A

PROJECT REPORT
ON
Inventory Management

At

JK PAPER LTD,
Submitted as fulfillment of Summer Internship program in Master of
Business Administration from Bhubaneswar Institute Of Management
And Information Technology(BIMIT), BHUBANESWAR.

Submitted By:
Nisika Kiran Kumar
Regd no.1706275042,Batch-(2017-19)

Under the Esteemed guidance of

Mr. Mahesh Reddy Mr.Amitav Mohanty

Manager (Stores) Asst.Professor(Finance)
JK Paper Mills, RAYAGADA BIMIT ,BBSR

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 CONTENTS
Chapter – I Introduction to the study:
- Brief Introduction
- Need For the Study
- Objective & Limitation of the Study
- Methodology of the study
Chapter – II Profile of Paper Industry & the Unit:
- Profile of the Paper Industry
- Growth of the Paper Industry
- Paper Industry In Global Perspective
- Major Players in Paper Industry
- Globalization & Its Impact
Profile of JK Paper Mills Ltd.:
- Introduction JK Paper Mills Ltd.
- Overview of JK Paper Mills Ltd.
- Strategic Orientation
- Product Profile
- Segment Paper
Chapter – III Theoretical and practical Aspect of Inventory
Management in JK Paper Mills
Chapter – IV Data Analysis, Interpretation & Data Presentation
- Sample
- Procedure
- Behavior & Awareness & Comparative study
- Field work Detail
Chapter – V Activities at Stores in JKPM Ltd.
Chapter – VI Result & Analysis of the work
- Findings
- Conclusion
- Recommendation & Suggestions
- Bibliography

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 PREFACE

Industrial productivity lies on optimum utilization of factors of production

i.e. man, material, machine and money. Materials play a prominent role in the
field of cost ascertainment and analysis. They have direct correlation and the cost
of finished product. Hence, now a day’s inventory management becomes a
challenging factor to the top level management. Inventory management is one of
the tools of working capital management. The strategic growth of industrial unit
depends upon efficient system of purchasing, storing, accounting control and
consumption of inventory. Thus an ideal system of inventory control exercised
through,
(i) Purchase control
(ii) Issue control
(iii) Store control
(iv) Yard control.
Inventory control is a science based of ensuring that right quantity of
inventory must be helped by an organization to meet its both internal and external
material requirement most economically. On the other hand there is the threat of
holding is the too much or too little inventory that causes over stocking and stock
outs. Therefore inventory control is primarily concerned with obtaining a correct
balance between these two extremes. Such diverse expression in mind instead of
getting lost in them.
The study objects of assessing the role of inventory management in the
paper industry in the state of Orissa, at the unit at JayKayPur, JKPM Ltd in
particular. The paper units have a prominent impact on the economic
development of the state industrial scenario by creating vast employment
opportunities and a significant amount of revenue to the state exchequer. JKPM
Ltd was set of in the year 1962 with an installation capacity 18000 tons of paper
per annum. At present it has coating unit with an installed capacity of 1, 08, 000
tones as 31.03.2007.

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 ACKNOWLEDGEMENT

I am deeply thankful to my guide Mr. Amitav Mohanty who spared his

valuable time and effort to guide me in the completion of this project report.

I express my sincere gratitude to Mr. Mahesh Reddy (Stores Manager),

and Biswajit Mishra (store officer) and members of finance and other
departments for giving me the required information and encouragement
throughout the period of my project work.

I have great pleasure in acknowledging my deep sense of heartily gratitude

to Mr. Susambit Sahoo (HRD) who has given me an opportunity to do my
summer internship program in JK Paper Mills.

I am highly obliged to MR. Amitav Mohanty (faculty) who has spent their
precious time in guidance for the completion of the project.

I would like to thank all the persons of the organization who has given their
valuable time for getting me the necessary information giving me their valuable
advice.

I lastly thank my parents, friends and well-wishers for their everlasting

support.

With Deep Gratitude,

Nisika Kiran Kumar

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 DECLARATION

I Nisika Kiran Kumar do here by solemnly declare that this project entitled
“Raw Material Management At Stores Of JK Paper Mills Ltd.” is originally done
by me is being submitted in fulfillment of the requirement for the award of a
degree of MBA in BIMIT, BHUBANESWAR
This project is my own & is not submitted to any other institution or published
anywhere before.

Nisika Kiran Kumar

Regd no.1706275042,Batch-(2017-19)

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 CERTIFICATE

This is to be certified that a student of BIMIT, BHUBANESWAR has

successfully completed the summer internship project entitled on “Inventory
Control Management”. This project is based on the original work done by the
candidate himself and fulfils the requirement of the semester, which is necessary
for the partial fulfillment of degree in Master of Business Administration. It is to
the best of my knowledge & believes that the work has not been submitted
elsewhere for the award of any degree.

Mr. Mahesh Reddy

Manager(stores)

JK Paper Mills, RAYAGADA

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 |

CHAPTER-I

Introduction to the study:

- Brief Introduction.
- Need For the Study.
- Objective & Limitation of the Study.
- Methodology of the study.

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 INTRODUCTION

Inventory management is primarily about specifying the shape and

percentage of stocked goods. It is required at different locations within a facility
or within many locations of a supply network to precede the regular and planned
course of production and stock of materials. The financial performance of any
organization reflects the strength, weakness, opportunities and threats of the
organization with respect to profits earned, investments, sales realization,
turnover, return on investment, net worth of capital.

The scope of inventory management concerns the fine lines between

replenishment lead time, carrying costs of inventory, asset management,
inventory forecasting, inventory valuation, inventory visibility, future inventory
price forecasting, physical inventory, available physical space for inventory,
quality management, replenishment, returns and defective goods and demand
forecasting. Balancing these competing requirements leads to optimal inventory
levels, which is an on-going process as the organization needs shift and react to
the wider environment.

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 NEED FOR THE STUDY

The basic function of inventories is to act as a buffer to decouple or uncouple

the various activities of a firm so that all do not have to be pursued at exactly
the same rate. The key activities are:

1. Purchasing
2. Production and
3. Selling.

Inventory is one of the area, where there are number of cost leaks exists. A
manufacturing firm loses more of its profits due to non-availability of materials
i.e. improper inventory control. This area “inventory control” is considered as a
gold mine for saving and most fruitful area for cost reduction and cost control.
Around 80% of the firm’s working capital is normally tied up in different form
of inventory. So the firm should concentrate more on inventory control.

OBJECTIVE OF THE STUDY

THE STUDY IS ORIENTED WITH THE FOLLOWING OBJECTIVES

 The primary objective is to acquire some practical knowledge about

inventory control system of JKPM.
 To study the management of inventory at J.K. Paper Mills Ltd.
 To know the utilization of finance provided by banks for Inventory
management.
 To know the various raw materials maintained by the stores in JKPM.

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 LIMITATIONS

 To depend on published data rather actual data because financial data are
confidential in nature.
 Major activities like procurement of capital items, “A Class inventory are
under control of Head office
 Inventory budget is prepared only at head office, no activate of mills is
involved in such budget preparation.

METHODOLOGY OF THE STUDY

The information for the study has been obtained from two sources:

1. Primary Data
2. Secondary Data

Primary Data

The primary data is collected from the discussions with the concerned
officers and staff of the organization

Secondary Data

The secondary Data is secured from annual reports, financial

statement i.e., Balance sheet, and Profit and Loss account, Records and other
information journals of the organization and from the textbooks on financial
management.

However in the study most of the information is obtained from the primary data.

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 Chapter-II

PROFILE OF PAPER INDUSTRY & THE UNIT

- Profile of the Paper Industry
- A brief history of Indian paper Industry
- Growth of the Paper Industry
- Major Players in Paper Industry
- Globalization and its impact
- Overview of JK ORGRANISATION

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WHAT IS PAPER
Paper is a thin material mainly used for writing upon, printing upon,
drawing or for packaging. It is produced by pressing together moist fibers,
typically cellulose pulp derived from wood, rags or grasses, and drying them into
flexible sheets.

Paper is made from plant fibers called cellulose, which are found in wood.
Cellulose must be converted into pulp before being used to manufacture paper.
Another potential source of cellulose is paper that has been recovered for
recycling. To begin the papermaking process, recovered fiber is shredded and
mixed with water to make pulp. The pulp is washed, refined and cleaned, then
turned to slush in a beater. Color dyes, coatings and other additives are mixed in,
and the pulp slush is pumped onto a large moving screen. As the pulp travels
down the screen, water is drained away and recycled.

