INTRODUCTIONCement is a building material has been known in one from other since the time of ancient

sindhu civilization. The information about preparation and use of cement before 18 th century.

Egyptians are known as the users of cement. The Greek civilization used some forms of motor

but romans has developed it. The Indian cement industry is the second largest in the world after

China in terms of quality, productivity and efficiency. In India it came to be established during

the beginning of 20th centuries. In fact the cement era in India commented with establishment of

a smack cement factory at dates “Washer man pet” in Chennai in 1904 by South India industry

Limited a company that dates back to 1979.The political capacity of this plant was only 10000

metrictons per annum

Zuari cement is a part of the Ital cement group, the fifth largest cement producer in the

world and the biggest in the Mediterranean region. Zuari cement ltd is located at Krishnanagar in

yerrraguntla, YSR District. Location of the plant at this place having many advantages. Zuari

entered the cement business in 1994 to operate the teamaco cement plant. In 1995, teximaco’s

plant in yerraguntla was takeover by Zuari and a cement division was formed. The fleding unit

came into its own year 2001 when Zuari industries entered into a joint venture with the ital

cement group. The fifth largest cement in the world, Zuari cement was born. Today the company

is the top most produces in south India.

NEED FOR THE STUDYInventory constitutes the most significant part of the current assets of large majority of

companies in India. On an average inventories are approximately 60% of current assets in public

limited companies in India. Because of the large size of inventories are maintained by firms a

considerable amount of funds is required be committed to them. It is therefore absolutely

improved to manage effectively in order to avoid unnecessary investment. Hence an attempt is

made to study the inventory management in Zuari Cement Ltd.

OBJECTIVES OF THE STUDYThe main objectives of the study are

To find out optimum level of investment in inventory.

To analyze the various inventory management control techniques used by the

organization.

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RESEARCH DESIGN The select ZUARI CEMENT LTD is located at Yerraguntla in Y.S.R District.The data

collected through secondary sources and. research design is analytical in nature.

DATA SOURCESIn order to perform the search on’’inventory management’’in zuari cement ltd.,used

secondary data for obtaining information.

Secondary Data

This data is obtained directly from the company’s annual report, production selection,

and spare parts store section, charts, related company websites and other documents.

Period of the study The study period confines 4 years from 2009-10 to 2013-14

Statistical tools for analysisLast in first out(LIFO)&first in first out(FIFO).

Scope and limitations of the study The study covers inventory management techniques in Zuari, yerraguntla branch only.

As of time constraint, the study concentrates on only inventory management techniques

only.

The financial matters are confidential in nature it is high risk to collect the data from the

company.

There is difference between the collected data as of the sources are annual reports and

website of the company.

Chapter layoutThe study is organized into 6 chapters.

Chapter-1 : Introduction

Chapter-2 :Industry profile

Chapter-3 : Zuari cements ltd., A profile

Chapter-4 : Research methodology & design

Chapter-5 : Data analysis & interpretation

Chapter-6 : Findings and recommendations

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FINDINGS OF THE STUDY All the materials are increased from the 2009 to 2012 i.e. Rs 2789.71 to Rs 9245.63

because increased in the production capacity.

Slow moving items are Up and down with marginal different from 2009 to 2012 i.e.

3.86y% to 7.34% and there small decrease in non moving items continuously from 2009

to 2012 from Rs20.38 to Rs7.95.

The components of average are increased in the year 2009 to 2011 i.e. Rs 722.38 to Rs

1517.84, but it was decreased in the year 2012 to 1094.61 because of less inventory.

As, it is observed that value of economic order quantities was continuously increased in

2009 to 2011 i.e. 258.23 units to 462.28 units due to continues increased in the

production capacity , but it was decreased in the year i.e. 434.17.

Implementation of inventory management and control on the cement manufacturing

industry has reduced the average costs of inventories which has lead to reduced carrying

costs.

SUGGESTIONS price are needed, and awareness among initiators is to be increased to control the

generation of slow moving and moving item.

Introducing the new trends like JIT for some slow moving materials will definitely show

a positie impact on the costs and the variations in the average costs.

The production planning and material requirement planning should be informed to the

purchThe company should increase in the days of inventory holding it is well to the

organization.

New ways and means of disposing of scrap, surplus and obsolete items at a reasonable

ase department. So that they can identify number of alternative vendors.

