Invent

Dharwad Milk Union (A Unit EXECUTIVE SUMMARY
TITLE OF THE STUDY:

An Organization Study at DMU and study on Application of Inventory Techniques to Dharwad Milk Union (A unit of KMF)
INTRODUCTION:
In todays competitive world, no business is spared from the competition even from the basic need related industries like milk industry are facing the same problem. The main objective of the companies is to be in the field of business and recap profits by providing the necessary products at the reasonable cost with good quality. An organization study was conducted at the plant of DMU to knowhow management principles as laid down by eminent authors have actually been applied. All the departments were observed and their workings were assessed in relation to the principles applied. The inventory department of DMU was thoroughly assessed and the techniques of inventory were applied to it
Dharwad Milk Union (A Unit OBJECTIVES OF THE STUDY:

To study the overall functioning of the organization. To study the infrastructural layout and hierarchical level of DMUs inventory department. To know which inventory techniques are applied in DMUs inventory. To know the types of inventories and their categorization. To know the annual consumption of inventories and rate of inventory turnover ratio. To study how the various stock levels are fixed for different items of inventory. To know the security and safety level of inventory department.
RESEARCH METHODOLOGY:
The methodology includes the personal interaction with the finance manager. Selection of data: From the Annual Reports of the firm for the last two years i.e., from Annual Report for the year 2009-10 Annual Report for the year 2010-11 Period: The study covers a period of five years data from 2009-10 and 2010-11 to mean an accounting year of the company consisting of 365 working days.
Sources of Data:
Primary Data: The primary data was collected by observing and interacting with the employees of organization and various departmental managers. Secondary Data: The secondary data was collected with the help of fact Sheets, organizational manuals, websites, past records etc.
Scope of the Study:

The study is limited to only Dharwad Milk Union Limited since it is a unit of KMF.
Dharwad Milk Union (A Unit of KMF) INDUSTRY PROFILE

Dairy Industry in India: A dairy enterprise is important occupation of farmers in India. Nearly 70% of the people depend on agriculture which is the Backbone of India. Dairy is linked with an agriculture industry to a larger extent. Animal husbandry in India is an essential part of husbandry. It is mainly a rural occupation closely related with agriculture. Development of Dairy Industry in India: During the pre independence year there was no serious stress given to dairy industry in 1866. The development of defense of the British government established as dairy farms for the supply of milk to the British troops in Allahabad. Later in 1920 serious steps were taken by Mr. William Smith, an expert in dairy farming to improve the milk production was discrimination done to the Indian hence, this led to the raise of the first milk union in India. During 1937 the Lucknow Milk Producers Co-operative Union Ltd was called. In 1946 AMUL (Anand Milk Udyog Ltd) was started in Gujarat to bring up
the economic stability of villagers. When the former Prime Minister Lal Bahadur Shastri visited the functioning as it was rendering a social service to the society, which helped the villagers to come in the national economic stream. The dairy and the animal husbandry received serious attention after the independence. There were lot many of progressive steps taken by the government through five year plans, this led to the formation of national dairy development board in 1965 and thus in 1970 he decided to bring a White Revolution throughout the country. Initially10 states were selected for this purpose excluding Karnataka.
Visvesvaraya Technological University, Belgaum.
Dharwad Milk Union (A Unit of KMF) KARNATAKA MILK FEDERATION

The first diary in Karnataka was started in Kudige in Kodagu district in 1955, further in June 1974; an integrated project was launched in Karnataka to re-structure and re-organize the diary industry on the co-operative principle and to lay foundation for a new direction in diary development. In 1975, the World Bank aided diary development was initiated. The present Karnataka Milk Federation (KMF) came into existence in 1984 as a result of merging of Karnataka Diary Development Co-operation, small cooperatives and Karnataka Milk Production Development. At the end of the march 1998, the network of 8023 Dairy Co-operative Societies (DCS) have been established. There are 13 milk unions and Dharwad Milk Union (DMU) is among them. There are 35 chilling centers, processing, conservation and marketing of milk. To supply cattle feed there are 4 cattle feed pants. To ensure supply of quality germ plasma, bull breeding farm and semen bank are also available. KMF is the apex body in Karnataka representing diary co-operatives. It is the second largest diary co-operative amongst the diary co-operatives in the country. To impart training institutes at Bangalore 7 regional training institutes at Dharwad and Gulbarga are functioning. Three nitrogen plants have been setup to supply nitrogen, which is used for refrigeration purpose. Three diagnostic centers have been set-up for monitoring diseases. Three fodder farms at Rajankunte, Kuttanahalli and Kodagu have been set-up to supply good quality of fodder and seed production farm at Shahpur has been set-up. The federation giving details of the latest technology in diary industry etc is published in Ksheer Sagar magazine monthly. KMF is a co-operative
Dharwad Milk Union (A Unit of KMF)

apex body in the state of Karnataka for representing diary organizations and also implementing diary development activities to achieve the following objectives: Providing assured and remunerative market for all the milk produced by the farmer members. Providing hygienic milk to urban consumers. To build village level institutions in co-operative sector to manage the diary activities. To ensure provision of milk production inputs and processing facilities. To facilitate rural development by providing opportunities for self employment at village level, preventing migration to urban areas, etc. Functions of KMF: Co-ordination of activities between the unions. To make the brand Nandini as a house hold name. Excellence in quality is to be maintained to lay a solid foundation for wide spread acceptance of Nandini products. To increase the market share of Nandini.
Dharwad Milk Union (A Unit of KMF) THE GROWTH PROCESS:
The growth over the years and activities undertaken by KMF is summarized briefly as follows:
Attributes
Units
of
1976-77
2010-11
Measurement Diary Cooperatives Membership Milk Procurement Milk Sales Cattle Feed Consumed Daily Farmers Turnover Rs. Crores 1,267.00 3,250.00 Payment To Nos Nos Liters/day Liters/day Kgs/DCS Rs. Lakhs 416 37,000 50,000 95,050 220 0.90 11,625 20,18,800 36,68,314 23,77,364 3,046 450
Dharwad Milk Union (A Unit of KMF) UNITS OF KARNATAKA MILK FEDERATION:

KMF has the following units functioning directly under its control: 1. Mother Diary, Yelahanka, Bengalooru. 2. Nandini Milk products, KMF complex, Bengalooru. 3. Cattle feed plants at Rajankunte/ Gubbi/ Dharwad/ Hassan.
4. Nandini Sperm Station (Formerly known as Bull Breeding Farm and Frozen Semen Bank) Hessaraghatta. 5. Pouch Film Plant at Munnekolalu, Marathhalli. 6. Center Training Institute at KMF Complex, Bengalooru.
THE 13 CO-OPERATIVE MILK PRODUCERS SOCIETIES UNIONS OF KMF ARE:
1. 2. 3. 4. 5. 6. 7.
Bangalore Milk Union Belgaum Milk Union Bellary Milk Union Bijapur Milk Union Dakshina Kannada Milk Union Dharwad Milk Union Gulbarga Milk Union
8. Hassan Milk Union 9. Kolar Milk Union 10. Mandya Milk Union 11. Mysore Milk Union 12. Shimoga Milk Union 13. Tumkur Milk Union
Dharwad Milk Union (A Unit of KMF) MILESTONES
1. 2000- Launching of new products. Badam powder (Jan 2000) Kunda (Jan 2003) Yoghurt (Aug 2004) Besan laddoo (Sept 2004) Good life high fat milk (Dec 2000) Nandini good life slim (May 2002) Good life tetra pack 200ml (July 2002) Good life tetra pack 1 liter (July 2002) 2. 2000- Chilling centre of 150 TLPD capacities at Hosakote started in Bangalore union. 3. 2000- Mega diary started functioning in Bangalore union. 4. 2001- Started sales depot at Mangalore union. 5. 2002- Release of 50 gm SMP in metalized poly pack. 6. 2002- Nandini shop on wheels started. 7. 2002- Registration of KMF website as www.kmfnandini.corp. 8. 2005- Launching of Nandini set curd. 9. 2006- Expansion of Dharwad CPF from 100 MTS to 150 MTS. 10. 2007- Release of nandini homogenized cow milk (3.5% fat and 3.5% SNF). 11. 2010- New sales depot started at Mysore.
Dharwad Milk Union (A Unit of KMF) COMPANY PROFILE
DHARWAD MILK UNION:
Dharwad Milk Union (DMU) came into existence on 3-3-1986. DMU was established under co-operative act on 3-3-1986 at Dharwad and Gadag, Haveri, Uttar Kannada and Dharwad come under its operation. Establishment: The Dharwad Milk Union is a co-operative society among the 13 establishments, under KMF. The Dharwad Milk Union (DMU) is one of the most modern plants in the country. It is located in the spacious 25 acres of land, located in Lakkamanahalli industrial area, adjacent to the national highway-4. It is of the pattern of AMUL Diary, Anand, and Gujarat.

History: A group of experienced officers are appointed by the Karnataka Milk Federation surveyed the whole of Dharwad districts (including 2 newly formed district Gadag and Haveri) and Uttar Kannada. Further they found out there is a need for a milk products and the benefits they would get from the milk diary. Seeing the overwhelming response and untapped resources and the huge market the federation decided to setup the milk union in 1984, known as Dharwad District Co-operative Milk Producers Societies Union Limited. Further in 1988 the Raypur diary and chilling center was setup in 1968 also came under the union. In 1989, the training center, which was controlled by KMF, came under Dharwad Milk Union. DMU was Rs. 7 crores project of which government has Rs. 2 crores of share capital and authorized capital of DMU is Rs. 5 crores. DMU formed 551 milk producers co-operative societies in Dharwad, Gadag, Haveri, and Uttar Kannada districts. The production capacity of DMU is 2 lakh liters of milk per day from its societies and sells 90 thousand of milk per day and the remaining milk I used for producing milk products.
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Functions of DMU:
To procure milk from the villagers and pay them the right price. To educate the villagers about milk and its quality. To make Nandini as a part of daily life. To provide good quality of cattle feed, fodder, veternity aid seeds, etc., to
the villagers.
To see that the milk is brought from DCSs to the chilling centers in the
prescribed time.
To see that the DCSs are carrying out their activities properly and in
efficient manner.
To look after the accounts of DCS, the purchase process, marketing of milk
and its products. Objectives of DMU: Providing hygienic and good quality of milk to the consumers. To build the economic strength of the milk products in villages. To eliminate middlemens in the business so that the farmers receive their appropriate share. To educate villagers about the adulteration of milk and its harmful effect on the body. To make villagers self-viable and build self image. Achievements or Awards: Best union in the state for CONSERVATION OF ENERGY awarded by the energy audit council, Chennai. Best union in the state for CLEAN & HYGIENE MAINTENANCE awarded by KMF bengalore. Outstanding union in the state for selling highest quantity of GOOD LIFE MILK- awarded by KMF Bengalore
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Dharwad Milk Union (A Unit of KMF) NATURE OF BUSINESS CARRIED:

