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India is a country of scarce resources and it is primary responsibility of each organization whether it is a public sector, private sector, or a government department to ensure optimum utilization of resources for production of goods and services. Materials have come to occupy a very vital and critical position in the resource position of the country. Inventories account for a major portion of the capital locked up in any organization. Reduction of inventories will affect the profitability of the organization. The Indian economy is growing and the performance of the manufacturing sector has regained its growth and it is indeed encouraging. The increased demand for basic industrial chemicals such as the chlor-alkali is a reflection of the growth rate in the national economy.

Meaning of Inventory Management

Inventory management simply refers to management of inventory. Inventory management maybe defined as the overall way a company manages its inventory & uses its control system to manage the benefit of carrying inventory against the cost. Although the finance department does not itself manage the firms inventory, it has a responsibility to ensure that the inventory is being managed effectively and efficiently.

Objective of Inventory management

Any firm will like to hold higher levels of inventory. This will enable the firm to be more flexible in supplying to the customers. Most of the

customers may require immediate delivery. Higher inventories may help meet their demands. Thus there is no chance of loss of sale. The objectives of Inventory management may be summarized as follow: To ensure that adequate inventories are available for smooth operation. To minimize investment of fund in the inventories. To maximize the wealth of the share holders (ie. To maximize profitability). To avoid cash crisis. To avoid both over-stocking & under stocking of inventories. To minimize losses on account of obsolescence, pilferage, wastage etc. To ensure right quality products at reasonable prices.

Types of Inventory
Raw material
A raw material is something that is acted upon or used by or by human labour or industry, for use as a building material to create some product or structure. Often the term is used to denote material that came from nature and is in an unprocessed or minimally processed state. Iron ore, logs, and crude oil, would be examples. A non-human related raw material would include twigs and found objects as used by birds to make nests.

Work in Progress

Work that has not been completed but has already incurred a capital investment from the company. This is usually recorded as an asset on the balance sheet. Work in progress indicates any good that is not considered to be a final product, but must still be accounted for because funds have been invested toward its production. A work that has been started but not yet completed. In manufacturing this can refer to inventory that has been worked on such that it is no longer viable as raw materials while not yet sellable as a finished product.

Finished goods
Completely manufactured products which ready for sale and delivery to the marketplace.

Definition: Commodities that will not undergo further processing and

are ready for sale to the final demand user, either an individual consumer or business firm. This includes unprocessed foods such as eggs and fresh vegetables, as well as processed foods such as bakery products and meats. This also includes durable goods such as automobiles, household furniture and appliances, and Nondurable goods such as apparel and home.

What is Inventory Control?

Inventory control is the process of deciding what and how much of various items are to be kept in stock. It also determines the time and quantity of various items to be produced. The basic objective of inventory control is to reduce investment in inventories and ensuring that production process does not suffer at the same time. To attain various objectives, inventory control must a) Determine items to be stocked b) Determine when & how much to replenish c) Keep suitable records d) Weed out obsolete items

The following are the inventory control: To reduce financial investment in inventories To facilitate production operations To avoid losses from inventory obsolescence To improve customer service Inventory Are Kept In Organization For Reasons Mentioned Below:
1. Raw Materials to provide for:

Economical bulk purchasing, To enable production rate changes To provide productive buffer against delays in transportation, For seasonal fluctuations.

2. Work-In-Process To enable economical lot productions To cater to the variety of products Replacement for wastages To maintain uniform production even though sales may vary 3. Finished Goods

For providing Off-Shelf Delivery To allow stabilization of the level of production For sales promotion

Techniques of inventory control

Economic Ordering Quantity Optimum Production Quantity Reorder level ABC analysis Inventory Turnover Ratio Inventory Holding Period Operating cycle Safety stock


Codification is one of the important processes in the inventory department of TCC Ltd. It refers to giving proper codes to each raw material for easy identification. Codes are used for identifying raw materials. Further processing is done using these codes. For any processing, for every details, all the records like Receivable Request (RR), Purchase Order (PO), Material Procurement request(MPR) etc. are using these codes instead of the item name. Thus every details is included in a single code is a ten digit number


The study aims at assessing the efforts made by the study unit by maintaining a sound inventory policy by adopting the EOQ . The reorder level is analyzed to know that the firm places an order to replenish the inventory.. Inventory turnover ratios were calculated to minimize the investment in inventories, besides the study offers some

valuable suggestions to the management of the study unit to improve the existing receivable management system. Inventory management tools and techniques are to be adopted as inventory forms major part of the assets of the firm and large funds are blocked in the form of assets, leading to high costs. This affects the profitability of the firm. Hence efficient management and control of the inventory is a must for improving efficiency and profitability of the company


Managing workers capital is synonymous with controlling inventories. Good inventory management is good finance

management. Active and gainful formulation of inventory policies designed to speed up turnover, maximize return on investment. Efficient management of inventory will ultimately result in the maximization of the owners wealth. Organizations have to tie up a need for larger percentage of capital in raw materials and work in progress than in finished goods. The former not only represents two-fold capital investment in finished goods but also takes longer to convert it in to revenue via the medium of sales. Inventory control is a science based out of ensuring that enough inventory or stock is held by an organization to meet both the internal and external demand commitments economically. There can be disadvantage in holding either too much or too little inventory. Therefore inventory control is primarily concerned with the obtaining of a correct balance between these two extremes. The very existence of inventory creates costs. Sometimes it is difficult to see what value is received from cost incurred. Inventory management may influence the decisions of the planning and executive personnel. It is a matter of deep concern of those dealing with production, sales forecasting, inventory planning, marketing, materials handling, finance product designing engineering etc. In the light of the above, researcher has made an attempt to study inventory management in Travancore Cochin Chemicals Ltd.

To know effort made by the study unit to maintain a sound inventory policy.

To analyze the various inventory policies through various methods & techniques of inventory control.

To know whether the study unit maintains a sufficient large size of inventory for efficient & smooth production & sales operation. To find out EOQ and Reorder level.


The management of the study unit was not willing to disclose all the information available with them. Hence it was not possible to make deep study. The study was confined to a single unit. Hence the finding of the study can not be generalized. Time factor was one of the limitations of the study. It was difficult to collect all the information in a short span of time. So the scope of the study was limited. The findings of the study could be misleading when there are some errors in the financial statement from where the data was collected.
Accurate data was not available for calculations.


