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INTRODUCTION
The term inventory originates from the French word inventories and Latin word
indentation, which implies a list of things found. The term inventory includes raw
materials work in progress finished goods, spares, in generally inventory mean stock,
and financial language, inventory means raw materials, work in progress, finished
goods.
The term inventory includes the following categories of items.
1. Production Inventories: - Raw Materials, parts and components which enter
the forms product in the production process.
2. MRO Inventories: - Maintenance, repair, operating suppliers which are
consumed in the production process but which dont become part of the
product. Eg:- lubricant oil, soap, machine repair parts.
3. Work in Process Inventories: - Semi finished products found at various
stages in the production operation.
4. Finished Goods Inventory :- Completed products ready for shipment
NEED OF THE STUDY
Every industry on average spends 70% on raw materials (inventory).
Therefore there is a need to know the raw material cost and also there is a great
importance to understand the inventory management system of this industry.
The study helps a lot to various departments to take steps to control the
inventory process.
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SCOPE OF STUDY
This study on inventory management has a wider scope as it assists the firms in
Defining the policies for inventory management.
Determining the most appropriate inventory management techniques and
methods.
Determining the economic order quantities, stock outs, safety stock, lead time.
In minimizing handling and storing cost.
Reduce wastage / scrap / obsolete items.
OBJECTIVES OF THE STUDY
The objectives are:
1. To study the present practices observed inventory management and inventory
of raw material.
2. To see how far these accomplish the set objectives.
3. To suggest any possible changes and improvements.
4. To present the conceptual theoretical framework relating to inventorymanagement.
5. To conduct a study on existing practices of inventory management in the
company.
6. To determine the inventory status of the company and analyze them.
7. To study the inventory valuation methods of the company.
8. To suggest various control systems for inventory management.
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METHODOLOGY OF THE STUDY
Sampling techniques
There are two basis alternative approaches to sample selection namely. Probability sampling
Non-probability sampling.
The executives related to all departments were interviewed on the basis of judgment
and convenience of the interviewer which helped the interviewer to get accurate and
understand the opinion of the officers and executives.
Source of Data
The methodology is to study the inventory perception towards cement company withspecial reference to Sagar Cement it contains.
Primary data
Secondary data
Primary Data
Primary data has been collected with the help of the person questionnaires, interviews,
enquiry, observations designed and developed for this purpose. The questionnaires has
been supplied to all theOfficers/ executives to edit the required informati3on. Interviewing technique
and personal observation has been used simultaneously to make the study exact and
relevant.
Secondary Data
This data has been collected from previous published records like Annual reports
inventory reports, printed statements do the company like wed site etc.
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LIMITATIONS OF THE STUDY
As the details of inventory are maintained confidentially. The project deals with
fewer areas of inventory
As the time spent on project is only one month, it is not possible to go in to detail
study of item wise.
The project covers the area of stores and spares under inventory management
system of the company.
The collected information is mainly through secondary data.
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INDUSTRY PROFILE
Joesph Aspidin with the invention of cement in the year 1812 has made a great
contribution for industrial development. Today, the industry has become one of the
major contributors to the national income. China is the first largest cement produce in
the world and India stands second. The ex-Factory cement prices in India are the
lowest in the world compared to the other. (Excluding the freight).
Compared to every other building material, increase in the cement price has been
the lowest for the last six years. Also cement is the second largest revenue contributor
in terms of excise duty. (3500 corers per Annum).
The industry has invested Rs.30000 corers of capital by way of share holders
stake and debt from public financial institutions. Yet, the industry has not been able to
recover the continuous increase in the input costs. Cement industry today directly
employs over 1.5 lakh workers. Over 12 lakh people are directly supported by the
industry.
The entire industry has been adversely affected by the depressed cement prices.
In fast over the last five years, cement price index has declined by 1.1% despite the
rise in the recent price, the cement price index is much lower than the index during
1996. But the cement industry the fluctuation of prices is norm. More than 70% of the
cement manufacturing units are in red. Ten of the largest cement companies have been
declared sick under BIFR. Being a highly captive industry there is a compelling need
to attain reasonable returns to service a huge debt burden of over Rs.1500. Cr.
In Indian the manufacture of cement was started in Tamil Nadu early in 1904.
At present India is one of the top ten cement producing countries in the world.
Now there are more than 90 units producing more than 300 million tones of cement
per year. Cement industry today has come to a long way from a seller market to a
buyer market.
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Cement is one of the basic and essential commodities for building activities and
its demand is more than the supply and position is likely to be continued the position
has been changed and some of the units are bringing their prices regularly down.
Effective from 1982 Feb. 28th government of India has introduced dual pricing
policy where by 66.6% of the licensed capacity is to be supplied on the government
and surplus producing above 66.6% is available to the manufacturer for sale in the free
market.
Cement Prices in some countries from last six months.
Rs/Mt(EX- Factory)
4600
3450
2750
2100
1900
2800
0 2000 4000 6000MEX
CIOUS
A
SR
ILANKA
THAILAN
INDONESI
INDIA
Rs/Mt(EX-Factory)
Cement prices nave been fluctuating a great extent over the last few years. In
all countries of the world cement attracts the last amount of taxes. In India cement is
One of the highest taxed commodities. The Ex- Factory price in India despite the
recent hike is the cheapest in the world.
Components of Price:
First lets understand which components make up the price of the cement.
Power and coal alone account for nearly 60% of the variable costs. Freight and
transport costs from another major chunk of the cement prices in different locations.
During the last nine years input costs of major component, which contribute to the
final price of the cement have risen between 100% to 220%.
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Cement is one of the highest commodities in India. Levies on cement comprise
a whooping 25% to 30% of its price. Practically all major inputs in cement production
fall under administered price mechanism. Costs of inputs in cement production have
gone up by Rs. 108 per bag during the last decade.
On the other hand cement prices during the last five year have infarct come
down. Moreover since April 2000 costs on account wages petroleum products, royalty
and freight have further increased.
CEMENT PRICE DEFLIES INFLATION:
Compared to the increase in the prices of other construction materials, cement
prices have hardly increased over the last five years. Price index of cement is far below
the increase seen in the world price index.
Cement prices are driven by demand and supply, cost of production, capital
related costs, brand values, grade of cement, distance from source of supply,
seasonally and fair return on investment. Cement prices on the country have kept low
despite the inflationary pressures.
The enthusiastic response of industry to the government policies during the
liberalization phase has resulted in greater benefits to the consumer easy availability,
best quality, and most competitive price. In the bargain, it is the fair return on the
investment that has been the worst hit considering the steep escalation in input costs
cement still under priced as bottom lines of many cement companies would reveal.
CEMENT INDUSTARY APERSPECTIVE:
After the decontrol of the cement industry in the 80s several new and
additional capacities were setup. Almost a decade later, when liberalization swept
across the country, the government announced several Hugh infrastructure projects.
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Anticipating a massive demand for cement in the coming years, almost 60% of
the total cement is consumed by the infrastructure project- the industry went in for a
second round of capacity increase. Efficient plans and higher capacity utilization
meant greater production.
Unfortunately, many of these big government projects are yet to reach the blue
print stage. Even housing plans could not fully materialize, as intended by the
government. Demand for cement failed to keep pace with supply excess resulted in
high unremunerated cement prices. Today the cement industry has an installed
capacity of 113 million tones.
The cement industry has been reeling under the impact of excessive supplies
and uneconomic realization for the lost four years. As a consequence of this, the
investment has considerably slowed down and there has hardly been an addition of any
fresh capacity in the industry. This bodes ill for the nation, considering the countrys
requirement for the massive in fracture development and ever increasing housing
requirements.
The cement industry has investment value of about Rs 30000 cores out of
which almost 15000 cores is in the form of debit from financial institutions and banks.
On a conservative estimate, lately the industry has been pasting an annualized loss in
excess of Rs 1000 cores. Debits have been turning into non performing assets and
share holders value fast encoding. Over 30 companies are in the red. More than 10 of
them have been BIFR cases. Many cement companies have decontrolled, no cement
plant was economically viable. Growth in the cement industry was insignificant.