Procuring & marketing of milk production & sale of milk Products.
Vision of DMU:
Cleanliness. Total quality maintenance. Discipline. Co-operation. Transparency.
DMU Mission Statement:

To promote social economic development of rural people. Empowering rural people through self-sustaining through dairy activities. Ensure that the milk & FDP supply to its customers around the clock. To penetrate up country market to enhance liquid milk sales & PDF. To be self sufficient in milk production through rural development.
Quality Policy of DMU:

To ensure pure, hygienic milk & milk products & continuous improvement of quality standards is made. Area of Operation: Regional. Ownership Pattern: DMU builds & runs under the co-operative institution viz, District Co-operative Society (DCS). National Diary Development Board (NDDB).
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Dharwad Milk Union (A Unit of KMF) DHARWAD MILK UNION:
PARTICULARS Status Nature of Business Plant Capacity
DETAILS A co-operative society registered under the Co-operative Act 1959. Procuring and marketing of milk production and sale of milk and milk products.
2 lakh liters/day Milk powder 12 Mt / day Butter 6 Mt / day Ghee 6 Mt / day Share Capital 3 crores approximately. Karwar Packing Unit The milk in bulk is sent for packing and distribution at Karwar which supplies the need for Karwar, Gokarna, Honnavar, Bhatkal, Murudeshwar and Goa. Milk Chilling Centers Gadag 20,000 Lpd And Capacity Haveri 20,000 Lpd Nargund 8,000 Lpd Ron 10,000 Lpd Sirsi 20,000 Lpd Ranebennur 20,000 Lpd Present Value Of Activity Collection of milk 92,000 Lpd Sales of milk 85,000 Lpd (Approx.) Area Of Operation Dharwad, Hubballi, Ranebennur, Sirsi, Karwar, Kumta, Honnavar, Ron, Parts of Maharashtra. Board Of Directors Location Total No. Of Workers Departments Brand Name Products Elected Members-8, Ex-officers -5, By Government-3. Lakkamanahalli Industrial Area, Dharwad. 348 workers 10 Departments. Nandini Milk: Toned milk, Standard milk, Shubham milk, Pasteurized milk, Flavored Milk, Slimmed milk. Milk Products: Butter (Both salted and un-salted), Ghee, Lassi, Peda, Paneer, Khova (Both sweet and plain), Milk Powder, Badam Powder, Cheese (Plain, salted and sweet), Ice-cream and Butter Milk. Co-operative Societies At 550 Societies. Village Level
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PROCUCT PROFILE
KMF, Dharwad produces the following milk and Milk Products
Nandini Toned Milk:-It is the Karnatakas most favorite milk. Nandini Toned, Fresh and pure milk contains 3.0% FAT and 8.5% SNF. It is available in 500ml and 1 liter pouches
Nandini Shubham: - Buffalos milk, 100% pure pasteurized processed and packed hygienically, this milk has 5%fat and 9%snf. Available in 5ooml and 1ltr, and also Available in 5trs packs for marriages, and other functions.
Nandini Full Cream Milk:-Full cream milk, containing 6% fat and 9% snf. Rich, creamier tastier milk, ideal for preparing homemade sweet & savories. Available in 500ml and 11trs packs.
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Nandini Homogenized Milk: - Nandini Homogenized and Pasteurized milk is pure and contains 3.5% FAT and 8.5% SNF. It is rich in nutrients and has got uniform thickness. One can feel the extra creamy feel till the last drop. It is available in 500ml, 1 liter and 5 liters pouches.
Nandini Milk powder:-Enjoy the taste of pure milk! Skimmed milk powder made form pure milk, processed and packed hygienically. Available in 100gms, 200mgs, 500gms, 1kg& 25kg Pack.
Nandini Butter: - Rich, smooth and delicious. Nandini butter is made out of fresh pasteurized cream, rich taste, smooth texture and the rich purity of cows milk makes any preparation a delicious treat. Available in 100gms(salted), 200gms and 500gms cartons both salted and unsalted
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Nandini Peda:-No matter what you ate celebrating! Made from pure milk, Nandini peda is a delicious treat for the family. It will be store at room temperature approximately 7days. Available in 250gms pack containing 10pieces each.
Nandini Ghee:-A state of purity, Nandini ghee made from pure butter. It is fresh and pure with a delicious flavor, hygienically manufactured and packed in a special pack to retain the goodness of pure ghee. Shelf life of 6 months at ambient temperature. Available in 200ml, 500ml, 1000ml sachets, 51trs tins and 15kegs tins.
Nandini Curd: - Nandini Curd made from pure milk. It's thick and delicious. Giving you all the goodness of homemade curds. Available in 200gms and 500gms sachet.
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Nandini flavoured milk:-Sterilised flavoured milk, a nutritious and healthy drink and an all-season wholesome drink available in five different flavours - pineapple, rose, badam, pista and natural orange. Apart from refreshing energy. Available in 200ml
Nandini Good Life:-Cow's pure milk, UHT processed bacteria free in a tamper-proof tetra-fino pack which keeps this milk fresh for 60 days without refrigeration until opened. Available in 500ml Fino and in 200ml Bricks
Nandini Paneer:-Nandini Paneer is made by coagulating pure milk, and it is an excellent source of milk protein. Available in 200 gms. pack.
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Nandini Goodlife Slim milk:Nandini Goodlife Slim Milk is Cows pure milk, homogenized and skimmed. It is UHT
processed milk, bacteria free in a tamper proof tetra fino pack which keeps the milk fresh for 60 days without refrigeration until opened. It is 99.5% fat free. Available in 500 ml. fino and 200 ml. bricks.
Nandini Mysore Pak: Nandini Mysorepak is made from quality Bengal gram, Nandini ghee and sugar. Available in 200 gm., and 500 gm. P. P. box
Nandini Khova: - Nandini pure milk Khova is prepared from fresh milk. Used for preparing sweets at home like Peda, Gulab Jamoon, Kalkand, Burfi, etc
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Dharwad Milk Union (A Unit of KMF) PRICE CHART OF THE PRODUCTS As on 23-01-2012
Sl.No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Product Name Toned Milk / Liter Homogenized Toned Milk / Liter Homogenized Cow Milk / liter Shubham Milk / liter Curd 200 gm Curd 500 gm Pot Curd 250 gm Sweet Lassi Masala Lassi Dharwad peda / kg Bulk Khova / kg Bulk Paneer / kg Butter Salted / kg Butter Unsalted Ghee 200 ml pack Ghee 500 ml pack Ghee 1000 ml pack Ghee / 15 kg Belgavi Kunda 250 gram Gulab Jamun / kg Badam Milk / kg Mysure Pak / kg Good life milk / liter
Good life milk / 500 ml
Maximum Price Of Sale 25 26 28 30 8 15 12 8 5 180 200 150 280 284 60 147 290 4800 240 250 230 300 40 20 9 38 250 50 3 15
Good life / 200 ml Good life milk (Slim) /500 ml Badam Powder 200 gm tin / kg Badam Powder 299 gm tin Badam Powder 10 gm tin SFM Bottles
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Dharwad Milk Union (A Unit of KMF) WORK MODEL OF DMU
DCS
Fresh Liquid Milk
Sample Testing
Chilling
FAT & SNF
Storing
Pasteurization
Separation
Homogenization
Storing
Packing
Dispatching
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Dharwad Milk Union (A Unit of KMF) ORGANISATIONAL STRUCTURE / CHART
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Dharwad Milk Union (A Unit of KMF) DEPARTMENTS OF DHARWAD MILK UNION:
1. Procurement and Input Department.
2.
Production Department.
3.
Quality Control Department.
4.
Finished goods Department.
5.
Purchasing Department.
6.
Stores Department.
7.
Marketing Department.
8.
Administration Department.
9.
Finance Department.
10. Engineering Department.
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Dharwad Milk Union (A Unit of KMF) 1. PROCUREMENT & INPUT DEPARTMENT
Manager
Procurement Wings
Technical Wings
Deputy Manager
Development Officer
Assistant Manager
Assistant Manager
Extension Officer
Marketing Assistant
Clerks
Clerks
Helper
The union carries on procurement by setting up co-operative societies at village level. Later milk is collected in the chilling center. Milk collected from the milk centers is first tested. There are milk testing equipments for this purpose. Then a survey on availability of transportation facilities & productive capacity of villages are conducted. If the marketable surplus is more than 150 liters per day, promoters are selected from the village & are given the responsibility of collecting the capital for the society twice
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a day and payment is made on the basis of percentage of the nearby. At the chilling centre milk is chilled up to 4 degree Celsius. Later this chilled milk is sent to union in insulated tanks for further processing. The main function of this department is to procure milk from different areas throughout the year. The main function of P&I Department is to organize, supervise & operate village diary co-operative societies & to procure more milk form village societies.
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Dharwad Milk Union (A Unit of KMF) 2. PRODUCTION DEPARTMENT
Manager (Diary)
Deputy Manager
Office Staff
Manager Assistants
Accounts Assistants
Stores Assistants
Technical Officer Typist Senior Supervision Clerk
Junior Supervision
Manager (Dairy)
Dairy Technicians
Dairy Workers
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The main objective of the dept is to follow up production schedule as per plan & to maintain close & co-ordinate relation with other dept & ensure to upgrade the technical efficiency of production. Milk, as it is highly perishable product it has to be processed immediately to avoid spoilage of milk with respect to its flavor, texture and taste. Production department is well equipped and has various types of highly sophisticated machines imported from Sweden and Denmark. Once the milk is received at P & I department,, it is first weighed with the help of weighing bowl.
Sample testing is made through lactometer reading and other tests. The SNF and fat content of each sample of milk is assessed and sent to the production section separately through two different stainless steel pipes. Later the raw milk is passed through plate chiller of variable capacity where it is cooled up to 4-5 degree Celsius. This cooled raw material is further stored in a silo of 30,000 liters capacity. Functions of Production Department: To produce the products on time to the required quality levels, at the defined product cost. Objectives: Minimum production time. Minimum costs. Execute, co-ordinate, organize and monitor the production activities. Ensure process control and quality of products manufactured.
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Dharwad Milk Union (A Unit of KMF) 3. QUALITY CONTROL DEPARTMENT Deputy Manager
Assistants Manager
Chemist
Tester
Helper
In DMU, at every stage, care is taken to ensure that the customer gets the products, which have quality, where the quality is done. There is a separate laboratory for this. Quality control is very essential as to maintain the freshness of the milk. All the containers, pipes and other equipments are washed with hot water before starting off with new production. There are many tests conducted here. The packed milk we get from chilling center next before standardization and the last test before packing. The other tests conducted are:
Tanker, can milk : Fat, SNF, temperature, acidity, adulterants. Raw milk silo : Stock, check at beginning and end of shift. Temperature, fat, SNF,
acidity.
Pasteurized milk silo : Fat, SNF, phosphates, temperature. Butter : Fat, curd, moisture, salt. Visvesvaraya Technological University, Belgaum. 27
Dharwad Milk Union (A Unit of KMF) Ghee : Moisture and free fatty acid. Peda : Moisture and total solids.
TESTS Temperature REASON Should be below 5 degree Celsius If milk curdles soon after billing, then the milk is rejected. To test the extent of acidity. To check the heat stability of milk. To check the density of milk. Percentage of fat is determined. Percentage of SNF is determined. For pricing SNF = CLR + FAT / 4
Clot on Boiling
Acidity Test Alcohol Test Lactometer Test Fat Test SNF Test
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Dharwad Milk Union (A Unit of KMF) 4. FINISHED GOODS DEPARTMENT
MANAGER
Marketing Manager
Account Assistant
Marketing Manager
Dairy Workers
This department acts as an interface between Production and Marketing department. It is concerned with maintenance of finished goods connected records. It receives all the finished goods and issues the stock to the marketing department as per the indents. It ensures that the goods are maintained properly with respect to quality. Accounts are maintained and daily and monthly report is submitted to the Production, Marketing and Finance departments. As the products are perishable so First- In- First- Out method of inventory is followed.
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Dharwad Milk Union (A Unit of KMF) 5. PURCHAING DEPARTMENT
Purchase Officers
Purchase Superintend
Assistant Purchase Officers
Helpers
It is a sub-department, which comes under Finance department. The main work of this department is to purchase various materials required by different departments. After ascertaining the stock position by stores department an indent is sent by different department duly approved by Managing Director. This department act to purchase materials. It also maintains records of all the suppliers, calls for tenders, quotations etc. Quotations with lowest rate are sanctioned. Purchase up to 50, 000 then the approval of Managing Director.
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The Main Functions of Purchase Department: Selection of supplies for issue of enquiries. Follow- up of purchase orders for delivery in due time. Verification and passing of suppliers bills to see that payments are made promptly. Maintenance of purchase records. Development of reliable and alternative sources of supply. Objectives: To increase the input as far as possible. To decrease the cost of production and wastage in production as much as possible. To execute, co-ordinate, monitor the production as much as possible.
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Dharwad Milk Union (A Unit of KMF) 6. STORES DEPARTMENT
Stores Officer
Superintendent
Administration Assistant
Helper
The stores department in DMU follows the Codex System (Coded Control System). A card is maintained for each item and a number is allotted. The card is attached to each article. The card consists of amount balance, date of issue, purchase date etc. This is later recorded in a separate ledger book. The inventories of different kinds ranging from mechanical, spares, packing items to animal drugs, stationery and veterinary drugs. There are at least more than 4,000 different inventories. This department has the following services: It tries to maintain maximum and minimum level of inventory so as to avoid blockage of capital and storage. Ordinary and locally available commodities are maintained at a minimum possible level to avoid over storage or overcrowding of materials. Items of urgency and not easily available are stored sufficiently for further demand.
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Dharwad Milk Union (A Unit of KMF) 7. MARKETING DEPARTMENT