As we enter the new millennium, several chemical industries set up in the past few decades will be subjected to design technological changes and associated economic constraints. Additions of larger, more automated, highly sophisticated and complex components will become necessary. Issues of life estimation and extinction on existing plants have to be addressed to overcome the loss in production and to conserve raw materials. As new plants are constructed and existing plants are modernized and automated, every possible effort is needed to cut cost and increase efficiency, and in this way increases profit. Maintenance of components becomes increasingly expensive and complex due to several advances that have taken place by way of modernization. As a consequence maintenance is increasingly more critical for the plant is less tolerable and reliability and safety of the equipment become increasingly important. Materials, techniques and methodologies that offer greater benefits in the way of higher output, efficiency, improved availability, increased safety and lower maintenance are being constantly incorporated in strategic life cycle management of several chemical plants. Monitoring the condition of the operating chemical plant is at increasing importance with growing awareness of the need to obtain the best financial return by demanding the highest level of reliability of components. Reliability is the ability of the component to perform the


required function under the stated condition in the stated period of time. It is difficult to separate reliability and maintenance, as there are no components which are perfectly healthy under the plant operating conditions.

Every component in the plant undergoes some kind of corrosion, wear, fracture, cracking, surface degrading, etc. during service. Both reliability and profitability can be achieved by careful attention to a few most important factors, viz. material selection and design, fabrication and quality control, operation and maintenance, condition monitoring, failure analysis, life prediction and life extension. Judicious and current technology-weighed attention to these factors leads to achieving greater reliability and profitability of chemical.

Chemical industry overview

India ranks twelfth in the world for production of chemicals by volume. Indias chemicals industry contributes about 3 per cent to the nations Gross Domestic Product (GDP). The industry has a turnover of about US$ 30 billion, and accounts for about 14 per cent in the general Index of Industrial Production (IIP) and 17.6 per cent in the manufacturing sector. It also accounts for about 13-14 per cent of total exports and 8-9 per cent of total imports of the country. The industry is mostly concentrated in western India, which accounts for 45-50 per cent of the total industry size. The Indian chemicals industry comprises both small and large-scale units. While the fiscal concessions granted to the small sector in mid-eighties led to the establishment of a large


number of units in the Small Scale Industries (SSI) sector, the industry is currently in the midst of major restructuring and consolidation. With the shift in emphasis on product innovation, branch building and environmental friendliness, this industry is increasingly moving towards greater customer orientation.

One of the fastest growing sectors of Indian economy. Chemical Industry in India is fragmented and dispersed - multi product and multi faceted. Chemicals are sold directly to large customers and through distribution channels. Distribution channels mostly consist of stockiest and dealers spread all over India addressing small segments and retail market. Major Segments Chemical Industry is highly heterogeneous with following major sectors: Petrochemicals Inorganic Chemicals Organic Chemicals


Fine and specialties Bulk Drugs Agrochemicals Paints and Dyes Chemical Industry Structure Highly fragmented and widely dispersed. Western India accounts for 45-50% of total Indian chemical Industry. Large players in bulk chemicals. Both large and small players in Fine and Specialty chemicals. Presence of many multinational companies also.

Foreign trade
India was a net importer of chemicals in early 1990s, but has now become a net exporter due to reduction in Imports because of implementation of many large scale petrochemical plants like Reliance etc. and also because of tremendous growth of exports in sectors like bulk drugs and pharmacy, pesticides, dyes and intermediates. Exports by the basic chemical sector in 1995-96 surpassed the target of Rs 6,742 crore by reaching a figure of Rs 7,979.30 crore and showing a massive growth of 24% over the preceding year's figure of Rs 6,403.90 crore. During 1994-95 exports totalled Rs 6,403.90 crore against the target of Rs 5,504.60 crore, while in the preceding year


shipments reached Rs 4,904.40 crore against the target of Rs 4,584.00 crore. The drugs and pharmaceuticals and the organic/inorganic/agrochemicals contributed as much as 63% of total exports. This has been a Herculean task, which has been achieved by competing with big multinational corporations of the world. Turnover for the year ended 1998-99 is close to Rs.15, 000 crores.

Challenges faced by chemical industries

The chemical industry has fundamentally changed the way we livefrom the cars we drive, to the houses in which we live, to the everyday conveniences that we take for granted. But for the chemical industry past success does not guarantee future results. Chemical companies face numerous challenges. Local and national tax requirements, often managed across multiple territories, are increasingly complex and under continuous review. New regulations have resulted in additional obligations with respect to internal controls and management certifications. As costs rise, managements are trying to figure out how to get most out of IT and people investments. At the same time, in search lines. of profitable growth, chemical companies are pursuing emerging markets seeking in partners and shedding non-core product

Chlor alkali industry in the world

During the 1970s caustic soda was manufactured by utilizing the mercury cell technology but this technology consumes lot of electrical energy and there was also the problem of mercury pollution. It was during the same period due to the Mina Meta disease resulting from


mercury pollution, the Japan govt. issued a direction to all caustic soda plants to change over from mercury cell technology to other technology under a time bound program. This paved the way for development of Ion Exchange Membrane (IEM) technology. This technology apart from totally avoiding mercury, consumes30% less electrical energy compared to the mercury cell.

Global scenario
In the global scenario the increased production of paper, aluminum, soap, detergent naturally led to the increased requirement of caustic soda. In the world scenario the green peace movement is seeking the phase of chlorine usage, especially the CFC compounds. This has led to the closing down of some of the chlorine industry in Europe and North American countries. This led to an increase in international price of caustic soda. The caustic soda which was sold for $50 per ton has grown up to $300 per ton now. The international markets are operating in the context of demand and supply prevailing from the time to time. Situation of surplus and shortage are cyclical as a result of which international prices tend to be highly volatile. Predatory pricing is common and drop in import duty often followed by a steep drop in price of the chemical. Though the demand for chorine is growing fast and the caustic soda is not promising. Hence the units in the gulf and western countries are selling caustic soda at a cheaper price. Major countries producing Caustic Soda




4. Germany


Canada 2. China India 3. Japan 6. Russia 5. France 8.