The resulting paper sheet, also known as “web,” is pressed between massive
rollers to extract most of the remaining water and to ensure uniform smoothness
and thickness. The semi-dry web is then run through heated dryer rollers to
remove any remaining water. The finished paper is then wound into large rolls,
which can be 30 feet +

666666+ wide and weigh close to 25 tons. A slitter cuts the paper into smaller,
more manageable rolls, and the paper is ready for use in your school, workplace
and community.

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 INTRODUCTION

Paper is derived from the word “papyrus”. Today, paper includes a wide
range of products with very different application: communication, cultural,
educational, artistic, hygienic and sanitary as well as storage and transport of all
kinds of goods. It’s almost impossible to imagine a life without paper. There is a
degree of consensus that the art of making paper was first Discovered in China
and its origin in that country is traced back to 2nd century in about A.D105 Tsai
Lun, an official attached to imperial court of china, created a sheet of paper using
mulberry and other best fibers along with fishnets, old rags and hemp waste. (2nd
Century B.C). Chinese considered paper a key invention and kept this a closely
guarded secret for over Five Centuries until the technology slowly made it way
westward. The Arabs captured Chinese city containing a paper mill in the early
700’s and from this started their own paper making industry. (Early 700’s)
Invention of printing in 1450’s brought a vastly increased demand for paper.
Paper was first made in England in 1496. The first U.S.Mill was built in 1690,
the Rittent House Mill, German town, Pennsylvania.

A BRIEF HISTORY OF INDIAN PAPER INDUSTRY

- The demand for paper in India is rising by nearly 7 per cent per annum

- Total production of paper in 2003-04 is 5.26 mn tons

- In 2003-04 India imported approximately 500,000 tones of paper.

- Newsprint capacity in India is estimated at 1.12 mn tons - a volume growth

of 5.47% CAGR over the last 3 years

- At present, there are 800 paper mills in India

- The Indian paper industry has an installed capacity of 6.7 mn tons.

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- Average capacity utilization of major players has been around 99% in FY04

- No significant new Greenfield capacity has been added in the paper industry
in the last few years

- Capacity expansions of over 600,000 tons have been announced by the 7

large players in the sector

The Indian Paper Industry is among the top 15 global players today, with
an output of more than 6 millions tones annually with an estimated turnover of
Rs. 150,000 millions. Paper Industry in India is riding on a strong demand and on
an expanding mood to meet the projected demand of 8 million tones by 2010 &
13 million tones by 2020.

The paper industry in India is more than a century old. These paper mills
are manufacturing industrial grades, cultural grades and other specialty papers.
The paper industry in India could be classified into 3 categories according to the
raw material consumed.

1. Wood based
2. Agro based &
3. Waste paper based While the number of wood based mills are around 20
and balance 780 mills are based on non-conventional raw materials.

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CONSUMPTION OF PAPER IN INDIA

In India, on the other hand, the per capita paper consumption hovers between
nine and 11 kg. Meanwhile, the Indian Paper Industry accounts for about 2.6%
of the world's production of paper, providing employment to more than 0.5
million people directly and 1.5 million people indirectly.

Growing consumerism, modern retailing, rising literacy (continued government

spending on education through the Sarva Shiksha Abhiyan) and the increasing
use of documentation will keep demand for writing and printing paper buoyant.
“Though India’s per capita consumption is quite low compared to global peers,
things are looking up and demand is set to rise from the current 13 million tonnes
(mt) to an estimated 20 mt by 2020,” said Harsh Pati Singhania, vice-chairman
and managing director of JK Paper.An India Ratings report estimates India’s per
capita paper consumption at nine kg, against 22 kg in Indonesia, 25 kg in
Malaysia and 42 kg in China. The global average stands at 58 kg.

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 CLASSIFICATION OF PAPER
TYPE END USE
Posters Beddi leaves,
Cream wove School books, bank slips etc.
Offset Printing
Duplicating Cyclostyling
Map litho Photocopying
Cultural paper Super printing Annual reports
Bond paper Letter heads
Art paper Multicolored printing
Chromo paper Labels
Tissue paper Beedi labels, napkins, etc
Ledger paper Accounting Bank
Cartridge Paper Drawing books for artist and
Architects
Duplex Board Consumer Goods
Packing paper Pulp Board /straw Filter Cigarettes packers etc
board
Kraft paper Corrugated packing
Micro Paper Cheque and Drafts
Specialty paper Glamine paper Waxed paper for Biscuits
Cellophane Paper Wrapping (colored)
Grease Proof Wrapping
Vegetable parchment Wrapping for butter
Base Boards Tetra packs

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 GROWTH OF THE PAPER INDUSTRY

Paper is one of the core industries and is linked to the basic human needs. Paper
is the pre-requisite for education and literacy and its use is an index of
advancement in these two fields as well as the overall well-being of the society.

This is the most important of all the forest based industries. Some people treat it
as a chemical industry due to its manufacturing process and because of certain
chemicals used for its manufacturing. Still some other people include it in the
group of agro-based industries because some of the agricultural products and
residuals are used as raw materials. As large proportion of the basic raw materials
is derived from the forests, it seems logical to treat it as a forest based industry.
The first paper mill in India was set up at Sreerampur, West Bengal, in the year
1812. It was based on grasses and jute as raw material. Over the decades the there
was rapid growth in the number of Pulp & paper mills from 17 in the early 1950’s
to 250 Mills in 1980’s. The domestic output of paper and paperboards grew from
1, 35,000mts in 1951 to 15, 00,000 mts in 1985.

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MAJOR PLACE IN PAPER INDUSTRY

1. FIVE UNITS OF BALLARPUR INDUSTRIES LTD.

PLACE INSTALLED CAPACITY

i. Illure, Maharashtra 40,000 TPA
ii. Ballarpur, Maharashtra 1,10,000 TPA
iii. Daulatabad, Orissa 22,000 TPA
iv. Yamuna Nagar 53,868 TPA
v. Gaganpur, Orissa 33,000 TPA
2. Century Paper Mill, Lalkua, Uttar Pradesh

Installed Capacity –1, 20,600 tones per annum

3. N.Ganga Group, Vapi, Gujarat

Installed Capacity –43,500 tons per annum

4. Hindustan News Print Ltd., News Print Nagar, Kerala

Installed Capacity – 1, 00,000 tones per annum

5. Hindustan Paper Corporation ltd., Panchgram, Assam

Installed Capacity –1, 00,000 tones per annum

6. Hindustan Paper Corporation ltd., Nagaon Paper Mills Ltd.,
Khagajnagar, Assam.
Installed Capacity –1, 00,000 tones per annum
7. ITC Bhadrachalam Paper Board Ltd., Sarapaka, AP.

Installed Capacity – 2, 12,000 tons per annum

8. Nepa Ltd., Nepa Nagar , M.P.

Installed Capacity- 88,000 tones per annum

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9. Orient Paper Mills, Amali, M.P.

Installed Capacity- 85,000 tones per annum

10. Pudumjee Pulp and Paper Mills Ltd., Pune, Maharashtra.

Installed Capacity – 48,000 tones per annum

11. Satia Paper Mills Ltd., Rupana, Punjab.

Installed Capacity –40,000 tons per annum

12. Sehasayee Paper and Board Ltd., Erode, Tamil Nadu

Installed Capacity – 60,000 tons per annum

13. Star Paper Mills Ltd., Saharanpur, U.P.

Installed Capacity – 1,80,000 tones per annum

14. The Andhra Paper Mills Ltd., Rajahmundry, A.P.

Installed Capacity – 98,500 tones per annum

15. The Mysore Paper Mills Ltd., Karnataka.

Installed Capacity – 1,05,000 tones per annum

16. Titlaghar Paper Mills Ltd., Titlaghar, West Bengal.

Installed Capacity – 66,000 tons per annum

17. The Sirpur Paper Mills Ltd., Sirpur, Kaghaznagar, A.P.

Installed Capacity – 71,000 tones per annum

SORUCE: Indian Press Services News Bulletin.

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 GLOBALISATION AND ITS IMPACT

India has 16% of the total population but consumes only 1.2% of the total
paper produced in the world. Its per capita consumption is very low around 8kg
head year. The installed capacity of the industry is 4.2 million 9 tones of paper
and 6,50,000 tones of newsprint.

Even though there are 380 mills registered, only few mills are large with
capacity of 50,000 to 9 tones per year ranging from 100 to 600 tones per day.
Indian paper industry has potential but it cannot meet growth in demand unless
constraints are overcome. Demand should reach 18kg per head by 2020.

