LOVELY PROFESSIONAL UNIVERSITY

DEPARTMENT OF MANAGEMENT
Report on Summer Training

Submitted to Lovely Professional University

In partial fulfillment of the Requirements for the award of Degree of
Master of Business Administration (Information Technology)
Submitted by:
SWATI DUBAY
University Roll No.:
RQ3205A07
DEPARTMENT OF MANAGEMENT
LOVELY PROFESSIONAL UNIVERSITY
JALANDHAR NEW DELHI GT ROAD
PHAGWARA
PUNJAB

PREFACE



I hereby declare that the project entitled A study on Inventory Management System at
Century Pulp and Paper submitted in partial fulfillment of the requirements for award of the
degree of MBA(IT) at Lovely Professional University.

Summer training constitutes an important part a good practice to the syllabus of MBAIT, every
student has to undergo 6 weeks summer training for exposure in any commercial industry or
organization. so for the partial fulfillment of this requirement ,I underwent my training at
Century Pulp and Pulp.

Training is necessary to understand that how theoretical concepts are applicable practically.
During my short stay in the organization, I was introduced to entire company. I visited many
department-Human Resources, Accounts, Administration, Regulatory & Safety, main plant,
Store & Purchase etc.







SWATI DUBAY
(11201536)
MBA(IT)



















ACKNOWLEDGEMENT

Firstly I would like to express our immense gratitude towards our management of Century Pulp
and Paper at lalkua (Nainital) for providing me the opportunity to get an exposure of their
esteemed unit.

I would thank all the HR department for coordinating my training and explicitly express my
thanks to Mr.T.C.Pandey, Sr. Manager (HRD) . I sincerely express my gratitude to Mr.
Harsh, Sr. Manager(System) and the employees in the Store & Purchase department for
guiding and helping me in successful completion of the project.


I am very much thankful to our Amanpreet Kaur (Internal Guide) for extending his guidance
and cooperation in doing this project.

I am also thankful to our project coordinator Mr. Pritpal Singh for extending his cooperation in
completion of Project.

I convey my thanks to my beloved parents, friends and my faculty who helped me directly or
indirectly in bringing this project successfully.


SWATI DUBAY
MBA(IT)
3
rd
Semester










Table of Contents

CONTENTS PAGE NUMBER
CHAPTER-1

1.1 Introduction to the study1
I. Definition
II. Scope
III. Mission
IV. Objective

1.2 Need for the study .3
1.3 Objectives of the study
1.4 Scope of the study
1.5 Limitations of the study
1.6 Research methodology
I. Formulating Research Problem
II. Extensive Literature Survey
III. Data Collection
IV. Analysis & Interpretation

CHAPTER-2

2.1 Company profile
Introduction
Product
Commitment to Quality & Service
Care for Environment
Towards Sustainable Development
Awards & Highlights
2.2 Process Description
CHAPTER-3
3.1 Inventory Management
Meaning of Inventory

Types of Inventory
Stores & Spares
Basic reasons to keeping an inventory
Meaning of Inventory Management
Operating Cycle of Inventory Management
Database Of Material Management
Costs Involved In Inventory

3.2 Purchase & Stores Procedure

Purchase Department
Receiving & Inspection Department
Inventory Control Department
Production Department
Stores Keeping Department

CHAPTER-4

4.1 Techniques used in CPP for Inventory Management

4.2 Inventory S/W used in CPP[ERP]
ERP System Defined
Evolution of ERP System
ERP System & Organization
Advantage & Disadvantage of ERP System


CHAPTER-5
5.1 Data analysis and interpretation
Inventory Control Techniques

CHAPTER-6
6.1 Findings and suggestions
6.2 Conclusion
6.3 Bibliography




ABSTRACT

Inventory Management is one of the process is used in every company. Before computer age
and integration, paper tables and paperwork solutions were being used as inventory management
tools. These we very far from being a solution, took so much time, even needed employees just
for this section of organization. Every process was based on paperwork, human fault rate was
high, the process and the tracing the inventory losses were not possible, and there was no
efficient logging systems. After the computer age, every process is started to be integrated into
electronic environment. And now we have qualified technology to implement new solutions to
these problems. Software based systems bring the advantages of having the most efficient control
with less effort and employees.

Most importantly ,Now these days most company used the ERP and SAP system and In this
report the ERP system is used for Inventory Management System.

This project of INVENTORY MANAGEMENT gives us the complete information about the
inventory . We can enter the record of new items and retrieve the details of items available in the
store. We can issue materials to the department and maintain their records and can also check
how many materials are issued and how much stock available in the store. if the materials is not
available in the store then demand for purchase In this project we can maintain the inventory of
company.










INTRODUCTION OF THE STUDY

Inventory Management System (IMS) is generally used by IT Office/Department or Accounting
Office of a company or a university. Therefore, searching the basic needs for implementation is
the first step of IMS design. Several meetings with IT Office and Accounting Office are
arranged.
Accounting Office needs detailed reporting tools, detailed categorization and declaration of
specifications on each item, purchasing and billing info. The Information Technologies Office
needs another module except the requirements of Accounting Office. The module is about the
interior maintenance and exterior product service flow. For interior maintenance flow, there will
be a section. This section will be available for all users or departments. Basically, a maintenance
request will be created by the users or departments , and the IT Office will respond to these
requests. Finally, it is necessary to consider the Departments needs that are also important part of
the IMS.
An efficient system of inventory management will determine:-
1. What to purchase
2. How much to purchase
3. From where to purchase
4. Where to store etc.

Effective inventory management enables an organization to meet or exceed customers
expectations of product availability while maximizing net profit.
Inventories constitute about 60% of current assets of companies of India. The manufacturing
companies hold inventories in the form of Raw material, work in process, finished goods, store
& spares , chemicals, lubricants etc.


Martin and miller identified three general motives for holding inventories

TRANSACTION MOTIVE:-
This refers to the need of maintaining inventory to facilitate smooth production and sales
operations.

PRECAUTIONARY MOTIVE:-
Precautionary motive for holding inventory is to provide a safeguard when then actual level of
activity is differ than anticipated. This inventory serves when there is a unpredictable changes in
the demand and supply forces.

SPECULATIVE MOTIVE:-
This motive influences the decision to increase or decrease the levels of inventory to take the
advantage of price fluctuations.



1.1.1. Definition

Inventory can be defined as any idle resource or tangible asset which can be seen, weighed, and
counted. This includes supplies, raw materials, work in process (WIP), and finished goods.









Goldratt and Cox's (1992) definition is "money the system invests in things that it intends to
sell: materials waiting to be processed, work in process, and finished goods" .