The marketing department of DMU is considerable extensive which covers major area such as Dharwad, Uttar Kannada district, Haveri, Gadag, Sirsi and Karwar covering almost 26 taluks. Marketing milk & milk products is done under the brand name called Nandini except loose milk packets & milk products which are marketed with the name of KMF by its marketing agencies. As the products are of perishable nature hence the biggest responsibility lines in the hands of marketing department to sell all the products before they loose its quality. Before pre-liberalization (July 21-1991) DMU enjoyed a monopoly due to Co-operative organization & other benefits received from the state government. But after 1991 the scenario totally changed, new products Diaries started grounding like mushrooms with entrance of private Diaries the DMU started facing tough competition in the market which resulted in major loss of market share gradually over the years. Today DMU as only 23% of total market share. DMU operates in 17 cities having total population 1.05 million. Media of Advertising News papers Magazines Wall paintings Pamphlets Television
Distribution channel DMU has its own marketing channels. It follows two types of direct channels. Those are; Consumer market Institutional market
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Competitors Bharat Siddhi Vinayak Datta Mayoor Goppal Aditya Arogya milk Loose vendors etc.
MARKETING DEPARTMENT STRUCTURE
Marketing Manager
Deputy Manager
Technical Officer
Marketing Superintendent
Development Officer
Development Officer
Vanshroff
Vanshroff
Marketing Assistant
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Functions of Marketing Department: To prepare the marketing plan at the beginning of every year, taking into consideration the demand, sales, production capacity. To undertake promotional activities in order to create awareness and to generate sales. To ensure proper supply chain management. To study competitors products and their strategy.
Strategies: The Dharwad Milk Union has the following set of strategy, which will be formulated every year. The present year has the following strategies. The strategies are formulated with the help of KMF and NDDB as the union members. Below are the strategies set for this year. Visit to all route of individual points by going in a route distribution vehicle for contact with all agents. Aims to contact consumer awareness program and various seminars. Aims at setting 10 exclusive Nandini Milk parlors. Aiming to set-up new sales promotional and advertise mental activities. Women Association Program. Joining with other programmes.
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8. ADMINISTRATION DEPARTMENT
Deputy Manager
Assistant Manager (Board)
Assistant Manager (Personnel)
Administrative Superintend
Administrative Superintend
Administrative Assistant
Time
Canteen
Security
The Administration department controls the overall functioning of the firm. The organization consists of the following three levels: Managerial cadre includes Deputy Manager, Assistant Manager and an Administration Officer. Supervisory level included technical officers and supervisors. Worker level includes labors / helpers.
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Dharwad Milk Union (A Unit of KMF) 9. FINANCE DEPARTMENT
Deputy Manager
Assistant Manager
Finance Officer
Superintendent
Accounts Assistant
Senior cum Computer Operator
Worker
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The department is responsible for keeping all the inward and outward flow of money. It prepares budget every year and financial values for receipts of all payments are framed. The functions of this department are: Preparation of financial reports. Preparation of annual reports. Budgetary control. Scrutinizing of purchase bills and proposals. Passing of all payment bills. Maintenance of sales ledger. Maintenance of subsidiary books under the co-operative societies acts like cash book, debtors and salary registers. Preparing of cost sheets. Directing to the internal auditing. Preparing monthly accounts (Receipts and payments, P & I account and Balance Sheet). Preparing quarterly financial statements. Preparing integrated business plan. Getting accounts audited from statutory books of accounts.
DMU follows two types of auditing: 1. Pre- Audit System: Done by finance and account department every year. 2. Statutory System: Done by private charted accountants every year.
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Dharwad Milk Union (A Unit of KMF) 10.ENGINEERING DEPARTMENT
Assistant Manager
Daily Supervisor
Senior Technician
Junior Technician
Computer Operator
Worker
The plant operates at a contract demand of 650 KWA at a power of 0.95 achieved by capacitor action. The section is equipped with two diesel generators of 400KVA capacity. They have 12 cylinders each. One engine is started by Battery where as the other is started by passing of compressed air. Both the engines are provided with alternatives of 400 with 558.5A, 415V and power factor 0.8 is connected to bus bar from where it is supplied to different loads.
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11. HUMAN RESOURCE DEVELOPMENT: Functions: The HRD is going to conduct in-house and out-house training to the workers. It is working to build a feeling that the organization belongs to the workers. They conduct former melas. Once the order is given to DMU to prepare 1,50,000 pedas, then all workers of every department is involved in preparing the pedas. This is called as Team Work. The employees are sent for technical and product training. Every month there will be a review meeting, in that the employees who have been sent for training will give the seminar on that. To improve employee morale the financial support has been made. Equipmental training is given. The section heads keep on observing the personal problems of employees. When the organization makes profit, then bonus is provided to the workers.
Skills: The skill here refers to the various skills the workers must have. Here the Workers are divided into three categories. The first category contains of the people who are in the top management level. The second category contains of the supervisors office assistants etc. The third category consists of the workers at the operational. The first category consist of the people who are in the decision making process. These people are highly qualified; few Deputy Managers are also included from the industries like IRMA, Anand Dairy for training. The second category is related to office work and field work. These people are also trained in Computer Applications, Secretarial Skills and Accounting Skills etc. The third level people consist of the workers who are actually involved into the operation. These people are also trained into fields like checking the quality of milk processing, packing etc.
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Training System: The union emphasizes on training the employees. Most of the training given to the employees here are On-the-Job Training and few Off-the-Job Training. Procurement and Technical Input Training (NDDB). PG Diploma in Rural Management. Basic Computer Applications. Data Base Administrator. Finance Training for Non-Finance Officer. Co-Operative management Training Programs. Clean Milk Production Training.
Styles of Management: DMU follows the following styles of management: 1. Top to Bottom or Top-Down Style. 2. Bottom to Top or Down-Top style. The styles of management of organization are said to follow the Participative type of management i.e., the management cadre follow the participative type of administration. The fact is that, for a manufacturing firm like KMF, Dharwad this type of administration is necessary. The indicators of this style of management are: Follows orders, rules and procedure. Is always reliable and dependable. Watches out for details / prefers to write out communications. It is rational, logical, self- controlled, fair and firm.
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Dharwad Milk Union (A Unit of KMF) INSURANCE COVERAGE MADE AT DMU

S. No. Insured Areas 1 Machinery Breakdown Policy (MBD) a) Plant & Machinery at Main Dairy b) Plant & machinery at Chilling Centers (Haveri, Hirekerur, Sirsi, Ron, Gadag). c) Fire Policy (For Stock of milk products like Ghee, Butter, Skim Milk Powder, Paneer, Peda, Khova, Curd& Lassi). Amount in cr. 1.25 0.8
3.00 0.45
d) Cash Policy i. At Main Dairy ii. At Sub Office Ankola, Hubli, Haveri, Hirekerur, Sirsi, Ron, Gadag. iii. Cashier Policy ( Fidelity Insurance) iv. Transact Insurance ( Cash Section to any Bank at Hubli, Dharwad, Ankola, Karwar). e) Stores (Packing Materials)
0.05 0.45
2.50 0.25
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Dharwad Milk Union (A Unit of KMF) MCKINSEYS 7-S FRAME WORK

The profile of the company can be explained with the help of McKinseys 7-S model. The McKinseys 7-S framework is as bellow
Structure
Strategy
system
Shared Values
Skills Style
Staff
Strategy: the plan devised to maintain and build competitive advantage over the competition. Structure: the way the organization is structured and who reports to whom. Systems: the daily activities and procedures that staff members engage in to get the job done. Shared Values: called "super ordinate goals" when the model was first developed, these are the core values of the company that are evidenced in the corporate culture and the general work ethic.
Style: the style of leadership adopted. Staff: the employees and their general capabilities. Skills: the actual skills and competencies of the employees working for the company.
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Dharwad Milk Union (A Unit of KMF) SWOT ANALYSIS:

Strengths: Nandini enjoys the good image. Wide distribution network leads to regular and timely supply. Milk processed is local milk, which reduces the transportation cost. It enjoys the highest market share in the packed milk segment. Huge infrastructure for processing, competitive prices, product diaries price, large procurement base.
Weakness: Perishable commodity. Lack of professional manpower and lack of quick decision making power. As there is no labor union here, workers participation is less. Poor consumer grievance handling and lowest playing brand i.e., the commission given by the company is less compared to other brands.
Opportunities: Huge market demand. There is scope for developing in new area. Availability of buffalo milk improves market milk quality. Predominance of loss milk segment can be divided into appropriate strategies.
Threats: Increased number of milk vendors. Most of the consumers prefer goulis milk. No entry barriers for private players. Low level of consumer awareness
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Dharwad Milk Union (A Unit of KMF) LEARNING EXPERIENCE GAINED IN THE ORGANIZATION I got complete knowledge about the various types of tests that are conducted to test the quality of products. Method of maintaining accounts in systematic manner. I came to know the types of milk and how it will be stored in the cold storage. Proper maintenance of punch card and every time strict security alert. Learnt about, how the coding will be done. I learnt about the importance of inventory techniques i.e. minimum maximum level in placing an order to continue the production process in organization. I learned to group the different items according to their value that carries in the organization. I got information about cardax control system (stock ledger system).
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PART-B
INVENTORY MANAGEMENT
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Dharwad Milk Union (A Unit of KMF) INVENTORY MANAGEMENT

Introduction Inventory is a list for goods and materials or those goods and materials themselves, held available in stock by a business. Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different locations within a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods.
Meaning of Inventory:
The term Inventory refers to the stock of raw-materials held for the use in manufacturing process and finished goods held for sale. These are the main sources of production. The term inventory includes stock of Raw-materials, Work-in-Progress, Finished goods and Supplies.
Components of Inventory:
1. Raw-Materials: They refer to the basic inputs that are converted into finished goods through manufacturing process. These are the inputs which have not yet been committed to production but are held in stock for future production. Adequacy of raw-materials is essential to ensure un-interrupted production.
2. Work-in-Progress: It refers to raw-materials in production process but has not yet been completed. It is nothing but semi-finished goods. They represent goods that need some more work on them before they become finished goods. 3. Finished Goods: These are completely manufactured goods which are ready for sale. In a manufacturing firm they are the final components of manufacturing process. In a trading concern these are called as Merchandise Goods. 4. Supplies: These are the materials which help the production to run smoothly. For example: soap, oil, fuel, gas, power, gum, Greece, cotton, threads etc.
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Dharwad Milk Union (A Unit of KMF) Motives for Holding Inventory:

Why inventories are held? Following are the three basic motives for holding inventories: 1. Transaction Motive: where an enterprise maintains inventory to facilitate smooth production and sales operations, it is called transaction motive. 2. Precautionary Motive: where an enterprise holds inventory to protect itself against the risk of un-expected changes in demand and supply forces, it is called precautionary motive. 3. Speculative Motive: where an enterprise holds its inventories to take advantage of changes in prices, it is called speculative motive.
INVENTORY MANAGEMENT:
It refers to the proper planning and controlling of materials, finished goods, stores materials for efficient production and ultimate selling. It includes the following activities: Determination of inventory to be carried Fixing the time schedule Determining minimum stock levels Method of purchasing Method of storing Method of issuing to production department Disbursing, storing materials Assigning inventory control responsibilities
Objectives of Inventory Management:

The operational objective is to maintain adequate inventory to ensure uninterrupted production and smooth sales function. The financial objective is to minimize the investment in the inventory and reduce carrying cost. To ensure the timely supply of raw-materials and supplies.
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To ensure adequate stock of finished goods to facilitate smooth sales function. To avoid both under and over stocking of inventory. To maintain investment in inventories at the optimum level. To keep materials cost at minimum. To utilize available storage space economically. To obtain benefits of large scale buying. To properly organize inventory department.
Dangers of Excess Investment in Inventory:

Un-necessary blocking of funds in inventory. Excessive carrying cost. Loss of liquidity and profit. Loss due to physical deterioration and mis-handling of inventories.
Dangers of In-Adequate Investment in Inventory:

Production stoppage. Failure to meet the delivery commitments. Loss of goodwill.
Cost of Holding Inventory: Cost of holding inventory is the sum total of Ordering cost
and Carrying cost. Ordering Cost: It is the fixed cost incurred for placing an order till the receipt of the inventory. It is fixed per order irrespective of the quantity of raw-materials ordered. It increases in direct proportion to the number of number of orders placed. If orders are placed more frequently, the number of orders will be more and vice versa.
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Carrying Cost: It is the variable cost per unit of holding an item for a specified period of time. These are the costs incurred for maintaining given level of inventory. The carrying cost and inventory size are positively related and move in the same proportion.
Benefits of Holding Inventory:

It facilitates economies in purchasing. Assurance of continuous and smooth production. The stock of finished goods facilitates smooth sales operations. No risk of lost sales. Increasing demand of consumers is easily met and there is no loss of goodwill.
Risks Associated With Inventories:

Risk of price decline. Risk of product deterioration. Risk of obsolescence.
Tools and Techniques of Inventory Management:

Inventory management aims at maintaining adequate inventories to ensure smooth production and sales activities. It aims at keeping the inventory cost at a minimum. A firm can adopt any of the below mentioned techniques to manage the inventory. The following are the techniques generally used to exercise better control over the inventories. 1. Fixation of Stock Levels: In order to maintain optimum quantity / level of materials (i.e., neither less nor more). The store-keeper applies a scientific method i.e., fixation of stock levels (fixing certain levels for each item of material). The following are the levels of stock which a firm fixes to ensure steady supply of adequate materials as and when required.
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a) Maximum Stock Level: It is that level of stock beyond which a firm should not maintain the stock. If the quantity exceeds maximum level it is called overstocking. Over stocking of inventories is associated with blocking of more funds in inventory, excess carrying cost, wastage, theft, pilferage etc., which in turns results in high material cost. The maximum level is ascertained as follows: Formula: Maximum Level = Re-order level + Re-order quantity - [Minimum Consumption Minimum Re-order period] The factor which determine the maximum level are availability of funds for purchase of raw material, availability of space for storing, maximum requirement of materials at a given point of time and nature of the material.
b) Minimum Stock Level (Better / Safety Stock): This is a level where the quantity of raw-materials should not be allowed to fall. If the actual materials fall below this level then it is called as under-stocking, there is a possibility of up-setting the production schedule for want of materials. This is determined by as follows: Formula: Minimum Level = Re-order Level [Normal Consumption Average Re-order Period] c) Average Stock Level: It refers to a stock level which arises after dividing the minimum and maximum stock level by 2. Formula: Minimum stock level + Maximum stock level 2 Formula: Minimum stock level + half of re-order quantity d) Re-order Quantity: It refers to a fixed quantity order for supply of materials in each order. e) Re-order Level: It is that level of inventory at which the firm should place an order to replenish the inventory. That is, at re-order level the firm should place an order with the supplier for material. It lies in between the maximum level and the minimum level. Re-order level is ascertained as follows: [OR]
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Formula: Re-order level = Maximum Consumption Maximum Reorder Period [OR] Formula: Re-order level = Minimum level + [Average Consumption Normal Lead Time] Re-order level is computed by using the following formula when safety stock is maintained. Formula: Re-order level = Lead Time Average Usage + Safety Stock. f) Danger level: It is that level of stock below which the materials should not fail in any situation. It lies below the minimum level. When the stock reaches this level it will interrupt the production. Hence, materials have to be purchased urgently so as to avoid the stoppage of production. Formula: Danger Level = Minimum Rate of Consumption Emergency Delivery Period.
g) Safety / Buffer / Cushion Stock: It is that stock of inventory which is maintained to meet unanticipated increase in usage of inventory. The usage of inventory cannot be forecasted perfectly. It fluctuates over a period of time. The demand for materials may fluctuate and delivery of inventory may also be delayed. Under such circumstances the firm may face the problem of stock-out. Stock-out situation leads to production stoppage. Therefore, it is necessary to maintain some additional stock of inventory for safety purposes. These additional stocks are called safety stocks. The level of safety stock is ascertained as follows: Formula: Safety Stock = Average Usage Period of Safety Stock. 2. Fixing of Economic Order Quantity: Economic Order Quantity (EOQ) is an inventory control tool that determines ideal ordering quantity of inventory at which the inventory cost (ordering cost + carrying cost) is the minimum. It is the purchase of right quantity of materials at a right time and at a right price.
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Assumptions for fixing the EOQ: Price remains constant. Quantity discount is not allowed. Pattern of consumption remains same. Ordering and carrying cost per unit remains the same. There are dynamic conditions of supply for a firm to place the order. Formula: EOQ = sq.rt of 2 Annual consumption Ordering cost per unit Carrying cost per unit. Carrying Cost = Material cost % of Carrying cost. 3. Perpetual Inventory System: The Institute of Cost and Management Accountants, London defines Perpetual Inventory System as A system of records maintained by the controlling department, which reflects the physical movements of stocks and their current balance. It is a system of recording stores receipts and issues as and when they occur so as to find out their current balances. The primary objective of this system is to ensure availability of
particulars of stock of inventories at any time in terms of value or quantity or both. The following stock records form the base for Perpetual Inventory System: a) Bin Card: It is a card kept attached to the bin (box) where the material is stored to record the quantity of materials received, issued and the balance. However, value of the material is not recorded in the bin card. Stores assistant makes entries in the bin card when the materials are received or issued and strikes the balance. The balance indicates the ready stock position of an item at any moment of time. b) Stores Register:(GRN) It is maintained by the store keeper on his table. He makes the entries of materials received or issued on the basis of documents like Goods Received Note (GRN) or Materials Requisition Note (MRN). It acts as an effective check over stores assistants against tampering with bin card. Here also quantity is recorded.
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c) Stores Ledger: It is maintained in Costing Department of the firm. It is a book of accounts. A separate account for every material is opened on different pages of the stores ledger. Each account is a columnar form for recording in detail about the material received, issued and balance. It records both quality and value of the material. It is maintained independently which acts as an effective check over stores personnel. Advantages of Perpetual Inventory System: Information about the stock position at any time is readily available. Continuous stock taking enables to keep continuous check on materials. Sound purchasing system can be introduced. Production planning becomes easy. A detailed and more reliable check on the store is possible.
4. Always Better Control (ABC) Analysis: An organization uses different kinds of materials. Some stores materials may be costly while others may be less expensive. The firm should not keep same degree of control on all the items of inventory. It is advisable for the store keeper to exercise better control over such items which are very costly because a little negligence may cause heavy loss to the enterprise. This approach of selective control system is popularly known as ABC control. It involves classification of the materials into three
categories on the basis of total amount cost of each item. The materials are classified into three categories as follows: Category A: It consists of inventory items whose value is several times more than the volume. Category B: It consists of inventory items with moderate value and moderate volume. Category C: It consists of inventory items whose volume is several times more than the value.
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A very stringent and high degree of planning and control is exercised in respect of Category A items, moderate degree of planning and control is exercised in respect of Category B items and less and simple planning and control is exercised in respect of Category C items. By closer control of Category A items inventory costs are reduced. Other terms used for ABC analysis include: Selective Inventory Control, Control by Importance and Exception (CIE), Proportional Value Analysis (PVA). Objectives: To optimize the efforts of the stores personnel. To minimize loss due to mishandling of inventories. To minimize the investment in inventories. To reduce the overall cost of inventories. Advantages: Better control can be exercised on costly items in which huge amount of capital is invested. It helps in saving management time. A sound purchasing policy can be developed. It helps in managing the inventories at minimum possible cost.
5. Just in Time Approach (JIT approach): Under this approach, the firm maintains a minimum level of inventory and rely upon supply to provide rawmaterials as soon as order is placed. Here all inventories are received in time. Raw-materials are received just in time to go into production and manufactured goods are completed just in time to be sold as products. This method is also known as Zero Inventory Production System (ZIPS), Zero Inventories (ZIN), Materials as Needed (MAN), and Neck of Time (NOT).
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Requirements: Supply should be nearer to the factory. Number of suppliers should be small. There should be highly reliable transportation system. Suppliers must be ready to supply the required materials in small quantities. It is better to have long term contracts with few suppliers. Advantages: It results in reduction of cost of inventories. It results to optimum use of available space. Helps in effective production planning. It minimizes frequent handling of materials. JIT was originally developed by Taiichi Okno of Japan. It has now grown to a complete philosophy. The basic idea behind this philosophy is that manufacturing process should be so designed and operated that the organization is in a position to produce the needed items at the right time, in the right quantities, at the right cost and of the right quality. 6. Material or Stock or Inventory Turnover Ratio: It is also one method of exercising material control. The Stock Turnover Ratio (STR) is calculated as follows: Formula: STR = Cost of goods sold or materials consumed during the period Cost of average stock or average stock held during the period Average stock is the average of opening stock and closing stock.
The STR can also be determined in days as follows: Formula: STR (In Days) = 365 ------------------------------Stock Turnover Ratio
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A low turnover ratio indicates slow moving stock or accumulation of obsolete stock carrying of too much stock. It is advisable that the management should avoid keeping capital blocked in such slow moving stock. On the other hand, a high turnover ratio is an indication of fast moving stock and less investment in stock.
7.
First-in First-out (FIFO) Method: Under this method materials are issued
on the basis of first come first basis. It means the goods in stock are out of the recent purchases. The valuation can be made with the following formula. Formula: FIFO value = Quantity of closing stock Price of latest purchases.
8. Last-in First-out (LIFO) Method: This method is such that where materials issued are valued at the latest purchase price on the assumption that material bought last have been issued first i.e., last come first served. Formula: LIFO value = Quantity of closing stock Price of opening stock and first purchase of materials. 9. Other Techniques: There are some other techniques which are used to
exercise control over the materials. They are: a) Vital Essential and Desirable (VED) Analysis: The items are classified intro Vital, Essential and Desirable in production for managing and controlling the inventory. It is mostly used for classification of spare parts. Vital parts are to be stored adequately; proper care has to be taken in case of essential parts, while desirable parts may not be stocked in larger quantities. b) Fast moving, Slow moving and Non-moving items (FSN) Analysis: The inventory is classified based on the movement of inventory from stores. The materials are classified
according to their pattern of consumption into fast moving, slow moving and nonmoving items. This technique is useful for avoiding obsolescence of inventory. Fast moving items enjoy high demand. In order to have smooth production, adequate inventory of these items should be maintained. Slow moving
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items should be maintained at a minimum level. Non-moving items have no demand and hence, should be disposed off as early as possible. c) High value, Medium value and Low value items (HML) Analysis: The items of inventory are classified based on the unit value and not on the annual usage value and control is exercised according to their value. The technique is similar to ABC analysis.
d) Scarce, Difficult and Easy (SDE) Analysis: The items of inventory are classified based on their availability. Scarce items of inventory are the ones which are in short supply. Difficult items of inventory are the items which are difficult to procure. Easy items of inventory are the items which are easy to procure. This categorization helps in planning purchases to ensure un-interrupted production.
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Dharwad Milk Union (A Unit of KMF) THE INVENTORY TECHNIQUES APPLIED IN DHARWAD MILK UNION
Every organization uses certain techniques to exercise a control on the items of inventory. The following inventory management tools and techniques are generally used in Dharwad Milk Union (DMU) to exercise better control over the inventories: Determination of Stock Levels: This technique is used in DMU to exercise a control over the raw-materials. Stock Turnover Ratio (STR): This technique is also used in DMU to exercise a better control on the items of inventory. First in- First out (FIFO): This technique is used to exercise a better control over the finished goods. Always Better Control (ABC) Analysis: This technique is used in DMU to know what degree of control should be exercised on costly, less expensive and cheap materials of inventory.
Note:
Since milk and milk products are perishable in nature, they are processed very quickly as soon as they are collected from the procurement (collection) department so the work-in-progress is not considered.
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Dharwad Milk Union (A Unit of KMF) Formulae to be used for calculation
1. Minimum Consumption = Annual consumption (units) 12 2. Maximum Consumption = Annual consumption (units) 8 3. Average consumption = Minimum consumption + Maximum consumption 2 4. Re-order Level = Maximum Consumption Maximum Delivery Period 5. Re-order Quantity = Annual consumption (units) 4 6. Minimum Stock Level = Re-order Level (Normal Consumption Normal Delivery Period) 7. Maximum Stock Level = Re-order Level + Re-order Quantity (Minimum Consumption Minimum Delivery Period) 8. Average Stock Level = Minimum Stock Level + Maximum Stock Level 2 9. Danger Level = Minimum Consumption Emergency Delivery Period 10. Safety Stock Level = Average Consumption Period of Safety Stock 11. Materials Consumed = Opening Balance + Purchases Closing Balance
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Dharwad Milk Union (A Unit of KMF) CALCULATIONS Determination of Stock Levels: 1. GROUP: Production Consumablesa) ITEM: Nitric Acid
No.
2009-10
Given: Annual Consumption = 6,240kgs Maximum Consumption = 195kgs per week each Minimum Consumption = 130kgs per week each Normal Consumption = 163kgs per week each Re-order Quantity = 1,560kgs Emergency Delivery Period = 1 week Maximum Delivery Period = 2weeks Minimum Delivery Period = 1 week Normal Delivery Period = 1.5 weeks Period of Safety Stock = 4weeks Opening Balance = 3,138kgs Closing Balance = 15kgs Purchases = 3,117kgs Re-order Level = 195kgs 2weeks = 390kgs Min. Stock Level = 390kgs (163kgs 1.5week) = 390kgs 245kgs = 145kgs Max. Stock Level =390 + 1,560 (130kgs 1wk) = 1,950kgs 130kgs = 1,820kgs Avg. Stock Level = 145kgs + 1,820kgs 2 = 1,965kgs 2 = 983kgs
2010-11
Given: Annual Consumption = 8,270kgs Maximum Consumption=259kgs per week Minimum Consumption = 173kgs per week Normal Consumption = 216kgs per week Re-order Quantity = 2,068kgs Emergency Delivery Period = 1 week Maximum Delivery Period = 2weeks Minimum Delivery Period = 1 week Normal Delivery Period = 1.5 weeks Period of Safety Stock = 4weeks Opening Balance = 2,825kgs Closing Balance = 1,460kgs Purchases = 6,905kgs Re-order Level = 259kgs 2weeks = 518kgs Min. Stock Level = 518 (216kgs1.5weeks) = 518kgs 324kgs = 194kgs Max. Stock Level=518+2,068 (173kgs1w) = 2,586kgs 173kgs = 2,413kgs Avg. Stock Level = 194kgs + 2,413kgs 2 = 2,607kgs 2
1. 2.
3.
4.
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= 1,304kgs Danger Level = 130kgs 1week Danger Level = 173kgs 1week = 130kgs = 173kgs Safety Stock = 163kgs 4weeks Safety Stock = 216kgs 4weeks = 652kgs = 864kgs Mat. Consumed = 3,138kgs + 3,117kgs Mat. Consumed=2,825kg+6,905kg 15kgs 1,460kg = 6,259kgs15kgs = 9,730kgs1,460kgs = 6,240kgs = 8,270kgs
5. 6. 7.
Interpretation: The rate of annual consumption during 2009-10 was 6,240 kgs and during 2010-11 it increased to 8, 270 kgs, as a result of which the re-order level also increased in 2010-11 by 518 kgs which was 390 kgs in the year 2009-10. The min. stock level in the year 2009-10 was 145 kgs where as it rised to 194 kgs during the next accounting year. The max. stock level in 2009-10 was 1,820 kgs while it increased to 2,413 kgs during 2010-11. The avg. stock level in the year 2009-10 and 2010-11 were 983 and 1,304 kgs respectively where as the danger level was 130 kgs and 173 kgs during the accounting years 2009-10 and 2010-11. The level of safety stock was set at 652 kgs during 2009-10 where as it hiked to864 kgs in 2010-11.
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Dharwad Milk Union (A Unit of KMF) 2. GROUP: Packing Materialsb) ITEM: 500 ml Ghee Cartons
No.
2009-10
Given: Annual Consumption = 3,255 tons Maximum Consumption = 102 tons per week each Minimum Consumption = 68 tons per week each Normal Consumption = 85 tons per week each Re-order Quantity = 814 tons Emergency Delivery Period = 1 week Maximum Delivery Period = 2weeks Minimum Delivery Period = 1 week Normal Delivery Period = 1.5 weeks Period of Safety Stock = 4weeks Opening Balance = 25 tons Closing Balance = 6,661 tons Purchases = 3,431 tons Re-order Level = 102 tons 2weeks = 204 tons Min. Stock Level = 204 tons (85 tons 1.5wk) = 204 tons 128 tons = 76 tons Max. Stock Level = 204 + 814 ( 68 1week) = 1,018 tons 68 tons = 950 tons Avg. Stock Level = 950 tons + 76 tons 2 = 1,026 tons 2 = 513 tons Danger Level = 68 tons 1week = 68 tons Safety Stock = 85 tons 4weeks = 340 tons
2010-11
Given: Annual Consumption = 2,460 tons Maximum Consumption = 77 tons per week Minimum Consumption = 52 tons per week Normal Consumption = 65 tons per week Re-order Quantity = 615 tons Emergency Delivery Period = 1 week Maximum Delivery Period = 2weeks Minimum Delivery Period = 1 week Normal Delivery Period = 1.5 weeks Period of Safety Stock = 4weeks Opening Balance = 1,318 tons Closing Balance = 2,990 tons Purchases = 1,848 tons Re-order Level = 77 tons 2weeks = 154 tons Min. Stock Level = 154 (65tons 1.5wk) = 154 tons 98 tons = 56 tons Max. Stock Level =154 + 615 ( 52 1wk) = 769 tons 52 tons = 717 tons Avg. Stock Level = 56 tons + 717 tons 2 = 773 tons 2 = 387 tons Danger Level = 52 tons 1week = 52 tons Safety Stock = 65 tons 4weeks = 260 tons
1. 2.
3.
4.
5. 6.
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7. Mat. Consumed = 25tons + 6,661tons Mat. Consumed = 1,318 +2,990 1,848 3,341 tons = 4,308 tons 1,848 = 6,686 tons 3,341 tons tons = 3,255 tons = 2,460 tons
Interpretation: The rate of annual consumption during 2009-10 was 3,255 tons and during 2010-11 it decreased to 2,460 tons, as a result of which the re-order level also decreased in 2010-11 by 154 tons which was 204 tons in the year 2009-10. The min. stock level in the year 2009-10 was 76 tons where as it fell to 56 tons during the next accounting year. The max. stock level in 2009-10 was 950 tons while it decreased to717 tons during 2010-11. The avg. stock level in the year 2009-10 and 2010-11 were 513 and 387 tons respectively where as the danger level was 68 tons and 52 tons during the accounting years 2009-10 and 2010-11. The level of safety stock was set at 340 tons during 2009-10 where as it fell down to 260 tons in 2010-11
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Dharwad Milk Union (A Unit of KMF) 3. GROUP: Oil Lubricants c) ITEM: HSD Diesel No. 2009-10
Given: Annual Consumption = 56,768 ltrs Maximum Consumption = 1,566 ltrs per week each Minimum Consumption = 1,044 ltrs per week each Normal Consumption = 1,305 ltrs per week each Re-order Quantity = 14,192 ltrs Emergency Delivery Period = 1 week Maximum Delivery Period = 2weeks Minimum Delivery Period = 1 week Normal Delivery Period = 1.5 weeks Period of Safety Stock = 4weeks Opening Balance = 7,973 ltrs Closing Balance = 11,205 ltrs Purchases = 60,000 ltrs Re-order Level = 1,566 ltrs 2weeks = 3,132 ltrs Min. Stock Level= 3,132 (1,305 ltrs 1.5weeks) = 3,132 ltrs 1,305 ltrs = 1,827 ltrs
2010-11
Given: Annual Consumption = 50,105 ltrs Maximum Consumption = 1,434 ltrs per week Minimum Consumption = 957 ltrs per week Normal Consumption = 1,196 ltrs per week Re-order Quantity = 12,526 ltrs Emergency Delivery Period = 1 week Maximum Delivery Period = 2weeks Minimum Delivery Period = 1 week Normal Delivery Period = 1.5 weeks Period of Safety Stock = 4weeks Opening Balance = 13,311 ltrs Closing Balance = 48,000 ltrs Purchases = 11,205 ltrs
1. 2.
3.
4.
5.
Re-order Level = 1,434 ltrs 2weeks = 2,868 ltrs Min. Stock Level=2,868 (1,196 1.5wk) = 2,868 ltrs 1,794 ltrs = 1,074 ltrs Max. Stock Level=3,132+14,192(1,044 Max. Stock Level=2868+12526(957 1week) 1wk) = 17,324 ltrs 1,044 ltrs = 15,394 ltrs 957 = 16,280 ltrs ltrs = 14,437 ltrs Avg. Stock Level = 1,827 ltrs + 16,280 ltrs Avg. Stock Level=1,074 ltrs +14,437 2 ltrs 2 = 18,107 ltrs 2 = 15,511 ltrs 2 = 9,054 ltrs = 7,756 ltrs Danger Level = 1,044 ltrs 1week Danger Level = 957 ltrs 1week = 1,044 ltrs = 957 ltrs
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6. 7. Safety Stock = 1,305 ltrs 4weeks Safety Stock = 1,196 ltrs 4weeks = 5,220 ltrs = 4,784 ltrs Materials Consumed = 7,973 + 60,000 Mat. Consumed = 13,311+ 48,000 11,205 11,206 = 69,973 ltrs = 61,311 ltrs 11,206 11,205 ltrs ltrs = 56,768 ltrs = 50,105 ltrs
Interpretation: The rate of annual consumption during 2009-10 was 56,768 ltrs and during 2010-11 it decreased to 50,105 ltrs, as a result of which the re-order level also decreased in 2010-11 by 2,868 ltrs which was 3,132 ltrs in the year 2009-10. The min. stock level in the year 2009-10 was 1,827 ltrs where as it fell to 1,074 ltrs during the next accounting year. The max. stock level in 2009-10 was 16,280 ltrs while it decreased to14,437 ltrs during 2010-11. The avg. stock level in the year 2009-10 and 2010-11 were 9,054 and 7,756 ltrs respectively where as the danger level was 1,044 ltrs and 957 ltrs during the accounting years 2009-10 and 2010-11. The level of safety stock was set at 5,220 ltrs during 2009-10 where as it fell down to 4,784 ltrs in 201011.
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Dharwad Milk Union (A Unit of KMF) 4. GROUP: Chemicalsd) ITEM: Formaline

