CHAPTER - I

INTRODUCTION

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INTRODUCTION
Tamilnadu SIDCO, a Public Sector Undertaking of the Government of
Tamilnadu has four decades of servicing to its credit as a Promotional Agency for Small
Scale Industries. This Corporation is rendering assistance to SSI's in the State, like
providing Infrastructure facilities, distribution of essential raw materials, marketing of
the SSI products, undertaking Civil and Electrical works etc.

Tamilnadu SIDCO apart from its activities for development of Small Scale
industries in the State runs production units engaged in the manufacture of wooden,
steel, hospital furniture, computer furniture, laboratory equipments, and aluminium
fabrication of any design. Also marketing products manufactured by SSI units in the
state under our Marketing Assistance Scheme.

Marketing division of SIDCO provides assistance to small scale units in

canvassing orders from government departments and public sectors undertaking by
wary of contract marketing and tender marketing. There are seven sales emporia and
seven marketing centers all over Tamilnadu. SIDCO participates in Exhibitions and
Trade Fairs on behalf of SSI sector for the promotion of their products. Steps are in
progress to market SSI products in Food, Plastic, Leather, and Rubber, Electrical in
addition to wood / steel /hospital furniture and Laboratory equipments. In the light of
Government orders from time to time SIDCO can supply various furniture to
Government Departments without participating in tender.

SIDCO mainly focusing on direct marketing, that means canvas orders from the
government institutions and offices by the marketing executives then give orders to the
small scale industries and collect products from the SSI units and sell the products to
the institutions from where the orders has been canvassed. SIDCO mainly marketing
the products to the government institutions rather than the private institutions. The
main customers of SIDCO are the government institutions and offices.

1.1 OBJECTIVE OF THE STUDY

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The project titled “To Evaluate and Study the Purchasing System Adopted by SIDCO”,
analyses the ability of purchasing department to select the proper sources of supply of
materials was studied. The objectives of this study are:

 To study the factors considered in selecting the source of raw materials in

SIDCO.
 To know about the accuracy in terms of time, in receiving the materials.
 To study about the delivery of materials in SIDCO
 To find whether there is any rate contract with the suppliers
 To know the methods of choosing a supplier
 To study about the consideration of other department during purchasing
 To analyze whether the materials were inspected
 To find the ways to reduce transportation cost
 To analyze the relationship with the suppliers
 To study about the mode of passing bills

1.2 SCOPE OF THE STUDY

The study is intended to attain a firsthand experience of the running of a marketing
department in an organization. The study helps to collect the detailed analysis of the
ability of purchasing department to select the proper sources of supply of material.

1.3 RESEARCH METHODOLOGY

The methodology section describes the research procedure. It describes the overall
research design, the methods of data collection, sampling procedure, field work,
including the analysis and interpretation of data. This research is targeted on the
decision making process of the purchasing manager of SIDCO which help him make
final solutions for the problem.

RESEARCH DESIGN

The research design applied here is the determination and statement of the general
research approach adopted for the project “To Evaluate and Study the Purchasing
System Adopted by SIDCO”

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The research design here serves as a bridge between what has been established (the
research objective) and what is to be done to realize those objectives.

The research with the help of descriptive design tries to establish association between
factors.

 The behavioral variables of people who are under study.

 The situations variables that existed.
 To demonstrate the cause and effect relationship the study has also used
experimental research design in some of the questions such as importance of
promoters activates market performance factors of consideration in stocking a
particular brand, competitive advantage etc.

1.4 METHODS OF DATA COLLECTION

The data collection method in the project includes primary and secondary data.

PRIMARY DATA

The primary data is obtained through observation and through direct

communication with respondents in one form or another or through personal interviews.
The primary data for the study obtained from unstructured interviews with managers
and departmental heads, employees and by direct observation.

SECONDARY DATA

Secondary data are those which have already been collected by someone else and which
have already been passed through statistical process. The secondary data were collected
from company records, journals, text books, annual reports, internet etc.

1.5 PROCESSING OF DATA

Processing implies editing, coding classification of collected data so that, that are
amenable to analysis. Percentages are often used data presentation for they simplify
numbers, reducing all of them to zero to hundred ranges.

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1.6 TOOLS AND TECHNIQUES

 SAMPLING
The research reaches its conclusion on the basis of sampling. The study
design statement finds out the target population which spells out the sources
from which the data are to be collected. In the particular research design the
target population in the employees of different sections in the organization.
The two quantities most desired in a sample are its representatives and
stability. The sampling errors as well as non sampling errors is avoided as far
as possible in the selection of representatives.
The research also uses snowball sampling throughout which initial
method and additional units are obtained from information supplied by the
training department.
 FIELD WORK
Personal interviewing is the chief method used in the survey.
Respondents will be more encouraging as most people are willing to supply
information when approached to personally. The interviewers can clear up
doubts which provide maximum accuracy. The language of the communication
can be adjusted to the status and educational level of the person interviewed,
thus avoiding inconvenience and misrepresentation.
In this survey the respondent’s selection errors, non response errors,
communication errors, recording errors and the like are minimized to be greatest
extent possible to achieve maximum information accurately. The questionnaire
prepared is pre-tested with five respondents.
 ANALYSIS
The raw data received from the fields of primary collection is validated,
edited and coded of the preparation of analysis. In adequate, inconsistent,
irrelevant and illegible responses avoided for analysis. Their conclusions are
drawn by the research by logical inference.
The statistical analytical method is used to manipulate the data. Tables
were prepared on the basis of coded data with the help of statistical tools such
as simple percentage and the like. Ranking techniques are also used for
analyzing the data.