Several mills have closed down and others are running below the capacity.
Most mills are in losses for the year ended march 1998. Since 1995 reduction of
import duty on paper, 15% to 20% paper import (especially newsprint) has raised
sharply. Frequent industry requests for restoring higher duties and imposition of
anti-dumping have not been acted upon.

In 1995-96 mills typically kept 6-7 days production on head. Inventories

often exceeded 30 days output. In 1998, several small and medium sized milled
creased for 3-4 months due to depressed demand. Major Mills like JK
Corporations, century, orients and Brajraj Nagar had been closed during
November 1998 due to labour problems.

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 OVERVIEW OF JK ORGRANISATION

JK Organization is an association of Industrial and commercial companies,

which was founded in 1918 by late Lala Kamalapatiji Singahania with its
headquarters at Kanuri (UP). The initials JK are the grouping of the first letters
of the name of Juggilal and Kamlapat, father and son. The founder grew u in an
atmosphere of nationalist favor and imbibed the sprit of patriotism; he shook off
alien dependence in the field of Industrial development of India.

He marshaled all his energies and activities towards the fulfillment of one
central object that of industrialization of India capital, Indian management and
above all Indian know-how. Equipped with tenacity of purpose, perseverance and
foresightedness, he achieved success in his mission and in a short span of time,
between 1921 and 1937 a series of Industries with diversified interests were setup
by him Kamala Ice Factory, JK Jute Mills co. Ltd., JK Cotton Manufacturers, JK

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Iron & Steel co. Ltd., against the tough opposition of British Industrialization and
an alien Government.

He died at an early age of 53 on 31st May 1973 and left the legacy of his
spirit of patriotism, swadeshism, and the aptitude for planning and social service
to his three illustrious sons, Sir Padmapatiji Singhania, Lala Kailshpatiji
Singhania and Late Lakshimipatiji Singhania, who along other family members
have Contributed the best of their services to the growth of the Organization, in a
term spirit. Today JK Organization is engaged in diverse Industries e.g. Cotton
Textiles, Jute Textiles, Woolen Textiles Rayon, Nylon and other synthetic and
man-made fibers, Metal engineering, Paper Boards, Sugar, Chemical, Plastic,
Cement, Electronics, Tyres & Tubes, Cosmetic and so on. It has its ramification
in seven States of India – Uttar Pradesh, Bihar, West Bengal, Orissa, Madhya
Pradesh, Maharashtra and Rajasthan and has also extended its overseas operations
in Indonesia, Mauritius, and Kenya etc.

The Group was pioneer in indigenous manufacture of numerous products.

For example, it was first in India to produce Calico Prints(1933), Steel Bailing
Hjoojps(1940), Aluminum(1944), Engineering Files(1949), nylon-6 (1962),
Sodium Suplhixylate Formaldehyde (1965), TV sets(1968), Acrylic
Fibers(1969), DMT Monomer and Polyester Wastage (1976), and Steel Belted
Radial Tyres(1977) and the list goes on.

JK Organization is constantly on the move and has ambitious plans of the

expansion not only in the existing product lines but also in many other for which
there are new opportunities. To those who are working in JK Organization,
challenges and opportunities, and meeting challenges is a way of life with them.
Excellence in performance is the motto of JK Employees. JK Organization has

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provided housing facilities for its employees and established a number of
townships at different plants sites. The townships are equipped with modern amen
ties including schools, clubs, markets, recreation centers etc.

The Organization is also conscious of its social responsibilities and in

this connection it has opened schools, Collages, and institutions for higher
technical education, modern hospitals etc. In its endeavor to promote research
and development and develop indigenous technology, various research
institutions have been promoted by the Organization. In the field of sports and
games, many institutions have been established to develop and promote sports.

 The Organization is devoted to promoting the religious and ethical values

of India and has constructed a number of exquisite temples at various
places.

 The above- mentioned activities clearly reflect the deep-rooted desire of

the organization to actively play its part in the sphere of nation building
activities.

 With this phenomenal growth, the JK Organization is divided into three

zones, viz, Northern zone (Kanpur), Eastern zone (Delhi/Calcutta), and
Western zone (Bombay) for administrative convenience. A Central Board
with Sri Hari Shankarji Singhania as President Pilots the Organization.

JK ORGANISATION’S EMBLEM

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 The Hand and Hammer of JK Organization came into use in the beginning
of 1943. This symbol was chosen by Late Lala Lakshmipat Singhania, third son
of Late Lala Kamalapat Singhania, the founder of JK Organization.

The circle denotes industry. 24 teeth in the circle symbolize round – the – clock
activity. The hand and hammer signify labour and tool. The hard grip of the hand
stands for the strength and workmanship. This emblem signifies the strong belief
of the organization in the capability of its employees.

J.K. GROUP OF COMPANIESBRIEF OVERVIEW OF JK PAPER

MILLS

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 JK Corp Limited (formerly Straw Products Ltd.) belongs to the Eastern
Zone and is one of the member-companies of JK Organization. JK Corp limited
along with JK Raymond’s, Bombay are regarded as the flagship companies of JK
Organization. It is a multi-product and multi-unit company. JK Paper limited was
incorporated in the year 1938 and started its operation with the Board Mill at
Bhopal for manufacture of Straw Board.

JK Paper Ltd., comprising of two units JK Paper mills at Rayagada, Orissa

and Central Pulp Mills at Songarh, Gujarat, is the 2nd largest producer of quality
paper with turnover exceeding Rs 650 Cores. Today, JK Paper has total
manufacturing output in excess of 1, 70,000 TPA pulp and Paper, operating at an
average capacity utilization of 115%. In the year 1962, JK Corp Limited set up
this integrated Pulp and Paper MILL in the backward district of Rayagada in
Orissa with an installed capacity of 18,000 tons per annum. Presently the installed
capacity of the Paper Mills and Board Mills Stands at 1,90,000 tones per annum.
Their Papers and Board enjoy high reputation for qualities which are constantly,
strive to maintain.

JK Paper Mills was setup with an annual installed capacity of 18,000 tons
in 1962, JK Paper Mills has expanded its operations and now has five Paper
Machines with an annual installed capacity of 1,70,000 tones of Writing and
Printing Paper of different grades and varieties. Production of Paper and Paper
Boards of high quality has been the forte of JK paper mills. This image for quality
has sustained the Mills so far and has contributed to its own growth. The Mills
works to carve a niche for its especially paper in the market.

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Production Capacity of jk Paper Mills

MACHINE Year of INSTALLED

INSTALLATION CAPACITY,
TPA
PAPER MACHINE-I 1962 35,000 TPA
PAPER MACHINE-II 1970 4,000 TPA
PAPER MACHINE-III 1972 26,000 TPA
PAPER MACHINE-IV 1989 8,000 TPA
PAPER MACHINE-V 1994 16,000 TPA
COTTING PLANT 2004 1, 08, 000 TPA
TOTAL 1,90,000 TPA

MISSION

To achieve and maintain brand leadership and products and services

excellence in the paper and board business through continuous technology up
gradation to provide maximum satisfaction to customer enriches employee life
and maximize return on investment while fulfilling societal obligations.

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QUALITY PROLICY OF JK PAPER MILLS
To provide consistent products & services at optimum cost for customer
delight through TQM approach.

CORE VALUES
 Caring for people.
 Integrity including intellectual honesty, openness, fairness & trust.
 Commitment to excellence.

OBJECTIVES OF JK PAPER MILLS

 Sustained growth optimizing production potential in least possible time.
 Leadership in niche market & customer-orientated marketing.
 Internationalization of business.
 Cost competitive news with international bench-marketing.
STRATEGIC ORIENTATION OF JK PAPER MILLS
 Strategic Planning & Strategic Objectives.
 Quality assurance system.
 Continuous improvement in Productivity, Quality, Cost Reduction &
Customer service.
 Technology up gradation.
 Process 1 system development in all functions such as production,
Maintenance.
 Marketing, Finance Management & inventory Management etc.
 Adopting modern management practices (TPM, JIT) * People
involvement.

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ENVIRONMENT POLICY
JK Paper Mills, Jaykaypur, Rayagada and Orissa (India) are committed to:

 Comply with applicable Environmental Legislations. * Prevention of

pollution.
 Continual improvement in Environmental Performance.
 A forestation through Social and farm forestry supported by colonel
technology.
 Cleaner technologies and processes & Conservation of Resources.
 Reducing pollutants in discharged water * Reducing particulate emissions.
QUALITY ACCREDITATION:
First emphasis is quality product manufacturing is assured. All exports are
checked of their quality as per specifications laid down. Supplier considers no
substandard materials even at discount. J.K.P.M. is the first Indian paper mill to
receive the ISO 9001(1994) certification. It also received ISO 14001 for
environmental friendly in the year 1998.