Inventory Management is an enterprise-wide discipline concerned with the identification and
tracking of Information Services (IS) hardware and software assets. Its three main areas of
concern are:-
Acquisition.
Redeployment.
Termination.
Acquisition procedures are established to assist personnel in procurement of software and
hardware products. Its main purpose is to ensure that proper justifications are performed and that
financial guidelines are followed.

Redeployment procedures are responsible for ensuring that assets are tracked when moved from
one location to another and that budgetary considerations are adjusted as needed. Should a
product be moved in conjunction with its original owner then the Inventory System is updated to
reflect the new location. Should a product location and owner change, then the Inventory System
must be updated to reflect the new owner and their location. In this case, the old product is
deleted from the original owner's budget and added to the new owner's budget.

Termination is responsible for deleting the asset from the inventory when it is discontinued, or
replaced. The owner's budget will be updated to reflect the asset termination and the asset will no
longer be listed when location reports are generated.

Inventories represent investment of a firms funds. The objective of the inventory
management should be the maximization of the value of the firm. The firm should
therefore consider costs, return risk factors in establishing its inventory policy.
Two types of costs are involved in the inventory maintenance:-
ordering cost requisition , placing of order, transportation, receiving, inspecting storing,
clerical staff are fixed per order. Therefore , they decline as the order size increases.
RAW
MATERIALS
WORK IN -
PROGRESS
FINISHED
GOODS

carrying cost warehousing ,handling, clerical staff, insurances & taxes. carrying costs
vary with inventory holding, As order size increases & therefore the carrying costs
increases .
The goal of the reorder point/EOQ method is to minimize the total cost by balancing the cost of
ordering material against the cost of storing material:-

Ordering decreases as order quantity increases,
Storage cost increases as order quantity increases, and
Total cost = ordering cost + storage cost.

1.1.2. Scope
The Inventory Management discipline encompasses all system and data network elements from
the mainframe through the server level to the PC or end component throughout the enterprise.
All mainframe and data network based hardware and software assets must be identified and
entered into the Inventory System. Any changes to these environments must be reflected in the
Inventory System.
Financial and technical product information must be available through the Inventory System, as
needed to support the functional responsibilities of personnel within the finance and contracts
management departments.

1.1.3. Mission
The mission of an Inventory System is to provide a Central Asset Repository of information used
to define assets and relate the asset to its owner, location, and relative importance. This
information will provide personnel with data needed to support their job functions, for example:

Facilities Management will be able to plan Heating, Ventilation and Air Conditioning (HVAC)
requirements, as well as power and floor space needed to support equipment listed in the Asset
Repository for a specific location.
Financial Services will be able to budget for asset procurement, depreciate assets over time, and
prepare complete tax documents.

Contracts Management will be able to negotiate vendor discounts and enterprise agreements.


Contingency Planning personnel will be able to develop recovery plans for mainframe and
office assets contained within the Inventory System based on the assets relative importance (as
stated within the Criticality field).

Technical personnel will be able to resolve problems more quickly with the information
contained within the Inventory System, because they will have a listing of the assets contained
within a location and any support or maintenance activities associated on the asset.

The Inventory System should be integrated within the everyday functions performed by
personnel associated with entering and maintaining asset information. The system will reduce the
effort devoted to asset management, while supplying many personnel with the information they
need to perform their functional responsibilities.

1.1.4. Objectives
The objective of Inventory Management is to manage the physical and logical properties of I/S
resources and their relationship, while ensuring that service level commitments are achieved.
This process will:
Ensure efficient and timely identification of vital corporate assets.
Assist in managing the enterprise-wide inventory.
Provide a common repository for asset protection.
Plan and control the proliferation of assets across the enterprise.
The possible objectives of concern to inventory managers include:
I. Cost minimization (with or without discounting).
II. Profit maximization (with or without discounting).
III. Maximization of rate of return on stock investment.
IV. Determination of a feasible solution.
V. Keeping at an acceptable level the amount of human effort expended in the management
and control of inventories.
VI. Ensuring flexibility to cope with an uncertain future.
VII. Minimizing political conflicts (in terms of the competing interests) within the
organization.
VIII. Maximizing the chance of survival of the individual managers position or of the firm
itself.

NEED OF THE STUDY

1. How to make the inventory system more efficient & effective?


2. By Which way the cost can be minimized that is invested in the inventory & how to
regulate the whole inventory system in a better way?


3. As we know that century is a very big organization & it is typical to coordinate with all
the employees who are working there. But for the effective inventory system there should
be coordination between the store & purchase department and finance department. so
what should be done for the coordination between the departments to make the inventory
system effective?


OBJECTIVE OF THE STUDY
The main aim of study is to check the efficiency & effectiveness of inventory management
system. Investment in inventory incurs a high cost therefore effective management is necessary
to minimize the cost & ultimately increases profitability of an organization.
A part from our main objective ,our main objective are:-
1. To analyze the level of inventory management by CPP.
2. To analyze the investment in inventory management.
3. To study about the ordering levels for the important components of inventory.
4. To understand and measure economic order quantity for the selected raw material items.
5. To analyze its inventory management methods with the help of ABC analysis, VED
analysis etc.
6. To evaluate the inventory management practices of CPP.
7. To offer suitable suggestions for the improvement of inventory management practices.


SCOPE OF THE STUDY


Inventory management is a simple concept-dont have too much stock and dont have too little.
Since there can be a substantial costs involved in staying above and below the optimal range,
careful inventory management can make a huge difference in the right balance can be quite a
complex and time consuming task without the right technology.

Inventory management is very important for CENTURY PULP AND PAPER. It enables the
business to meet or exceed expectations of the customers by making the products readily
available.


The scope of the study includes the ABC Analysis of Raw Materials, work in progress and
finished goods for financial years.

This study provides insight to the management of high value items and also brings attention
of management towards movement of A class items over period of years.


LIMITATIONS OF THE STUDY


Detail study about all the material was not possible because of time limit.

Some of the information was kept confidential by the stories department.

Study was confined only to the selected components in the stores department.



RESEARCH METHODOLOGY


The data has been gathered through interaction and discussions with the executives working in
the division. Some important information has been gathered through couple of unstructured
interviews of executive .Annual reports and other magazines published by the company are used
for collecting the required information.

Research covers the search for retrieval of information for a specific purpose. Basically research
is the objective and systematic method of finding solution to a problem .The steps followed to
conduct this study are as follows:-
I. Formulating research problem:-The problem under study ,how effective are the
measures applied by CPP. Material is important for the efficiency of the system. It
is a matter of great importance for inventory department .
II. Extensive literature survey:- Many published studies, books or materials on
effective control of inventory were referred to for getting a true direction to
research process.
III. Data collection :- The study is conducted through collection of data through
surveys, interviews with officials etc. Personal interviews were conducted where a
set of preconceived questions were asked from the officers of inventory
department regarding materials control policies adopted by them,ABC analysis
was used where sample of materials was graded under 3 categories:-A ,B,C .