The industry doing the period was rife with all kinds of ills hoarding black
marketing and profiteering if the current trend of the erosion of the net worth of the
cement industry continues, the might once again run into dark ages.
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In any economic situation, interest of the consumer and the investor of the
capital have to be protected. Consumers long term interests have to be protected.
Consumers long term interest is served by getting the product at a competitive out of
the efficient economic working of the industry.
Indian cement industry has state- of art technology and the production cost is
most competitive in the world. The industry can survive only when it gets economic
return on the capital employed. India has to implement large infrastructure projects of
roads, bridges, ports etc. which will require a massive quantity of cement in the next
10 years.
With purchasing power increasing in the rural area and semi urban pockets of
the country, housing projects will have to be undertaken an a priority basis. It is
therefore, necessary that cement industry in India should remain healthy and fresh
capacity to meet the growing demand of the cement.
Health of any company requires a fair return on the investment. Then only a
company or an industry can protect the interests of its consumers. An industry that
fails to earn a fair share of return con never survives in the long run. Ultimately, it will
be the retail consumers who will have to bear the brunt.
IMPACT OF MINI BUDEGT:
Reduction of basic customs on non-cooking coal from 25% to 15%
Abolition of special additional of 4%
IMPACT:
The governments decision to slash basic customs duty on non-cooking
coal is expected to benefit the cement.
Considering that international prices of non-cooking coal have nearly
double in the last 12 months. The reduction in the duty will only provide
partial relief to the cement units. Moreover the cement industry largely
dependant on local supplies for non-cooking coal.
Coal accounts for around 20% of the direct cost of the cement makers.
Duty costs coupled with an expected pick-up in.
Demand, should help cement companies struggling on both the cost and
realization fronts.
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COMPANY PROFILE
Started on 20-01-1985 with an installe3d capacity of 200 TPD, promoted by
Sri S. Veera Reddy Managing Director, along with highly competent and successful
technocrats. Plant machinery is very contemporary and suitable a produce wide variety
of cements. Having lime stone mines of highest quality. Mineral available is suitable
for all varieties of cements.
Inherent strengths are:
Highly competent men.
Latest generation sophisticated machinery.
Highly quality minerals.
Which are the three important prerequisites (M3, Men, Machinery, and
materials) for any good product. (The fourth M being marketing for
successful origination)
From the day one, Sagar Cements is a success storey and stood first in all
areas of its activities, made big strides and grown rapidly in phases to its present
cement capacity of 18100 TPD.
Quality consistency is an on going activity at Sagar Cements. Top
managements priority is always to implement new technologies with in a time frame
even at huge investment and to be one of the best quality cement producing industry in
India. Management considers technology up gradation is of highest priority and spent
huge amounts towards latest machinery, systems and pollution control equipment.
The important recent investments:
Latest world best cooler for efficient cooling and better quality( I.K.N.G
mbh, Germany)
Usage of low ash imported coal.
Latest software for process optimization.
The result is sagar cements industry is of latest contemporary technology not
only when it was installed but also today and known in cement industry circle as one
of the highly efficient unit.
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Quality was given the prime importance even during the construction stage of
the project itself. The layout planning, equipment sizing, technology absorption etc.,
were considered purely based on quality aspect of view.
The quality control department is accorded highest status in work and produced
very high quality cement very consistently. During 98 an amount of Rs.40 lakes was
spent for the surveying and quality analysis of the available limestone in our mine.
This is helping in planning our mining activities to supply optimum quality limestone
to factory, the consistent well designed Raw Mix is helping in producing consistent
quality cement.
To improve the quality.
Rs.30 corers is invested towards new machinery
Works are under progress with a budgeted investment of 5.0 corers.
Other schemes are also under study.
Cement is accepted and appreciated by many Govt institutions and big builders.
Company is producing follow grade of cement.
43 Grade ordinary Portland cement.
53 Grade ordinary Portland cement.
SRC (sulphate resistant Cement).
IRST_40 (Railway sleeper cement).
Super grade (Portland pozzolana Cement).
Super steel Grade (Blast furnace slag cement).
Till date Sagar Cements could produce any specialty cement required by the market
for special application. The following are few of the many highly critical constructions
made with Sagar cements:
Bombay:-
Vasai Bridge (NBCC).
Ircon Project.
Thane crecke (Sulphate Resisting cement).
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Chennai:-
Madras Refineries Ltd.
Metropolitan Railway Transport Projects.
( Intercity Railway Bridges)
Hyderabad:-
Buddha Purnima Project.
Khirathabad Fly over Bridge..
Railway sleeper cement (IRST_40).
Kakinada:-
Nagarjuna Fertilizers & Chemicals Ltd.
Kovvur to Rajamundry Bridge III
Vizag:-
Simhadri Thermal Power project. (E.C.C.C.)
H.P.C.L.Project.
Rain Calcining Limited (RCL).
Khammam:-
Paleru dam
Singarenicolleries ltd., Kothagudem
Nalgonda:-
Dindi Project
Jhanphad Hydel power project
Vijayawada:-
Hyderabad Industries limited Kondapally.
Sagar Power ( Narsaraopet, atmakur) Irigation Projects.
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Manufacturing process of 43 Grade & 53 Grade OPC.
It is produced by grinding of Lime stone, (Calcareous) Bauxite, clay& late ritein suitable proportions in tube ball mill to a fine powder, which is called raw meal.
The raw meal is fed to rotary kiln through pre-heater with precalciner system. The raw
meal under goes chemical reactions and reaches to sintering temperature (1350
14000 C) and becomes clinker nodules. These clinker nodules are finally dropped in to
grate cooler. Here the clinker is cooled from 1300 to 100c and transported to clinker
stockpile.
During the burning the strength giving clinker compounds are formed i.e., c3s,
c2s,c3A, &c4AF.in OPC43 graed clinker the c3s content is low (45%) and in 53 grade
clinker the c3s cement is higher (50-55%) . this clinker is ground to stable fineness
with 3-4% gypsum in a ball mill. These finally ground is called ordinary Portland
cement 43&53 graed. 53 graed cement requires higher fineness than 43 Graed cement
to give early strength . 43 graed OPC clinker is made from lower concentration of lime
(CaO). 53 Graed OPC clinker requires higher concentration of lime (CaO).
Application (products):
43 Grades OPC:-
Used for general concrete construction works where special properties are not
required. Its heat of hydration is lower than 53 grade OPC but offer lower resisistance
to sulphate than P.P.C.
53 Grades OPC:-
Used where high early strength are required. Thos helps in faster construction.
The ratio of sand and metal to cement can be higher.
Portland Pozzalana Cement:-
PPC is manufactured by grinding Portland cement clinker (53 Grade) and 15 25% fly
with 3-4% gypsum. The fineness of PPC in higher to OPC cements.
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Application:
Super grade produces low heat of hydration than 43 grade OPC cements. Andgreater resistance to the attack of aggressive waters then normal Portland cements. So
minimum water required for curing than others cements. It reduces the leaching of
calcium hydroxide liberated during the hydration of cement. One of the important
reasons for using pozzolzna cements has been the increased resistance they offer to
attack by chemical agencies and particularly seawater. Its initial strength may be lower
but later strength is higher than normal OPC. Its superior properties are the cause for
its present day world wide popularity. Its high resistance and low porosity mad this
grade of cement to be very good to constructions in general and highly durable even in
costal areas.
Sagar Priya Special Grade, IRST_40:-
Sagar Priya Special Grade ordinary Portland cement confirming to IRST 40 of
Indian Railways is made my sagar cements limited which is having full facilities to
produce consistent quality to give better strength.
The minimum strength after 7 days id maintained more than IRS T-40 standard
with 43 Mpa and are progressively increased the 7 days strength.
The magnesia content in the lime stone of our mines is below 1% hence the
concrete products made out off this cement are sound.