ISO –9000 QUALITY SYSTEM

JK Paper mills are the first Indian Paper Mills to receive the ISO-
9000(1994) certification. The ISO-9000 standards define an effective quality
system with reference to Organizational structures and responsibilities, processes
and procedures and the documentation and implementation of Quality Policy.

EXPORT
Export of selected grades of paper is made to Australia, Malaysia,
Singapore, Sri Lanka, Bangladesh, Africa and Middle East, UK etc. The company
is dispatching its consignment through water transport. Normally the company is
dispatching the consignment from its port located at Chennai.

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TPM POLICY
In continuous pursuit on organizational excellence by maximizing overall
plant effectiveness and achieving total customer satisfaction, the organization is
committed to

 Achieve zero accidents, zero defects and zero breakdowns.

 Continuous reduction in cost of production.
 Involve all employees in systems and process improvement through
teamwork.
 Create a clean and safe working environment.

Plant Location- Jaykaypur

The J. K. Paper Mill is situated at village Chandili, District Rayagada in

Orissa. Jaykaypur is located on the slopes of the Eastern Ghats Plateau in the
southern part of Orissa bordering the state of Andhra Pradesh. The project falls
within the Survey of India Top sheet No. 65 M/7 and 65 M/8. Its average height
above the mean sea level is 758 feet.

The proposed project does not involve any further land acquisition as it has
been intended to replace and expand the existing capacity on the same land area
of 659.93 acres.

The township has a population of about 25,000 and has a self-sufficient

marketing complex, including Employees Multi-purpose Co-operative society, a
sub- post office and Telegraph office, a branch post office, a police outpost and
has two banks viz., State Bank of India and Indian overseas Bank.

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 The township has two schools viz., Laxmipath Singhania High School
affiliated to CHSE Board and Laxmipath Singhania Public School affiliated to
CBSE Board and also places of worship of all major faiths. The nearest railway
is Singapuram Road Railway station at a distance of 1.15 km, North West. The
nearest airport is Vishakhapatnam at a distance of 170 km in South direction.

The nearest town is Rayagada, which is the district headquarter and is

located at distance of about 10km form the mills. Rayagada District has a
predominance of tribal population. Therefore, the villages in and around the mill
are inhabited mostly by the adivasis, who too are assimilating the Industrial
culture and thus coming into the national mainstream.
MAJOR DEPARTMENTS IN JK PAPER MILLS

1. Pulp Mill 12. Power House

2. Stock Preparation 13. Civil Department
3. Paper Machine 14. Technology Development
4. Paper Finishing House 15. HRD & Personal
5. Finishing House 16. Township & Transport
6. Soda Recovery 17. Works office
7. Quality control 18. Accounts
(a) Central laboratory 19. Stores & Yard
(b) Pulp Paper Laboratory and 20. Sales & Stock
Pollution control
8. Mechanical Engineering 21. Security
9. Electrical Engineering 22. Dispensary
10. Instrumentation 23. Safety & Management Services
11. Planning & Designing

30 | P a g e
JK PAPER MILLS PRODUCT’S

BRIGHT MAPLITHO
A Paper most suited in all Xerox
JK COPIER
Machines.
SURFACE SIZED PULP BOARD Super grade of Board for Printing &
&SURFACE SIZED SUPER HIGH Poaching with high finish and
BRIGHT PULP BOARD brightness.
CHACELLOR BOND A superior variety Bond and Writing.
JK BOND A normal grade of Bond Paper.
Writing and printing paper with good
WOOD FREE PRINTING finish and brightness meant for
export market.
A lower grammar writing & Printing
ARIMAIL paper used for Bills Books as well as
Airmail.
JK LASER PRINTING Suitable for Laser Printer.
TITANIUM DIOXIDE LOADED
A better grade food packaging paper.
TISSUE PAPER
OPAQUE PRINTING PAPER A common food packing
A high bright board supplied to
WHITE OFFSET BOARD
Cigarette Industries.
Catering labels and quality printing
VARNISHABLE MAPLITHO
jobs with varnishing.

31 | P a g e
 Used of Yellow Pages in Telephone
YELLOW PRINTING Directory as well as for other quality
printing.
Used for Match Sticks of better
WAX MATCH TUSSUE
quality.
OFFSET PRINTING A paper used for Coating base.
BLACK CENTERED ART BOARD For Playing Cards.
INVORY BOARD A Superior Coated board used for
A Superior coated board used for
ENAMEL BOARD
Visiting.
A Coated Board used for Printing
CHROMO PAPER
Magazine covers.

JK PAPER PRODUCTS

JK Copier

Suitable for any job on Office printers - Inkjet and LaserJet,

Photocopiers and Multi-functional Devices.
JK Easy Copier

Ideal for Photocopying.JK Excel Bond

32 | P a g e
 Ideal for Letterheads, Brochures, Certificate,
Presentations, Project Reports, Envelopes, Pamphlets, Manuscript writing,
Corporate Stationery.
JK Copier Plus

Ideal for Quality Photocopying, Project Reports, Resumes,

Inkjet & LaserJet printers, Presentation copies or any aesthetic job.
JK Savannah

Suitable for Corporate Stationery, Reports, Certificates,

Presentations, Resumes,Invitation Cards, Hotel/Airline Menu Cards,
Personal Letterheads.
Sparkle Copier

Ideal for photocopying & desktop printing.

QUALITY ASSURANCE

33 | P a g e
 First emphasis on Quality Product manufacturing is assured. All inputs are
checked for their quality as per laid down specifications. No sub-standard
materials are considered even at discount by supplier. All intermediate products
are checked at regular intervals and action is expedited in case of non-
conformance. Final product is rigorously inspected / tested to ascertain
conformance to Quality Standards.

All the specifications have been evolved from statistical data analysis of
actual result and the same is subjected to alterations as per consumer’s end. Any
product no conforming to the specifications is liable for rejections.

Periodical evaluation of the properties of the product is done in order to

verify the process capabilities.

Average Outgoing Quality (AOQ) of the finished products is evaluated

based on actual checking and defects generated. This is to quantify inherent
defects escaping to the consumers. A regular checking creates an all round
alertness amongst the Finishers. For bulk consumers (Reel order) 100% checking
is ensured for a better AOQ. We have 3(three) Laboratories Viz., Central
Laboratory, Pulp and Power control Laboratories well equipped with latest testing
instruments for controlling the quality of incoming and outgoing products.

CUSTOMERS SERVICE

Regular feedback for the market is fed to the Mills by the Marketing
Department. In case of any problem, technical service is provided to overcome
the problem arising at conversion/ consumer’s end. Interaction between the
technocrats of the Mills and the Wholesalers/Consumers is the regular feature of

34 | P a g e
their Organization. Arrangements are made fodder the visit of wholesalers,
Distributors and Customers to Mills for direct discussion of the problems faced
by them for further quality improvement. Technocrats are very often deputed to
the converters / consumers/ wholesalers to gain direct knowledge about the
problem arising at market.

Facilities are open to their bulk consumers to be present at mills during

manufacture of their product up to their satisfaction. Interaction is also
encouraged for suppliers of the inputs and suggestions from the technocrats of
their Mills with regard to quality improvement are made for betterment of the
products.

PRODUCT MIX OF JK PAPER MILLS

A Product Mix consists of all the product lines and items that a particular
seller offers for sale. J.K.P.M. being a producer of quality papers, offers
varieties of papers. Here in the machine itself the various products mixes are
made.
The product mix of J.K.P.M. is as follows:
VARIETY OF PAPER BUDGETED PRODUCTION (IN
A YEAR)
JK COPIER 48176
PULP BOARD 7873
SPARKEL COPIER 2043
JK COPIER PLUS 613
JK EXCEL BOND 1224
SS MAPLITHO(SHB) 25598

35 | P a g e
 JK EVERVITE 3216
POSTERS 5373
JK BOND 1832

JK COPIER PULP BOARD

SPARKEL COPIER JK COPIER PLUS
JK EXCEL BOND SS MAPLITHO(SHB)
JK EVERVITE POSTERS

JK PAPER LIMITED (Formerly JK Corp Limited)

Formed in 2001 by amalgamating the JK Paper Mills at Rayagada and the

Central Pulp Mills at Songarh, Gujarat, to become India’s 2nd largest producer
of quality paper with a turn over exceeding Rs. 650 crores.