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 The collected data is brought to a quantitative order in an array by an
arrangement of data items in numerical sequence sample tabulation as well as
cross tabulation is used to investigate the relationship between two or more
variable.
On the basis of analyzed data some findings were extracted. After
evaluating the findings alternative course of action can be set of from suggestion
and recommendations.

1.7 LIMITATIONS OF THE STUDY

As usual for any research were also having certain limitations as

mentioned below
 As in-depth study was not possible because the time limit was the main
constraint.
 More time was required for collecting information from each respondent
because interviews were held only at the convenience of the informants.
 The chances of personal prejudice were greater among the respondent.
 As the collected and interpreted data is only from Thiruvananthapuram, the
conclusion cannot be applicable to the total market.
 Marketing research used the techniques of science but it by itself is not an exact
science, so the result obtained is not very much applicable in all situations.
 Some of the customers and dealers were reluctant to give information at most
good faith.
 I faced various difficulties in collecting data through questionnaire from the
public because of their illiteracy.
 Many customers did not co-operate with me in the research process.

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1.8 CHAPTERIZATION
Chapter 1 Introduction

This chapter covers objectives of study, scope of study, methods used for collecting
data, tools and techniques, limitation of the study and chapterisation.

Chapter 2 Review of Literature

Chapter 3 Industry Profile

This chapter includes detailed profile of the industry, growth and history of Indian
Textile Industry.

Chapter 4 Company Profile

This chapter contains the company details, company’s mission, vision, objectives,
group profile and product profile.

Chapter 5 Data Analysis And Interpretation

This chapter contains analysis of data collected and its interpretation.

Chapter 6 Findings, Suggestions and Conclusion

This chapter deals with findings during the study at the organization, the
suggestions made for improvement of the company and the conclusion.

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 CHAPTER - II

REVIEW OF LITERATURE

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REVIEW OF LITERATURE
PURCHASE

“The total amount of goods procured by a business concern for cash or credit
for the purpose of sale or use is known as purchases”. In the case of a trading concern
this is the major item of expense. Goods purchased by the owner as it is not meant for
resale or processing into finished goods.

PURCHASE CONTROL

Material procurement is known as the purchase function. The functional

responsibility for purchasing is that of the purchase manager. The purchase manager
has the responsibility for purchase cost accounting and cost control.

Purchase Manager And His Duties

The purchase manager is entrusted with all purchasing activity. He has to

organize the purchase department systematically and efficiently. His in-efficiency to
perform his duties effectively has far reaching consequences on the finances of his
concern.

The duties or functions of the purchase manager are:

 Prepare a purchase budget

 Receive purchase requisition and ascertain the material requirements
 Ascertain the sources of supply
 Invite tenders from suppliers
 Select the supplier who is offering best terms and conditions
 Issue purchase order to the supplier concerned
 Followup the purchase order to avoid any unnecessary delay in delivery
 Receive the goods received note and goods inspection report to make sure that
the right type and right quantity of materials have been received
 Return to materials to the supplier which are not according to the required
specification.

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  Verify the invoice with regard to the quantity, price and other relevant
particulars and pass it for payment.
 Send the invoice to the accounting section.

CENTRALIZED AND DECENTRALIZED PURCHASING

Centralized purchasing means that all the purchase are made by the specialized
department organized for the specific purpose of purchasing. The centralized
purchasing only on purchasing department is there and all the purchase are made by
this department. This department is headed by the manager, who is responsible for all
purchase procedure. In this all the materials purchased are kept at one central store.

Decentralized purchasing is exactly opposite to centralized purchasing. In this

separate stores are situated in various departments. The department requiring stores
can draw them from their respective stores. Thus decentralized purchase are made by
the individual department.

PURCHASE PROCEDURE

The sole function of the purchase department is to buy the light type of material
at reasonable price and supply them when required without interruption. The purchase
procedure varies from firm to firm depending upon the various requirements and
conditions. Forms and records are used to implement purchase procedure and purchase
policies. Following steps are commonly followed in purchase procedure.

1. Initial purchase requisition

It is the duty of these tore keeper t o initiate a purchase requisition. A
purchase requisition is a form used as a formal request ot the purchasing
department to purchase materials. In some cases this is prepared by the
departmental head, say for special materials. The formal request received from
the store keeper for purchase of certain materials is known as ‘Purchase
Requisition’. The purchase requisition may by either a regular purchase
requisition or special purchase requisition.
Regular purchase department is prepared by the store keeper for regular
stock of item. A special purchase requisition which is prepared by the
departmental head for special materials. It is usually prepared in triplicate. The

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 original copy is kept by the purchase department, the duplicate by the store
keeper and the triplicate is sent to the authorizing executive.
Bill of material: It is a complete schedule of materials and components
needed for a particular work order. The buying department is informed through
the bill of materials as to the quality, quantity and other specifications of the
materials required for a particular work.

2. Calling for tenders and selecting suppliers

The purchase department will have with them a list of suppliers. Quotations
are invited from these suppliers and a comparative study should be made to
decide who should be selected. A rational selection is made after considerating
the various capabilities of the supplier. Ultimately statement of quotations is
prepared giving particulars such as names and address of suppliers, the price,
their capacity to supply and the terms and conditions relating to mode of
payment, mode of delivery etc.