The fineness of cement manufactures is consistently above 380M2/Kg. this is
achieved due to closed circuit grinding method using O-sepa technology, which
eliminates higher size particles completely.
Sagar Priya cements works has been inspected by RDSO, LUCKNOW and
approved our process and facilities. The cement made as per IRS T-40/1985 is tested
by Railway institute of technical and Economical services and recommended to supply
for manufacturing process of concrete sleepers.
Sagar Priya Sulphate Resisting Portland cement
Sagar Priya Sulphate cement generally knows as SRC made to IS, BS & ASTM
standards.
Selection of limestone in our mining area through surveying, core drilling and
sample collection of stone. Separate silo is required to store SRC raw meal iron ore
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fines from Bellary are to be mixed in the raw mill process. Raw meal sample will be
checked thoroughly. After confirming to the suitability then only passed to feed to
kiln. For manufacturing of SRC clinker low ash coal is required (25-27%) for reducing
the alumina content.High blain (3000m2/kg) of cement is to be maintained and separates silo is
required to store the SRC.
The sulphate resisting properties in SRC are developed by restricting the C3A
content to below 5%. So there is no 0 excess C3A left to react with sulphates. Low
heat of hydration, less risk of the 3 rmal shrinkage.
Applications:-
SRC can be used in costal areas. Dockyards, Bridges , aqua farm tanks,
sewerage and effluent- carrying drains it will protects the structure from sulphate
attacks. Suitable for massive constructions suitable where soils having higher
percentage of water soluble sulphates, i.e. more than 0.5% at seashore. Penetration of
sulphate ions into concrete made with OPc can result in scaling and ultimately in some
circumstances to complete disintegration.
Storage at the construction site:-
Cement which is stored unprotected for any considerable length of time absorbs
moisture causing lumps formation and resulting in a loss of hardening capacity. So
long as the lumps are easily crumbled between the fingers the strength will not be
seriously affected. If the cement is not properly stored at the construction site, about
10% of strength is lot in a months time. So the period of storage should always be
kept as a short as possible.
Leakage: - No Proper Vibration of Concrete.
Cracks: - Settlement of foundations.
Cement & Concrete:-
Concrete is composed of a course aggregate forming the bulk of the mix, a fine
aggregate filling the voids between, and cement and water to bond the whole together.
The sand, or fine aggregate, and cement may together be regarded as a mortar in which
the coarse aggregate is set. The properties of the concrete depend primarily on the
quality and amount of this interstitial mortar and only secondarily on the coarse
aggregate.
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As per specification sand contain 5 to 50% of material passing on 52 sieve, the
maximum at 30 % the main bulk of the sand, which lies between a no 52 sieve and a3/16 inch mesh should contain particles of varying size and does not consist
predominantly of any one size.
The proportions of cement and aggregate in concrete and expressed as one (1)
cement. X fine aggregate y coarse aggregate by volume or by weight, or alternatively
as the weight of cement per unit volume of mixed concrete.
The proper ties of the cement- sand motar, which binds the coarse aggregate
together, depends on the proporyion of cement it contains the amount of water used,
and on the finess of the sand. The finer the sand,the greater is the surface area it
possesses, and hence the larger the proportion of cement required to cover that surface.
This is one reason why sand should not be excessively fine and contain much material
passing a 100 mesh. An increase in the amount of water above that necessary to give
a workable mix renders the mortar weaker and more permeable and increases the
volume of voids which will be left empty when the concrete dries out and excess water
is removed. If the proportion of the sand in concrete is not sufficient, then is if the mix
is over Sand the fragments of coarse aggregate will be separated more than
necessary by the excess mortar and the mortar itself will be leaner in cement. The
coarse aggregate in concrete is normally quite insert and impermeable and it is the
cement mortar which is the point of attack by most destructive agencies, and which
forms the channel by which water can permeate in to the concrete. The presence of an
excess of this mortar in a weaker condition tends therefore tp lower the resistance of
the concrete to attack. The proportion of sand required decreases as the maximum size
of the coarse aggregate in creases. As a rough working role about 30 -40% by volume
of the aggregate should consist of sand when the maximum size of coarse aggregate is
inch, but this proportion has to be adjusted to suit the particular aggregates used.
The use seawater is reinforced concrete should be avoided for increases the risk
of corrosion of reinforcement. It must never be used for mixing high alumina cement
as it has a very adverse effect on the strength.
The mixing and placing of concrete also play an important part in determining
the quality of the product. The ease with which concrete can be placed depends on the
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workability of the max. The workability of concrete is measured by various tests such
as the slump test. The workability of concrete is influenced by the type and grading of
the aggregate as well as other factors.
The amount of water required of produce a given slump in a concrete mixincreases with the temperature of the mix. This increase from 60-100f raise the water
requirement by the order of 10% this results in a lower ultimate strength and increase
in the subsequent drying shrinkage.
Concrete can be damaged by lack of proper curing. It is essential for the
development of high strength that the concrete should be kept moist for a period and
nor allowed to dry out rapidly. Once a concrete has been cured under moist condition
for a sufficient period, its resistance to attack by chemical action is increased by
allowing it to remain in air and dry out. A film of calcium carbonate forms over the
surface of the material, blocking the pores and producing a hard and dense surface
skin.
And additional factor is involved in reinforced concrete where steel bars are
embedded in the material. The function of the concrete here is not only to provide a
medium to with stand the compressive stresses to which the reinforced concrete
member may be subject, but also to protect the steel reinforcement against corrosion.
Any corrosion of the reinforcement result in the formation of a film of iron oxide over
the metal occupying a volume about 2.2 times that of the iron from which it is formed.
The expansion which thus occurs results eventually in the flaking off or cricking of the
concrete overlies it. The corrosion hence damages not only the steel but also the
concrete. The degree of protection afforded to the reinforcement depends on the
impermeability and thickness of the concrete covering it. Reinforced concrete, which
is exposed to seawater. Reinforced concrete members may show the cracks arising
from deflection under load (or) from shrinkage of concrete.
Failures in Concrete Structure:-
Failures in concrete may be assigned three general causes.
Unsuitable materials.
Error in preparation, placing curing.
Exposure to natural or artificial destructive agents.
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Unsuitable materials:-
Unsuitable materials group defective cements, defective aggregates, and
incorrect proportions of cement and insufficient entrained air to give the required frostresistance and excessive additions of admixtures.
Error in preparation, placing curing
Poor mixing and the use of too wet or dry mixes with the accompanying troubles
of segregation, the last being aggravated by insufficient ramming. Bad jointing two
days work, inadequate curing may also be grouped under this head.
This shape of the voids present in a fractured surface may give some indication
of the consistence of the mix. Small double holes with smooth surface and spherical
shape are characteristic or rather wet mixers, while the presence of numerous voids of
irregular shape and an uneven distribution of the fine aggregate indicates the use of a
mix which has been too dry for the degree of ramming employed. Bad grading of the
aggregates is also usually indicated by the appearance of the fractured surface.
Aggregates
Concrete or mortar is made up of cement, water, and aggregates (store chips and
sand) and at times chemical additives. The aggregates, fine (sand) and coarse (stone
chips) make up about 75 % of the volume of concrete. Generally sp. Gravity of
aggregates 2.4 and 2.90.
The aggregates from main matrix of the concrete or mortar. The aggregate
particles are hold together by cement matrix, formed out of the past of cement. While
the coarse aggregates from the main matrix, the fine aggregates from the filler matrix
between the coarse aggregates. With cement and water the entire matrix binds together
into a solid mass called concrete. The aggregates may be igneous (granite or basalt) of
sedimentary (Lime stone, etc,) rock.