JK PAPER LIMITED

JK PAPER MILLS CENTRAL PULP MILLS

JK MISSION

36 | P a g e
To achieve growth and leadership through the JK brand equity, customer
obsession, technology innovation and cost leadership, with a clear focus on
environment, while continuously enhancing shareholders value.
JK VISION
To be a dynamic benchmark and leader in the Indian Paper Industry.
JK QUALITY POLICY
“To provide ‘customer Delight’- both internal and external through products and
services at lowest cost by continuous Improvement in processes, productivity,
quality and management systems”
JK CORE VALUES
 Integrity
 Trust
 Caring for people.
 Commitment to excellence

Performance Review of the J.K. Paper Mills Ltd 2010.

During the year under review, the company achieved a hues turnover then
the previous year. The operating profit (PBIDT) increased by 14.8% to Rs.133.39
crores, accompanied by a healthy growth of 42.6% in cash profit at Rs. 97.26
crores. Production of paper of market pulp at 1.71,849 tones (previous year 1,
64,972tones), was the highest ever achieve by the company. The overall capacity
utilization improved further to 115%. During the year the company paid interim
dividend on preference shares amounting to Rs. 15.59 crores at specified rates.

37 | P a g e
 CHAPTER-III

THEORETICAL AND PRACTICAL ASPECT OF

INVENTORY MANAGEMENT IN JK PAPER MILLS.

38 | P a g e
INTRODUCTION

Inventories constitute the most significant part of current Assents of a large

majority of companies on India. On an Average Inventories are approximately 60
percent of current Assets in public Ltd. Companies. Because of the large size of
the Inventories maintained by the firm it is requested to efficiently & effectively
management over Inventories. A ‘Excessive’ Inventory carries a unfavorable
impact on a company’s profitability.

NATURE OF INVENTORIES

The various forms in which Inventories exist in a manufacturing companies are:

 Raw material.
39 | P a g e
  Work-in-process.
 Finished goods.
 Stores & Spares.
Raw Material: These are the basic inputs that are converted into finished product
through the manufacturing process. These are those units which ave been
purchased and stored for future production.

Work-in-process: These are the semi finished product. They represent the
products that need more work before they become finished goods.

Finished goods: These are the completely manufactured products which are
saleable.

Stores & Spares: These are the material which don’t enter directly in the
production but are necessary for the production process. Ex. - Soap, brooms, oil,
fuel, jute, bulbs, etc.

NEED TO HOLD INVENTORIES

Maintaining inventories involves with many costs & also it causes to

blocking of companies fund. So there may be a question arise that why do
company hold inventories?

There are three general motives for holding inventories:

Transactional motive: To facilitate smooth production & sales operation.

Precautionary motive: To guard against the risk of unpredictable changes in

demand and supply forces & other factors.

Speculative motive: Influences the decisions to increase or reduce inventory

levels to take advantage of price fluctuations.

40 | P a g e
OBJECTIVE OF INVENTORY MANAGEMENT

The objective inventory management should be to excessive inadequate levels of

inventories & to maintain sufficient inventory for the smooth operation of sales
& production. So the aim of the inventory management is

 To maintain a large size of inventory for efficient & smooth

Production & uninterrupted sales operations.

 To maintain a minimum investment in inventories to maximize

profitability.

An effective inventory management should-

 Insure a continuous supply of raw material to facilitate uninterrupted

production.

 Maintain sufficient stocks of R.M. in period of short supply

&anticipate price change.

 Maintain sufficient finished good inventory for smooth sales

operation & efficient customer service.

 Minimizing the carrying cost & time.

 Control investment in inventories & Keep it at an optimum level.

COST & RISK ASSOCIATED WITH INVENTORIES

The costs associated with inventories are mainly divided in to 2 costs.
I. Capital cost: maintaining of inventory results the blocking of the financial
resources. These resources may be arranged from the own or out side
resources. In the case of sawn resources there is an opportunity cost in the
axes of out side resources the firm has to pay interest to the outsiders.
II. Storage or handling cost: Cost incurred for manufacture a given level of
inventory is called carrying or handling cost.

The storage or handling or carrying cost includes warehousing, handling, clerical,

41 | P a g e
insurance, deterioration and obsolescence.
Risks associated with inventories are mainly divided in to 3 risks:
1. Risk of price decline.
2. Risk of obsolescence.
3. Risk deterioration quantity.

QUESTIONS INVOLVED WITH “TO MANAGE INVENTORIES

EFFICIENTLY”.
The two important questions for effective inventory management are-
1. How much should be ordered?
2. When it should it be ordered?
The 1st question, How much to ordered, relates to the problem of determining
economic ordered quantity i.e. EOQ.
The 2nd question, when to ordered, relates to the problem of determining re-
ordering point.

SELECTIVE INVENTORY CONTROL:

The inventory of a firm consists of a large number of items of various nature, size
& value. It is not possible to exercise the same degree of control over each and
every item of inventory. To get optimum benefits for the firm we have to select
all the items and to categories them into different classes.
For this purpose, there are different methods of selective control which are
enumerated as under:
1) ABC Analysis (Always Better Control Analysis).
2) VED Analysis (Vital, Essential & Desirable items Analysis).
3) FNSD Analysis (Fast moving, Normal moving, Slow moving &
Dead moving item Analysis)
4) HML Analysis (High, Medium, Low volume Analysis)
5) SDE Analysis (Scarce, Difficult & Easily available items
42 | P a g e
 Analysis)
6) GLF Analysis (Govt., Local or Foreign suppliers Analysis)
7) VIR Analysis (Vital, Important, Routine Analysis)
8) MTR Analysis (Material, Turn over, Rate Analysis)

Of the above methods of selective control, the following are the most popular
ones, which are explaining as under.
ABC Analysis:
This method of selecting the items of stock for control is known as Always Better
Control method. In this method, various types of goods are classified into three
classes.i.e. ‘A’ class, ‘B’ class, ‘C’ class.
‘A’ class goods
Goods constituting higher percentage of value but lower percentage of items are
included in ‘A’ class.
‘B’ class goods
Goods of the medium nature are both the respects of the value & items are
grouped under ‘B’ class.
‘C’ class goods
Goods constituting lower percentage of value but higher percentage of items are
included in ‘C’ class. After classification, control is exercised over them. Here
‘A’ class goods find more attention, ‘B’ class goods normal and ‘C’ class goods
find attention. By doing so the cost of inventory control is minimized.
Characteristics of different classes:
‘A’ class:
 It requires strict control.
 It needs frequent control.
 It needs frequent review at short interval.
 It requires very low level of safety stock.
 It needs centralized purchasing.
‘B’ class:
 It requires moderate control.
 It needs moderate lead time.
43 | P a g e
  It requires low safety stock.
 It needs both centralized & decentralized purchasing.
‘C’ class:
 It deserves loose control.
 It can manage with long lead time.
 It requires more amount of safety stock.
 It needs de centralized purchasing.

VED Analysis
In this method of selective control, inventory items are classified in descending
order of their criticality as under-
 Vital items.
 Essential items.
 Desirable items.

Vital Item:
The items, the stock out of which even for a moment hampers production for a
considerable and the cost of stock out of which in very high are considered as
vital items.
Essential item:
The items, the shortage of which cannot be managed for more than a day on two
& the cost of stock out of which is higher are known as essential item.
Desirable item:
The items, the absence of which for even a week dose not hamper the production
work & and the cost of Stock act is not very much are known as desirable items.
SDF Analysis
We classified the item in 3 categories.
 Scarce or ‘S’ item.

44 | P a g e
  Difficult or ‘D’ item.
 Easily available or ‘E’ item.
In this analysis scarce items need more attention as compared to other two
items.

TECHNIQUES OF INVENTORY CONTROL:

After the items are classified into various classed under any of the method of
selective control mentioned above, various techniques are applied for proper
control of inventories.
The techniques are:
 Measurement of different levels of the inventory.
 Inventory turn over ratio.
 Measures of Economic order quantity i.e. EOQ.
 Selection of Replenishment system.
 Codification.
 Standardization.
 Simplification or variety reduction.
 Computerization
 Theory of probability of demand forecasting.
 Review of surplus& dead stocks.
 Reporting.
 Perpetual inventory system.
 JIT control system.