IV. Analysis & interpretation :- The data about inventory is analyzed to find out the
effectiveness & efficiency of inventory policy.

Sources of data :-
1. Through asking the question from the employee.
2. Internet
3. From the Stores & Purchase
4. By the inventory software that is used in CPP.

COMPANY PROFILE

Century Pulp & Paper
Introduction:-
Century Pulp And Paper, a unit of Century Textiles & Industries Ltd. and a member of B.K.Birla
Group of Companies. The Chairman of the company is Mr. Basant Kumarji Birla. Century Pulp
And Paper was established in 1984.Location of the plant is at Lalkua on Bareilly-Nainital Road,
5 Km from Pant Nagar towards Haldwani. The Company is pioneer in Bagasse based paper
manufacturing throughout the country.

Machinery Used :- Most modern machinery with latest technology

Raw Material :- Bamboo, Wood,Vineer Chips,
Bagasse , Waste Paper, Soft Wood Pulp

Products Manufactured:- All types of Writing & printing Papers, Rayon Grade Pulp,
Tissue Paper & Packaging Board.
Permanent Staff &
Workers :- 798 + 2119 = 2917 approx


Products:-

The Company makes a wide variety of Paper grades, high quality dissolving Rayon Grade Pulp,
Tissue Paper & Packaging Board. The Companys principle products in paper are Azuare-laid,
Century Maplitho, Century Excel, Copier, Duplicating, S.S.Maplitho, Super printing, Chairman
Bond and Coating base paper.

It also manufactures Rayon Grade Pulp which is used for Viscose Staple Fiber/Filament Yarn by
Textile industries, Paper Grade Pulp for making special grade of paper and RG (HB) Pulp for
Urea Melamine Formaldehyde applications.
Company manufacture a variety of Tissue papers like; Facial, Toilet, Napkin and Towel Tissue.
The company produces a range of multi layer packaging board (170-500 GSM).

Presently the following main plants are in existence within the campus:-

W.P.P. PLANT

Integrated Pulp & Paper Unit based on Eucalyptus and Bamboo furnish. Two Paper Machines
with 115 TPD Capacity. Paper M/c I equipped with Size press. Capable to manufacture 44-210
gsm(gm/sq.metre). Machine deckle is 2.69 meters. Rewinders are Jagenberg make with
1000m/min speed and cutters are of 1.45m. width with 200m./min speed.

R.G.P. PLANT

Based on Eucalyptus & Poplar furnish. Bleaching sequence includes Chlorine di-oxide
treatment. Sheeting M/c with 105TPD production with on machine cutters and baling press.
(Make Carcano, Italy make). M/c deckle 2.4 meters.


BAGASSE PLANT


Based on Bagasse furnish 84%, Eucalyptus and Bamboo 10% and imported Pulp 6%. Paper
machine equipped with Film Press for on-line coating with 235 TPD production. Capable to
manufacture 40-120 gsm including light weight coated varieties. M/c deckle 5.2 meters.

RE CYCLE FIBRE PLANT

A second fiber based plant manufacturing writing printing paper. DIP plant is equipped with two
stage floatation and two-stage bleaching. Latest technology incorporated in this plant facilitates
production of finest paper quality in this category. The product range includes writing and
printing papers of 52-130 GSM.

TISSUE PLANT
Prime grade tissue plant of 100 TPD with hi-speed machine (2000MPM) supplied by metso is
equipped with latest technology to produce finest quality in this category. The product range will
include facial, napkin, toilet, C-fold, and kitchen towel etc. in the range 13-40 GSM.

BOARD PLANT
Based on Wood & Waste paper, Voith Machine equipped with latest technology, capable to
produce 500 TPD finest quality Packaging Board with 600 MPM speed. The product range
includes 4 layer board of 170 to 500 GSM, M/C Deckle is 3.75 Mtr.

POWER BLACK
Power houses has 9 coal & pith fired boilers and three turbines. The turbines are of 6.8 MW
BHEL TG Set (extraction back pressure), 21 MW TDK TG Set and 16 MW BHEL Turbine, 43
MW TG Set (All are Double extraction condensing type).
8 boilers are fluidized bed boilers out of which, 1 F.B.C. Boiler is of 100 T/hr, 62 kg/cm2, 480
degree Celsius, 3 F.B.C. Boilers are of 23 T/hr, 47 ata, 420 degree Celsius each and 2 F.B.C.
Boilers are of 50 T/hr, 63 ata, 480 degree Celsius each, 1 boiler is spreader stoker coal fired
boiler of 25 T/hr, 47 ata, 420 degree Celsius and 1 boiler is coal cum pith fired boiler of 60 T/hr,
66 ata, 485 degree Celsius, 1 new coal boiler of 100 T/hr, 65 Kg/ Cm2, 480 degree Celsius.

CHEMICAL RECOVERY PLANT


Chemical Recovery Plant recovers cooking chemicals spent during cooking operation in
digesters with the help of latest technology available. These chemicals are reused in cooking
operation in Pulp Mill. The liquor received from Pulp Mill is called Black Liquor and the liquor
supplied back to Pulp Mill is called White Liquor based on their colour appearance. The Black
liquor contains substantial quantity of organic matter like lignin which when burnt in Recovery
Boiler along with Black liquor releases enormous amount of heat which is utilized to generate
high pressure steam and is sent to turbines to generate power. The black liquor is first
concentrated in Evaporators, then burnt in Boilers and thereafter is reacted with Lime (Calcium
oxide) in Causticizing section to finally recover the spent chemicals. Make-up sulphur and lime
stone are added in the system as per requirement. Lime is produced in Rotary Lime Kilns by
burning the mud (Calcium Carbonate) obtained from Causticizing Section.

Commitment to quality & service
At century quality is an all-pervasive commitment. We strive to continually improve the quality
of our products and services, which have been, affirmed in the form of ISO 9001:2008
certification to the company for its quality management system. The company has been
responsive to the changing market requirement and has developed new quality products to care
to the varying end uses.
Care for environment

Preserving and protecting the environment is a top priority at century. We are always sensitive to
our bio-diversity of the soil, water and air around us.
CPPs power plant maintains an efficient system for reducing air emission. Electrostatic
precipitators have been installed to remove particulates from recovery boilers, coal fired boilers
and lime kiln flue gases.
In strict adherence to the standards and guidelines, the effluents are treated in a modern ETP,
which is recognized as a model plant for its efficiency and performance.
Companys adoption of a systematic approach to the environment matters including waste
minimization, water recycling and re-use programs of by products has facilitated the company in
getting the ISO-14001: 2004 certification for its environment management system.
Companys friendship with environment has also reflected in its Bagasse based paper being
licensed for eco labeling, a distinct honor to be attained.