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Selections Factors of Aggregates:-
Sl.No Factors Influence of concrete property
1. Specific Gravity Strength/absorption2. Chemical stability Durability
3. Surface texture Bond grip
4. Shape Water demand(strength)
5. Gradation or particle Water demand(strength)
6. Size distribution Bleeding and segregation
7. Maximum size Strength
8. Deleterious materials Water demand bound cohesion and durability.
Quality of Aggregate:-
The presence of clay, dust, slit or mud in aggregates beyond the permissible
limits is harmful, because it results in production of lower strength concrete. Generally
grit and dust portions of the aggregate will cause an increase in water demand and
subsequent drop in concrete strengths.
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INVENTORY MANAGEMENT AN OVERVIEW
One of the major tasks of any management today is to control inventories. Quite
often, it is a massive task; yet it has to be done since the cost of inventories is totally non-
value producing and is a direct charge on the profits of their company. Let and controlled
it can eat away all the profits of the company and drag it into the sick bed. The problem
with inventories is that it has several facets and its environment is very complex in nature.
TYPES OF INVENTORY:
For the purpose of control, it is very essential to study the following four types of
inventories in detail:-
1. Raw Material Inventories
2. MRO Inventories or maintenance, repairs and operating supplies.3. Work-In- Progress or In-Process Inventories.
4. Finished goods Inventories.
Raw Material and Production component:
Raw Material and Production component are purchased from outside suppliers
and the reason for their existence is to uncouple the purchasing function from the
production function.
The size of this inventory is dependent upon factors such as internal lead-time for
the purchase, supplier lead time, vendor relations and availability of material, government
import policy, in the case of imported material, the annual consumption of the material
and relative criticality of the material.
MROs:
MROs are bought out materials required for maintenance of the production
process but which do not form part of the finished product. These include petrol, oil and
lubricants, machine repair parts, jigs, tools, etc.
Work- In-Progress Inventory:
Work- In-Progress Inventory might exists merely because of the production cycle
time or could also be maintain for decoupling successive manufacturing operations. The
decoupling could be employed either for implementing an incentive scheme or to enable
each of the production departments to plan independently.
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The size of the inventory is dependent on the production cycle time, the percentage
of machine utilization the make / buy policies of the company, the management policy for
decoupling the various stages of manufacturing.
The Finished Goods Inventory:The Finished Goods Inventoryis maintained to assure a free flowing supply to the
customer and for this the marketing department insists on the substantial finished goods
inventory. The size also depends on the ability of the marketing department to push the
product, the companys ability to stick to the delivery schedule of the client.
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FUNCTIONS OF INVENTORY:
Inventory has five basic functions. These functions must be understood if
inventories are to be analyzed to determine how much inventory is really required. These
functions are1. The lot-size Inventory:
Most companies manufacture items in lots rather than at exactly the rate they are
required. The main reason relates to productions and efficiency. As a result of this,
inventory is excess of immediate requirements will be carried.
2. Fluctuating inventory:
This inventory exists because demand or supply fluctuates. Safety stock is
fluctuating inventory.
3. Anticipation Inventory:
These are the inventories that are built in anticipation of future demand. Anticipation
inventory might take the form of an inventory build up during a slack season to keep the
labor employed, while providing for demand during the peak season. Inventory build-ups
a head of the holiday season, in anticipation of strikes, and to provide initial inventories
of new products of new products items are also anticipation inventory.
4. Transportation Inventory:
These inventories exist because materials are moved from place to place. A company
with a plan in nasik and stock points at Bombay, Calcutta, Chennai and Nagpur, would
normally have considerable amounts of inventory in transit between the plant and the
stock point warehouses. If the time for rail shipment across the country were two weeks
on the average there would be a two weeks supply of inventory in transit.
5. Decoupling Inventories: Such in inventories are needed for meeting our demands
during the decoupling period of manufacturing or purchasing.
OBJECTIVES FOR INVENTORY CONTROL:
The first consideration is the overall objective of the work of stock control. Like all
other activities in the company, inventory management has to contribute to welfare of the
whole organization. The logistic operation must aim to contribute to profit by servicing
the marketing and financial needs of the company.
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The aim is not to make all items available at all times as this may well be
determinable to the finances of the company. The normal role for stock control is to meet
the required demand at a minimum cost. The aim of long term profitability has to be
translated into operations and financial targets, which can be applied to daily operations.The purpose of the inventory control function in supporting business activity is to
optimize three targets.
1. Customer Service
2. Inventory Cost
3. Operating Cost
The first Target
Customer service can be considered in several ways, depending on the type of
demand. In a general stores environment the service will normally be taken as
availability ex stock, where as in a supply to customer specification, the service
expected would be delivery on-time against customer requested data.
The Second Target
Inventory costs, requires a minimum of cash tied up in stock. This target has to be
considered carefully, since there is often the feeling that having any stock in the stores for
a few months is bad practice. In reality minimizing the stock usually means attending to
the major costs; very low value items are not considered a significant problem. Low
inventory can also be considered in terms of space or other critical resources. Where the
item is voluminous or the stores space restricted, the size of the items will also be a major
consideration.
The Third Target:
Avoiding operating as become more of an issue as focus has been placed on
inventory management. The prime operating costs are the stores operations, inventory
control, purchasing and associated services. The development of logistics, linking
distribution costs with inventory, has added a new set of transportation costs tothe
analysis.
Optimizing the balance between these three objectives is the focus of inventory
control the better the balance greater the profits provided the company.
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MECHANICS OF INVENTORY CONTROL:
It would be worth recapitulating the entire process of materials procurement and
stocking, before we go into the details of the mechanics of the inventory control. The
starting point is the sales forecast, which enables the management to decide how much ofwhat products it will have to produce to meet the demand.
There are various factors in this decision, the chief of them are ;
1. Production Capacity
2. Product Mix
3. Raw Material Availability
The next point is to make out a bill of materials or a list of all materials that will
be required to produce the goods. Production may not necessarily follow a constant
pattern throughout the year.
There may be for example, lot size production, i.e. a minimum quantity that will
make for an economical batch of production. Next, there may be a seasonal production to
meet the demands during the particular season. To cite an example, in pharmaceutical
industry there are some drugs which are required only in summer and the once that are
required in winter.
There are only produced for three to four months in a year. In view of these
variations in production pattern, there will naturally be a variation in the monthly
requirement of materials.
Some materials may be required only from Jan to March and none thereafter.
Some may be required every alternative month or once in six months only, and so
on. This call for the making of a production schedule. The bill of materials when
made up, will reflect this schedule precisely not only what materials are required,
but also when they are required and in what quantities.
Of course, not in all industries can a precisely accurate estimate of materials
required be made. There are several industries that depend on other industries for
their orders, and production in their case will depend upon the orders, they
receive.
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COSTS INVOLVED IN INVENTORY:
Holding Costs is the cost associated with carrying or holding the goods in the stock is
known as holding or carrying cost. Holding cast is assumed to vary directly with the sizeof inventory as well as the time for which the item is held in stock.
The following components constitute the holding costs:
1. Inventory Capital Cost: This the interest charges over the capital investment.
Since this is the most important component, a careful investigation is required
to determine its rate.
2. Record Keeping and Administration Cost: This signifies the need of keeping
funds for maintaining records necessary administration.
3. Handling Costs: These include all costs associated with movement of stock
such as; Cost of Labor, Overhead Cranes, Gantries and other Machinery
required for this purpose.
4. Storage Costs: These involve the rent of storage space or depreciation and
interest even if the own space is used.
5. Depreciation, Deterioration, Obsolescence Costs: Such costs arise due to the
items in stock being out of fashion or the items undergoing chemical changes
during storage.
6. Taxies and Insurance Costs: All these costs require careful study and generally
amount to 1% to 2% of the invested capital.
7. Purchase or Production Costs: Purchase price per unit item is affected by the
quantity purchased due to quantity discount or price breaks. Production cost
per unit item depends upon the length of production runs.
8. Salvage Costs or Selling Costs: When the demand for an item is affected by its
quantity in stock, the decision model for the problem depends upon the profit
maximization criterion and includes the revenue from the sale of the item.