MEASURES OF DIFFERENT LEVELS OF INVENTORY

There are different levels of stocks which are to be carefully ascertained for
effective inventory control under different situation.

 Minimum stock level:

It is the level below which the stock of an item should not be allowed to fall. It is
minimum quantity of the material which must be kept in store at all time.

45 | P a g e
For determination of the minimum level of stock, the following model is to be
applied.

Minimum stock level = Re-ordering level – (Normal use X normal re-order period)

 Maximum stock level:

It is the quantity beyond which the stock of particular item should not be allowed
to stand.

Maximum stock level = (Re- ordering level + Re-ordering quantity) – (minimum use X
minimum re-ordering period)

It is the maximum quantity of an item which be held at store at any time to avoid
the over stocking & unnecessary blockage of capital are avoided.
 Ordering level:
It is the level of stock at which the production cycle is taken to be complete &
fresh orders are made for replenishment of the stock for starting with an other
production cycle

Ordering level = minimum level + consumption during the lead time

 Re-order level:
It is the level of stock at which an order to be placed when stock reaches a
particular level.

Re-ordering level = maximum consumption X maximum re-order period

Or

Re-ordering level = safety stock + (avg. daily usage X avg. lead time (in days)

46 | P a g e
  Danger level:
This refers to that level of stock at which normal issues of the material to the
production center are stopped.

Danger level = avg. consumption X maximum re-ordering period for emergency

purchases.

 Avg. stock level:

It is the level at which the stock of an item ordinarily remains throughout a
production cycle.

Avg. stock level = minimum level + ½ re-order quantity

Or
(Minimum level + maximum level)/2.

 Safety level:
It is the level of stock at which there will be no danger for the firm an account of
sudden rise in the demand for the goods.

Safety level = maximum demand during the maximum lead time – avg. demand
during the avg. lead time.

INVENTORY TURN OVER RATIO (ITR):

I.T.R. is calculated to indicate whether inventories have been used efficiently or

not.
I.T.R indicates the No. of times the stock has been turn over during the period &

I.T.R. = Cost of goods sold or Net sales a

Avg. inventory at cost Avg. inventory at cost

47 | P a g e
evaluates the efficiency with which a form is able to manage its inventory.

 Inventory conversion period is calculated to see avg. time taken for

clearing the stocks.

Inventory period = 365 / ITR

MEASURES OF ECONOMIC ORDER QUANTITY:

One of the measure problem is “how much inventory should be added?” When
inventory is replenished?
This problem is called order quantity problem & the task of the firm is to
determine the optimum or economy order quantity or economic lot size.
Determining an optimum inventory level involves two types of cost i.e.-
 Carrying cost.
 Ordering cost

Carrying cost:
Costs incurred for maintaining a given level of inventory are carrying cost. This
includes:
 Warehousing
 Handling
 Clerical & Staff
 Insurance
 Deterioration & Obsolescence.
Carrying costs vary with the inventory size.
Order size increases carrying cost increases.

Ordering cost:
Costs incurred for acquiring inventory from suppliers are called ordering cost.
This includes:-

48 | P a g e
  Requisition
 Order placing
 Transportation
 Receiving, inspecting & storing
 Clerical & staff
When order size increases the ordering cost decreases.
The economic inventory quantity is that inventory level which minimizes the total
of ordering into carrying cost.
Approaches to determine EOQ

To determine the EOQ we can follow two approaches.

 Order formula approach.
 Graphical approach.

Order formula approach:

Suppose the ordering cost per order ‘O’ is fixed, ‘A’ be the annual demand and
‘Q’ be the order size. Then the No. of orders will be A/Q & the total order cost
will be

TOC = AO/Q

Let us further assume that carrying cost per unit, ‘C’ is constant. the total carrying
cost will be the product of the avg. inventory units & the carrying cost per unit,
if ‘Q’ is the order size the average inventory will be –
Average inventory = Q/2
& total carrying cost will be = Average inventory X per unit carrying cost
T.C.C. = (Q/2) X C
The total inventory cost, then, is the sum of the total carrying & ordering costs:
Total cost = T.C.C + T.O.C
Total cost = ((Q/2) X C) + (AO/Q)
This show, for a large order quantity the carrying cost will increase, but the
ordering cost will decrease on the other hand, the carrying cost will be lower &
49 | P a g e
the order cost higher in the lower order quantity.
So to obtain a formula for EOQ the total cost equation is differentiated with
respect to Q & setting the derivative equal to zero, we get-

Economic Order Quantity =

2 X quantity required X ordering cost

Carrying cost

i.e EOQ = 2AO

Where, C

A = Annual demand
O = Ordering cost
C = carrying cost

GRAPHICAL APPROACH:

The EOQ can also be finding out graphically. In the following graph the
cost i.e. carrying cost, total cost & ordering cost are floated on vertical axis &
horizontal axis are used to represent an order size.

We note that total carrying cost increases as the order size increases
because a large inventory to be maintained.

On the other case the ordering cost curve declines because as the order size
increases the No. of order decreases, the total cost curve behave definitely. The
total cost declines in the first instance, but they start rising when the ordering cost
decreases & the carrying cost increases. So the economic order quantity occurs

50 | P a g e
where the total cost is minimum i.e. Q. The following graph indicates how EOQ
is determined by using graph method.

st
in g Co
Total Cost Carry

Costs
Ordering Cost

Q O rder Size

Economic order Quantity Graph

CLASSIFICATION & CODIFICATION OF INVENTORY

For proper recording & control of inventory proper classification of various

items are essential. The inventory should be classified & coded respectively as
per there identification. The coding may be done alphabetically or numerically.
COMPUTERIZATION

A computerized inventory control system enables a company to easily

track large items of inventory. It is the automatic system of inventory, recording
with drawls & revising the balance. There is in built system of placing order as
the computer notices that the re-order point has been reached.

51 | P a g e
INVENTORY REPORT
To know the latest stock position of different items, the inventory reports
are needed to be producing continuously. This report contains all information on
required for management.
PERPETUAL INVENTORY SYSTEM

It is a system maintained by the controlling department, which reflects the

physical movement of stock & their current balance. The store ledger & bin cards
are helpful in this system because this records help in knowing the movement of
store. This facilitates regular checking of stores without closing down the plant.
Advantages:
 Quick calculations of closing stock.
 Helpful in formulating purchase policies.
 Check on stores personal.
 Helpful in production planning.
 Investment under check.
 Errors and shortage daily detected.
 Increasing efficiency of organization.
JUST IN TIME (JIT)

In JIT system material on manufactured component & parts arrive to the

manufacturing sites or stores just before few hours when they are put to use. JIT
system helps to save the carrying & other related cost to the manufacturer. The
success of the system depends upon how well a company manages its suppliers.
The JIT system complements the total quality management (TQM).

52 | P a g e
 DIFFICULTIES BEING FACED IN PRACTICING INVENTORY
MANAGEMENT SYSTEM IN J.K.PAPER MILLS
 Demand & lead times are not static & deterministic in most of the actual
cases.

 RIL policy has not been followed as periodic preview system.

 Inventory norms for some of the major items could not be followed mainly
raw material, pulp, coal & m/c clothing due to Govt. control & its seasonal
availability.

 Location disadvantages of J.K.Paper mills forces them to carry large

inventories of spare parts.

 Most of times user departments don’t realize the cost involve in materials.

53 | P a g e
 Chapter-IV

DATA ANALYSIS, INTERPRETATION & DATA

PRESENTATION.

- Sample
- Procedure
- Behavior & Awareness & Comparative
study
- Field work Detail.

54 | P a g e
DATA ANALYSIS & INTERPRETATION
Performance appraisal of inventory management through ratio analysis:

INVENTORY TURNOVER RATIO:-

It is the ratio of cost of goods sold and average inventory. It indicates how rapidly
the inventory is turning into receivable through sales. A high ratio is an indicator
of good inventory management. A low inventory implies excessive inventory
level thus warranted by production and sales activity.

Net Sales
Inventory turnover Ratio =
Average inventory

Table 1
YEAR COST OF AVERAGE INVENTORY
GOODS SOLD INVENTORY TURNOVER
(RS.IN (RS. IN RATIO
CRORES) CRORES) (IN TIMES)
2011-2012 1177.25 145.86 8.07
2012-2013 1326.57 190.09 6.98
2013-2014 1614.12 253.76 6.36
2014-2015 1904.49 332.54 5.73
2015-2016 2048.64 355.64 5.76
2016-2017

Inventory turnover ratio = Cost of goods sold/ Average inventory at cost

&

Average inventory at cost = Opening Inventory + Closing Inventory

2

INTERPRETATION:

55 | P a g e
 It is observed that in J.K. Paper Mills stock velocity indicates efficient
management of inventory; because of more frequently the stocks are sold. Due to
installation of coating plant the inventory increased for more productions.