Towards sustainable development
Caring for the community

Century cares for community at large and strives to be a good corporate and social citizen. We
actively contribute to the community development of the areas in our surroundings and regularly
conduct medical campus, undertake construction work of schools, drinking water facilities, self-
employment schemes etc.


Awards and highlights

In Farmers Fair 2012 CPP is awarded first Prize. The unit adjudged first among Agro-
forestry, Nursery, Herbal and Medicinal plants group in the AgroIndustrial Exhibition
held from 4 Sept. to 7 September, 2012 at G. B. Pant Univ. of Agriculture &
Technology Pantnagar, Uttarakhand

In Farmers Fair 2012 CPP is awarded first Prize. The unit adjudged first among Agro-
forestry, Nursery, Herbal and Medicinal plants group in the AgroIndustrial Exhibition
held from 15 th to 18 th March 2012 at G. B. Pant Univ. of Agriculture & Technology
Pantnagar, Uttarakhand
State energy conservation award 2011, first prize under the category of large and
medium scale industries at Dehradun on 14.12.2011.
Units Quality Circle AGRO has secured Excellent Award in the 24
th
National
Convention on Quality Circles, organized by Quality Circle Forum of India,
(Visakhapatnam Chapter) held at Visakhapatnam on 28
th
December 2010 for their case
study presentation.
The unit was awarded for outstanding achievement in Energy Conservation State
Energy Conservation Award 2010, IInd Prize by UREDA, Uttarakhand, under
the category of Large & Medium Scale Industries at Dehradun on 14.12.2010.

Units Quality Circle AGRO has secured Gold Award in the 2
1st
Regional
Convention on Quality Circles, organized by Quality Circle Forum of India, Kanpur
Chapter, held at Kanpur on 13 November 2010 for their case study presentation.

State energy conservation award 2009, first prize under the category of large and
medium scale industries at Dehradun on 14.12.2009.
Excellent award to Agro quality cycle (Bagasse process) in National Convention on
Quality Circles (NCQC-09) held at Bangalore on 19.12.09.
National Energy Conservation award in Pulp and paper sector for the year 2004, 2006
& 2008 by Govt. of India at New Delhi.
National Award for Excellence in Energy Management for the year 2007&2008 by CII.

National Safety Award for outstanding performance in Industrial safety for the
performance year 2007 by Govt. of India, as runner up on 17 Sep 2009 at New Delhi.
IPMA Environment award - 1
st
prize for environment conservation in 2006 for the year
2005-06.
Energy conservation award for the year 2002&2004 by Indian Paper Makers
Association.
Based on Environment Management & Cleaner Technology adopted, CPP was selected
as a Model Unit in the field of Waste Minimization audit by CPCB/NPC.
Award Eco-Labeling for copier paper from bagasses & some of the verities of
writing printing paper from bagasse.


PROCESS DESCRIPTION:-

The Company has three streets of Production viz., W.P.P., Bagasse & R.G.P. Plants. A wide
variety of writing and printing paper is manufactured in W.P.P. & Bagasse Plants and Rayon
Grade Pulp is manufactured in R.G.P. Plant.
The main steps in manufacturing Paper/ Rayon Grade Pulp are as follows :

Chipping of the logs of Bamboo, Eucalyptus/Poplar in WPP Street and Eucalyptus in RGP
Street to about 1 size chips and storage in Chips Silo.

Bagasse unloading, handling, depithing, Pile building, reclaiming and washing in Bagasse
Street.

Cooking Sulphate Process : In WPP & RGP Streets, Vertical Batch Digesters (for Chips
cooking) & in Bagasse Street, Continuous Tube type Digester (for Bagasse fiber cooking) are
in operation. The cooking process is carried out at preset temperature and pressure in
presence of cooking chemicals for specified cooking period.

Removal of Knots/uncooked/partially cooked portion of the material obtained from Digesters
on the knotters.

Washing of Pulp in Brown Stock Washers to remove Spent Chemicals and organic matter.
Screening & Cleaning of the Pulp to remove impurities.


Bleaching of the Pulp based on the latest technology to attain final Pulp brightness as per
requirement.

Sizing & Loading of Pulp Stock in the Stock preparation section to achieve desired qualities
in final product.
Paper sheet formation in Paper Machines (WPP & Bagasse Streets) equipped for on-line
quality products.

Pulp sheet formation in Sheeting Machine in RGP Street equipped for on-line quality
products.

MANUFACTURING PROCESS



If Space are not met








If Not Accepted


Raw Material
Chemical &
Physical Test
Follow Procedure Control of
Non-Confirming Product
Store in Raw Material Yard
Cut to sizes as per requirement
Feeding into Re Heating Furnace
Rolling roughing mill, Intermediate
mill, finishing mill
Test Physical
Dimension
Rejection
Controlling
Cutting to Regulate Length & Straightening


If Not Accepted




INVENTORY MANAGEMENT
MEANING OF INVENTORY
Inventory is a list for goods and materials, or those goods and materials themselves, held
available in stock by a business. It is also used for a list of the contents of a household and for a
list for testamentary purpose of the possessions of someone who has died. In accounting
inventory is considered an asset.

TYPES OF INVENTORIES
Inventories play a major role in a business or depending on nature of the businesses. The
inventories may be classified as under.

(I) Raw Materials:-
Materials and components scheduled for use in making a product. These are the basic inputs,
which are converted into finished products through manufacturing process. Raw material
inventories are those units, which have been purchased and stored for future production.

(II) Work in process / Progress:-
Materials and components that have begun their transformation to finished goods. Materials
issued to the stop floor, which have not yet become finished products they are value added
materials to the extent of labor cost incurred.

(III) Finished Goods:-
A finished goods is a completed part that is ready for a customer order. These goods have been
inspected and have passed final inspection requirements so that they can be transferred out of
work-in-process and into finished goods inventory. From this point, finished goods can be sold
directly to their final user, sold to retailers, sold to wholesalers, sent to distribution centers, or
held in anticipation of a customer order.

STORES & SPARES
The level of four kind of inventory depends upon the nature of the business. Supplies include
office and cleaning materials like soap, brooms, oil, light, blubs etc. these materials do not
directly enter production, but are necessary for production process.
Sampling inspection for
Chemical & Physical Properties
Rejection
Finished Goods Yard


BASIC REASONS TO KEEPING AN INVENTORY

There are three basic reasons for keeping an inventory:-

1. TIME:- The time lags present in the supply chain, from supplier to user at every stage,
requires that you maintain certain amount of inventory to use in this lead time.