Storage Costs or Stock out Costs:
Storage Costs or Stock out Costs are the penalty costs that are incurred as a result of
running out of stock. These costs due to storage of goods, sales may be lost, goodwill
may be lost, either by a delay in meeting the demand or being quite unable to meet the
demand at all.
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In the case where the unfulfilled demand for the goods can be satisfied at a later
date, these costs are usually assumed to vary directly with the shortage quantity and the
delaying time both. On the other hand, if the unfilled demand is lost, shortage scosts
become proportional to shortage quantity only.Set-up Costs:
Set-up Costs these include the fixed cost associated with obtained goods through
placing an order or purchasing or manufacturing or setting up machinery before starting
production.
So they include costs of purchase, requisition, follow-up, receiving the goods,
quality control etc. These are also called order costs or replenishment cost. They are
assumed to be independent of the quantity ordered or produced
.
INVENTORY CONTROL TECHNIQUES
Inventory control refers to the regulation of the stock and flow of materials and stores
is an efficient, effective and economical manner to meet the needs of manufacturing and
trading concerns in order techniques.
Economic order quality fixation of stock levels, ABC quality inventory turnover
ratio input output ratio analysis , pricing of raw material and valuation of stock are most
important.
The important tools & technique of inventory agent & control.
Determination of stock level:-
Carrying of too much and too little of inventories is detrimental to the firm. If the
inventory level is too little, the firm will face frequent stock. Outs inventory heavy
ordering cast and if the inventory level is too high if will be unnecessary tie up of capital.
Minimum Level:-
This represents the quality which must be maintained in hand at all times. If
stocks are less than the low level there the work will stop due to shortage of materials.
Lead Time:-
The time taken is processing the order and their executing it is known as lead
time. It is essential to maintain some inventory during this period.
Rate of consumption:-
It is the average consumption of materials in the industries. The rate of
consumption will be decided on the basis of past experience and production plans.
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Nature of Material:-
The nature of material also affects the minimum level. If a material is required only agent
special orders of the customers then minimum stock will not be required for such
materials.Maximum level:-
The quality of materials beyond which a firm should not exceed its stocks. If the
quality exceeds maximum level limit then it will be over stocking maximum stock level
will depend upon.
The availability of space for strong the materials.
The maximum requirements of materials of any point of time.
The availability of space for strong the materials.
The cost of maintaining the stores.
Danger Level:-
If the danger level arises their immediate steps should be taken to replenish the stock
ever if more cost is incurred in arranging the materials.
Average stock level:-
Average stock level = minimum stock level + of re-order quality.
EOQ (Economic order quality):-Is one of the important techniques used to determine the optimum quality order to
be place from the supplies. The main objective of EOQ is minimizes. The cost of
ordering and cost of carrying materials and total cost of production.
The formula for EOQ is
= 2AB/CS
A= Annual Consumption.
B= Buying cost per order.
C= Cost per unit.
S= storage cost per annual.
Example:-
Material Cost Rs. 1.00
Yearly consumption = 16000
Cost of receiving material = 18
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Storage & caring cost = 20% of Avg inventory.
= 2AB/CS
2X1600X181X20
2X1600X18
1X20/100
2X1600X18X100 = 1700 UNITS
1X20%
From the above diagram it is clearly show that the behavior of the
company cost the ordering cost and the same of these two costs, the charring cost
various directly with the order size where the ordering cost various inventory the
order size.
EOQ model is based on the following assumptions:
1. Material cost per unit remains unaffected by order size.
2. Orders will be received on the expiry of lead time.
3. Variable inventory constant throughout the order.
4. Production and sales can be forecast perfectly.
SELECTIVE INVENTORY CONTROL:-
ALWAYS BETTER CONTROL (ABC):
ABC Analysis is a basic tool, which helps the management to place their efforts
where the results would be useful to the greatest possible extent. The first important step
in inventory management is to have a selective approach to fix up inventory levels, order
quantities and the extent to which the control can be exercised.
The selective approach mainly depends on the annual consumption of various
items. For example, the items like nuts and bolts costs less than the items like engines.
But we cannot safely stock the items like engines because of their heavy cost, while the
items like nut-bolts can easily be stocked. Thus, less control is required for stocking the
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items like nut-bolts etc. But, more emphasis should be given to control the stocking of big
items like engines.
The investment of such items is substantial, and record keeping is expensive. ABCanalysis is a very effective tool for such selective control. This technique involves the
classification of inventory items in to three categories A, B, C in descending order of
annual consumption and annual monetary value of each item. Based on ABC analysis,
and average pattern of percentages of items and percentages of their annual consumption
value may be as shown table pare to analysis by the current stock level in good for
reducing stock levels, but a more consistent classification is required when focusing on
the management of inventory.
The end stock does not necessarily show which items are important for the
business. In fact there may be some important items where the current level of stock is
low because the stores are awaiting an impending delivery. On the other hand some items
may have high stock value simply because no one is buying them. It is therefore usual to
rank the items according to the annual turnover. The annual turnover is given by,
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Purpose:
The purpose of ABC analysis is not to provide different types of service but to provide
service with the least amount of cost and effort.
S.NO
.
Class A Items Class B Items Class C Items
1 Frequent ordering is
required
Moderate control is
required
Loose control is
required
2 Size of order is based
on their calculated
requirement
Size of order is based
on their consumption
Size of order is based
on the level of
inventory
3 Procured from many
sources
Procured from two or
three sources
Procured from two
sources
4 Requires keeping
records of receipt and
consumption
Also, requires keeping
records of receipt and
consumption
No need of keeping
any records
5 Moderate effort is
made to reduce lead
time
Moderate effort is made
to reduce lead time
Minimum effort is
made to reduce lead
time
6 Close check on
schedule revision is
required
Some checks on
changes are required on
need
No checks are
required against any
need
7 Frequent ordering is
required
Less frequent ordering
is required
Bulk ordering is
required
8 Continual expediting Expediting for
prospective shortages
No expediting
9 Accurate forecasts Less accurate Appropriate forecast
10 Have high
consumption value
Have average
consumption value
Have low
consumption value
Saving Time:-
Applying the Pareto principle is a way of balancing inventory, stock availability
and critical resource spent on each item. How the law can be applied depends on what the
critical resource is considered to be. The critical resource for all inventory controllers is
time, because of large amount of information required and the wide variety and quantity
of stock held. The Pareto principle shows that 80% of the time in spent doing 20% of the
jobs and a significant time saving can be made if a small reduction can be achieved in
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these jobs. They may be very frequent short jobs or more infrequent, long-winded jobs In
ABC analysis the items are classified in three main categories based on their respective
usage value:
Category A items:More costly and valuable items are classified as A. Such items have large
investment but not much in number.
Category B items:
The items having average annual consumption value are classified as B these
items have less importance than A class items, but are much costly to pay more attention
on their use.
Category C items:
The items having low consumption value are put in category C. Such items can be
stocked at an operative place where people can help themselves with any requisition
formality.
Annual usage* unit cost:
Limitations of ABC Analysis:
1. ABC analysis doesnt permit precise consideration of all relevant problems of
inventory control.
2. If ABC analysis is not updated and reviewed periodically, the real purpose of
control may be defeated.
3. The periodic consumption value is the basis for ABC classification. Hence ABC
classification can lead to overlooking the needs of spare parts whose criticality is
high, but consumption value is low.
XYZ Analysis based of inventory value:
We know that the basis for ABC classification was the consumption value of the items.
But, the basis of the XYZ classification is the closing inventory value of the items.
X- Items with high inventory value
Y- Items with moderate inventory value
Z- Items with low inventory value
XYZ classification is usually performed once in a year during the annual stocktaking
device. This analysis helps us in identifying the items, which are being stocked
extensively.
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XYZ classification can also be combined with the ABC analysis and the controls on the
items can be affected as shown in the table:
XYZ Classification X Y ZABC Classification X Y Z
A A Attempt to
reduce the stock
Attempt to convert
Z items
Items are within
control
B B Review stock and
Consumption more
often
Items are within
control
Review bi-annually
C C Dispose of the
surplus items
Check and maintain
the control
Check and maintain
the control
VITAL, ESSENTIAL, DESIRABLE (VED) ANALYSIS:
The VED Analysis is based on the criticality of the items. If the items are arranged
in the descending order of their criticality viz.