3. Purchase order
An order is a contract to buy a specific material or materials from a supplier
it serves as the basis of legal obligation to supply specified material, subjected
to price and terms standard in it. Five copies of an order are prepared for
sending each of supplies, receiving department, accounting department,
department which initiated the purchase requisition and purchase department.
The order for goods should be drafted carefully in clear, definite words
without any ambiquity. Generally printed terms are used containing the
following particulars.
a. Order no, date, reference no.
b. Suppliers name and address
c. Description of items and quantity orderd
d. Rate and the amount
e. Mode and date of delivery
f. Packing and forwarding instruction
g. Cash discount and other terms of payment
h. Signature of the officials authourised to place the order

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 4. Receiving and inspection
When the goods ordered are received, receiving clerk checks whether the
packages and their contents are in the correct quantity. Delivery note and the
copy of purchase order. He would sign the copy of ‘delivery note’ as an
acknowledgedment of receipt of the goods.
The material will then be inspected by an inspector, who will prepare a
‘material inspection note’. He has to verify the quality and suitability of
materials in accordance with the specification as given in the purchase order.
Receiving clerk shall prepare a goods ‘received note’ in 5 copies to be
sent to
a. Purchase department
b. Accounting department for passing entries
c. Stores
d. Department initiating the requisition
e. One copy is retained for filing.

5. Making payment
Before making payment, the relevant invoices are checked by the
accounting section to confirm its authenticity as well as its arithmetical
accuracy. The quantity and price mentioned in the voice are checked.

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 CHAPTER - III

INDUSTRY PROFILE

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INDUSTRY PROFILE
3.1 SMALL SCALE INDUSTRY

Small scale industries are differentiated from the former by the technique of
production. They use modern power driven machines and employ labor as well. The
raw materials are also obtained from outside, if not available locally. These industries
are larger in size than cottage industries. Their products are sold through traders beyond
local markets. In many developing countries, the role of these industries is crucial as
they provide employment to a large number of people. In countries like India and China,
a large number of goods such as clothes, toys, furniture, edible oil and leather goods
are produced by small scale industries.

The Industries Development and regulation act of 1990 defines a small scale industries
unit as a unit engaged in the production, processing and preservation of goods, repairs
and servicing, with an initial investment not exceeding Rs.60 lakhs on plant and
machinery.

The Major Objectives in Developing Small Scale Industries

The major objectives in developing small scale and medium industries are given
below:

 To increase the supply of finished products.

 To encourage capital formation.
 To develop local entrepreneurship and skills.
 To create employment opportunities.
 To decentralize manufacturing activities from town areas and distribute them in
the rural sector.
 To reduce regional imbalances.
 To popular entrepreneurial and managerial abilities and skills.

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The Importance of Promoting Small Scale Industries

The promotion of small scale industries is important due to the following

reasons.

 Being labour - incentive, small scale industries provide the possibilities for
creating employment opportunities.
 Small scale industries require comparatively lesser amounts of capital. So they
are suited to a country like India, where capital resources are meager.
 When compared to large scale industries the small scale industries have very
short gestation period. They are quick yielding.
 They can be successfully operated in rural and backward areas.
 They can be installed as ancillary unit if- necessary.
 They can act as catalytic agents to enhance the growth of entrepreneurship.
 Decentralization of authority is very easy to put into practice in the management
of a small industry.

Price Preference Offered To Small Scale Industry Units

For the purchases made by the Government Semi-Governmental institutions

and public companies from small scale units, the Government is giving the following
price-preferences:

 15% on the products of industries which are situated outside the state.
 5% on the products of medium scale industries and large scale industries
situated inside the state.
 2% additional price to the products of small units with ISI registration.

Services Rendered By the Taluk Industries Offices

The services rendered by the Taluk Industries offices are to grant provisional
registration to small scale industry units, to help them in their coordination and
development etc. These offices make the entrepreneurs of small scale industries
informed about the incentives and assistance offered to them by the Government. They
also recommend the names of small scale units which deserve to get incentives and
assistance, to the respective District Industry office. They also help in promoting new
industry units, and provide leadership in conducting various schemes in the Taluk level.

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Bridge Finance

Bridge finance is an interim finance which commercial banks provide to

entrepreneurs on a short-term basis to enable them to tide over the delay in getting
sanctioned term loans. In case the borrowing entrepreneur delays in submitting
necessary documents, the commercial banks and other financial institutions shall also
delay in distributing sanctioned term-loans. This delay shall cause further delay in
commencing the business unit. In such a situation the entrepreneur approaches banks
to get bridge sanctioned. As soon the term loan is sanctioned the amount of the bridge
finance is repaid.

Green Channel Clearance

There are several small scale units each with a capital investment, less than
Rs.10 lakhs. In order to encourage the growth of such industries, the entrepreneurs must
get prior sanction from the control agencies. The agencies accord sanction with
retrospective effect. This system of getting prior sanction is known as ‘Green Channel
Clearance’. Industries which are enlisted as of polluting nature by the pollution Control
Board Shall not get this facility.

Tax Holiday Benefit

New industrial enterprises, including small scale industries are exempted from
paying income tax up to 6% of their profits (7.5% in the case of companies) from their
gross income. This is according to section 80J of the Income Tax Act. Now according
to section 80HH and 80HHA the entrepreneur of a small scale unit established in a rural
area is entitled to get exempted of 20% of his profits. A small scale unit gets these
exemptions for 10 years from the actual commencement of production.

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Different Types of Government Incentives

The central Government or the State Governments or both offer the following
incentives to entrepreneurs of small scale industries:

 Export-import subsidies and bounties.