No. 2009-10 Given: Annual Consumption = 177 ltrs Maximum Consumption = 6 ltrs per week each Minimum Consumption = 4 ltrs per week each Normal Consumption = 5 ltrs per week each Re-order Quantity = 44 ltrs Emergency Delivery Period = 1 week Maximum Delivery Period = 2weeks Minimum Delivery Period = 1 week Normal Delivery Period = 1.5 weeks Period of Safety Stock = 4weeks Opening Balance = 82 ltrs Closing Balance = 11 ltrs Purchases = 106 ltrs Re-order Level = 6 ltrs 2weeks = 12 ltrs Min. Stock Level = 12 ltrs ( 5 ltrs 1.5weeks) = 12 ltrs 8 ltrs = 4 ltrs 2010-11 Given: Annual Consumption = 83 ltrs Maximum Consumption = 3 ltrs per week Minimum Consumption = 1 ltr per week Normal Consumption = 2 ltrs per week Re-order Quantity = 21 ltrs Emergency Delivery Period = 1 week Maximum Delivery Period = 2weeks Minimum Delivery Period = 1 week Normal Delivery Period = 1.5 weeks Period of Safety Stock = 4weeks Opening Balance = 36 ltrs Closing Balance = 63 ltrs Purchases = 16 ltrs
1. 2.
3.
4.
5. 6. 7.
Re-order Level = 3 ltrs 2weeks = = 6 ltrs Min. Stock Level = 6 ltrs(2 ltrs 1.5weeks) = 6 ltrs 3 ltrs = 3 ltrs Max. Stock Level = 12 ltrs+44 ltrs(4 ltrs Max. Stock Level = 6 + 21 (1 ltr 1week) 1week) = 27 ltrs 1 ltr = 56 ltrs 4 ltrs = 26 ltrs = 52 ltrs Avg. Stock Level = 4 ltrs + 52 ltrs 2 Avg. Stock Level = 3 ltrs + 26 ltrs 2 = 56 ltrs 2 = 29 ltrs 2 = 28 ltrs = 15 ltrs Danger Level = 4 ltrs 1week Danger Level = 1 ltr 1week = 4 ltrs = 1 ltr Safety Stock = 52 ltrs 4weeks Safety Stock = 2 ltrs 4weeks = 208 ltrs = 8 ltrs Materials Consumed = 82 ltrs + 106 ltrs 11 Mat. Consumed = 36 ltrs + 63 ltrs 16 ltrs ltrs = 99 ltrs 16 ltrs = 188 ltrs 11 ltrs = 83 ltrs = 177 ltrs
67

Interpretation: The rate of annual consumption during 2009-10 was 177 ltrs and during 2010-11 it decreased to83 ltrs, as a result of which the re-order level also decreased in 2010-11 by 6 ltrs which was 12 ltrs in the year 2009-10. The min. stock level in the year 2009-10 was 4 ltrs where as it fell to 3 ltrs during the next accounting year. The max. stock level in 2009-10 was 52 ltrs while it decreased to 26 ltrs during 2010-11. The avg. stock level in the year 2009-10 and 2010-11 were 28 and 15 ltrs respectively where as the danger level was 4 ltrs and 1 ltr during the accounting years 2009-10 and 201011. The level of safety stock was set at 208 ltrs during 2009-10 where as it fell down to8 ltrs in 2010-11.
68
Dharwad Milk Union (A Unit of KMF) 5. GROUP: Machinery Sparese) ITEM: Springs
No. 2009-10 Given: Annual Consumption = 203 pcs Maximum Consumption = 7 pcs per week each Minimum Consumption = 5 pcs per week each Normal Consumption = 6 pcs per week each Re-order Quantity = 51 pcs Emergency Delivery Period = 1 week Maximum Delivery Period = 2weeks Minimum Delivery Period = 1 week Normal Delivery Period = 1.5 weeks Period of Safety Stock = 4weeks Opening Balance = 19 pcs Closing Balance = 199 pcs Purchases = 15 pcs Re-order Level = 7 pcs 2weeks = 14 pcs Min. Stock Level = 14 pcs ( 6 pcs 1.5weeks) = 14 pcs 9 pcs = 5 pcs Max. Stock Level =14pcs+5pcs ( 5 pcs1wk) = 65 pcs 5 pcs = 60 pcs Avg. Stock Level = 5 pcs + 60 pcs 2 = 65 pcs 2 = 33 pcs Danger Level = 5 pcs 1week = 5 pcs Safety Stock = 6 pcs 4weeks = 24 pcs Mat. Consumed = 19 pcs + 199 pcs 15 pcs = 218 pcs 15 pcs = 203 pcs 2010-11 Given: Annual Consumption = 200 pcs Maximum Consumption = 6 pcs per week Minimum Consumption = 4 pcs per week Normal Consumption = 5 pcs per week Re-order Quantity = 50 pcs Emergency Delivery Period = 1 week Maximum Delivery Period = 2weeks Minimum Delivery Period = 1 week Normal Delivery Period = 1.5 weeks Period of Safety Stock = 4weeks Opening Balance = 19 pcs Closing Balance = 196 pcs Purchases = 15 pcs Re-order Level = 6 pcs 2weeks = 12 pcs Min. Stock Level =12 pcs (5 pcs 1.5wk) = 12 pcs 8 pcs = 4 pcs Max. Stock Level = 6 + 50 (4 pcs 1wk) = 56 pcs 4 pcs = 52 pcs Avg. Stock Level = 4 pcs + 52 pcs 2 = 56 pcs 2 = 28 pcs Danger Level = 4 pcs 1week = 4 pcs Safety Stock = 5 pcs 4weeks = 20 pcs Mat. Consumed =19 pcs+196 pcs 15pcs = 215 pcs 15 pcs = 200 pcs
1. 2.
3.
4.
5. 6. 7.
69