V- Vital Items
E- Essential Items
D- Desirable Items
Than the more attention is paid to the v-type items.
The criticality of an item may be of two-types
1. Technical
2. Environmental
Vital items:
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Such items are those which when required, and not available, they make the whole
system in operative. For example, a clutch wire is vital item for the speed vehicle like
scooter, motorcycle et
Essential items:
Those items which when demanded, and not available reduce the efficiency of the
system are called essential items. For example, Telephone is an essential item. In the case
of E-items some risk can be taken.Desirable items:
Desirable items are such that even if they are not available, they neither stock the
system nor reduce its efficiency but it will be good if they are present in the system. The
VED analysis is useful in stock controlling of spare parts required for maintenance.
This analysis can also be very useful to capital intensive process industries. Since
this analysis is based on the criticality of an item, it can be used in the raw materials,
which are rarely available VED can be combined with ABC for the effective management
of spare parts. This can be shown in the following table.
FSND-ANALYSIS BASED ON USAGE RATE OF ITEMS:
In this analysis, items can be classified according to descending order of their
usage rate, or movement as follows:
F- Fast Moving Items
S- Slow moving Items
N- Normal Moving Items
D-Dead Items
In this classification, a close attention is paid to the F-Items, while D Items are
transferred to the disposal cell. FSND analysis is particularly useful to combat obsolete
items.The cutoff point of four classes are usually indicated in terms of the number of
issues in the past 2 to 3 years. For example, No issue in the past two years, may be
BOMMA INSTITUTE OF INFORMATICS Page 33
Classification V-Items E-Items D-Items
A- Items Constant control and
regular follow up
Moderate stocks Nil stocks
B- Items Moderate stocks Moderate stocks Very low stocks
C- Items High stock Moderate stocks Low stocks
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classified in D-category; up to 10 issues during that period in S Category; up to 20
issues in N category and more than 20 issues are put in F- category. The XYZ and
FSND both can be combined to control the obsolete items, which are useful in the timely
prevention of obsolescence.
Classification F-Items S-Items N-Items
X- Items Tight inventory
control
Reduction of Stock
to very low level
Quick disposal of
items at optimum
price
Y- Items Normal inventory
control
Low level of stocks Should be
disposed as early
as possibleZ- Items Can reduce
clerical labor by
Low level of stock
GOLF CLASSIFICATION:
These letters stands for Government-Ordinary-Local-Foreign. There are many
imported items which are canalized to the State Trading Corporation, MMTC, Indian
Drugs and Pharmaceuticals Ltd., Metals Trading Corporation etc.
There are special procedures to be followed for procuring such item. As such,
ordinary procedures of inventory control may not work in respect of these materials and
they would require special treatment. Similarly, items that are available within the
country could be treated differently if they were available locally, compared to their being
available only in very distant towns or where they have to be specially manufactured.
Imported items would be a special class by themselves and have to be accorded a
treatment quite unique.
SOS CLASSIFICATION:
Some of the items required may be seasonal in nature and may require special
purchasing and stock age strategies. Many commodities, especially the agricultural and
seasonal in character, have to be purchased at the appropriate time.
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One can not apply EOQ here. A buying and stocking strategy for seasonal items
depends on a large number of factors, and more and more sophistication is taking place in
this sphere and mostly operational research techniques are used to obtain optimum
results.MUSIC 3D ANALYSIS:
A multi unit selective inventory control three dimensional (music 3D) approach
has been advocated. This approach considers criticality of the usage, consumption value
and lead time in supply; with each factor having two variants critical and non-critical
usage, high and low consumption and long and short lead-time, respectively.
MODERN INVENTORY TECHNIQUES:
Just-in-time (JIT)
Journal of business logistics, 1998 by Droge, Cornelia, Germain, and Richard Just
in time refers to a collection of practices that eliminate waste. These organization wide
practices encompass the entire logistics flow of materials from purchasing through
production and distribution.
The elements of JIT may include shared product design with suppliers and
customers, movement toward single sourcing, proximate suppliers and customers,
reduced machine setup times, total preventive maintenance, reliance on analytic tools
( such as pareto charts) to identify source of defects in products and processes, demand-
pull support and cellular plant layout, among others.
The Inventory Effect of JIT
JITs inventory effect results from three interrelated processes. The first concerns
a focus on product and process quality. The adoption of analytic tools (such as pareto
charts) and the inclusion of direct labor to quality improvement programs have a
significant effect on inventory levels.
Analytic tools are used to spot the sources of defects, whether these sources
originate in defective assembly processes, materials, or materials design. These tools
become all the more powerful when their use is orchestrated by direct workers in
production and logistics whose expertise and knowledge is tapped by quality circles.
As sources of defects are identified and remedied, product quality improves, the number
of quality control inspectors declines, and more important, the amount of scrap and
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rework inventory declines. Reductions in work in process inventories lead to a lesser need
for safety stock based up on expected defect levels in inventory. .
Safety stocks of finished goods may also decline because the expected defect rate
is lower.The result is fewer inventories for unanticipated internal delivery delays. Since
machines run when they should, fewer inventories is required to accommodate machine
breakdowns. Demand-pull support links the quantity produced to the quantity demanded,
triggering production only when successive stations demand inventory. Reduced machine
set-up time drives down lot sizes, resulting in less average inventory on hand.
The third and final inventory related element of JIT is exchange with suppliers.
Proximate suppliers shorten inbound supply lines, reducing both the length and the
variance in delivery cycles. This ultimately reduces the level of inventory needed to
account for late or incomplete delivery. The buyer sharing production plans with
suppliers further controls late delivery. Shared buyer seller product design increases the
number of people tackling quality issues and increases the probability of design for
manufacturability (DFM).
ADVANTAGES OF INVENTORY:-
Inventories often constitute a major element of the total working capital, and
hence it has been correctly observed, good inventory. Management is good financial
agent. The basic responsibility of the finance manager is to make sure that the firms cash
flows are managed efficiently. Efficient management of inventory should ultimately
result in the maximization of the owners wealth. The managerial objectives of inventory
are two types.
Operating Objectives.
Financial Objectives.
Operating objectives means that the materials & spares should be available in
sufficient quality. These objectives aim at a Vat avoiding the possibility of delay in
production.
The financial objectives of inventory agent to secure many economics. The
objectives and importance of material are very wide.
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Investment is inventories should not remain Idle & minimum working capital
should be locked in it.
Inventory Turnover Ratio:-The ratio is also called as stock turnover ratio; it may be defined as a ratio which
measures the number of items affirms average inventory is sold during the year.
Inventory turnover ratio = Cast Goods Sold
Average inventory
Or
Sales Revenue
Average Inventory
Manufacturing Concern = Cast Raw material consumed
Avg Value of Raw material in stock
Inventory Records:-
The company is maintaining records in two types.
1. Bin cards
2. Store ledger.
Bin Cards:-
It is only quantitative record of stores receipt, issues and balance and is kept by
the store keeper for each item.
Store Ledger:-
Stores ledger is both quantitative and monetary value record of store receipt issues
and balance is prepared as per the cost over wise. The company is marinating the
following cost entries.
Valuation of Methods:-
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The company is following FIFO method other method.
FIFO method
Last in first out method
Specify price method
Basic stock method etc.
FIFO Method;-
Under this method the pricing of issue is based on a assumption made that the
oldest stock is issued first there fore at the time of issue. The rate pertaining to thet will be
applied unit the whole lots are exhausted.
Advantages:-
It is beneficial when the prices are falling as actual prices are issued, it reflecting
no profit no loss in the pricing. This method is very useful for slow moving materials.
Disadvantages:-
Calculations become complicated due to fluctuation of material prices.
More changes of clerical errors due to complicated calculation.
