-200
-300
-400
Year
Net Profit (in lakhs)

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).

Chart no: 4.14.2

Net Profit Ratio

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

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.

XV Calculation of EOQ of common salt:

Economic Ordering Quantity is calculated using the formulae

Economic Ordering Quantity

= 2 C O I
=
2 C O
I

Table no: 4.15

Year

Annual

Carrying cost

Ordering cost

EOQ

consumption

2005-2006

90308

158

  • 1250 1195

 

2006-2007

99393

142

  • 1250 1265

 

2007-2008

72669

118

  • 1300 1265

 

2008-2009

81465

139

  • 1350 1257

 

2009-2010

83937

85

  • 1350 1632

 

Source: Secondary data

Chart no: 4.15.1

Annual Consumption of Common Salt

2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 0 20000 40000 60000 80000 100000 120000 Consumption (in MT) Year
2009-2010
2008-2009
2007-2008
2006-2007
2005-2006
0
20000
40000
60000
80000
100000
120000
Consumption (in MT)
Year

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 2009- 2010 the annual consumption of common salt is 83,937 MT.

Chart no: 4.15.2

Carrying Cost of Common Salt

2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 0 50 100 150 200 Cost (in lakhs) Year
2009-2010
2008-2009
2007-2008
2006-2007
2005-2006
0
50
100
150
200
Cost (in lakhs)
Year

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.

Chart no: 4.15.3

Ordering Cost of Common Salt

2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 1200 1220 1240 1260 1280 1300 1320 1340 1360 Cost (in
2009-2010
2008-2009
2007-2008
2006-2007
2005-2006
1200
1220
1240
1260
1280
1300
1320
1340
1360
Cost (in lakhs)
Year

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).

Chart no: 4.15.4

EOQ of Common Salt

EOQ of Common Salt 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 0 500 1000 1500 2000 EOQ Year
EOQ of Common Salt
2009-2010
2008-2009
2007-2008
2006-2007
2005-2006
0
500
1000
1500
2000
EOQ
Year

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.

XVI Calculation of EOQ of Aluminium Sulphate:

Economic Ordering Quantity is calculated using the formulae

Economic Ordering Quantity =

2 C O I
2 C O
I
 

Table no: 4.16

Year

Annual

Carrying cost

Ordering cost

EOQ

consumption

2005-2006

3

 
  • 18135 1

1250

 

2006-2007

7

 
  • 88105 1

1250

 

2007-2008

11

 
  • 22354 1

1300

 

2008-2009

6

 
  • 30259 1

1350

 

2009-2010

8.02

 
  • 31006 1

1350

 

Source: Secondary data

Chart no: 4.16.1

Annual Consumption of Aluminium Sulphate

2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 0 2 4 6 8 10 12 Consumption (in MT) Year
2009-2010
2008-2009
2007-2008
2006-2007
2005-2006
0
2
4
6
8
10
12
Consumption (in MT)
Year

Inference:

This chart shows that the annual consumption during 2005-2006 was 3 MT, in 2006- 2007 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.

Chart no: 4.16.2

Carrying Cost of Aluminum Sulphate

Carrying cost of Aluminium Sulphate 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 0 20000 40000 60000 80000 100000
Carrying cost of Aluminium Sulphate
2009-2010
2008-2009
2007-2008
2006-2007
2005-2006
0
20000
40000
60000
80000
100000
Cost (in lakhs)
Year

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.

Chart no: 4.16.3

Ordering Cost of Aluminium Sulphate

Ordering cost of Aluminium Sulphate 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 1200 1220 1240 1260 1280 1300
Ordering cost of Aluminium Sulphate
2009-2010
2008-2009
2007-2008
2006-2007
2005-2006
1200
1220
1240
1260
1280
1300
1320
1340
1360
Cost (in lakhs)
Year

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).