Interpretation: The rate of annual consumption during 2009-10 was 203 pcs and during 2010-11 it decreased to 200 pcs, as a result of which the re-order level also increased in 2010-11 by 12 pcs which was 14 pcs in the year 2009-10. The min. stock level in the year 2009-10 was 5 pcs where as it fell down to 4 pcs during the next accounting year. The max. stock level in 2009-10 was 60 pcs while it decreased to 52 pcs during 2010-11. The avg. stock level in the year 2009-10 and 2010-11 were 33 and 28 pcs respectively where as the danger level was 5 pcs and 4 pcs during the accounting years 2009-10 and 2010-11. The level of safety stock was set at 24 pcs during 2009-10 where as it came down to 20 pcs in 2010-11.
70
Dharwad Milk Union (A Unit of KMF) First in- First out (FIFO) Method:
Following data represents the summary of First in- First out (FIFO) methods Film account for the year 1.4.2010 to 31.3.2011
500 ml Toned Milk Films:

Month April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. March TOTAL Opening Balance 5274.92 4158.98 1851.14 3789.39 2886.682 2904.72 3547.88 6150.91 2497.92 5647.47 5084.72 5783.11 Purchases 2849.49 1950.7 5892.8 3154.7 3586.74 4355.89 6558.26 ----------7158.8 3932.36 5007.73 4341.1 48788.57 Total 8124.41 6109.68 7743.94 6944.09 6473.42 7260.61 10106.1 6150.91 9656.72 9579.83 10092.5 10124.2 Usage 3965.43 2320.29 3954.55 4057.41 3568.7 3712.73 3955.23 3652.99 4009.25 4495.11 4309.34 4071.46 48010.7 Closing Balance 4158.98 1851.14 3789.39 2886.68 2904.72 3547.88 6150.91 2497.92 5647.47 5084.72 5783.11 6052.75
500 ml Standard Milk Film:

Month April May June Sept. TOTAL Opening Balance 4905.29 3208.4 1268.25 1187.51 Purchases 2221.57 ------------------------------------2221.57 Total 7126.86 3208.4 1268.25 1187.51 Usage 3918.46 1940.15 80.74 268.416 6207.76 Closing Balance 3208.4 1268.25 1187.51 919.094
71
Dharwad Milk Union (A Unit of KMF) 1000 ml Shubham Milk Film:

Month April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. March TOTAL Opening Balance 429.03 24.44 236.89 1043.82 693.32 287.32 1224.22 759.22 565.07 195.47 1160.21 881.23 Purchases ------------451.23 1189.9 ------------------------1177.8 ------------------------------------1176.69 ------------------------3995.62 Total 429.03 475.67 1426.79 1043.82 693.32 1465.12 1224.22 759.22 565.07 1372.16 1160.21 881.23 Usage 404.59 238.78 382.97 350.5 406 240.9 465 194.15 369.6 211.95 278.98 154.88 3698.3 Closing Balance 24.44 236.89 1043.82 693.32 287.32 1224.22 759.22 565.07 195.47 1160.21 881.23 726.35
1000 ml Homogenized Cream Milk Film:

Month April Sept. Oct. Nov. Dec. Jan. Feb. March TOTAL Opening Bal. ----------506.7 506.7 465.65 400.8 365.49 331.55 236.64 Purchases 506.7 ----------------------------------------------------------------------506.7 Total 506.7 506.7 506.7 465.65 400.8 365.49 331.55 236.55 Usage --------------------41.05 64.85 35.31 33.94 94.91 15.21 285.27 Closing Bal. 506.7 506.7 465.65 400.8 365.49 331.55 236.55 221.43
72
Dharwad Milk Union (A Unit of KMF) 200 ml Sweet Lassi Film:

Month April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. March TOTAL Opening Balance 31.42 --------------------276.6 276.6 647.59 647.59 647.59 565.7 483.3 361.3 320.8 Purchases ----------165.12 276.6 ----------370.99 ----------------------------------------------------------------------812.71 Total 31.42 165.12 276.6 276.6 647.59 647.59 647.59 647.59 565.7 483.3 361.3 320.8 Usage 31.42 165.12 --------------------------------------------------81.89 82.4 22 40.5 42.28 565.61 Closing Balance Nil Nil 276.6 276.6 647.59 647.59 647.59 565.7 483.3 361.3 380.8 278.52
200 ml Ghee Films:

Month April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. March TOTAL Opening Balance 536.55 536.55 514.75 389.35 368.35 368.35 349.45 308.65 267.25 246.75 246.75 204.35 Purchases ------------------------------------------------------------------------------------------------------------------------Total 536.55 536.55 514.75 389.35 368.35 368.35 349.45 308.65 267.25 246.75 246.75 204.35 Usage ----------21.8 125.4 21 ----------18.9 40.8 41.4 20.5 ----------42.2 43.4 375.6 Closing Balance 536.55 514.75 389.35 368.35 368.35 349.45 308.65 267.25 246.75 246.75 240.35 160.95
73
200 ml Masala Lassi:

Months April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. March TOTAL Opening Balance 315..23 --------------------320.95 320.95 242.28 242.28 159.29 546.05 463.45 846.68 701.22 Purchases 203.58 204.3 320.95 ----------------------------------------486.96 ----------505.23 --------------------1721.02 Total 518.81 204.3 320.95 320.95 320.95 242.28 242.28 646.25 546.05 968.68 846.68 701.22 Usage 518.81 204.3 --------------------78.67 ----------82.99 100.2 82.6 122 145.46 126.05 1461.08 Closing Balance Nil Nil 320.95 320.95 242.28 242.28 159.29 546.05 463.45 846.68 701.22 575.17
1000 ml Standard Milk Film:

Month s Openin g Balanc e April 476.74 -----------May 441.24 -----------TOTAL 476.7 4 441.2 4 167.7 0 203.2 0 273.54 35.50 Purchas es Total Usag e Closin g Balanc e 441.24
74
Dharwad Milk Union (A Unit of KMF) ALWAYS BETTER CONTROL (ABC) ANALYSIS:
Implementation of the ABC plan involves the following steps: 1. Tabulate the inventory items and classify them on the basis of quantity and price per unit. 2. Find out the total cost of each item. 3. Rank the items on the basis of their total cost, highest total cost will be ranked first. 4. Re-arrange the data in order of rank, starting with item ranked first. 5. Find out the percentage cost of each item to the total cost of the inventory. 6. Form three groups A, B and C on the basis of relative value. A rough count puts that: A category accounts for 70 percent value and 10 percent volume. B category accounts for 20 percent value and 20 percent volume. C category accounts for 10 percent value and 70 percent volume. Following is the chart showing ABC analysis at DMUs inventory for the year 2010-11:
75
Dharwad Milk Union (A Unit of KMF) Calculation:

Find out the total cost of each item and rank them, highest total cost will be ranked first. Sl. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. Items Sugar Butter salt Bleaching powder Nitric acid Soda ash Ghee cartons SMP Bags SMP Liners Butter cartons Ghee tins HSD Diesel Servo 220 SEA 20-40 Gear HP-90 Transformer oil Sohum kling Formaline Annual (Units) 79,500 2,905 225 8,270 1,700 2,460 52,929 53,450 52,818 314 50,105 150 473 632 210 Usage Unit Price Total (Rs.) (Rs.) 27 10 22 18 17 20 17 7 12 83 45 69 68 72 59 265 50 60 215 160 16 15 70 21,46,500 29,050 4,950 1,48,860 28,900 49,200 8,99,793 3,74,150 6,33,816 26,062 22,54,725 10,350 32,164 45,504 12,390 54,325 3,950 240 2,365 8,000 32,000 60 280 Rank 2 13 23 6 14 9 3 5 4 15 1 19 11 10 17 8 27 41 29 21 12 48 39
dairy 205 79 4 11 50 2,000
Nitric acid pherol Iso Amyl alcohol Idopher Patri dishes Cream meter
Butryo 4 4
Hydrometer L.L
76

24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. Thermometer 1100 C Burret 25/50 S.S Tray Milk Analyzer Adulteration Kit Hot Heater Bath S.S Dipper 25 mm Gasket Manhole Gasket 38 mm Gaskets Valve O Ring Pump Gasket Thinner Metal Primer Aluminum Paint Pale Cream Paint Brick Red Paint Oil seat 30.47.7 Oil seat 40.62.10 Oil seat 125.42.8 14 10 3 7 6 9 2 30 19 80 23 27 14 25 34 13 10 4 4 5 63 61 3,200 14,000 700 1,250 65 4 330 5 26 120 18 90 135 130 2 20 25 10 35 40 165 26 32 12,000 175 882 610 9,600 98,000 4,200 11,250 130 120 6,270 640 598 3,240 252 2,250 4,590 1,690 20 80 100 50 140 160 330 1,586 4,000 24,000 1,225 6973647 34 36 20 7 25 18 44 45 22 35 37 28 40 30 24 31 50 47 46 49 43 42 38 32 26 16 33
Oil seat 4 300.225.37 Oil seat 50.65.10 4 E. M Carbon Seal 2 O Rings Springs Weighing Scale 61 125 2
F. M Carbon Seal 7
TOTAL
77

Re-arrange the above data as follows and find the percentage cost of each item to the total cost of inventory.
Rank 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27.
Items HSD Diesel Sugar SMP Bags Butter cartons SMP Liners Nitric Acid Milk Analyser Sohum dairy kling Gheecartons Gear HP-90 SEA 20-40 Patri dishes Butter Salt Soda Ash Ghee Tins Weighing Scale Transformer oil Hot Heater Bath Servo 220 S.S Tray Idopher Manhole Gasket Bleaching powder Aluminum Paint Adulteration Kit Springs Formaline
Total Cost (Rs.) 22,54,725 21,46,500 8,99,793 6,33,816 3,74,150 1,48,860 98,000 54,325 49,200 45,504 32,164 32,000 29,050 28,900 26,062 24,000 12,390 11,250 10,350 9,600 8,000 6,270 4,950 4,590 4,200 4,000 3,950
% of Total 32.33 30.78 12.9 9.08 5.36 2.13 1.4 0.77 0.7 0.65 0.46 0.45 0.41 0.41 0.37 0.34 0.17 0.16 0.14 0.13 0.11 0.08 0.07 0.06 0.06 0.05 0.05
Category 76.01% A Category
20.09% B Category
3.90% C Category
78