National scenario
In India caustic soda is produced by electrolysis process. The manufacturing of caustic soda is started during 1940s in the country. The growth was rather slow in the 1960s and thereafter growth picked up substantially. Today there are about 38 chlor alkali units in India. Major south Indian Chlor-alkali units are: Chemplast, Tamil Nadu Chem Fab alkalis ltd, Pondicherry Tamil Nadu petrochemicals ltd, Chennai Andhra sugars, Andhra Pradesh DCW, Tamil Nadu Solaris Ltd, Karwar, Karnataka TCC Ltd, Kerala


State scenario
Caustic soda is one of the basic inorganic chemicals manufactured from common salt. Caustic soda, chlorine, hydrochloric acid and sodium hypochlorite are the products in Kerala, In the state, chemical industry only a few companies are engaged in the production of caustic soda, chlorine, hydrochloric acid. TCC is the only Chlor-alkali industrial unit and has a production capacity of 175tpd.there are many small scale industries in the state which consumes caustic soda for the production of soaps, detergents, plastics, textiles etc. Though the average rate of 4% the capacity has been increased by nearly 7% in the view of the high transportation cost and hazardous nature of chemicals transported. The caustic soda industry in the state is more localized and the units have come nearer the consuming Centre. With the high transportation cost it is not possible to export caustic soda in large volume. Most of the units in the state are running on outdated technology. Chlorine is the basic material required for water purification without which the govt. is unable to supply drinking water to public.


The Travancore-Cochin Chemicals Ltd., popularly known as TCC was established in 1950. The idea of establishing the unit was conceived by M/s Sheshasayee Brothers the then Managing Agents of FACT. After the Second World War the Sheshasayee brothers were under financial crisis and were unable to make huge investments for modernization. They approached for the help of Divan of Travancore Cochin and he took over the bulk of shares, and named the company as Travancore Mettur Chemicals. The venture was started as partnership concern in the name Travancore Mettur Chemicals with FACT and MCIC (Mettur Chemicals and Industrial Corporation) as partners. After the formation of the state of Kerala, with the State Government contributing the major share of equity and the company was then named as TRAVANCORE COCHIN CHEMICALS LTD .it was incorporated in the year 1951 as a Public Limited Company(under Indian companies act 1931). M/s Sheshasayee Brothers continued to be the managing agents for the next 10 years. Commercial production of Caustic Soda from the first plant of 20 tpd capacity was started in 1954 January. TCC is the first unit in India to manufacture Rayon grade Caustic Soda.


TCC is situated at Udyogamandal in Cochin industrial belt, the factory and the registered office is located 20 km from the Cochin international airport and 15 km from the Ernakulum railway station. Incorporated in 1951, TCC is one of the oldest Chlor-alkali units in the sub continent. Today TCC is having a production capacity of 57750 tons caustic soda per annum. The company supports a large number of industrial units of strategic importance by supplying basic chemicals with continuous effort for up gradation of technology and professional management. The market is spread over southern and western India. The company has a good track record of profitable operation and healthy industrial relations. About the company TCC is one of the oldest Chlor alkali units in India. The main product manufactured in TCC is caustic soda in the form of both lye and flake. And various other products such as liquid chlorine, hydrochloric acid, sodium hypochlorite are the by-products which are made to further process for its final consumption. A wide range of industries like mineral processing, paper, textiles, petrochemicals, oil refining, pesticides, water treatment etc. uses these products.

Stages of Growth
1956 - A continuous Caustic Fusion Plant 20 tpd (tones per day) for producing Caustic Soda flakes. 1958 - Chlorine Liquefaction Plant 1960 - Capacity enhanced to 30 tpd further to 40 tpd.


o Established







Hydrosulphate with 3 tpd capacity. 1967 - 7 tpd Sodium Hydrosulphate 60 tpd Caustic Fusion Plant 4 tpd Iron free Sodium Sulphate 1975 - Added another 100 tpd Caustic Soda Membrane Unit thereby increased the production Treatment Plant. 1988- Many of the old unit was dismantled 1997 - 100 tpd Caustic Soda manufacturing unit using Membrane technology capacity 125tpd. 1998- New CCF Plant in place of existing 60 tpd. 2005 -Addition 25 tpd 2006 Addition 25 tpd
At present total installed capacity is 175 tpd and Caustic Fusion

capacity 200 tpd own Water

plant is 100 tpd.

TCC at present
TCC is the only Chlor alkali units in Kerala. In India there are 38 chloralkali units. It is known as the mother industry as it provides its finished product not for final consumption but for a further production. The various customers for TCC are the industries such as Hindustan newsprint ltd (HNL), Fertilizers and chemicals Travancore ltd (FACT) which uses the provided chemicals for its productions. The company has helped in attracting user industries to Kerala in the past, due to the assurance in availability of raw materials.


Production The major raw material of TCC is common salt and electricity. Common salt is brought from Tuticorin and Kutch. The electricity is supplied by KSEB. The electricity bill of TCC comes to about Rs.150000 per day. TCC uses the third generation technology of cell membrane.

Plant capacity TCC has 2 plantsFirstly AGC, Japan with 150 capacity tons per day. Secondly there are 2 UDAY plants each with a capacity of 25tons per day. Currently the total capacity of TCC is 175 tons per day Industries served by TCC Caustic soda: soap, paper, textiles, fertilizers, drugs &

pharmaceuticals, petroleum, chemical.



paper, textile, water purification, drug & pharmaceuticals, sugar, rubber

minerals processing,

Commercial HCL acid: fertilizers, engineering, minerals processing, starch, plastics.

1. 2. Cost efficiency in all operation Regular up gradation in technology used in processing.

TCC is committed supply quality chemicals at competitive prices to customers. Customer satisfaction, Concern for environment and Safety are the priorities.

TCC intend to achieve Utmost level of conservation of all resources including energy Cost effectiveness in all our operations Regular upgrading of technologies used in processing Compliance with laws and statutory regulations.