 Interest free loans.
 Subsidies for research and development
 Subsidies on Capital investments.
 Subsidies for transportation
 Interest subsidies
 Financial assistance for purchasing power generators
 Exemption from property tax
 Subsidies to artisans, craftsmen and entrepreneurs of traditional industries
including hand-loom industry
 Incentives to non-resident Indians who start business concerns of their own
 Special incentives to women entrepreneurs
 Exemption from paying income-tax
 Sales tax exemptions
 Interest free sales tax loans
 Subsidies for the purchase of laboratory equipments
 Loans for industrial housing
 Land and building at subsidized rates
 Price preference for small scale industries
 Subsidies for technical advice
 Reduction in stamp duty
 Seed capital facilities
 Allotting prepared sheds
 Making available controlled and subsidized raw materials
 Financial assistance for conducting market studies.

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3.2 SMALL SCALE INDUSTRY IN INDIA

Since the time of independence, the small-scale sector in India has been a major
contributor to country’s Gross Domestic Product (GDP). This traditional sector in India
is considered to have huge growth prospect with its wide range of products. With 40
percent share in total industrial output and 35 percent share in exports, the small-scale
industrial sector in India is acting as Engine of Growth in the new millennium.

The definition for small-scale industrial undertakings has changed over time.
Initially they were classified into two categories- those using power with less than 50
employees and those not using power with the employee strength being more than 50
but less than 100. However the capital resources invested on plant and machinery
buildings have been the primary criteria to differentiate the small-scale industries from
the large and medium scale industries. An industrial unit can be categorized as a small-
scale unit if it fulfills the capital investment limit fixed by the Government of India for
the small-scale sector.

As per the latest definition which is effective since December 21, 1999, for any
industrial unit to be regarded as Small Scale Industrial unit the following condition is
to be satisfied: -

 Investment in fixed assets like plants and equipments either held on

ownership terms on lease or on hire purchase should not be more than Rs 10
million.
 However the unit in no way can be owned or controlled or ancillary of any
other industrial unit.

The traditional small-scale industries clearly differ from their modern

counterparts in many respects. The traditional units are highly labor consuming with
their age-old machineries and conventional techniques of production resulting in poor
productivity rate whereas the modern small-scale units are much more productive with
less manpower and more sophisticated equipments.

Khadi and handloom, sericulture, handicrafts, village industries, coir, Bell metal
are some of the traditional small-scale industries in India. The modern small industries
offer a wide range of products starting from simple items like hosiery products,

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garments, leather products, fishing hook etc to more sophisticated items like television
sets, electronics control system, various engineering products especially as ancillaries
to large industrial undertakings.

Nowadays Indian small-scale industries (SSIs) are mostly modern small-scale

industries. Modernization has widened the list of products offered by this industry. The
items manufactured in modern Small-scale service & Business enterprises in India now
include rubber products, plastic products, chemical products, glass and ceramics,
mechanical engineering items, hardware, electrical items, transport equipment,
electronic components and equipments, automobile parts, bicycle parts, instruments,
sports goods, stationery items and clocks and watches.

Since independence the Government of India has nurtured this sector with special care
with the following aims: -

 To develop this sector as a major source of employment

 To encourage decentralized industrial expansion
 To ensure equitable distribution of income.
 To mobilize capital investment and entrepreneurship skills

The small-scale industries play a vital role in the growth of the country. It contributes
almost 40% of the gross industrial value added in the Indian economy.

It has been estimated that a million Rs. of investment in fixed assets in the small scale
sector produces 4.62 million worth of goods or services with an approximate value
addition of ten percentage points.

The small-scale sector has grown rapidly over the years. The growth rates during the
various plan periods have been very impressive. The number of small-scale units has
increased from an estimated 0.87 million units in the year 1980-81 to over 3 million in
the year 2000.

When the performance of this sector is viewed against the growth in the manufacturing
and the industry sector as a whole, it instills confidence in the resilience of the small-
scale sector.

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 Year Target Achievement
1991-92 3.0 3.1
1992-93 5.0 5.6
1993-94 7.0 7.1
1994-95 9.1 10.1
1995-96 9.1 11.4
1996-97 9.1 11.3
1997-98 * 8.43
1998-99 * 7.7
1999-00 * 8.16
2000-01 (P) * 8.90
P- Projected (April-December)
* Target not fixed at constant prices

Employment

SSI in India creates largest employment opportunities for the Indian populace,
next only to Agriculture. It has been estimated that 100,000 rupees of investment in
fixed assets in the small-scale sector generates employment for four persons.

Generation of Employment - Industry Group-wise

Food products industry has ranked first in generating employment, providing

employment to 0.48 million persons (13.1%). The next two industry groups were Non-
metallic mineral products with employment of 0.45 million persons (12.2%) and Metal
products with 0.37 million persons (10.2%).

In Chemicals & chemical products, Machinery parts except Electrical parts, Wood
products, Basic Metal Industries, Paper products & printing, Hosiery & garments,
Repair services and Rubber & plastic products, the contribution ranged from 9% to 5%,
the total contribution by these eight industry groups being 49%. In all other industries
the contribution was less than 5%.

Per Unit Employment

Per unit employment was the highest (20) in units engaged in beverages, tobacco &
tobacco products mainly due to the high employment potential of this industry
particularly in Maharashtra, Andhra Pradesh, Rajasthan, Assam and Tamil Nadu.