Under fluctuating prices, one requisition involves more than one price.
In times of raising price this method tends to show the production at low cast
since the cost of replacing the material will be higher.
LIFO Method:-
This method is just opposite to FIFO method. The basic assumption here is that
most recent receipts are issued first. The prices of the materials to be issued would be the
cast price of the last of materials purchased.
Advantages:-
It is benefited where the period of rising prices.
Under this method latest prices are issued there by leading to lower reported profit
hence saving in taxes.
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When there are wide fluxions in price levels this method tends to minimize
unrealized gains or losses in inventory.
Disadvantages:-
This method involves more clerical work, which leads to complicatedcalculations.
Due to wide fluctuations of prices, comparison of cost of similar jobs is very
difficult.
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RAW MATERIALS CONSUMED
BY USING WEIGHTED AVERAGE PRICE METHOD:
It takes into account both the prices paid and the quantities purchased at each price during
a particular period. The price is calculated as;
= Total cost of purchases / Total quantity purchases
GRAPHICAL REPRESENTATION:
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DETAILS OF RAW MATERIALS CONSUMED (2007-2010)
S.NO PARTICULARS
2007-08 2008-09 2009-10
Quantity
MTS
Value
Rs.
Quantity
MTS
Value
Rs.
Quantity
MTS
Value
Rs.
1 Lime Stone 602577 51643393 557999 43182820 725239 60130427
2 Laterite 21057 5455237 36927 12869094 40067 20394980
3 Gypsum 13876 9617213 14919 11256927 12658 9963143
4 Iron-ore 12599 3003109 1979 1363916 2680 1874025
5Clinker
Transportation0 23894565 0 16727477 0 0
6 Slag 52746 21607526 37544 13347166 0 0
7 Fly-ash 23662 6776999 29175 8308748 28845 9344390TOTAL 726517 121998042 678543 107056148 809489 101706965
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INTERPRETATION ON RAW MATERIAL CONSUMED:
1. Comparing with 2007-2008and 2008-2009raw material, consumed quantity is
decreased to the 6.6%. The value also decreased.
2. Comparing with 2007-2008and 2008-2009raw material consumed quantity is
increased to the 19.29%.
3. Comparing with 2007-2008and 2008-2009raw material consumed quantity is
increased to the 5.96% and value of material is also increased to the 26.74%.
4. Comparing with 2009-2010 and 2009-2010 ram material consumed is
decreased to the 8.64% but the value of material increased to the 1.07%.
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INVENTORY MANAGEMENT
BY USING WEIGHTED AVERAGE PRICE METHOD:
It takes into account both the prices paid and the quantities purchased at each
price during a particular period. The price is calculated as;
Total cost of purchases / Total quantity purchases
DETAILS OF RAW MATERIALS CONSUMED (2010-2012)
S.NO PARTICULARS
2010-11 2011-12
Quantity
MTS
Value
Rs.
Quantity
MTS
Value
Rs.
1 Lime Stone 758012 73072048 729474 80674608
2Purchased Raw
material1857 1044538 1002 586836
3 Laterite(AL) 14049 7792568 19657 13019817
4 Laterite 21134 10723412 1601 935502
5 Gypsum 12521 11489566 13724 16042857
6 Iron ore 6450 6243243 14369 17289921
7 Iron - ore sludge 1594 814926 597 305126
8 Dolomite 0 0 146 42311
9 Slag 0 0 93 70841
10 Fly-ash 42136 16828509 2953 1252445
TOTAL 857753 128908810 783616 130220264
GRAPHICAL REPRESENTATION:
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INVENTORY MANAGEMENT
INTERPRETATION ON RAW MATERIAL CONSUMED:
1. Comparing with 2010-2011and 2011-2012 raw material, consumed quantity is
decreased to the 6.6%. The value also decreased.
2. Comparing with 2010-2011and 2011-2012 raw material consumed quantity is
increased to the 19.29%.
3. Comparing with 2010-2011and 2011-2012 raw material consumed quantity is
increased to the 5.96% and value of material is also increased to the 26.74%.
4. Comparing with 2010-2011and 2011-2012 ram material consumed is decreased to
the 8.64% but the value of material increased to the 1.07%.
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INVENTORY MANAGEMENT
INVENTORIES
BY USING WEIGHTED AVERAGE PRICE METHOD:
It takes into account both the prices paid and the quantities purchased at each price
during a particular period. The price is calculated as;
= Total cost of purchases / Total quantity purchases
INVENTORIES
S.NO PARTICULARSYEAR
2007-08
YEAR
2008-09
YEAR
2009-10
YEAR
2010-11
YEAR
2011-12
1 Stores & Space4246253
9
3812963
4
4047341
5
4037216
7470 83279
2 Raw materials 4323631 5384125 6170394 8508184 7109270
3 Coal 78121481737790
0
1068176
6
1556408
016190287
4 Packing Materials 2299089 24331662769936
1393343 1635482
5 Goods in Transit 0 0 0 0 145657
6 Work in Progress3287468
1
2005508
0
74516741787742 4223884
7 Finished goods 6605349 1627777 2069280 2634248 1757174
8 Elovered Energy 0 3392234 9863270 8528720 2239956
TOTAL9637743
7
8839991
6
8001973
5
7878848
4
33301710
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INVENTORY MANAGEMENT
GRAPHICAL REPRESENTATION:
INTERPRETATION ON INVENTORIES:
1. Comparing with usage of the total inventories value with 2007-2008and 2008-
2009is decreased to the 8.27%.
2. Comparing with 2008-2009and 2009-2010the value of the total inventories isdecreased to the 9.47%.
3. Comparing with usage of the total inventories value with 2009-2010and 2010-
2011is decreased to the 1.53%.
4. Comparing with usage of the total inventories value with 2010-2011and 2011-
2012 is increased to the 2.02%.
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INVENTORY MANAGEMENT
STORES & SPARES
BY USING WEIGHTED AVERAGE PRICE METHOD:
It takes into account both the prices paid and the quantities purchased at each price
during a particular period. The price is calculated as;
= Total cost of purchases / Total quantity purchases
STORES & SPARES
YEARS 2007-08 2008-09 2009-10 2010-11 2011-12
AMOUNT 42462539 38129634 40473415 40372167 47083279
GRAPHICAL REPRESENTATION:
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INVENTORY MANAGEMENT
INTERPRETATION
1. In 2007-08 total value of stores and spares is 4,24,62,539.
2. In 2008-09 total value of stores and stores and spares by comparing with 2007-08.
It was decreased with 10.20%.
3. In 2009-10 total value of stores and spares comparing with 2008-09 It was
increased with 6.15%.
4. In 2010-11 total value of stores and spaces with comparing 2009-10. It was
decreased with 0.25%.
5. In 2011-12 total value of stores and spares with comparing 2010-11. It was
increased with 16.62%.
6. By observing base year which is 2007-08 and comparing with current year that is
2011-12. It was increased with 10.88%.
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INVENTORY MANAGEMENT
RAW MATERIALS
BY USING WEIGHTED AVERAGE PRICE METHOD:
It takes into account both the prices paid and the quantities purchased at each priceduring a particular period. The price is calculated as;
= Total cost of purchases / Total quantity purchases
RAW MATERIALS
YEARS 2007-08 2008-09 2009-10 2010-11 2011-12
AMOUNT 4323631 5384125 6710394 8508184 7109270
GRAPHICAL REPRESENTATION:
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INVENTORY MANAGEMENT
INTERPRETATION
1. In 2007-08 total value of raw materials is 43, 23, 631.
2. In 2008-09 total value of raw materials by comparing with base year which is
2007-08. It was increased by 24.43%.
3. In 2009-10 total value of raw material by comparing previous year which is 2008-
09. It was increased by 24.63%
4. In 2010-11 total value of raw material by comparing with previous year which is
2009-10. It was increased by 26.79%.
5. In 2011-12 total value of raw materials by comparing previous year which is
2010-11. It was decreased by 16.44%.