Corporate objective of TCC To maintain optimum level of efficiency so as to serve optimum return on investment. To produce and market chemicals such as caustic soda, liquid chlorine and hydrochloric acid economically and in eco friendly manner. To continuously improve the plant and operational safety and to confirm statutory pollution standard. To maximize profits from the projects taken up. To ensure corporate growth by expansion.


Moving with the times, TCC keeps up its technology regularly updated and continue to be the competitive strength in the Chlor-alkali industry. With expanded plants and higher production capacity, TCC has come out to be the profitable public sector undertaking. Over the years we have achieved recognition and awards for the remarkable performance in the industry with regard to production, productivity, energy conservation and environmental protection. 1981 - Best Performance Award for Safety in the State from Directorate of Factories & Boilers, Government of Kerala 1988-89 - Best Pollution Control Award under group "Heavy Inorganic Industries" in Kerala, from Kerala State Pollution Control Board 1989 - Award for Best Performance in Safety in India under "Chemical Industries" group from National Safety Council. 1989-90 - Prize for Productivity from Kerala State Productivity Council. 1993 - Best Performance award for Energy Conservation in the State of Kerala under group "Chemical & Fertilizers above 3000 KVA" from Government of Kerala.


1994-95 - Best Performance award for the Productivity in the State of Kerala under group "Large Industries" from Kerala State Productivity Council. 1995-96 - Best Performance award for Productivity in the State of Kerala under group "Large Industries" from Kerala State Productivity Council. 1998 - Best performance award for Energy Conservation in the State of Kerala under group "Major Industries" from Energy Management Centre, Govt.of Kerala. 1998 - Performance award for Energy Conservation under group "Chlor-alkali Sector". Ministry of Power, Government of India. 2003 - Kerala State Energy Conservation Award (2000) in the category of Large Scale Industry 2005 - National Energy Conservation Award "Chlor-alkali Sector" 2006- Kerala state conservation award
2009 Kerala state pollution control award(3rd price)

Eco clean (sodium hypo chloride): Recently TCC have come out with a product of its own brand name, Eco clean. Its a new product that TCC has launched. Strong disinfectant and cleansing agent. More powerful than ordinary bleaching powder Anti bacterial, germicide and algaecide Leaves behind no residues on application


Does not contain phenol compound Quality policy TCC is committed to enhance customer satisfaction by providing products and related services complying with a continually improving Quality Management System. Health & safety policy TCC is committed to provide every one of its employees and the related public an accident-free and healthy environment in its efforts to manufacture high quality products at competitive prices. The company will comply with all statutory requirements in this regard. The company will provide a work environment in which identified hazards are controlled, if elimination is not feasible and will provide personal protective equipments wherever necessary. Accident prevention is the direct responsibility of the Line Management and will be an important criterion for performance appraisal. Line Management will ensure that all safety measures are incorporated in the operating and maintenance procedures as well as in any process technology changes in the plant/infrastructure. Consideration of health and safety will be given proper weight age in selection and deployment of the personnel.


The company will ensure that health and safety aspects are given due consideration in decision regarding purchase of plant equipments, machinery and materials. Every employee of the company shall perform his/her job adopting Safe and proper work methods and using appropriate Safety equipments understanding that their career advancement is linked with SAFE performance. Contractors, sub-contract workers, transporters and visitors entering the factory shall be required to observe health and safety practices of the company in all their activities. All contract jobs will be carried only through the laid down procedures with appropriate supervision. The company will carry out safety audits, risk assessment studies, emergency mock drills, periodic assessment of health of its employees as well as status of environment, and implement remedial measures. Employee, consumer and public awareness where necessary, will be imparted with the required education, training and retraining on Safety and health aspects related to the process and products. The company will include a resume of its health and Safety performance in its annual Reports. Energy policy Travancore-Cochin Chemicals, Udyogamandal is committed to

conservation of energy by all possible means


To accomplish the mission, they strive for: Technological up gradation to reduce specific energy consumption Conducting energy conservation studies including energy audit and adopting the apt measures for conserving energy Contacting other organizations and enriching our experiences on energy conservation Using renewable energy sources to the extent possible Disseminating knowledge and information on energy conservation to our employees Low energy fuels also to be tried depending upon feasibility. Eco preserve We are well aware of the responsibility that manufacturing industries bear towards environment. Conserving the resources of environment from pollution and preserving healthy living conditions are important concerns at TCC. Our commitment is to sustain the toxic-free environment observing statutory stipulations and legal regulation.TCC believes in pollution prevention rather than pollution control. Our activities comprise awareness programs among the employees, customers, contractors and all those who are associated with us. Our endeavor is to minimize hazardous emission and waste and to reduce the impact of the manufacturing activities. TCC aims to achieve zero effluent discharge by the end of this year.

Hindustan Lever Limited-Cochin, Kerala


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


Kochi Refineries Ltd., Ernakulam, Kerala

Competitors of TCC
TCC is the only chlor-alkali unit under public sector in India and it is the only chlor-alkali unit in Kerala. Some of the major competitors are: Chemfab, Pondicherry DCW ltd,Mumbai Grassim industries,nagda,m.p Gujarat alkalis and chemicals Gujarat heavy chemicals Hukumchand jute and industries, Kolkata Indian pharmaceuticals corporation, gujrat Indian rayon and industries, Mumbai Kothari petrochemicals ,Chennai Saurashtra chemicals,Gujrat Tamil nadu petro chemicals Sree Rayalaseema alkalies and allied chemicals, Karnataka


1. Caustic Soda Lye

Caustic Soda is considered to be the main product of TCC LTD. TCC is the first rayon grade caustic soda manufacturer. Caustic soda is available in both lye and in the forms of flakes. Caustic soda lye is the liquid form that consists to about 32-40 % of the products. It is majorly manufactured for export. Caustic Soda Lye from Membrane Cells, A clear colourless, odourless and soapy liquid. Sodium carbonate as Na2CO3 % by mass (Max): 0.12 Chloride as NaCl % by mass (Max): 0.01 Iron by mass : 0.60

Sodium hydroxide as NaOH % by mass: 47-50 Sodium Carbonate as Na2CO3 % by mass (Max): 0.18 Chloride as NaCl % by mass: 0.015


Iron by mass: 1.00 QUANTITY (MT)/ANNUM: 57750 Nature of Hazard skin Protective Devices : Goggles, Plastic or Rubber Gloves, Apron, Boots : Corrosive: Causes severe damage to eyes and

First Aid: If substance has got in to eyes, immediately wash out with plenty of water for at least 15 minutes.