It may also be mentioned that there are no rule of thumbs for interpreting
the inventory turnover ratio this ratio may be different for different firm
depending upon the nature of the industry.

INVENTORY HOLDING PERIOD:

It is the period for which inventory held by a firm.

365
Inventory holding period =
Inventory Turnover ratio

The table shows the inventory holding period for the period 2000-2010

Table 2

YEAR DAYS INVENTORY INVENTORYHOLDING

TURNOVER PERIOD
RATIO (IN DAYS)
(IN TIMES)
2011-2012 365 8.07 45
2012-2013 365 6.98 52
2013-2014 365 6.36 57
2014-2015 365 5.73 64
2015-2016 365 5.76 63
2016-2017 365

INTERPRETATION: It can be interpret here that the level of inventory of the

JKPM is maintained for 50-55 days averagely, for all items of inventory.
However for finished goods the inventory is maintained mostly for 6-8 days for
dispatching the items.

56 | P a g e
 INVENTORY TO CURRENT ASSET RATIO:

TABLE 1.3

Year/Items Current Assets Inventory Ratio

2011-2012 704.59 164.19 23%

2012-2013 561.43 216.00 39%
2013-2014 857.10 291.51 34%
2014-2015 842.05 373.58 44%
2015-2016 837.60 337.71 40%
2016-2017
INTERPRETATION:

From the above results we can say the nearly 1/3 of the total current
assets is constitutes inventory at J.K. Paper Mills Ltd.

RATIO OF OPENING AND CLOSING INVENTORY TO THE TOTAL INVENTORY (i.e.

raw material)
TABLE 1.7
OPENING CLOSING TOTAL
OPENING CLOSING
YEARS Rs.in.lacs Rs.in.lacs Rs.in.lacs
RATIO RATIO
(0.1Million) (0.1Million) (0.1Million)
2011-12 66.47 83.91 153.38 0.44 0.56
2012-13 83.91 117.24 201.45 0.42 0.58
2013-14 117.24 133.75 250.99 0.47 0.53
2014-15 133.75 179.68 313.43 0.43 0.57
2015-16 179.68 164.54 344.22 0.52 0.48

57 | P a g e
 Chapter-V
ACTIVITIES AT STORES IN JKPM LTD.

Activities at stores in J.K.Pur.

58 | P a g e
 1. Codification and Classification of Inventory.

2. Item Categories and Treatment

3. Purchase Requisitions Process.

4. Inventory Receipts.

5. Issue of Inventory.

6. Stock Verification and monitoring.

7. Disposal/ Sale of Waste and Scrap.

8. Codification & Classification of Inventory.

 Item codification is done for new items or incases where item specification
changes/ correction is requested.

 User department sends “Request Form” for code generation to the IE

department by giving detail specifications of item and other details like
Imported/ Indigeneous source, Regular/ Insurance item. User department
provides the first six digits of the item code in the form. IE department verifies
the correctness of the six ditirs and allots the remaining four digits to the item.

 Item code is put on hold in the system incase the item does not record any
transaction for a period of three years. The code is deleted from the system
after one year in the hold status.

 The current codification it is difficult to distinctly identify to distinctly identify

Revenue items from capital items as some of the spares are procured with
capital nature whereas the same spare is also procured against revenue head.

59 | P a g e
 Duplicate item codes at different departments need to be eliminated from the
system before taking up the exercise of common item codification between
the manufacturing facilities.
The classification of items at the stores is done based on factors like
frequency of purchase and consumption patterns, nature/ usage of the item the
accounting books being updated etc.

JKPM classifies the items under the following categories:

 IRP Items.
Regularly consumed material is categorized under IRP based on
consumption, usage rate and lead times. Inclusion of an item as IRP is advised by
the user department with due approvals to the IE department. Refer details on IRP
Items maintenance in this document. On a daily basis Stores generates exception
listing of IRP items the requirements to be replenished. General Stores items are
categorized under annual requirements and reviewed on a quarterly basis by
Stores for replenishment. The decision for inclusion/ exclusion of IRP item is
taken by the IE department. Current inventory of regularly consumed “C” class
items of about 1900-2000 items fall under perpetual review, annual requirements
items are around 800 in numbers. Inventory for specifically indented by user
department is maintained department wise wherein issue from inventory to any
department other than the intended department is not done without prior approval
of the concerned user department.

 Insurance Items.
Due to uncertainty, longer lead time and vital nature of the items for
production/ maintenance fall under the category of Insurance items. Spares for
main enhance activities and production support items fall under this category.
User department declares insurance items at the time of generating the PR.
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Inventory of such items is maintained at stores. These items are not purchased
under specific budgets and are procured against need-based PR’s raised by the
user department. For such items the non-moving or slow moving items definition
does not apply.
Items identified by user department for changing from regular item to
insurance items category is done by inputting necessary code in the system by the
IE department. Insurance items are identifiable from the item code itself at the
time of item code defilation as requested by the users on the Purchase Requisition.

 Purchase Requisition based Items.

Material procured upon as and when required basis fall under this category.
Purchase Requisitions raised by user and duly approved are routed through stores
for availability checking as well as flagging the record onto the system for further
processing by the purchase department. Stores monitor budgeted purchases of the
departments to almost all the inventory/ non- inventory items. If some material is
average stock value of the same is adjusted to the department’s available budget
by stores. PR based item category does not include raw material items as well as
IRP items.

 Capital Items which is part of Plant & Machinery.

Items procured against this category are codified under heading “Capital
equipment” are maintained by stores. These stock details are accounted as WIP
under various budget schemes by accounts department capital issues are made
against issue requisition with specific budget/ code number/ accounting number
by technology development department/ planning cell.

 Obsolete Items/ Slow & Non moving items.

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 Any items which are part of equipment which is discarded/modified which
in-turn make this item non usable termed as obsolete. Engineering department
identifies and declares through a lost duly approved by competent authority like
CGM (E)/ CE(W). Store maintains periodic reports listing non-moving items in
stock with age-wise analysis in the last five years (except insurance items).

Currently slow moving items are categorized in the range of 2-3 years and
3-5 years over five years the items are classified as non-moving (except
insurance/ obsolete items).

Items Categories & Treatment.

Majority of the inventory items are classified within six categories namely
chemicals. Packing material, Machine clothing, Capital items &spares, Stores,
Printing & stationery and Welfare items.

 Chemicals:
Annual budgeted requirement for chemicals is planned. Incase when HO
purchase department is involved in placing the purchase order, stores ascertains
the monthly requirements considering the stock levels and communicates the
same to HO purchase. HO purchase informs Stores of the order placement and
quantities ordered for the chemical. As and when the material is required stores
either releases the delivery schedule directly to the supplier or intimates the
supplier through HO purchase department.
Incase of the chemicals purchase locally, these items fall either under IRP
or against PR. Local purchase department processed the same after receiving
information from stores. All chemical are purchased on weight basis only.
Follow-up is done by stores with suppliers for material inventory below minimum
stock levels.

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 Packing Material:
Job work orders for wrappers are handled by local purchase department,
scheduling for supply on the same is done by stores considering the minimum
stock level and requirements. At the end of the month reconciliation of account
is carried out at stores based on the ration of paper and BOPP film with respect
to the ectual wrapper received, as specified in the purchase order along with the
details of weight gain against adhesive, film and ink. The base paper required as
per the PO terms and conditions is indented to the sales department which in-turn
issues it to the hob worker.

ITW/L&S annual rate contract work is directed by the saled department

[details from sales document]. The related material is ordered by local purchase
department; material is received through stores GRN and issued by stores to the
sales department. These items are identified as ITW/ L&S items. Unused
quantities at department are received by stores on a monthly basis. The same is
maintained on the inventory books at store.

 Machine Clothing:

Stores maintain stock position of the inventory as per the budgeted

inventory norms.

 Imported Items:

LOI is forwarded to HO by planning cell a copy of the same is received by

stores for budget control. Upon receipt of PO form Ho the order is regularized at

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stores on the system is the material is received a GDN is prepared by stores
followed by GRR.

 Stores & Spares:

These are PR items processed for purchase based on user department

requirements raised through the system. The items are normally non-stock items
ordered as and when required.