2. UNCERTAINTY:- Inventories are maintained as buffers to meet uncertainties in
demand, supply and movement of goods.
3. ECONOMIES OF SCALE:- Ideal condition of one unit at a time at a place where user
needs it, when he needs it principle tends to incur lots of costs in terms of logistics. So
bulk buying, movement and storing brings.

MEANING OF INVENTORY MANAGEMENT
Inventory management is primarily about specifying the size and placement of stocked goods.
Inventory management is required at differ 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. The scope of inventory management also
concerns the fine lines between replenishment lead time, carrying costs of inventory, asset
management, inventory forecasting, inventory valuation, inventory visibility, feature inventory
price forecasting, physical inventory, available physical space for inventory, quality
management, replenishment, returns and defective goods and demand forecast.

Inventory management involves:-
Inventory management is the active control program which allows the management of
sales purchases and payment.
System and processes that identify inventory requirements, set targets, provide
replenishment techniques and report actual and projected inventory status.
Inventory management helps providing a good understanding ground and the capacity to
control financial costs.
The Inventory management will control operating costs and provide better understanding.

OPERATING CYCLE OF INVENTORY MANAGEMENT
Operating Cycle is the time duration to convert sales after the conversion of resources into
invention, into sales there is difference between current assets and fixed assets. A firm required
many years to recover initial invests in fixed assets such plant and machinery or land buildings or
furniture and fixtures etc. On the contrary, investment in current assets such as inventory and
books debts are realized during the firms operating cycle, which in usually less than a year.

The operation cycle can be said to be the heart of the working capital. The need for working
capital or current assets cannot be over emphasized as already observed. The main motive of
many business firms is to achieve maximum profits, which can be earned depending upon the
magnitude of the sales among other things. However, sales do not convert in to cash instantly.
There is invariable time lag between sale of goods and receipts of cash. Therefore the need of
working capital in the form of current assets to deal with the problem arising good sold.


Therefore, sufficient working capital requires sustaining sales activity. Technically this is refer to
as the operating the cash cycle. The continuous flow form cash to supplies to inventory to
accounts receivable and back into cash what is called operating cycle.



Material or Inventory Management include Two contents :-
Material
Management

MATERIALS

1. Raw Material:-
Wood
Baggase
Bamboo
Chemical
Coal
2. General Store:-
Jug
Pipe
Color
CASH
RAW
MATERIAL
WORK IN
PROGRESS
FINISHED
GOODS
SALES
DEBTORS

Rope
3. Spare:-
Bearing
Motor
Valve
Shaft
4. Packing Material:-
Wrapper
Box
Plastic
Sticker
5. Furniture:-
Fan
Table
AC
6. Finished Paper:-
Copper Paper
Real Paper
7. Main Machinery
MANAGEMENT

Procurement
of Material
Recipt of
Material
Consumtion
of Material
Material
Requirement


Procurement of Material
Purchase Requisition
Purchase Indent
Quotation for Purchase
Order for Purchase
Storage of Material
Receipt of Material
Checking of Material(Physical/Quality)
Shifting of Material to right Place
Issue of Material
Issue Requisition
Issue of Material
Update of Record
Accounting

DATABASE OF MATERIAL MANAGEMENT:-





Advantages of Inventory Management

The following are suggested advantages:-
1. Eliminates wastages in use of material.
2. It reduces the risk of loss form fraud and theft.
3. It helps in keeping perpetual inventory and other records to facilitate the preparation of
accurate material reports management.
4. To reduce the capital tied up in inventories.
5. It reduces cost of storage.


Disadvantages of Inventory Management
Every firm has to maintain optimal level of inventories. It not the following will be the result
in form of losses.


1. Opportunity cost : Every firm has to maintain inventory for that some investment is needed it
is known as opportunity cost and handle the investment in inventory are more the funds are
blocks up with inventory.

2. Excessive inventories: It will lead to firm losses due to excessive carrying costs the risk of
liquidity. It is also referred as danger level.

3. Inadequate Inventory: It is another danger which results is production hols-up and failure to
meet delivery commitments. In adequate raw materials and work - in - process inventors will
results in frequent production interruptions. It finished goods are not sufficient customers may
shifts to competitors.

4. Danger due to physical decoration: It is one of the reason with the inventories due to
maintaining stocks at high levels they will be deteriorated due to passage of time, sometimes due
to mishandling or improper storage facilities.


COSTS INVOLVED IN INVENTORY
Every firms maintains inventory depending upon requirement and other features of firm for
holding such inventory some cost will be incurred there are as follows .

Carrying Cost:-
This is the cost incurred in keeping or maintaining an inventory of one unit of raw materials,
work-in-process or finished goods. Here there are two basic cost involved.

Cost of Storage:-
It includes cost of storing one unit or raw materials by the firm. This cost may be for the storage
of materials. Like rent of spaces occupies by stock, stock for security, cost of infrastructure, cost
of insurance, and cost of pilferage, warehousing costs, handling cost etc.

Cost of Financing:-
This cost includes the cost of funds invested in the inventories. It includes the required rate of
return on the investments in inventory in addition to storage cost etc. The carrying cost include
therefore both real cost and opportunity cost associated with the funds invested in the
inventories.
The total carrying cost is entirely variable and rise in directly proportion to the level of
inventories carried.

Total carrying cost = (carrying cost per unit) X (Average inventory)



Cost of Ordering:-
The cost of ordering includes the cost of acquisition if inventories. It is the cost of preparation
and execution of an order including cost of paper work and communicating with the supplier.

The total ordering cost is inversely proportion to annual inventory of firm. The ordering cost may
have a fixed component, which is not affected by the order size: and a variable component,
which changes with the order size.
Total Ordering Cost = (No of orders) X (cost per order).

Cost of Stock out:-
It is also called as hidden cost. The stock out is the situation when the firm is not having units of
an item is stores but there is a demand for that item either for the customers or the production
department. The stock out refers to zero level inventories. So there is a cost of stock out in the
sense that the firm faces a situation of lost sales or back orders. The stock outs are quite often
expensive.
Even the good will of firm also be effected due to customers dissatisfaction and may lose
business in case of finished goods, where as in raw materials or work in process can cause the
Production process to stop and it is expensive because employees will be paid for the time not
spine in producing goods.

The carrying cost and the ordering cost are opposite forces and collectively. They determine the
level of inventors in a firm.

Total Cost = (Cost of items purchased) + (Total Carrying and ordering cost)

PURCHASE & STORES PROCEDURE

In inventory management the purchase department store department plays a major role to be the
effective inventory there must be cooperation of various departments such as purchase receiving
and inspection stores production and stock control departments.