2. Caustic soda flakes Caustic soda flake is another form that is solid in nature. It is thus packed and sold in bags. Caustic soda is used in industries such as soap, paper, textiles, fertilizers, drugs & pharmaceuticals, petroleum, chemical. White deliquescent solid in flakes form. Sodium hydroxide as NaOH % by mass (Min): 99.50 Sodium Carbonate as Na2CO3 % by mass (Max): 0.40 Chloride as NaCl % by mass (Max):0.10 Iron by mass (Max):20 QUANTITY (MT)/ANNUM: 30000 3. Liquid chlorine


Chlorine in manufactured in both liquid and gaseous form. Chlorine is a by product of TCC. Chlorine another basic chemical is used for the manufacture of plastics, various organic & inorganic chemicals, petrochemicals, textile & paper, insecticides, pharmaceuticals etc. It is the traditional water purification agent. Chlorine and chlorine compounds in pharmaceutical industry has saved billions of life since its discovery and use. A greenish yellow gas with characteristic pungent smell. Liquid chlorine is amber in colour and is one and half times as heavy as water Chlorine % by vol (Min):99.8 Moisture ppm by mass (Max): 150 QUANTITY (MT)/ANNUM: 23760 First Aid: If substance has got in to eyes immediately wash out with plenty of water Remove contaminated clothing and drench affected skin with plenty of water. 4. Hydrochloric acid It is a combination of chlorine and hydrogen. The product is supplied to industries such as fertilizers, engineering, minerals processing, starch, and plastics. Hydrochloric Acid produced by TCC is of high purity and finds application in number of chemical industries such as mineral processing, gelatin, food industry, water treatment etc. Hydrochloric Acid is clear colourless liquid Hydrochloric acid as HCl % by mass 28.50


Iron by mass

25 50

Free chlorine by mass (Max.) First Aid:

If the substance has got into the eyes, immediately wash water for at least 15 minutes. Remove

out with plenty of

contaminated clothing immediately and wash affected skin with plenty of water. Seek medical treatment when any one has symptoms apparently due to inhalation or contact with skin or eyes. 5. Sodium hypochlorite Sodium Hypochlorite finds its use in bleaching and disinfectant applications and also for extraction of rare earth materials.

Sodium Hypochlorite (Industrial) Pale yellowish green clear liquid Available Chlorine gpl (Min):110 Excess Alkalinity as NaOH gpl (Min):10 15 QUANTITY (MT)/ANNUM: 15000 6 .Sodium Hypochlorite (Domestic) Sodium Hypochlorite for domestic application is marketed under the brand name "Eco clean". A powerful disinfectant, which also acts as:


Antibacterial Fungicide Algae Resistant Mosquito Repellent Disinfectant Applications: Best recommended for operation Theatres of Hospitals, Drainage purposes. Found effective for cleaning of swimming pools, water theme parks, fish processing/Agro processing. Not recommended for fish ponds and fish nurseries. and Toilets cleaning for hospitals, corporations, Municipalities, Panchayats and other public and private sanitation

Products and production capacity

Products Caustic soda lye Caustic soda flakes Liquid chlorine quantity per annum 57750 tons 33000 tons 23760 tons


Common hydrogen Sodium hypochlorite PRODUCT Caustic soda

127442 tons 15000 tons INDUSTRY Rayon and rayon pulp Paper, news paper Soaps Textiles Mineral process, rare earth mining process Chemical, drugs and pharmaceuticals Vanaspathi

USED AS A chemical for dissolving out extraneous matter from wood for preparing pure cellulose Chemical for preparing pure cellulose by dissolving out extraneous matter Saponification In bleaching, dying etc. For processing of monetize and refining of bauxite Reagent for the production of organic compounds For the production of hydrolytic hydrogen in oil industry For the production of electrolytic hydrogen for ammonia synthesis As a purification agent Cleaning agent For refining petroleum fraction

Heavy chemicals engineering Petroleum refining

Hydrochlori c acid

For the production of ammonium chloride In monetize processing and the separation of rare earth metals Minerals


For hydrolyzing starch into sugar For the production of PVC pipes As a cleaning agent Chlorine For producing insecticides In purifying drinking water For the production of chloramines and its organic derivatives For bleaching As bleaching agent For the production of neoprene and chlorinated rubber

Starch industry plastics Engineering insecticides Water purification Insecticides Paper, pulp and textile Sugar Rubber industry


Managing director


Administratio n






Deputy Senior Deputy Director finance accounts finance finance

Finance department Travancore Cochin Chemicals ltd. has an efficient finance department headed by the finance manager and he is assisted by deputy manager, finance. Finance manager is responsible for shaping the fortunes of the company, preparing budgets, raising funds, keeping different accounts etc.TCC is having management information system to assist the finance dept. the finance dept. is divided into different sections like


general account, costing bills, establishment and provident fund accounts sections each having its own functions. Functions 1. Purchase bills passing and payment to suppliers. 2. Sales invoice records. 3. Debt collection 4. Budgeting and costing 5. Statutory auditing 6. Finance control 7. Handle audit and taxes 8. Sales accounting 9. Generation and utilization of funds 10. Treasury operation Deputy finance manager Deputy finance manager control the costing process. Various cost such as material cost and production cost are assessed. Fixed capital and working capital are also planned. A comparative study on budgeting control is made. The various areas under DFM are: AOGA: The main area coming under this section is finalization of accounts, preparation of P&L a/c and balance sheet. Different vouchers, journals and ledgers are also maintained under this area.


Bank, cash, payroll etc. Also comes under this. Based on these, ratio analysis is made. AOEDP This area deals with hardware and software programs of computer. Any problem with computers is analyzed with this dept. AOBILLS Under this, first a quotation is collected from various companies. If it is accepted, purchase order contains the specifications, date, place etc. Then the products are received in the stores. Receiving report is given. Income, sales tax and VAT is maintained in this section. Senior account officer The SAO deals with sales accounting. He also maintains the account of sundry debtors, sales tax, VAT also come under this category. Every activities of sales tax are done here. The qualification of SAO is either M.COM or CA. Finance manager The function of finance manager is to have an overall control of above depts. The various sections under finance dept. are explained below.