The losses due to non moving items should be informed to corresponding department

initiators. So that the initiator can think economically to reduce the inventory.

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INTRODUCTION The basic responsibility of the financial manager is to make sure the firm cash flows are

managed efficiently. Efficient management of inventory should ultimately result. In the maxima

ion of owners wealth in order to minimize cash requirements inventory should be turned over as

quick as possible. Avoiding stock outs that may result is closing down the production line or lead

to loss of sales. It implies that while the management should try to pursue the financial objective

of turning inventory as quickly as possible. It should at the same time ensure sufficient

inventories to satisfy production and sales demand. In other wards the financial manager has to

reconcile these two conflicting requirements I) to minimize investment in inventory and II) to

meet demand for the product by efficiently organizing the production and sales operation. These

two completing objectives can also be expressed in terms of cost and benefits associated with

inventory.

INVENTORY It is a list of goods and materials, or those goods and materials themselves, held available

in stock by a business. It is also used for a list of the contents of a household and for a list for

testamentary purpose of the possessions of someone who has died. In accounting inventory is

considered an asset business inventory.

REASONS FOR KEEPING STOCK There are three basic reasons for keeping an inventory:

TimeThe time lags present in the supply chain, from supplier to user at every stage, requires

that you maintain certain amount of inventory to use in this “lead time”.

UncertaintyInventories are maintained as buffers to meet in demand, supply and inventories of scale

Economic Of ScaleIdea condition of one unit at a time at place where user needs it. When needs it principle

tends to insure lost costs in terms of logistics so bulk buying movement and strong bring in

economic of scale, thus inventory. All these stock reasons can apply to any owner or product

stage.

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Buffer stock held in individual workstations against the possible that the upstream workstation

may be a little delayed in long setup or change over time. .this stock is then used while that

change over is happening. This stock classification applies along the whole supply chain not

within a facility or plant.

Where this stock contains the same or similar items is often the work practice to hold all

these stock mixed together before or after the sub-process to which they relate. This ‘reduces’

costs. Because they are mixed-up together there is no visual reminder to operators of the adjacent

sub-processes or line management of the stock which is due to a particular cause and should be a

particular individual’s responsibility with inevitable consequences. Some plants have centralized

stock holding across sub-processes which makes the situation even more acute.

SPECIAL TERMS USED IN DEALING WITH INVENTORYStock Keeping Unit (SKU) is a unique combination of all the components that are

assembled into the purchasable item. Therefore any change in the packaging or product is a new

SKU. This level of detailed specification assists in managing inventory.

Stock out means running out of the inventory of an SKU. New old stock ‘’(sometimes

abbreviated NOS) is a term used in business to refer to merchandise being offered for sale which

was manufactured long ago but that has never been used. Such merchandise may not be

produced any more, and the new old stock may represent the only market source of a particular

item at the present time.

Inventory examples While accountants often discuss inventory in terms of goods for sale.Organizations-

manufacturers. Service-providers and not-for-profits-also have Inventories. That they do not

intend to sell. Manufactures’. Distributions’. And wholesalers’. Inventory tends to cluster in

warehouses. Retailers’ inventory may exist in a warehouse or in a shop or store accessible to

customers. Inventories not intended for sale to customers or to clients May be held in any

premises an organization uses. Stock ties up cash and if uncontrolled it will be impossible to

know the actual level of stock ties up cash and if uncontrolled it will be impossible to know the

actual level of stocks and therefore impossible to control them.Whilst the reasons for holding

stock are covered earlier. Most manufacturing organizations usually divide their “goods for sale”

inventory Into Raw materials – materials and components scheduled for use in product

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Transportation The moment of goods between owners. Or between locations of a given owner. The seller

owns goods in transit until the buyer accepts them. Sellers or buyers may transport goods but

most transportation providers act as the agent of the goods.

WholesalingDistributors who bay goods from manufactures and other suppliers for re-sale work in

the whole sale industry. A wholesaler’s inventory consists of products in its warehouse that it has

purchased from manufacturers or supplier’s .A produce–wholesaler (or distributor) may buy

from distributors in other parts of the world

Retailing

A retailer’s inventory of goods for sale consists of all the products on its shelves that it

has purchased from manufacturers or wholesalers. The store attempts to sell its inventory to

consumers.It is a key observation in “lean manufacturing” that it is often the case that more than

90% of a product’s life prior to end user sale is spent in distribution of one form or another. On

the assumption that the time is not itself valuable to the customer this adds enormously to the

working capital tied up in the business as well as the complexity of the supply chain. Reduction

and elimination of these inventory ‘wait’ states is a key concept in Lean.