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Cotton textile products (17), Non-metallic mineral products (14.1), Basic metal
industries (13.6) and Electrical machinery and parts (11.2.) The lowest figure of 2.4
was in Repair services line.

Per unit employment was the highest (10) in metropolitan areas and lowest (5) in rural
areas.

However, in Chemicals & chemical products, Non-metallic mineral products and Basic
metal industries per unit employment was higher in rural areas as compared to
metropolitan areas/urban areas.

In urban areas highest employment per unit was in Beverages, tobacco products (31
persons) followed by Cotton textile products (18), Basic metal industries (13) and Non-
metallic mineral products (12).

Location-wise Employment Distribution - Rural

Non-metallic products contributed 22.7% to employment generated in rural areas. Food

Products accounted for 21.1%, Wood Products and Chemicals and chemical products
shared between them 17.5%.

Urban

As for urban areas, Food Products and Metal Products almost equally shared 22.8% of
employment. Machinery parts except electrical, Non-metallic mineral products, and
Chemicals & chemical products between them accounted for 26.2% of employment.

In metropolitan areas the leading industries were Metal products, Machinery

and parts except electrical and Paper products & printing (total share being 33.6%).

State-wise Employment Distribution

Tamil Nadu (14.5%) made the maximum contribution to employment.

This was followed by Maharashtra (9.7%), Uttar Pradesh (9.5%) and West Bengal
(8.5%) the total share being 27.7%.

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Gujarat (7.6%), Andhra Pradesh (7.5%), Karnataka (6.7%) and Punjab (5.6%) together
accounted for another 27.4%.

Per unit employment was high - 17, 16 and 14 respectively - in Nagaland, Sikkim and
Dadra & Nagar Haveli.

It was 12 in Maharashtra, Tripura and Delhi.

Madhya Pradesh had the lowest figure of 2. In all other cases it was around the average
of 6.

Year Target Achievement Growth rate

(in lakhs.) (in lakhs.)
1992-93 128.0 134.06 3.28
1993-94 133.0 139.38 3.28
1994-95 138.6 146.56 5.15
1995-96 144.4 152.61 4.13
1996-97 150.5 160.00 4.88
1997-98 165 167.20 4.50
1998-99 170.1 171.58 2.61
1999-00 175.4 177.3 3.33
P-Provisional

EXPORT

SSI Sector plays a major role in India's present export performance. 45%-50% of the
Indian Exports is contributed by SSI Sector Direct exports from the SSI Sector account
for nearly 35% of total exports. Besides direct exports, it is estimated that small-scale
industrial units contribute around 15% to exports indirectly. This takes place through
merchant exporters, trading houses and export houses. They may also be in the form of
export orders from large units or the production of parts and components for use for
finished exportable goods.

It would surprise many to know that non-traditional products account for more than
95% of the SSI exports. The exports from SSI Sector have been clocking excellent
growth rates in this decade. It has been mostly fuelled by the performance of garments,
leather and gems and jewellery units from this Sector.

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The product groups where the SSI Sector dominates in exports, are sports goods,
readymade garments, woolen garments and knitwear, plastic products, processed food
and leather products.

The SSI Sector is reorienting its export strategy towards the new trade regime being
ushered in by the WTO.

Year Exports (Rs. Crores)

(at current prices)
1994-95 29,068 (14.86)

1995-96 36,470 (25.50)

1996-97 39,249 (7.61)

1997-98 43946 (11.97)

1998-99 48979 (10.2)

1999-00 (P) 53975 (10.2)

P-Provisional

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 CHAPTER IV

COMPANY PROFILE

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4.1 COMPANY PROFILE

Tamilnadu SIDCO a Promotional Agency wholly owned by Government of

Tamilnadu was set up in November, 1975. Tamilnadu SIDCO, a Public Sector
Undertaking of the Government of Tamilnadu has four decades of servicing to its credit
as a Promotional Agency for Small Scale Industries. This Corporation is rendering
assistance to SSI's in the State, like providing Infrastructure facilities, distribution of
essential raw materials, marketing of the SSI products, maintenance of 17 Industrial
Estates, 36 Mini Industrial Estates and undertaking Civil and Electrical works etc. We
are also running 8 production Units, which are undertaking various kinds of jobs works
in metal and wood. Moreover Tamilnadu SIDCO is supplying Bitumen to Local Bodies
as Nodal Agency and Paraffin Wax to small scale industries.

SIDCO is a fully owned Government corporation, set up to promote small scale

industries in the state. SIDCO was registered as a company on November, 1975. This
company is actually an amalgam of two former companies namely Tamilnadu State
Small Industries Corporation (formed in July 1961) and Tamilnadu Employment
Promotion Corporation (formed in 1974). The authorized share capital of the company
is Rs.13 crores comprising of 12000 equity shares of Rs.1000/- each, issued subs rived
and fully paid up capital is Rs.1244.02 lakhs. The main objective of the newly formed
corporation-which were clearly delineated in the Articles of Association are extracted
below:

To aid, council, finance and protect and promote the interests of small industries
in the state, stabilize and run any industrial undertakings projects or enterprise whether
owned or run by Government, statutory body, company, co-operative society, firm or
individuals by providing them with capital, credit, mean, resources supply of machinery
and equipments on hire purchase procurement and distribution of scarce raw materials,
advise on import control policy and export promote in procedures marketing and sales
of products, revitalization of sick units and rehabilitation of defunct units, adequate
information and publicity, construction, maintenance, management and administration
of Industrial Estates and Development plots, provision of all infra structural facilities,
technical and managerial assistance for the prosecution of their work and business.