General account section In this section a large number of general accounts are maintained. These include: 1. 2. General journal in which the transaction are entered first. Standard journal in which all recurring items are entered.(salary, wages, excise duty) 3. 4. 5. Cashbook in all cash receipts and payments are recorded Sundry creditors and sundry debtors ledger Bank book in which all bank payments and receipts are entered

6. Subsidiary ledger which include individual account maintained by each dept. A trial balance is prepared every 4 months. Balance sheet is prepared annually for financial year from April 1st to mar 31st. Bill section In this sectional payments for purchase are recorded. This includes B/P to suppliers and contractors. In case a supplier demands an advance, it is paid and properly accounted. Sundry creditors ledger and supplier account are kept in this section. At the end of the year, the accounts are ratified and sent to the general accounts section. In this section, separate cost records are maintained and kept. A cost audit is conducted internally as well as by the govt. nominees. Costing section


Budgeting and budgetary control is the main function of costing section where both revenue and capital section budget are prepared. Capital expenditure is prepared based on the total cost incurred for all items in all debts. Revenue budget is prepared based on the estimates of production, sales and expenditure. The balance sheet with total assets and liabilities is prepared and total cash flow is found.

Activities of costing section 1. Assessing monthly performance. 2. Preparation of various analysis statements. 3. Preparing association. 4. Presenting monthly information about the performance of and issuing reports for alkali manufacturing

company to the govt. 5. Preparation of monthly consumption statement of raw materials.




Time office & establishm

Marketin g accounts

General accounts


1. Costing: this dept. deal with all activities related to the control and maintenance of details with regard to production


2. Bills: all activities related to payments and maintenance of vouchers is carried in bills section. 3. Time office & establishments: details with regard to the employees attendance, salary, advances, increments, bonus etc. are maintained here. 4. Marketing accounts: maintenance of accounts with regard to sales, taxes are done here. 5. General accounts: preparation of final accounts such as trading a/c, P&L a/c and balance sheet is made here. 6. Finance: activities related to payment, cheque clearance, presenting cheques, cash flows are controlled here.


The Title of the Study The title of the study is A study on the Inventory Management in Travancore Cochin Chemicals Ltd., Cochin. Methods of Data Collection The study is mainly based on secondary sources of data. The secondary data were collected from the profit and loss account and balance sheet of the study unit. The other information needed for the study were collected from the books, journals, periodicals and other


published document kept in the study unit to collect the relevant information required for this study. Research Design In this project, descriptive type research design is used. It means that this project thoroughly analyses all the detail about this particular topic. Analytical Tools To analyze the inventory management of the Travancore Cochin Chemicals Ltd, the researcher analyzed the following techniques of inventory control, being applied at the company to reach at logical conclusion about the efficacy of inventory control. 1. Economic Order Quantity 2. Re-order Level 3. Inventory Turnover Ratios 4. Inventory Holding Period Tools of Projection of Findings Tabulation Percentages Ratios Percentage bar chart Period of the study


The period of the study devoted to period of 30 days, that is from January 20, 2011 to February 20, 2011 .


After collecting the data by using various methods, the next step is to present them in a systematic manner. This is because raw data itself will not convey their full meaning. Data when arranged in a systematic manner will bring out their underlying characteristics so that they can


be easily understood by the readers. The term analysis refers to the computation of certain measures along with searching. Analysis of data involves a number of closely related operations that are performed with the purpose of summarizing the collected data and organizing these in such a manner that they will yield answers to the research questions. Interpretation helps one to understand what the given research finding really means and what the underlying abstract principle is of which the research finding is just one concrete level of empirical observation. It helps us to understand the concrete observation, but one instant of the operation of theory on principle and on this basis to draw inferences about things seemingly quite unrelated to it.

1. Analysis of Inventory Management

1.1. Inventory to current asset ratio.


Inventory to current asset ratio reveals how much the contribution of inventory to the current asset in the organization. This helps to decide in advance the amount required to be invested in the inventory. Inventory to Current Asset Ratio= (Inventory/ Current Asset) X 100

Table showing inventory to current asset ratio

Inventory Year (Rs. Lakhs) 2004-05 2005-06 2006-07 2007-08 2008-09 644 967 1044 1018 1504 In

Current Asset (Rs. Lakhs) 2588 3576 3717 3457 3636 25 27 28 29 41 Inventory to Current In Asset Ratio

Chart showing inventory to current asset ratio


Interpretation. From the above graph we can see that Inventory to current asset ratio has been increasing for last five years. This means the contribution of inventory to the current asset in the organization is increasing year by year. The inventory has decreased in the current year, it is mainly due to the increase in the cost of common salt which is one of the major raw materials of TCC Ltd. but the decrease in current asset is due to the other factors that constitute current asset. We can see that the company has tried to maintain above 25% of ratio in every year which is satisfactory for the company.


I.2. Inventory Turnover Ratio

The inventory turnover ratio measures the number of times a company sells its inventory during the year. A high inventory turnover ratio indicated that the product is selling well. Formula to calculate inventory turnover ratio: Inventory Turnover Ratio = cost of goods sold / average inventory. Average Stock = (Opening Stock + Closing Stock) / 2 The inventory turnover ratio should be done by inventory categories or by individual product. This ratio, which is arrived at by dividing cost of goods sold by inventory (finished goods), indicates the rapidity with which a company is able to convert its output into revenues, by way of sales. Companies in the perishables business tend to have a high inventory turnover ratio while those that deal in goods with a long-shelf life tend to have a low inventory turnover ratio. The inventory turnover ratio could be further broken down into finished goods turnover ratio, work-in-progress turnover ratio and raw materials turnover ratio.


Table showing Inventory Turnover Ratio


Cost Goods Sold

of Average Inventory (Rs. (Rs. Lakhs) 136.39

Inventor y In Turnover Ratio 42.36

In Lakhs) 20042005 20052006 20062007 20075777




8151 6950

208.29 301.21

39.13 23.07


2008 20082009 Total 8457 36591 270.48 1018.49 31.27 206.88

Chart showing Inventory Turnover Ratio


Interpretation: Average inventory turnover ratio is 50.37%. The ratio shows a fluctuating trend. It goes on increasing & decreasing year after year. From the average ratio it is clear that the companys utilization of inventories in generating sales is good. But the companys efficiency in turning its inventories to sales is fluctuating.