Chart no: 4.16.4

EOQ of Aluminium Sulphate

EOQ of Aluminium Sulphate 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 0 0.2 0.4 0.6 0.8 1 1.2
EOQ of Aluminium Sulphate
2009-2010
2008-2009
2007-2008
2006-2007
2005-2006
0
0.2
0.4
0.6
0.8
1
1.2
EOQ
Year

Inference:

This chart shows that the EOQ of aluminium Sulphate is 0.6 during the year 2005- 2006, 0.45 in the year 2006-2007, 1.13 in the year 2007-2008, 0.73 in the year 2008- 2009, and 0.72 in the year 2009-2010.

XVII Calculation of EOQ of Barium Carbonate:

Economic Ordering Quantity is calculated using the formulae

Economic Ordering Quantity =

2 C O I
2 C O
I
 

Table no: 4.17

Year

Annual

Carrying cost

Ordering cost

EOQ

consumption

2005-2006

 
  • 673 1250

1310

 

35

2006-2007

 
  • 724 1250

1814

 

31

2007-2008

 
  • 617 1300

1876

 

29

2008-2009

 
  • 486 1350

3755

 

18

2009-2010

 
  • 437 1350

3205

 

19

Source: Secondary data

Chart no: 4.17.1

Annual Consumption of Barium Carbonate

2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 0 100 200 300 400 500 600 700 800 consumption (in
2009-2010
2008-2009
2007-2008
2006-2007
2005-2006
0
100
200
300
400
500
600
700
800
consumption (in MT)
Year

Inference:

This chart shows that the annual consumption of Barium carbonate in the year 2005- 2006 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 2009-

2010.

Chart no: 4.17.2

Carrying Cost of Barium Carbonate

2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 0 500 1000 1500 2000 2500 3000 3500 4000 Cost (in
2009-2010
2008-2009
2007-2008
2006-2007
2005-2006
0
500
1000
1500
2000
2500
3000
3500
4000
Cost (in lakhs)
Year

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 2008- 2009 is Rs. 3, 755 (in lakhs), and in the year 2009-2010 is Rs. 3, 205 (in lakhs).

Chart no: 4.17.3

Ordering Cost of Barium Carbonate

2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 1200 1220 1240 1260 1280 1300 1320 1340 1360 Cost (in
2009-2010
2008-2009
2007-2008
2006-2007
2005-2006
1200
1220
1240
1260
1280
1300
1320
1340
1360
Cost (in lakhs)
Year

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).

Chart no: 4.17.4

EOQ of Barium Carbonate

2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 0 5 10 15 20 25 30 35 40 EOQ Year
2009-2010
2008-2009
2007-2008
2006-2007
2005-2006
0
5
10
15
20
25
30
35
40
EOQ
Year

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.

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

Average daily

Lead time in days

Reorder level

consumption

2005-2006

54.54

16

20874.64

2006-2007

34.67

58

22010.86

2007-2008

28.16

241

26786.56

2008-2009

54.49

66

23596.34

2009-2010

45.96

94

24320.24

Source: Secondary data

Chart no: 4.18.1

Average Daily Consumption of Common Salt

60 50 40 30 20 10 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year consumption (in MT)
60
50
40
30
20
10
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
consumption (in MT)

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, 2006- 2007, 2007-2008, 2008-2009, and 2009-2010 respectively.

Chart no: 4.18.2

Lead time in Days

300 250 200 150 100 50 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year Lead time (in
300
250
200
150
100
50
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Lead time (in days)

Inference:

This line chart shows that the lead time of common salt was 16 days in the year 2005- 2006, 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.

Chart no: 4.18.3

Reorder level of Common Salt

30000 25000 20000 15000 10000 5000 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year Reorder level (In
30000
25000
20000
15000
10000
5000
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Reorder level (In MT)

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

Average da il y consumption

Lea d time in da ys

Reorder level

2005-2006

  • 0.04 11

 

5.44

2006-2007

  • 0.04 20

 

5.8

2007-2008

  • 0.03 29

 

5.87

2008-2009

  • - -

 

-

2009-2010

  • - -

 