The main functions of each department are as follows:-
Purchase Department
It is responsible for purchase of all necessary goods of proper quality to produces, without
interruption to supply the finished goods.
1) It receives purchase requisitions.
2) Invites quotations or tenders from suppliers with desired quality.
3) Issue purchase orders to the selected supplier.
4) Certify the quality and quantity of order received in specified time
5) Approve purchase invoice for payment after checking invoice for paying after checking prices
and extensions if any needed.

Material Cost
Materials cost of a job or cost unit can be ascertained by multiplying the quantity consumed for
the job or cost unit by the price of the materials. For ascertaining the quantity consumed for each
job or cost unit we have devised material requisition which will indicate the quantity required for
the job and the job number against which the material cost will be change directly.

For indirect material issued the material requisition will not indicate the job number but the
cost center number will be indicated for charging to relevant cost center as indirect materials.

Thus in order to ascertain material cost.
1. Make valuation of purchase.
2. Make use of proper valuation of material issue and closing stock following different method
such as, FIFO, LIFO ,WEIGHTED AVG. etc.

The purchase price of material is directly obtained from the suppliers receives and have to be
issued to production before the invoice of materials is received.

The rate per unit, total price of the item as shown in the purchase order plus sundry charges such
as delivery and forwarding charges sales tax, duty etc, may be borne by suppliers, governments
controlled prices by notifications, suppliers, catalogues and circulars may be valuable guides for
obtaining rates of materials.

Delivery charges may be estimated with reference to the kind of transport with charges incurred.
The price may also include sales tax, excise duty, fright etc, so the total cost and rate per unit can
be computed and entered in the stores received registered and posted to stores ledger for the issue
of material to production. In some cases material needs adjustment for any discount allowed
charges for transport containers etc.
Discounts may be like trade discounts quantity discount, cash discounts etc. Transportation and
storage costs may not include the cost of air, sea on land transport and other stores costs, where
the purchaser has to bear the costs. Cost of containers with regarded may not make a separate
charge because of non refundable and also sales tax, excise duty, insurance etc., all the items are
added to Purchase price.

Receiving and Inspection Department
a) Receiving all raw materials and other supplies from various suppliers.
b) Verify items by count, weight etc., and report any shortage
c) Inspect materials and supplied as to quality by analyzing them suitably.
d) Inform the purchasing department and accounts department all facts that may require
adjustment with vendor.
e) Analyze and give them the code depending up on the type of materials.

Stores keeping Department
a) Check and accept all materials form the received department.
b) Identity each material received with the stock list, check the code number and place in the
respective bins.
c) Issue materials and supplies for use upon presentation of authorized requirement.
d) Record quantities received and issued on bin lards or stock ledger cards consisting the
perpetual inventory records.

Production Department
Make out materials requirement note i.e. requisition of requisite quantity and quality of materials
at the right moment so the all materials may be availab1le without delay on production.

1) Check and verify that the materials of requisite quantity and quality have been received and
charged to production.
2) Keep proper records or materials received and their progress through different operations or
progress.
3) Prepare materials return note for excess materials.
4) Prepare materials transfer note to cover any transfer of materials.
5) Prepare report on scrap for reporting to management.

Inventory Control Department
In may be a subdivision of the cost accounting department, although in many concerns, it is a
part of the stores keeping department.
A) It keeps perpetual inventory records.
B) Adjust the stock on receipt of the property authorized adjustment notes.
C) Prepare weekly or monthly, statement of receipts, issue, balance and average consumption of
materials both in terms of quantity and value.


TECHNIQUES USED IN CPP FOR INVENTORY
MANAGEMENT
First in First out (FIFO)
This is the price paid for the material first taken into stock from which the material to be priced
could have been drawn. Under this method stocks of materials may not be used up in
chronological order but for pricing purpose it is assumed that items longest in stocks are used up
first. The method is most suitable for use where in material is slow - moving and comparatively
high unit cost.
Advantages:
(I) Price is based on actual cost and not on basis of approximations such as no profits or losses
arises by reasons of adopting this method.
(II) The resulting stock balance generally represents fair commercial valuation of stock.
(III) It is based on traditional principles.

Disadvantages:
(I) The number of calculations in the stores ledger involved tends to be Complicated with
increase in clerical error.
(II) The cost of consecutive similar jobs will differ if the price changes Suddenly.
(III) In times of rising prices, the charge to production is unduly low as the Cost of replacing the
material will be higher.

Last in first out (LIFO)
This is the price paid for the material last taken into stock from which the materials to be priced
could have been drawn. This method also ensure material being issued at the actual cost. Its use
is based on the principle that costs should be as closely as possible related to current price level.
Under this method production cost is calculated on basis on replacement cost.


Advantages
(I) Production is charged at the most recent prices so that it is based on the principle that cost
should be related to current price levels.
(II) It obviates the necessity for continuously ascertaining the replacement price.
(III) Neither profit nor loss is usually made by using this method.
(IV) In the times of rising prices there is no wind fall profit as would have been obtained under
FIFO.
Disadvantages
(I) Needs more clerical work.
(II) Compassion among similar jobs is very difficult.
(III) Stock values relating to prices of the oldest cost on hand may be entirely out of the current
replacement prices.

Weighted average price
This is the price which is calculated by Z dividing the total cost of material in the stock from
which the material to be priced have been drawn, by the total quantity of material in the stock.
This method differs from all other methods because here issue prices are calculated on receipts
of materials and not on issue of materials. Thus as soon as new lot is received a new price is
calculated and issues are then taken.

Advantages
(I) this method is advantageous where the price varies widely as its use even out the effect of
these wide variations.
(II) The basis of price calculations is a simple one involving only the division of total amount of
material in stock by quantity in stock.
(III) Calculation of new prices arises only when receipt of stocks are received.
(IV) Stock records under this method give a fair indication of the stock values, which can be
used in financial analysis.

Disadvantages
This method is completed than simple average because it takes into consideration the total
quantities and total costs in stock.
(I) Profit or loss may be incurred as in simple average price.
(II) As LIFO or FIFO this method calls for many calculations.
(III) In order to calculate the accurate value of issues the average price must normally be
calculated to four to five decimal places.








INVENTORY S/W USED IN CPP


Enterprise Resource Planning:-

Starting in the late 1980s and the beginning of the 1990s new software systems known in the
industry as enterprise resource planning (ERP) systems have surfaced in the market targeting
mainly large complex business organizations. These complex, expensive, powerful, proprietary
systems are off the-shelf solutions requiring consultants to tailor and implement them based on
the companys requirements. In many cases they force companies to reengineer their business
processes to accommodate the logic of the software modules for streamlining data flow
throughout the organization.