2. Inventory Structure Analysis


This section analysis the structure of inventory held by the company during the period of study under the heads raw materials, work in progress and finished goods.

2.1. Raw materials turn over ratio

This can be calculated using the following formula Raw material turn over ratio = sales/ Raw material

Table showing raw material Turnover Ratio


Sales (Rs. Lakhs) In

Raw Material (Rs. Lakhs) In

Raw Materials Turn Over Ratio 8.59 6.82 7.48 7.49 5.93

04-05 05-06 06-07 07-08 08-09

9123.33 8868.57 10877.30 12320.67 9390.60

1032 1594 1648 1253 2035


Chart showing raw material Turnover Ratio

9 8 7 6 5 4 3 2 1 0 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 Raw Materials Turn Over Ratio

Interpretation It is clear from the above graph that the raw material turnover ratio is showing a fluctuating trend in all the years understudy. There is slight variation from each years raw material turnover ratio. This is mainly because of the fluctuating trend in sales and raw materials consumed.


2.2. Finished goods turn over ratio. This can be calculated using the following formula Finished Goods Turn Over Ratio =Sales / Finished Goods

Table showing Finished Goods Turnover Ratio

Sales Year (Rs. Lakhs) 04-05 05-06 06-07 07-08 08-09 8869 10877 12320 9385 12061 In

Finished Goods (Rs. Lakhs) 96 109 308 294 247 92 100 40 32 49 Finished Goods Turn In Over Ratio


Chart showing Finished Goods Turnover Ratio

Interpretation. In finished goods turnover ratio also we can see fluctuations. The period from 03-04 to 05-06, shows an upward movement. But after that the ratio starts declining. Since raw material concerned is less, the finished goods inventory would also be decreased.



3.1Raw material holding period It can be calculated by using this formula RM holding period = (RM inventory/RM consumed) x 360 RM inventory = Open stock + Clos stock of RM 2

Table showing raw materials holding period

Year 04-05 05-06 06-07 07-08 08-09

RM Inventory 136 102 208.29 301.21 270.48

RM consumed 1032 1594 1648 1253 2035

RM period 47 23 45 86.54 47.85



Chart showing raw materials holding period



The table showing a fluctuating trend in RM holding period. RM holding period is less in is very high in 2007-08.the graph indicates the in efficient performance in material handling and over stocking of raw materials.

3.2. WIP conversion period

It is calculated by using this formula Avg WIP / Cost of production

Table showing WIP conversion period

Year 04-05 05-06

Avg WIP 970 1429

Cost production 5696 7269

of WIP period 62 72



06-07 07-08 08-09

472 6 26

8350 6937 8409

21 0.32 1.13

Chart showing WIP conversion period


Interpretation The graph showing a decreasing trend in WIP holding period after the year 2005-2006 up to the current year. The table is clearly pointing the efficiently used and the investment in WIP is within the proper limit

4. Finished Good conversion period


Finished good conversion period indicates the relation between the finished goods inventory and the Cost of Goods Sold. It indicates whether the investment in inventory is efficiently used or not. Therefor it explains whether the investment in inventories with in the proper limit or not. The ratio is calculated as

FG conversion period = inventory of finished goods X 365 COGS The table showing finished good conversion period

Year 04-05 05-06 06-07 07-08 08-09

FG Inventory 136 102 208 301 271

COGS 5777 7256 8151 6950 8457

FG conversion period 8.6 5 9 16 12


Char showing finished good turnover ratio

16 14 12 10 8 6 4 2 0 2004-05 2005-06 2006-07 2007-08 2008-09 Column2

Interpretation The graph showing a varying trend in FG conversion period. The FG conversion period is less in the year 2005-06 and more in 2007-08. The current year showing an increased value for the F G Conversion period when comparing with the previous years 2004-05, 2005-06 and 2006-07. From this we can understand that TCCis maintaining It also excessive inventory. It also shows that the FG of TCC contains inferior quality goods, stock of unusable goods and obsolete goods. to push up the sales reflects the dull business and the management should take some steps


5. Reorder Level This is the level at which order is placed for further supply of materials. When the stock of material reaches this level, the store keeper should initiate action for the purchase of materials. Reorder level is fixed some where between minimum level & maximum level. It must be fixed in such a way that the store representing the difference between reordering level & minimum level should be sufficient to meet demands of production till new materials arrive. The reorder point for replenishment of stock occurs when the level of inventory drops down to zero. In view of instantaneous replenishment of stock the level of inventory jumps to the original level from zero level. In real life situations one never encounters a zero lead time. There is always a time lag from the date of placing an order for material and the date on which materials are received. As a result the reorder point is always higher than zero, and if the firm places the order when the inventory reaches the reorder point, the new goods will arrive before the firm runs out of goods to sell. The decision on how much stock to hold is generally referred to as the order point problem, that is, how low should the inventory be depleted before it is reordered. The two factors that determine the appropriate order point are the delivery time stock which is the Inventory needed during the lead time (i.e., the difference between the order date and the receipt of the inventory


ordered) and the safety stock which is the minimum level of inventory that is held as a protection against shortages due to fluctuations in demand. Reorder Point = Normal consumption during lead-time + Safety Stock. Several factors determine how much delivery time stock and safety stock should be held. In summary, the efficiency of a replenishment system affects how much delivery time is needed. Since the delivery time stock is the expected inventory usage between ordering and receiving inventory, efficient replenishment of inventory would reduce the need for delivery time stock. And the determination of level of safety stock involves a basic trade-off between the risk of stock-out, resulting in possible customer dissatisfaction and lost sales, and the increased costs associated with carrying additional inventory. Another method of calculating reorder level involves the calculation of usage rate per day, lead time which is the amount of time between placing an order and receiving the goods and the safety stock level expressed in terms of several days' sales. Reorder level = Average daily usage rate X lead-time in days. From the above formula it can be easily reduced that an order for replenishment of materials be made when the level of inventory is just adequate to meet the needs of production during lead-time. Here reorder level of main five materials in corresponding years are calculated. They are: common salt


alum barium carbonate flocculent soda ash

Table showing reorder level


Avg. on (in MT)

Lead (in days)

Reorder Level MT) (in

Consumpti Time






















Chart showing reorder level


Interpretation The average consumption of main five raw materials has been taken here for calculation. Reorder level of these raw materials shows a varying trend. It falls, rise and then falls. It is clear from the above graph that it shows same pattern of movement. Reorder level in the current year is less due to the decline in average consumption as compared to previous year. It is because of the problem faced by the company regarding cost and production capacity.