28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. TOTAL Pump Gasket Iso Amyl alcohol Metal Primer Pale Cream Paint O Rings F. M Carbon Seal Thermometer 1100 C 38 mm Gaskets Burret 25/50 Valve O Ring E. M Carbon Seal Hydrometer L.L Thinner Nitric acid pherol Oil seat 50.65.10 Oil seat 300.225.37 S.S Dipper 25 mm Gasket Oil seat 40.62.10 Oil seat 30.47.7 Cream Butryometer Oil seat 50.65.10 Brick Red Paint 3,240 2,365 2,250 1,690 1,586 1,225 882 640 610 598 330 280 252 240 160 140 130 120 100 80 60 50 20 69,73,647 0.04 0.03 0.03 0.02 0.02 0.01 0.01 0.009 0.008 0.008 0.004 0.004 0.003 0.003 0.002 0.002 0.001 0.001 0.001 0.001 0.0008 0.0007 0.0002 100
C Category
Take first few items which account together for about 70% of cost and categorize them as A. Here, the items (1 to 3) account for 76.01% of cost and hence may be put under category A. Stringent control is necessary as value of these items account for the bulk of usage value.
79

Take the next few items which together account for about 20% of cost and categorize them as B. Here, the items (4 to 10) account for 20.09% of cost and hence may be put under the category B. Moderate control is necessary for these items.
The remaining items which account together for about 10% of cost are categorized as C. Here, the items (11 to 50) account for 3.9% of cost and hence may be put under the category C. Moderate control is to be exercised on these items.
80
Dharwad Milk Union (A Unit of KMF) RATIOS RELATED TO INVENTORY 1. INVENTORY TURNOVER RATIO
Every firm has maintained certain level of inventory of finished goods, so as to meet the requirements of the business. The inventory turnover reflects the efficiency of inventory management and also it indicates the efficiency of firm in producing and selling its products. High ratio is good from the view point of liquidity and vice-versa. This ratio establishes relationship between cost of goods sold during a given period of time and average amount of inventory held during that period. IT CAN BE ASCERTAINED AS FOLLOWS
81
Sl.No 1 2 3 4 5
Year 2006-07 2007-08 2008-09 2009-10 2010-11
Cost of goods sold 346684070 397561561 439840674 495039505 594855810
Average inventory 28794259 22949260 27151622 28714623 24239437
Inventory Turnover Ratio 12.04 17.32 16.2 17.24 24.5
30
25
Inventory Turnover Ratio
20
15
10
0 2006-07 2007-08
Year2008-09
2009-10
2010-11
82
Dharwad Milk Union (A Unit of KMF) INTERPRETATION

As per the above information there is a increasing & decreasing trend of inventory ratio in the DMU. In the year 2006-07 & 2008-09 there is a decreasing trend, the reason behind this are as follows: Procurement of milk in to the organization is less because of low demand in the market due to entry of privatization. Huge advertisement cost. Hiked in the prices of petrol & other products as a results milk vendors started asking more price for the milk. In the year 2007-08, 2009-10 & 2010-11 there is a increasing trend the reasons are as follows: Procurement of milk in to the organization increased due to high demand for the products in the market. Increase in the sale of products due to attractive advertisement. 2 Rs subsidy declared by the government to the milk vendors in order to attract them from giving milk to private sector. Door to door campaign.
83
Dharwad Milk Union (A Unit of KMF) INVENTORY CONVERSION PERIOD

Inventory period is the time lag between the purchase of raw materials & sale of finished goods. It includes: Raw material conversion period Work in progress conversion period Finished goods conversion period
The inventory conversion period can be ascertained by following formula
No. of days in a year = 365 days
84

The table showing inventory conversion period
Sl.No 1 2 3 4 5
Year 2006-07 2007-08 2008-09 2009-10 2010-11
No. Days in a Year 365 365 365 365 365
Inventory Turnover Ratio 12.04 17.32 16.2 17.24 24.5
Inventory Conversion Period 30.31 21.07 22.53 21.17 14.9
35 30
Inventory Convertion Period
25 20 15 10 5 0 2006-07 2007-08 2008-09 2009-10 2010-11
Year
85
Dharwad Milk Union (A Unit of KMF) INTERPRETATION

Inventory conversion period shows that, how many days the DMU will take to convert the raw materials in to finished goods. In the year 2006-07 organization took more days to convert but from 2007-2011 it started to decrease the conversion period. This indicates that in 2000-07 there was less demand to products where as in 2007- 2011 there was a more demand in the market. From this I conclude that DMU maintaining better inventory conversion period i.e., DMU is safeguarding its position in the market.
86
Dharwad Milk Union (A Unit of KMF) FINDINGS:

The inventory department at DMU is very near to production department; as a result the time and cost of transferring raw-materials to production department is very negligible. The department is quiet spacious and all the items of inventory are placed orderly according to their usage. The inventory department at DMU is managed by Stores officer, superintendent, administration assistant and few helpers. A store keeper is also appointed to ensure that strangers are not allowed to enter into this department without permission. The DMU uses different inventory techniques to have a better control over different items of inventory. It uses determination of stock levels and stock turnover ratio technique for raw-materials, first-in first-out technique for finished goods and always better control technique for all the items of inventories. The annual consumption of nitric acid in the year 2009-10 was 6,240 kgs and it increased to 8,270 kgs in the year 2010-11. The annual consumption of ghee cartons in the year 2009-10 was 3,255 tons while it decreased to 2,640 tons in the year 2010-11. The annual consumption of HSD diesel in the year 2009-10 was 56,768 ltrs and it decreased to 50,105 ltrs in the year 2010-11. The annual consumption of formaline in the year 2009-10 was 177 ltrs where as it decreased to 83 ltrs in the year 2010-11. The annual consumption of springs in the year 2009-10 was 203 pcs while it decreased to 200 pcs in the year 2010-11. The A category of items accounts for 76.01% value for 10% of volume. B category of items accounts for 20. 01% value for 20% of volume. C category of items accounts for 3.9% value for 70% of volume. In DMU totally there are about 4,000 different items of inventory.
87

The maximum, minimum and average delivery period for all the items of inventory is fixed i.e. the maximum delivery period is 2 weeks, minimum delivery period is 1 week and the average delivery period is 1.5 weeks. The inventory turnover ratio for the year 2009-10 was 22.28% and it increased to 34.81% in the year 2010-11. Under the FIFO technique- For 500 ml toned milk film, the purchases made were 48,788.57 out of which 48,010.74 were used. For 1000 ml homogenized cream milk film, the purchases made were 506.70 out of which 285.27 were used. For 1000 ml shubham milk film, the purchases made were 3,995.62 out of which 3,698.30 were used. For 200 ml sweet lassi film, the purchases made were 812.71out of which 565.61were used. For 200 ml Masala lassi film, the purchases made were 1,721.02 out of which1, 461.08 were used. All the items of inventory are categorized into various groups based upon their properties and characteristics, for example - Production consumables, Oil lubricants, Chemicals, Packing materials, Machinery spares, Paints and varnishes etc. Further under each group there are about 100-150 items belonging to each group. This categorization helps the stores person for easy identification and to make the proper entries.
88
Dharwad Milk Union (A Unit of KMF) SUGGESTIONS: The inventory department at DMU follows the old method of Codex (Coded
control) system of inventory under Denmark collaboration, so it would be better if it would try to follow some recent/modern methods of inventory.
The inventory techniques applied in DMU are only few viz., Determination of
stock levels, Always better control analysis, Stock turnover ratio and First-in First-out method. DMU should try to adopt and check the effectiveness of other techniques such as- Economic order Quantity analysis, Fast-Slow and Nonmoving items of inventory analysis, Vital-Essential and Desirable analysis etc.
If we see the annual consumption of 2009-10 and 2010-11 then we can see that
the level of consumption is decreasing, so DMU should try to analyze that whether this decrease in level of consumption is due to decreased demand or is it due to the in-efficiency of production system. The ABC analysis at DMU is very effective and it is advised to concentrate more on it. The maximum, minimum and average delivery period for all the items of production are fixed, but DMUs inventory has some items which are used in small quantities and their availability is also easy so it would be better if it could try the Just-in-Time approach as it results in reduction of cost of inventories, results to optimum use of available space, helps in effective production planning and minimizes frequent handling of materials. It would be better if the items of inventory are categorized on the basis of their availability as-easy, difficult and scarce items; so that different delivery schedules can be fixed differently on their availability in order to reduce the inventory cost and to ensure effective production planning.
89
CONCLUSION:
It was a great experience to do my project in Dharwad Milk Union (DMU), Dharwad. DMU (A unit of KMF) is one of the popular milk co-operative societies amongst 13 establishments of KMF. In spite of having many close competitors DMU is working efficiently. It would not be in-correct if it said that the performance and efficiency of DMUs inventory adds to the success and profits of DMU. By the study I came to know about all the different items of inventories and different techniques applied to them. The inventory techniques applied in DMU are really very worthwhile as the techniques applied are different for different inventories based on their characteristics. The ABC analysis works really well and it can be applied to all the items of inventories. DMU maintains a very good and cordial relationship with its suppliers. Since milk is a perishable product so the in-efficiency of inventory department in supplying raw-materials will affect the production process. The inventory department at DMU is quiet active and the records are maintained properly. DMU is performing really well and if it continues this performance in the near future then it can earn more profits. More preference on the development of R & D department will help DMU to earn huge profits.
90
Dharwad Milk Union (A Unit of KMF) BIBLIOGRAPHY:

Observations made during the study. Manual sheets, reference reports. Conversation with the departmental heads and workers.
Text Books: Financial Management by: I. M Pande and Financial Management by: Khan and Jain Essentials of Business Finance by: R M Srivastava. Websites: www.kmfnandini.com www.google.com
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Dharwad Milk Union (A Unit EXECUTIVE SUMMARY

TITLE OF THE STUDY:

Dharwad Milk Union (A Unit OBJECTIVES OF THE STUDY:

Scope of the Study:

Dharwad Milk Union (A Unit of KMF) INDUSTRY PROFILE

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF) KARNATAKA MILK FEDERATION

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF)

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF) THE GROWTH PROCESS:

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF) UNITS OF KARNATAKA MILK FEDERATION:

THE 13 CO-OPERATIVE MILK PRODUCERS SOCIETIES UNIONS OF KMF ARE:

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF) MILESTONES

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF) COMPANY PROFILE

DHARWAD MILK UNION:

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF)

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF)

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF) NATURE OF BUSINESS CARRIED:

DMU Mission Statement:

Quality Policy of DMU:

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF) DHARWAD MILK UNION:

PARTICULARS Status Nature of Business Plant Capacity

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF)

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF)

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF)

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF)

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF)

Visvesvaraya Technological University, Belgaum.

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF) WORK MODEL OF DMU

Fresh Liquid Milk

FAT & SNF

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF) ORGANISATIONAL STRUCTURE / CHART

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF) DEPARTMENTS OF DHARWAD MILK UNION:

1. Procurement and Input Department.

Quality Control Department.

Finished goods Department.

10. Engineering Department.

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF) 1. PROCUREMENT & INPUT DEPARTMENT

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF)

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF) 2. PRODUCTION DEPARTMENT

Technical Officer Typist Senior Supervision Clerk

Visvesvaraya Technological University, Belgaum.

Dharwad Milk Union (A Unit of KMF)

Visvesvaraya Technological University, Belgaum.