In recent years ERP systems have received much attention.ERP system applications are often
implemented to improve a firms performance .Over the last decade, many firms world-wide
have implemented enterprise ERP systems which are packaged business software systems that
help in managing the efficient and effective use of resources (materials, human resources,
finance, etc.) .They assist enterprises in automating and integrating corporate cross-functions,
such as inventory control, procurement, distribution, finance, and project management.

ERP implementation involves a large number of stakeholders . ERP systems are integrated
applications with an impact on the entire organization.


ERP System Defined:-
Enterprise resource planning systems or enterprise systems are software systems for business
management, encompassing modules supporting functional areas such as planning,
manufacturing, sales, marketing, distribution, accounting, financial, human resource
management, project management, inventory management, service and maintenance,
transportation and e-business. The architecture of the software facilitates transparent integration
of modules, providing flow of information between all functions within the enterprise in a
consistently visible manner. Corporate computing with ERPs allows companies to implement a
single integrated system by replacing or re-engineering their mostly incompatible legacy
information systems.

American Production and Inventory Control Society (2001) has defined ERP systems as a
method for the effective planning and controlling of all the resources needed to take, make, ship
and account for customer orders in a manufacturing, distribution or service company. We quote
several definitions from the published literature to further explain the concept: ERP (enterprise
resource planning systems) comprises of a commercial software package that promises the
seamless integration of all the information flowing through the companyfinancial, accounting,
human resources, supply chain and customer information .


ERP systems are configurable information systems packages that integrate information and
information-based processes within and across functional areas in an organization . One
database, one application and a unified interface across the entire enterprise . ERP systems are
computer-based systems designed to process an organizations transactions and facilitate
integrated and real-time planning, production, and customer response .


Evolution Of ERP System:-

The evolution of ERP systems closely followed the spectacular developments in the field of
computer hardware and software systems.

ERP Systems Concept Diagram:-
Applications
g
Applications
Inventory
Management
Service
Applications
Sales &
Distribution
Human Resources
Management
Corporate Reporting
CUS
T
O
ME
R
S
S
UPP
L


During the I1960s most organizations designed, developed and implemented centralized
computing systems, mostly automating their inventory control systems using inventory control
packages (IC). These were legacy systems based on programming languages such as COBOL,
ALGOL and FORTRAN.
ERP systems first appeared in the late 1980s and the beginning of the 1990s with the power of
enterprise-wide inter-functional coordination and integration. Based on the technological
foundations of MRP and MRP II, ERP systems integrate business processes including
manufacturing, distribution, accounting, financial, human resource management, project
management, inventory management, service and maintenance, and transportation, providing
accessibility, visibility and consistency across the enterprise.
E


Central
Database
Corporate
Reporting
Financial
Applications
Manufacturing
Applications
Inventory
Management
Sales &
Distribution
Service
Applications
Human Resources
Management
c
u
s
t
o
m
e
r
s
s
u
p
p
l
i
e
r
s
FRONT -Office
BACK -Office

RERP Systems And Organization

It is generally a misleading perception that implementing an ERP system will improve
organizations functionalities overnight. The high expectation of achieving all-round cost savings
and service improvements is very much dependent on how good the chosen ERP system fits to
the organizational functionalities and how well the tailoring and configuration process of the
system matched with the business culture, strategy and structure of the organization. Overall an
ERP system is expected to improve both backbone and front-end functions simultaneously.
Organizations choose and deploy ERP systems for many tangible and intangible benefits and
strategic reasons.
In many cases the calculation of return on investment (ROI) is weighted against the many
intangible and strategic benefits. To reap the benefits of ERP systems, however, organizations
need to overcome certain problems and disadvantages,
S

Advantages of ERP System:-

What benefits

How
Reliable information access



Common DBMS, consistent and accurate
data, improved reports
Avoid data and operations
redundancy



Modules access same data from the central
database, avoids multiple data input and
update operations.
Delivery and cycle time reduction


Minimizes retrieving and reporting delays
Cost reduction




Time savings, improved control by
enterprise-wide analysis of organizational
decisions.
Easy adaptability



Changes in business processes easy to adapt
and restructure.

Improved scalability



Structured and modular design with add-
ons.
Improved maintenance



Vendor-supported long-term contract as part
of the system procurement


Disadvantages of ERP System:-
Disadvantages

How to Overcome
Time-consuming


Minimize sensitive issues, internal politics and
raise general consensus.
Expensive



Cost may vary from thousands of dollars to
millions. Business process reengineering cost
may be extremely high.
Conformity of the modules




The architecture and components of the
selected system should conform to the
business processes, culture and strategic goals
of the organization.
Vendor dependence



Single vendor vs. multi-vendor consideration,
options for best of breeds, long-term
committed support.
Features and complexity



ERP system may have too many features and
modules so the user needs to consider
carefully and implement the needful only.




DATA ANALYSIS & INTERPRETATION
Inventory Control Techniques:-
These following Techniques are used:-
* ABC analysis
* Economic Order Quantity
* VED Analysis
* Re-Order Level
* Safety stock
* Just-In -Inventory

ABC Analysis:-
It is based on proposition that Managerial items and efforts are scare and limited. Some items of
inventory are some important than others.

ABC analysis classifies various inventory into three sets or groups of priority the allocates
managerial efforts in proportion of the priority
The most important item are classified into class - A, Those of intermediate importance are
classified as class - B and remaining items are classified into class - C.

The financial manager has to monitor the items belonging to monitor the items belonging to
different groups in that order of priority and depending upon the consumptions.
The items with the highest values is given priority and soon and are more controlled then low
value item.

Procedure:-
(I) Items with the highest value is given top priority and soon.
(II) There after cumulative totals of annual value consumption are expressed as percentage of
total value of consumption.
(III)Then these percentage values are divided into three categories.

ABC analysis helps in allocating managerial efforts in proportion to importance of various
items of inventory.
An ABC analysis of inventory involves the following steps:
(1) Establishing levels for analysis, such as A, B, and C (or as many classes as warranted), on the
basis of the items' Categories;

(2) Assigning a level for each item on the basis of the criteria established in the previous step,
(3) Applying a degree of control in proportion to the value of the items in the group.

"A" items are defined as those with the greatest annual dollar usage, or the high-value
items.

"B" items are those with a lesser amount of annual dollar usage, or the medium-value
items
"C" items are those with the lowest annual dollar usage, or the low-value items.

Graphic Representation of ABC Analysis




Economic Order Quantity:-
EOQ applies only when demand for a product is constant over the year and each new order is
delivered in full when inventory reaches zero. There is a fixed cost for each order placed,
regardless of the number of units ordered. There is also a cost for each unit held in storage,
sometimes expressed as a percentage of the purchase cost of the item.
We want to determine the optimal number of units to order so that we minimize the total cost
associated with the purchase, delivery and storage of the product.
Assumptions:-
1. The ordering cost is constant.
2. The rate of demand is known, and spread evenly throughout the year.
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.
6. Only one product is involved.