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 To promote employment and entrepreneurship among the skilled, semi-skilled,
trained experienced and educated members of the public by promoting, establishing and
undertaking the development areas and plots, growth centers, common facility or
service centers or others infra structural works on its own or as agents of Governments
or any other body corporate or co-operative society or person.

To promote and operate schemes for industrial development and to develop

entrepreneurship by providing package consultancy service, including pre-investment
services, investment services and post-investment services and for that purpose to
prepare and get or cause to be prepared reports, studies, surveys, procedures, designs,
blue-prints, statistics and other information necessary for successful implementation of
industrial projects.

Functions and Divisions

From the very inception of the new company, SIDCO was assisting the Department of
Industries in the implementation of 10000 Industries program.

SIDCO started in a big way with the following Divisions.

 Technical Consistency
 Research and Development
 Entrepreneurs Development
 Raw material
 Finance (share participation and margin money loan)
 Sick unit Revival
 Import and Export
 Marketing
 Machinery
 Manufacturing
 Information and publicity
 Industrial Estate and Infrastructure

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SIDCO Objectives

 Development of small Industries in the state by providing

 Infrastructure facilities
 Raw material supplies
 Marketing products of SSI units
 Promotional activities for SSI products

Opportunities open for prospective Business partners Tamilnadu SIDCO

 Availability of Industrial land

 New B.S Avenue through J.V Partnerships
 Facilities for out sourcing parts and components
 Training to B.S aspirants and entrepreneurs

4.3 IMPORTANT ACTIVITIES OF TAMILNADU SIDCO

It is a promotional agency wholly owned by the Govt. of Tamilnadu was set up

in November 1975. This corporation is rendering to SSI in the state. At present the
important activities of SIDCO are distribution of raw material to SSI units, Marketing
of SSI products, maintains of 17 industrial estates, 36 mini Estates and doing under take
civil works for industries department and Government agencies. We are also running,
production units, which are undertaking various kinds of jobs works in metal and
woods.

 MARKETING DIVISION
 RAW MATERIAL DIVISION
 PRODUCTION DIVISION
 CONSTRUCTION DIVISION
 INDUSTRIAL ESTATE DIVISION
 INDUSTRIAL PARKS
 TRAINING PROGRAMS

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MARKETING DIVISION

Marketing Division of SIDCO provides assistance to Small Scale Units in

canvassing orders from Government and other Public Sector Undertakings by way of
Contract Marketing and Tender Marketing. This Division participates in Tenders
floated by Government Departments and Public sector Undertakings on behalf of SSI
unit to market their products.

The Marketing Division is now having seven sales emporia at

Thiruvananthapuram, Kollam, Kottayam, Thodupuzha, Ernakulam, Kozhikode and
Kannur. Besides there are seven marketing centers at Thiruvalla, Alappuzha, Ollur,
Palakkad, Manjeri, Wayanad and Kasaragod. SIDCO participates in exhibitions and
Trade Fairs on behalf of SSI sector to promote them by displaying SSI products.

As requested by us, G.O.(Rt) No.10/2005/SPD dated 03.02.05 permitted them

to supply Hospital Furniture/Lab Equipments etc to Government Departments/ Public
Sector Undertakings and Local Bodies without tender. Similarly as per G.O.(Rt)
No.8/2005/SPD dated 24.01.05 SIDCO is supplying Wooden Furniture and Other
Furniture respectively without participating tender. SIDCO is supplying electrical items
such as CFL, Sodium Vapour Lamps, Tubes, Tube Fittings etc to Panchayaths,
Municipalities, Corporations and Other Public Sector Undertakings.

Steps have also been taken for marketing of SSI products through SIDCO with
a common branding proposed by Tamilnadu State Small Industries Association. As
SIDCO is a promotional agency, the products of SSI units should be marketed through
SIDCO. The main items selected are food products, Plastic products, Leather and
Rubber, Electrical Products in addition to Wood, Steel, Hospital Furniture and
Laboratory Equipments.

During the year 2004-2005 Marketing Division achieved a turnover of Rs.16

crores. The interior decoration work of the High Court of Tamilnadu, Modular seating
arrangements in Government Secretariat, Thiruvananthapuram; supply of Furniture
and Hospital equipments to Government Medical College, Thissur; Work under MGP
at Malappuram Collectorate and Furnishing work at Government Guest House,
Palakkad etc are some of the prestigious works undertaken by Marketing Division
during the previous year.

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 SIDCO is working hand in hand with the Tamilnadu state Small Industries
Association and SIDCO Suppliers Association for the development of the SSI sector in
Tamilnadu.

RAW MATERIAL DIVISION

Raw Materials Division is engaged in the distribution of various raw materials
to the SSI sector and public sector undertakings in Tamilnadu through the district Raw
material depots in each district. Our distribution includes Iron and steel, Paraffin wax,
Titanium Dioxide, Plastic granules, Cement, G.I. pipes, Aluminum sheet and Petroleum
products like Lubricants, Rubber process Oil and Bitumen. Tamilnadu SIDCO is also
appointed as the agency for distribution of Bitumen to the Local Bodies vide G.O (P)
NO.88120021LSGD dated, 31.05.03 by the Govt of Tamilnadu. The Govt of India has
sanctioned Rs.2 crores for the Import of Paraffin wax under the Japanese Debt Relief
Grant Assistance Scheme. Coal India Limited nominated Tamilnadu SIDCO as an
agency for the distribution of coal amongst small consumers in the state with the annual
requirement of 24000 tonnes. We are also having a plan for establishing a high Tech
Industrial Park in the vacant land available at Raw material division premises on joint
ventures basis, if possibility of raising funds is there for this. Steps for setting up of
Residential Flats on joint venture basis in the vacant land of SIDCO Auto Engineering
unit at pachalam are also under way. We have also a proposal for setting up of our own
steel stockyard at SIDCO, Gandhi Nagar, and Kochi for the benefit in, Tamilnadu. We
are trying for find out the small manufacturing firms which wish to market their
products through SIDCO and nourish their business supply to the Government
organization such a planning is in the preliminary stage.