6. ECONOMIC ORDERING QUANTITY The economic order quantity can be defined as the quantity which is most economical to order at a time. In other words, it is the ordering quantity which minimizes the total cost of inventory. The total cost of inventory comprises ordering cost & caring cost. Ordering cost is those cost which are relating to acquisition of materials. These include the cost of placing a purchase order. Carrying cost refers to cost of holding or carrying the stock in storage (i.e. storage cost). EOQ is that quantity at which the total inventory cost is minimum i.e. the ordering cost & carrying cost are equal.





Underlying assumptions 1. The ordering cost is constant. 2. The rate of demand is constant


3. The lead time is fixed

4. The purchase price of the item is constant i.e. no discount is

available 5. The replenishment is made instantaneously; the whole batch is delivered at once. EOQ is the quantity to order, so that ordering cost + carrying cost finds its minimum. EOQ= 2 CO / I C = Annual consumption O = Cost per order I = Inventory carrying cost / unit In EOQ ordering cost and carrying cost finds minimum Ordering cost carrying cost Low high




When ordering cost moves from low to high then the carrying cost will move from high to low. So EOQ can determine the optimal level of quantity which makes the minimum total cost.

Here EOQ of main five raw materials are calculated. Raw materials are: Common salt Alum Barium carbonate

Soda ash EOQ of Common Salt Table no.6.1 Year 2004-05 2005-06 2006-07 2007-08 2008-09 Qty 81609 90309 99393 72669 81465 Order cost 1200 1250 1250 1300 1300 Carrying cost 49 136 126 108 134 EOQ 1999 1288 1404 1322 1257


Chart No.6.1

Interpretation The graph shows that EOQ of common salt is varying in every year because of its increased consumption and increased trend of ordering cost. The average EOQ of common salt is 1454 which are higher than other raw materials in inventory because of its higher consumption


EOQ of Aluminum Sulphate Table No.6.2 Year 2004-05 2005-06 2006-07 2007-08

Qty 2 3.1 7.025 11.50


Order cost 1200 1250 1250 1300


Carrying cost 61 100 171 162


EOQ 8.87 8.62 13.25 13.61


Chart No.6.2



The table shows EOQ of alum is increasing in every year because of its increased consumption and increasing trend of ordering cost and varying trend of carrying cost EOQ of Barium Carbonite Table No.6.3 Year 2004-05 2005-06 2006-07 2007-08 2008-09
Chart No.6.3

Qty 644.45 673.5 724.5 617.58 486.23

Order cost 1200 1250 1250 1300 1300

Carrying cost 124 98 118 93 104

EOQ 111.68 131.08 123.89 131.39 110.25


Interpretation The graph shows the EOQ of Barium Carbonite is varying in every year because of its varying consumption and increasing trend of ordering cost and varying trend of carrying cost. We can see an alternative increasing and decreasing trend of EOQ of barium carbonite

EOQ of Flocculent Table No.6.4 Year 2004-05 2005-06 2006-07 2007-08 2008-09
Chart No.6.4

Qty 1125 875 850 800 710

Order cost 1200 1250 1250 1300 1300

Carrying cost 116 100 111 59 140

EOQ 152.56 147.90 138.36 187.76 114.83


Interpretation The graph shows EOQ of flocculent is varying in every year because of its varying consumption and increasing trend of ordering cost and varying trend of carrying cost. Because of less carrying cost, increased consumption and increased ordering cost, the EOQ of Flocculent is higher in the year 2007-08

EOQ of Soda Ash Table No.6.5 Year 2004-05 2005-06 2006-07 Qty 426.3 364.15 453.65 Ordering cost 1200 1250 1250 Carrying cost 133 98 107 EOQ 87.7 96.38 102.95


2007-08 2008-09

335.36 440.62

1300 1300

93 91

96.82 112.20

Chart No.6.5


Interpretation The above table shows the EOQ of soda ash is varying in every year because of its varying consumption and increasing trend of ordering cost and varying trend of carrying cost


Here the calculations had been made on inventory turn over

ratio, inventory structure analysis, inventory holding period, reorder level, EOQ . Every calculation shows fluctuations
Inventory to current asset ratio shows a fluctuating trend.


fluctuations may be due to the changing trend of inventory and current assets. Most of the administration works are manually and this will cause the delay in recording The sections having the full data about the items, the stock checking is done from the computer screens print outs and sorting is done manually and recording. checking The codification is following in a good manner and this is simplifying the identification work of items There are very limited number of employees in the inventory control department The sections without the complete data are very difficult to updating and stock


Increase the number of employees in the inventory department

TCC should have to follow theoretical approach in inventory department

The departments related with the inventories should be automated


The norms following in inventory control by TCC is not that much effective to give a good profit to the firm. inefficient inventory control. The current year annual report shows more than 50% loss in the firm which may be due to the Companys utilization of inventory in generating sales is good. But all the factors are fluctuating. So proper maintenance of inventory should be taken into consideration, as it helps to reducing the wastage and in sales promotion. Because every firm will like to hold higher level of inventory for the future. This will enable the firm to be more flexible in supplying to the customer. Most of the customers require immediate delivery. Higher inventory will help to meet their demand and also there is no chance for the loss of sale will help in customer satisfaction and can earn more and more profit.


ONLINE REFERENCE OTHER REFERENCE Principles of inventory management john A Muckstadt, Amar Sapra Essentials of inventory management Max Muller TCCL ANNUALREPORT 2008-2009 ANNUAL ACCOUNTS 2008-2009