-

Source: Seconary data

Chart no: 4.19.1

Average Daily Consumption of Aluminium Sulphate 0.05 0.04 0.03 0.02 0.01 0 2005-2006 2006-2007 2007-2008 2008-2009
Average Daily Consumption of Aluminium Sulphate
0.05
0.04
0.03
0.02
0.01
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Consumption (in MT)

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 25 20 15 10 5 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year Lead time
35
30
25
20
15
10
5
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Lead time (in days)

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 6 5 4 3 2 1 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year Reorder level
7
6
5
4
3
2
1
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Reorder level (in MT)

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

Average da il y consumption

Lea d time in da ys

Reorder level

2005-2006

1

16

66

2006-2007

1.369

16

71.904

2007-2008

0

0

0

2008-2009

  • 0.09 17

 

51.53

2009-2010

  • 0.12 15

 

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 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 0 Year Consumption
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
0
Year
Consumption (in MT)

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 2008-2009 2009-2010 Year
18
16
14
12
10
8
6
4
2
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Lead time (in days)

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.

105

Chart no: 4.20.3

Reorder Level of Barium carbonate

80 70 60 50 40 30 20 10 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Year Reorder
80
70
60
50
40
30
20
10
0
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
Year
Reorder level (in MT)

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

Units

Unit cost

Total cost

% of

Ranking

total cost

Common salt

83937.74

1769.41

148520777.59

61

1

Aluminium

8.025

7397.89

59368.13

0.2

9

sulphate

Barium

437.250

17428.829

7620755.83

4

3

carbonate

Max floc T floculent

150

188.7

28305

   

Floculent

675

108.7

73403.13

0.3

8

Hydrated lime

10.15

6986.2

70910

   

powder

Soda ash

335.41

4684.70

4925396.94

2

5

Sodium

51.15

20045.03

1025303.65

.4

7

bisulphate

Sulphuric acid

640.15

2063.80

1321146.85

   

Sugar

4750

31.02

147390

   

Furnace oil

2935.861

23823.87

69943577.28

29

2

HDPE carbo y for Ecko clean

40

132.34

5293.60

.02

11

20LT

HDPE ba g for caustic soda flakes 60 x 90 CM

386250

12.919

4990010.98

2

4

HH HDPE liner 65cm x 100cm x 200G

387900

4.636

1798679.5

0.7

6

PP multi filament twine 840 / 1 x 2 (kg)

300.810

167.46

50374.67

0.2

10

     

240580693.15

100

 

Source: Secondary data

 

ABC analysis of inventory items

 
 

Categor y

% of items

% 0f value

 

A

15

80

B

35

15

C

50

5

107

Table no: 4.21.2

ABC analysis plan

Items in o rder

Items

% of

Value

Cumu lative

Cumulative

% of

Cate gor y

of ranking

no:

total

value

Percentage

total

items

value

Common salt

2

20

148520777.59

148520777.59

61

90

A

Furnace oil

69943577.28

218464354.87

90

Barium

3

30

7620755.83

22608511.07

94

7

B

carbonate

HDPE bag for caustic soda flakes 60 x 90 CM

4990010.98

23107512.17

96

Soda ash

4925396.94

236000518.62

98

HH HDPE liner 65cm x 100cm x

6

50

1798679.5

237799198.12

98.7

3

C

200G

Sodium bi

1025303.65

238824501.77

99.1

sulphate

Floculent

73403.13

238897904.90

99.4

Aluminium

59368.13

238957273.03

99.6

sulphate

PP

multi

50374.67

239007647.70

99.8

filament twine 840 / 1 x 2 (kg)

HDPE carboy for Ecko clean 20 LT

5293.60

239012941.30

100

Source: Secondary data

108

Inference:

CATEGORY

NO:OF ITEMS

% OF ITEMS

% OF VALUE

A

2

18.18

90

B

3

27.27

7

C

6

54.54

3

 

11

100

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.

109

CHAPTER -5

FINDINGS, SUGGETIONS AND CONCLUSION

110

FI NDINGS

  • The con su mpt ion 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.

  • The 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 ..

 

.

111