PRODUCTION DIVISION

At present 8 Production units are functioning. All units are depending on job
works. 4 units undertake manufacture of wooden furniture, all kinds of Timber partition
works. One unit namely Government instrument Workshop undertake the manufacture
of Steel furniture, Cash Chests, Leveling instruments etc. One of the unit namely
Service Workshop, Ollur undertake all type of Steel Fabrication works, Dies, Fixtures
etc. another unit at Umayannalloor ie. SIDCO tools, undertake precision machinig jobs,
dies, fixtures etc. The Pressure Die-Casting Unit, Pappananmcode, Trivandrum

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manufacture Pressure Die- Cast Components. Government Departments can purchase
various furniture and equipments from our Production units without observing Tender
formalities.

CONSTRUCTION DIVISION

The Construction Division offers a package of integrated services for the design,
execution and management for various types of Civil and Electrical Works. This
division is a full-fledged division headed by a Chief engineer with Architects, Civil and
Electrical Engineers. There is a network of Engineers throughout the State and the
Division has built up considerable expertise and experience in the field of Civil and
Electrical works of major projects for the past 35 years. SIDCO is the Nodal Agency
for implementing infrastructure facilities for Development Plot, Development areas and
Construction of Multistoried buildings and other factory buildings for industries
Department and other sister concerns, and those works are carried out through the
Construction Division .The mode of arrangement and those works are as per the rules
and regulations laid down by Tamilnadu Public Works Department. Our clients are
Industries Directorate, Tourism Department, Serified, Tamilnadu Khadi and Village
Industries Board, Government Secretariat. Coir Corporation, Foam Mattings, Pollution
Control Board, Alappuzha Municipality, Tamilnadu State Poultry Development
Corporation, Rajiv Gandhi Centre for Bio-Technology.

INDUSTRIAL ESTATE DIVISION

Tamilnadu SIDCO owns 17 Conventional Industrial Estates and 36 Mini

Industrial Estates which are functioning in different Districts of Tamilnadu. There are
920 factory sheds in which more than 750 SSI units are functioning. The above said
factory sheds were allotted on Lease basis, Hire Purchase basis and Out Right Purchase
basis. A very few sheds are vacant for allotment preferably on Out Right Purchase basis.
In addition to these factory sheds, Industrial Plots are being allotted to the entrepreneurs
in Industrial Estates, Mini Industrial Estates and Industrial Parks for constructing
factory sheds of their own design to run industrial units. Considering the importance of
Small Scale Industries, as part of Government Policy, the scheme for setting up of One
Industrial Park in each of the 140 Assembly Constituencies of the State is being
implemented by SIDCO

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 SIDCO Industrial Estates

No. Name of Branch Address Telephone

Office
1. Ambattur The Branch 044 – 26253644
Manager,
SIDCO Branch
Office,
SIDCO Industrial
Estate,
Ambattur,
Chennai- 600 058
2. Coimbatore The Branch 0422 – 2672825
Manager,
SIDCO Branch
Office,
SIDCO Industrial
Estate,
Kurichi,
Coimbatore – 641
021
3. Cuddalore The Branch 04142-225134
Manager,
SIDCO Branch
Office,
SIDCO Industrial
Estate,
Semmandalam,
Cuddalore-607 001
4. Erode The Branch 0424 – 2275237
Manager,
SIDCO Branch
Office,
SIDCO Industrial
Estate,
Chennimalai Road,
Erode-638 001
5. Guindy The Branch 044 – 22501482
Manager,
SIDCO Branch
Office,
Thiru Vi Ka
Industrial
Estate,Guindy,

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 Chennai-600 032.

6. Hosur The Branch 04344 – 276975

Manager,
SIDCO Branch
Office,
SIDCO Industrial
Estate,
Hosur – 635 126
7. Kakkalur The Branch 044 – 27665310
Manager,
SIDCO Branch
Office,
SIDCO Industrial
Estate,
Kakkalur– 602 003
8. Krishnagiri The Branch 04343 – 236092
Manager,
SIDCO Branch
Office,
SIDCO Industrial
Estate,
Krishnagiri – 635
001
9. Madurai The Branch 0452 – 2566897
Manager,
SIDCO Branch
Office,
SIDCO Industrial
Estate,
K.Pudur,
Madurai – 625 007.
10. Salem The Branch 0427 – 2448520
Manager,
SIDCO Branch
Office,
SIDCO Industrial
Estate,
Five Roads,
Salem – 636 004

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INDUSTRIAL PARKS

SIDCO is entrusted with the scheme of establishing one Industrial Park in each
Legislature Assembly Constituency. Land is allotted on 90 years saleable lease. We
have succeeded in establishing Industrial Parks at Athani in Thrissur District,
Angamaly in Eranakulam District, Shornur in Palakkad District and Moodadi in
Kozhikode District and Thiruvarpu in Kottayam. We have succeeded in allotting 530
cents of land in the above Industrial Parks on 90 years lease scheme to Industrialists.
Around 27 Acres of developed is available in the above Parks for allotment. Allotment
is being made by Quotation cum Auction. Steps are underway to develop land in
Industrial Parks at Kunnamthanam in Pathanamthitta District and Chelakkara in
Thrissur District .New areas are being identified in other constituencies.