EOQ is the quantity to order, so that ordering cost + holding cost finds its minimum. (A common
misunderstanding is that the formula tries to find when these are equal.)
Variables:-
A= annual requirement
O= per order cost
Q= order size
C= per unit carrying cost
Qc = avg. inventory
S= set up costs
ordering costs: requisitioning, order placing, transportation, receiving, inspecting and storing,
administration[total ordering cost(TOC)=(AO)/Q]
carrying costs: warehousing, handling, clerical and staff, insurance, depreciation and
obsolescence[TCC= (Qc)/2]
ordering and carrying costs trade-off:
EOQ=


The Total Cost function
The single-item EOQ formula finds the minimum point of the following cost function:
Total Cost = purchase cost or production cost + ordering cost + holding cost
Purchase cost:- This is the variable cost of goods
purchase cost = purchase unit price annual demand quantity. This is cD
Ordering cost:- This is the cost of placing orders,each order has a fixed cost K, and we need to
order D/Q times per year. This is K D/Q
Holding cost:- the average quantity in stock (between fully replenished and empty) is Q/2, so this
cost is h Q/2
.

EOQ Model:-
EOQ =economic order quantity
F = cost per order
U = annual usage/demand
F = cost per order
C = percent carrying cost
P = price per unit
EOQ =

OR
EOQ=


VED Analysis

Vital Essential and Desirable analysis is done mainly for control of spare parts keeping in view
of the criticality to production.
Vital spares are spare the stock out of which even for a short time will stop production for quite
some time. Essential spares are spares the absence of which cannot be tolerated for more than a
few hours a day. Desirable spare are those, which are needed, but their absence for even a week
or so will lead to stoppage of production.

MATERIAL CLASS VALUE PRIORITY MATERIAL
10% A 70% V 10% 70%
E 20% 10%
D 70% 10%

20% B 20% V 10% 70%
E 20% 20%
D 70% 10%

70% C 10% V 10% 70%
E 20% 20%
D 70% 10%

Re-Order Level
The re-order level is the level of inventory at which the fresh order for that item must be placed
to procure fresh supply. The re-order level depends upon.
1. Length of time between the placement of an order and receiving the supply.
2. The usage rate of the item. The inventory is constantly being used up. The rate at which the
inventory is being used up. The rate at which the inventory is being used up is called the usage
rate.

The reorder level can be determined as follows:

R= M+TU

R=Reorder level
M=Minimum level of inventory
T=time gap/delivery time
U=Usage Rate


Safety stock


The safety stock protects firm from tradeoffs due to unanticipated demand for the items level of
inventory investments is however increased by the amount of safety stock. Safety level is
ascertained in inventory as a part because there is always an uncertainly involved in time lag
usage rate or other factors.
Usually smaller the safety level greater the risk of stock outs. If stock levels are predictable
then there is a chance of stock out occurring. However stock inflows and outflows are
unpredictable or lesser predictable it becomes to carry additional safety to prevent unexpected
stock outs so usage rate is estimated if cost is low then no safety stock is needed.

Just In Inventory

The Basic concept is that every firm should keep a minimum level of inventory on hand, relying
suppliers to furnish just in time as and when required. JIT helps in emphasizing sufficient level
of stock to ensure that production will not be interrupted. Although the large inventories may be
had idea due to heavy carrying JIT is a modern approach to inventory management and the goal
is essentially to minimize such inventories and there by maximizing turnover.

JIT system significantly reduces inventory carrying cost be requiring that the raw material be
procured just in time to be placed into production. Additionally the work in process inventory is
minimized by eliminating inventory buffers between different production departments.

If JIT is to be implemented successfully there must be a high degree of coordination and
cooperation between the supplier and manufacturer and among different production centers. JIT
does not appear to have any relation with EOQ however it is in fact alters some of the
assumptions of EOQ model. The average inventory level under the EOQ model is defined as

Average inventory =1/2EOQ+safety level JIT attacks this equation in two ways.

By reducing the order cost.
By reducing the safety stock

The basic philosophy in JIT is that benefits, associated with reducing inventory and delivery time
to a bare minimum through adjustment iEOQ model, will more than offset the costs associated
with the increased possibility of stock outs.


FINDINGS & SUGGESTIONS
The company is having good sales for their products during all the years of the study.

The company should adopt sophisticated techniques to manage its inventory in a better
manner.
The EOQ calculated is suggesting that the company should obtain its inventory
requirements by placing orders frequently to its suppliers rather than one time
replenishment.

Company should take measures for maintenance of proper stores and spares so as to
avoid the frequent breakdown of the machinery.
There is a need to develop good communication system between various departments like
marketing, planning, procurement, and production and distributions functions.
The company should follows Just-in-Time technique, their by it can do away with
waiting time for a receipt of materials.
More than 50% of the shareholders fund is invested in working capital of the company
we must try to reduce it. Reducing stock and increase in the average payment period can
help this up to some extent.
As we are the market leaders in our products and the number of competitors is also very
low, we can ask for the full advance payment for domestic sales also. Thus reducing the
investment in the receivables.
The expenses on sales promotion should be controlled and more emphasis should be
given on the advertisement as it has more reach than any other sales promotional tool.
The expenses of materials can also be controlled by applying the rule of recording the
materials requirement in the provided format .





CONCLUSION

Inventory management has to do with keeping accurate records of finished goods that are ready
for shipment. This often means posting the production of newly completed goods to the
inventory totals as well as subtracting the most recent shipments of finished goods to buyers.
When the company has a return policy in place, there is usually a sub-category contained in the
finished goods inventory to account for any returned goods that are reclassified or second grade
quality.

Accurately maintaining figures on the finished goods inventory makes it possible to quickly
convey information to sales personnel as to what is available and ready for shipment at any given
time.

Inventory management is important for keeping costs down, while meeting regulation. Supply
and demand is a delicate balance, and inventory management hopes to ensure that the balance is
undisturbed. Highly trained Inventory management and high-quality software will help make
Inventory management a success. The ROI of Inventory management will be seen in the forms of
increased revenue and profits, positive employee atmosphere, and on overall increase of
customer satisfaction.

Now the company profits is increased and these days is more easy to handle the record of
materials with the help of ERP system .it is more user friendly and its maintain the records
without any error .



BIBLIOGRAPHY

Referred following standard text and websites:

Financial Management . I.M. Pandey
Financial Management . Prasanna Chandra
Financial Management . Van Horn
Management Accounting and Control . S.N.Maheswari
Financial Management .Khan and Jain

Website:

www.effectiveinventory.com
www.scribd.com