6. By observing base year which is 2007-08 and comparing to 2011-12. It was
increased by 64.43%
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INVENTORY MANAGEMENT
COAL
BY USING WEIGHTED AVERAGE PRICE METHOD:
It takes into account both the prices paid and the quantities purchased at each priceduring a particular period. The price is calculated as;
= Total cost of purchases / Total quantity purchases
COAL
YEARS 2007-08 2008-09 2009-10 2010-11 2011-12
AMOUNT 7812148 17377900 10681766 15564080 16190278
GRAPHICAL REPRESENTATION:
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INVENTORY MANAGEMENT
INTERPRETATION
1. In 2007-08 the total value of coal is 78, 12, 148
2. In 2008-09 the total value of coal is increased by the comparing base year which
is 2007-08 is 122.44%
3. In 2009-10 the total value of coal by comparing with previous year which is 2008-
09. It was decreased by 38.53%
4. In 2010-11 the total value of coal by observing with previous year 2009-10. It was
increased by 45.70%
5. In 2011-12 the total value of coal by comparing with the base year which is 2010-
11. It was increased by 4.02%
6. By observing the total value of coal by observing from 2007-08 to 2011-12. It was
increased by 107.24%
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INVENTORY MANAGEMENT
PACKING MATERIAL
BY USING WEIGHTED AVERAGE PRICE METHOD:
It takes into account both the prices paid and the quantities purchased at each priceduring a particular period. The price is calculated as;
= Total cost of purchases / Total quantity purchases
PACKING MATERIAL
YEARS 2007-08 2008-09 2009-10 2010-11 2011-12
AMOUNT 2299089 2433166 2769936 1393343 1635482
GRAPHICAL REPRESENTATION:
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INVENTORY MANAGEMENT
INTERPRETATION:
1. In 2007-08 the total value of packing material is 22, 99, 089.
2. In 2008-09 the total value of packing material is comparing with base year which
is 2007-08. It was increased by 5.83%
3. In 2009-10 the total value of packing material is compared with previous year
which is 2008-09. It was increased by 13.84%.
4. IN 2010-11 the total value of packing material is compared with base year which
is 2009-10. It was decreased by 49.69%
5. In 2011-12 the total value of packing material is compared with the previous year
which is 2010-11. It was increased by 17.37%.
6. By observing the total value of packing material from 2007-08 to 2011-12. It was
decreased by 28.86%
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INVENTORY MANAGEMENT
GOODS IN TRANSIT
BY USING WEIGHTED AVERAGE PRICE METHOD:
It takes into account both the prices paid and the quantities purchased at each price
during a particular period. The price is calculated as;
= Total cost of purchases / Total quantity purchases
GOODS IN TRANSIT
YEARS 2007-08 2008-09 2009-10 2010-11 2011-12
AMOUNT 0 0 0 0 145657
GRAPHICAL REPRESENTATION:
INTERPRETATION:
By observing from 2007-08 to 2011-12 the total value of goods in transit is increased
145%.
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INVENTORY MANAGEMENT
WORK IN PROGRESS
BY USING WEIGHTED AVERAGE PRICE METHOD:
It takes into account both the prices paid and the quantities purchased at each price
during a particular period. The price is calculated as = Total cost of purchases / Total
quantity purchases
WORK IN PROGRESS
YEARS 2007-08 2008-09 2009-10 2010-11 2011-12
AMOUNT 32874681 20055080 7451674 1787742 4223884
GRAPHICAL REPRESENTATION:
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INVENTORY MANAGEMENT
INTERPRETATION:
1. In 2007-08 the total value of work in progress is 3, 28, 74, 681.
2. In 2008-09 the total value of work in progress comparing with the base year which
is 2007-08. It was decreased by 38.99%
3. In 2009-10 the total value of work in progress comparing with the previous year,
which is 2008-09. It was decreased by 62.84%
4. In 2010-11 the total value of work in progress comparing with the previous year
which is 2009-10. It was decreased by 76%.
5. In 2011-12 the total value of work in progress comparing with the previous year
which is 2010-11. It was increased by 136.26%
6. By observing from 2007-08 to 2011-12 the total value of work in progress by
87.15%
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INVENTORY MANAGEMENT
FINISHED GOODS
BY USING WEIGHTED AVERAGE PRICE METHOD:
It takes into account both the prices paid and the quantities purchased at each price
during a particular period. The price is calculated as;
= Total cost of purchases / Total quantity purchases
FINISHED GOODS
YEARS 2007-08 2008-09 2009-10 2010-11 2011-12
AMOUNT 6605349 1627777 2069280 2634248 1457174
GRAPHICAL REPRESENTATION:
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INVENTORY MANAGEMENT
INTERPRETATION:
1. In 2007-08 the total value of finished goods is 66, 05, 349.
2. In 2008-09 the total value of finished goods comparing with base year which is
2007-08. It was decreased by 75.35%.
3. In 2009-10 the total value of finished goods comparing with previous year which
is 2008-09. It was increased by 27.12%
4. In 2010-11 the total value of finished goods comparing with previous year which
is 2009-10. It was increased by 27.3%
5. In 2011-12 the total value of finished goods comparing with previous year which
is 2010-11.It was decreased by 33.29%
6. By observing from 2007-08 to 2011-12 the value of finished goods is decreased
by 73.39%.
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INVENTORY MANAGEMENT
DELIVERED ENERGY
BY USING WEIGHTED AVERAGE PRICE METHOD:
It takes into account both the prices paid and the quantities purchased at each price
during a particular period. The price is calculated as;
= Total cost of purchases / Total quantity purchases
DELIVERED ENERGY
YEARS 2007-08 2008-09 2009-10 2010-11 2011-12
AMOUNT 0 3392234 9863270 8528720 239956
GRAPHICAL REPRESENTATION:
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INVENTORY MANAGEMENT
INTERPRETATION:
1. In 2008-09 the total value of delivered energy is 33, 92, 234.
2. IN 2009-10 the total value of delivered energy compared with base year which is
2008-09.It was increased by 190.76%
3. In 2010-11 the total value of delivered energy comparing with previous year
which is 2009-10 decreased by 3.53%
4. In 2011-12 the total value of delivered energy comparing with previous year
which 2010-11. It was decreased b 73.73%
5. By observing with from base year to 2011-12 the delivered energy is decreased by
33.96%
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INVENTORY MANAGEMENT
A-B-C ANALYSIS OF AN INVENTORY
A-B-C ANLAYSIS OF AN INVENTORY(2005-2007)
PARTICULARS 2007-08 GRADE PARTICULARS 2008-09 GRADE
Stores & Spares 44.06
A
Stores & Spares 43.13
AWork in Progress 34.1 Work in Progress 22.69
Coal 8.11 Coal 19.66
Finished Goods 6.85B
Raw Material 6.09B
Raw Material 4.49 Delivered energy 3.84
Packing Material 2.39C
Packing Material 2.75
CGoods in Transit 0 Finished Goods 1.84
Goods in Transit 0
100 100
A-B-C ANLAYSIS OF AN INVENTORY (2005-2008)
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INVENTORY MANAGEMENT
PARTICULARS2007
-08
GRA
DEPARTICULARS
2008
-09
GRA
DEPARTICULARS
2009
-10
GRA
DE
Stores & Spares 50.18
A
Stores & Spares 51.12
A
Stores & Spares 58.87
ACoal 13.35 Coal 19.75 Coal 20.15
Delivered energy 12.32 Delivered energy 10.83
Work in Progress 9.31
B
Raw Material 10.8
B
Raw Material 8.84
BRaw Material 8.39 Finished Goods 3.34 Work in Progress 5.25
Work in Progress 2.27 Delivery Entry 2.79
Packing Material 3.46
C
Packing Material 1.77
C
Finished goods 2.19
CFinished Goods 2.59 Goods in Transit 0 Packing Material 0.18
Goods in Transit 0 Goods in Transit 0.18
100 100 100
INTERPRETATION:
1. First, calcula