IMPORT and EXPORT DIVISION

SIDCO has recently formed a new division called Import and Export Division
attached to the Marketing Division at Kochi with a view to give all possible assistance
to the SS Sector by functioning as the canalizing Agent for the SSI units in Tamilnadu
both for their raw material import and product export.

IT and TELECOMMUNICATION DIVISION

Tamilnadu SIDCO has recently formed a new division called Information

Technology and Telecommunication Division for expanding its area of business
operations to the field & Information Technology and Telecommunication. Areas
identified under this project are E- Governance, office Automation, modernization of
office, smart card development. Statewide Area Network, state of art
Telecommunication and communication Park Micro Documentation etc.for the
Government Departments/Agencies. SIDCO has entered in to MOU with M/s. Indian
Telephone Industries a premier PSU under the Ministry & Communication,
Government of India for setting up joint ventures in the state. The division has already
initiated action for setting up a Telecom-city in Thiruvananthapuram joining hands with
ITI.

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SIDCO consortium for Automobile Body Building

SIDCO is planning to form a consortium of Automobile Body Building units in

the state under its leadership to promote this Industry in the state by canvassing orders
for bus body building from the Government Departments/Public sector
undertakings/local bodies

RIGHT TO INFORMATION

Under the Right to Information Act, as directed by the Government, SIDCO has formed
an Information cell with the Managing Director as appellate authority.

SUPER CHECK CELL

A super check cell is formed with the vigilance officer as the conener to conduct super
check cell of the articles supplied by Marketing Division and Production units with a
view to avoid quality complaints.

Prestigious Projects Undertaken

 Interior decoration of court halls of High court of Tamilnadu

 Modular seating at Government Secretariat, Thiruvananthapuram

 MGP project at Malappuram collectorate.

 Supply of Medical Equipments & Furniture at Medical College, Thrissur

 Furnishing works at Government Guest House, Palakkad.

BUISNESS PROPOSALS TO INVESTORS

 Technology up gradation and modernization of SSI units/production units.

 Investment in Infrastructure development on SIDCO's Industrial Plots.

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  Setting up of High Tech Industrial Parks of International Standard in SIDCO’s
Sites.
 Setting up of advanced study centers exclusively for industrial entrepreneurs

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 CHAPTER – VI
FINDINGS, SUGGESTIONS &
CONCLUSION

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FINDINGS
 In SIDCO, all factors like quality, price and transportation are considered in
selecting the source of raw material.
 In SIDCO the material are purchased from external agency.
 The materials are delivered in time from the supplier in SIDCO.
 Purchase department in SIDCO won’t change their suppliers frequently.
 We can understand that they have rate contract with the supplier
 We can understand that SIDCO used to call for quotation from supplier before
choosing a supplier.
 The material purchased is inspected for quality and quantity most of the time
from the survey conducted in SIDCO.
 Purchasing policy is centralized in SIDCO
 In SIDCO, the checking and passing of bills for payment of purchased
materials are done in time almost always.
 We can obtain the information that the purchasing department before making
any purchase considers the requirement of the entire department.
 We can get the information that the proper purchasing reduces inventory
carrying cost.
 It can be found that the firm provides sufficient storage space as and when
required.

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SUGGESTIONS
 Transportation cost of material can be reduced by choosing appropriate method
of transportation.
 The whole purchase department can be computerized to make the processing
fast.
 Discounts in terms of price and quantity should be properly utilized.
 Inventory cost can be reduced by making purchases at proper intervals.
 The relationship with the suppliers can be improved by conducting frequent
meeting with the suppliers
 A planned budget should be made every financial year for the purchase
department.
 Financial losses during delivery of material should be reduced.
 Management decisions relating to purchases should also be considered.
 Appoint more employees to make the work easy.
 Careful utilization of raw material is essential to avoid wastage.
 Proper planning is essential in SIDCO which minimizes risk
 Material received should be tested for quality specification
 Products should be produced for all required consumers other than government
institutions.

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CONCLUSION

The study was to analyze the effectiveness of purchasing system in SIDCO.

SIDCO holds a good position among government organization in Tamilnadu.

The purchase policy adopted by SIDCO is satisfactory from the study. Only
very few disadvantages could be found out from the study. The limitations of the
study don’t provide more in-depth study.

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 BIBLIOGRAPHY
BOOKS
1. Kothari. C.R, “Research Methodology, Methods & techniques”. (2004), 2nd
Edition, New Age International (P) Ltd, Publishers, New Delhi.
2. V.S Ramaswamy & S. Namakumari “ Marketing Management” third edition.
3. Umasekaran “Research methods for business, a skill building approach”,
(2007). 4th edition, Wiley India (P) Ltd, New Delhi.
4. Kotler Philip, “Marketing Management”, (2000), 12th edition, Pearson
Education.

READING MATERIALS

1. COMPANY MANUAL
2. MAGAZINES

WEBSITES VISITED

1. www.Tamilnadusidco.com
2. www.google.com
3. www.wikipedia.com

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