 Printing & Stationary Items:

Store informs requirements to the purchase department based on Annual

Quota of the user departments. Monthly requirement certained by stores after
receiving feedback from user department. The same is forwarded to purchase
department for supply.

For “Office Supply” items requirements are raised by stores, otherwise the
user department raised manual PR on the purchase department directly as and
when such purchases are required. All the purchases under this category are done
under specific expresses codes and Zero value inventory records are maintained
by stores.

Purchase Requisitions Process:

The PR item requests are raised by the user department on as-and-when-

required basis, Stores receives the duly approved PR copy to verify any existing,
in- transit stock. The PR record on the system is flagged by stores and forwarded
to purchase department.

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Inventory Receipts:

 Material at the gate is enter in OWBS (Online weighment bridge system)

entry at the security gate . After authentication at stores the same is forwarded
to the weigh bridge for preparation of “Weighment Slip”. All material
received is weighed at vehicular bridge, Weighment slip generated and GRR
is prepared based on this Weighment.

 As regards to trucks received with multiple packages from Calcutta, Vizag and
also against local collections are weighed on the weigh bridge as normal
practice. However stamping on manifesto (list of packages with challan no.
and party name) is done by security.

 A day book records transaction details for the day, GRR is prepared by stores
after validating the receipt details against the GDN received, the basic
information related to the quantities received is retrieved from the systems
Weighment records.
 Stores obtain through purchase department the LR along with a GDN (Goods
Delivery Note) for collection of material by company owned trucks. The
vehicle is allowed into the gates after the purchase department gives a copy of
the GDN to the stores. (GDN details the PO contents and is generated only
from a PO as recorded on the system, i.e. PO record is mandatory for making
any receipt by stores). In some receipts of urgent supply at mills, the system
after due approval from competent authority for the same.
 Material received at stores, quantity checked with the challan. Any shortage
breakage is specified on the transporters copy. The same is intimated to

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 purchase/ accounts/ supplier through shortage breakage damage excess report
(SBDE).
 GRR is prepared at stores with four copies (A/c copy, User Department copy
and Stores copy, purchase department copy)with remark of shortage/ breakage
as indicated in the LR.
 Quality check is done either by the QC department or the user department for
acceptance of the supply. Upon clearance the material is passed to the storage
location. Until the QC is cleared material is stored at “Under Approval
Location”.
 For user department/ quality control rejections purchase department is
intimated by stores and after their approval for paid/ unpaid items, material is
returned to the supplier.

Issue of Inventory:

 Material is issued to the departments based on an issue slip received by stores

on daily basis. In some cases where stores is not the custodian of the material
received, as soon as the bulk liquid material is received at the department
(which is the custodian of storage location) the department generates an issue
slip of the total quantity received to the stores.
 The stock is maintained at the tanks by the respective departments and on the
system the same is maintained on a daily basis as departmental stock. As
regards other than liquid stores maintains the inventory.
 Issue slips are raised by the user on the system, duly approved hard copy is
received by stores against which the material is issued to the user.
 Exceptionally material may be issued by stores on manual issue request:

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 1. In case where the material is not inventoried after receipt on the system and
the same needs to be issued to shop floor. In this case the material is issued
manually and transaction regularized after the inventory records are
updated.

2. In case material is required urgently and the requesting user is not able to
get the issue request on the system. Here the same is regularized at a later
date upon getting post-facto clearance.

 As the material issued on-line the same is reduced from inventory at the time
of the issue transaction. The posting of the same is done as a batch job on daily
basis.
 Material issued to contractors on chargeable basis is issued by stores against
issue vouchers from the concerned department. The issue document series is
maintained separately on the system by stores indicating contractors name
with vendor code for realization by accounts from their bills. On a monthly
basis Accounts department maintains the realization from the contractor for
all such issues.

 Stores have a procedure of recording shop-floor inventory quantities on a

monthly basis as reported by the user departments (Six user depts.). The figure
are consolidated by stores after assigning the weighted average costs (as
provided by the user department) and forwarded as an MIS report to the
Finance/ Accounts department (MOR).

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Stock verification:

 “A” Class- Raw material (Bamboo, hard wood, imported pulp), Heavy
Chemicals (Line, Soap Stone powder, Ground Calcium Carbonate, Caustic
Lye, chlorine, sodium Sulphate, alum, Liquid Oxygen, HCL, Hydrogen
Peroxide, Sulphur Dioxide, Cool etc.)

 Stock taking is done jointly by stores and accounts on half yearly basis,
difference is charged to the consumption account after due approval from
competent authority.

 “B” class-Packing Material, Machine clothing, Furnace Oil, LDO/ HSD,

Lubricants variety), Industrial knives etc. Stocking taking is done on perpetual
basis (it normally happens twice a year.

 “C” class-07 to 99 grouped items like machinery spares and consumables fall
under this category. Stocking taking is done on perpetual basis (it normally
happens twice a year).

 The existing inventory is approximately 8000 number of stock items, 12000

members items are moved items.

 Any variance in physical count and book stock are listed annually after due
approved by competent authority. Necessary adjustment made with
adjustment voucher prepared and updated in the ledger by the accounts
department through the system.

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Chapter-VI
RESULT & ANALYSIS OF THE WORK.

- Conclusion
- Recommendation & Suggestions
- Bibliography

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CONCLUSION:

This practical study is about the “INVENTORY MANAGEMENT”. Its

purpose is to present, as clearly and vividly as possible the nature, characteristics
of modern day inventory management techniques. This task poses a major portion
of the current assets of any firm. Many appropriate techniques are employed so
as to control unnecessary wastage of money in maintaining the inventory of the
firm. In spite of variety and the pace of change in the inventory management
techniques proper focus has to be made on the use of appropriate techniques to
plan the inventory levels which affecting the production and sales of the firm
because the major revenue for any firm is from its sales. The intent of this report
is to provide an insight in the application of various inventory management
techniques. It has always been important to identify and apply various
appropriate techniques of logistic inventory management. So as to, achieve high
performance in sales and thus reduce unnecessary costs.

The summer internship training was instrumental in acquiring through

knowledge about the Inventory Management at JKPM. I learnt the applicability
of the study and above all I got a chance to test and enhance my knowledge in a
new field.

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RECOMMENDATION & SUGGETIONS

 In my opinion the company should give more emphasis on backward

integration by inducing the local farmers to produce Bamboo and hard
wood which helps the company to be independent over inventory in raw
materials
 Timely connective action to control inventory will definitely yield fruitful
results.
 Much control should be exercised in procuring spare parts for old
equipment due to the fact that remaining life of these equipments will be
very less and the same way be replaced by new equipment shortly.
 FIFO system should be implemented & strengthened.
 Cost reduction on inventory can achieved to a greater extent if the
concerned department like stores, purchase & user departments work in
close co-ordination.
 The identification & disposal of stocks should be done on top priority basis.
 Timely connecting action to control inventory will definitely yield fruitful
results.
 Much control should be exercised in procuring spare parts for old
equipments due to the fact that remaining life of these equipments will be
very less & the same way be replaced by new equipment shortly.
 Standardization in respect of equipment will greatly help in reducing
inventory of spare parts
 If ABC analysis s is applied for the materials produced it helps to reduce
the unnecessary investment and if applied for raw materials it will reduce
the CC and OC.
 Perpetual system needs to be strengthened.

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  Storage area for certain nature of item to be taken care & involved lively.

BIBILOGRAPHY
BOOKS:
MARKETING MANAGEMENT- Philip Kotlor, edition-twelve edition 2006,
Publisher- Prentice Hall of India (p) Ltd, New Delhi Branch
RESEARCH METHODOLOGY- C.R Kothari, edition-2004, reprint 2006
Publiher – New Age International (P) Ltd, publishers, Branch New Delhi
FINANCIAL MANAGEMENT- I M Pandey, edition- ninth edition….. 2005,
Publisher- Vikash Publishing House (p) Ltd. Noida
MANAGEMENT ACCOUNTING- Sashi K. Gupta, R.K. Sharma. Second
revised edition 2009,
Publisher- Kalyani Publishers, Delhi
JOURNALS:
ANNUAL REPORTS ON J.K.PAPER MILLS LTD- JK PAPER Ltd. April 2010
INDUCTION MANUAL OF JK PAPER MILLS- JK PAPER Ltd. 2010
BROCHURES AND BOOKLET OF JK PAPER MILLS- JK PAPER Ltd.
2000-2010
INTERNET SOURCES:
http//: www.jkpaper.com
http//: www.wikipedia.org
http//:www.paperonweb.com

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