INVENTORY It is a financial accounting tool for evaluation inventory and it is not necessarily a

management tool. Inventory management should be forward looking. The methodology applied

is based on historical cost of goods sold. The ratio may not be able to reflect the usability of

future production demand as well as customer demand.

BUSINESS MODELSIncluding just in time (JIT) inventory, vendor managed inventory (VMI) and customer

managed inventory (CMI) attempt to minimize on-hand inventory and increase inventory turns.

VMI and CMI have gained considerable attention due to the success of third party vendors who

offer added expertise and knowledge that organizations may not possess.

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ACCOUNTING PERSPECTIVES

The basis of inventory accounting Inventory needs to be accounted where it is held across accounting period `from standard

and theory of constraints-based (throughput) cost accounting perspective follows some examples

and a discussion of inventory from a financial accounting perspective.

The internal costing/valuation of inventory can be complex. Whereas in the past most

enterprises ran simple one process factories, this is quite probably in the minority in the 21 st

century. Where ‘one process’ factories exist then there is a market for the goods created which

establishes an independent market value for the good. Today with multi-stage process companies

there is much inventory that would once have been finished goods which is now held as ‘work-

in-process’ (WIP). This needs to be valued in the accounts but the valuation is a management

decision since there is no market for the partially finished product. This somewhat arbitrary

‘valuation’ of WIP combined with the allocation of overheads to it has led to some unintended

and undesirable results

NATIONAL ACCOUNTS Inventories also play an important role in national accounts and the analysis of the

business cycle. Some short-term macroeconomic fluctuations are attributed to the inventory

cycle.

DISTRESSED INVENTORY

Also known as distressed or expired stock distressed inventory is inventory whose

potential to be sold at a normal cost has or will soon pass. In certain industries it could also mean

that the stock is or will soon be impossible to sell. Examples of distressed inventory include

products that have reached its expiry date or has reached a date in advanced of expiry at which

the planned market will no longer purchase it clothing that is defective or out of fashion and old

newspapers or magazines.

It also includes computer or consumer-electronic equipment that is obsolescent or discontinued

and whose manufacturer is unable to support it.

INVENTORY CREDIT

Inventory credit refers to the use of stock or, inventory, as collateral t o raise finance.

Where banks may be reluctant to accept traditional collateral, for example in developing

countries where land title may be lacking, inventory credit is a potentially important way of

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overcoming financing constraints. This is a new concept archaeological evidence suggests that it

was practiced in Ancient Rome. Obtaining finance against stocks of a wide range of products

held in a bounded warehouse is common in much of the world. Inventory credit on the basis of

stored agricultural produce is Latin American countries and in some Asian countries [5] a

precondition for such credit is that banks must be confident that the stored product will be

available if they need to call on the collateral; this implies the existence of a reliable network of

certified warehouse. Banks also face problems in valuing the inventory. The possibility of

sudden falls in commodity prices means tha5t they are usually reluctant to lend more than about

60% of the value of the inventory at the time of the loan.

TYPES OF INVENTORY Another perspective on inventory is to classify it by how it is created. Where inventory

takes four forms:

Cycle

safety stock

anticipation and

pipeline.

They cannot be identified physically, that is an inventory manager cannot look at a oiled of

widgets and identify which ones are cycle inventory and which ones are pipeline inventory.

CYCLE INVENTORY The proportion of total inventory that varies directly with lot size is called cycle

inventory. Determining how frequently to order and in what quantity is called lot sizing. Two

principles apply.

the lot size varies directly with clasped time (or cycle) between orders if a lot is ordered

The longer the time between orders for a given item, the greater the cycle inventory must be.

At the beginning of the interval. Just before a new lot arrives, cycle inventory drops to its

minimum or 0. the average of these two extremes.

Average cycle inventory = Q+0/2 = Q/2

This formula is exact only when the demand rate is constant and uniform. However,

it does provide a reasonably good estimate even when demand rates are not Constant. Factors

other than the demand rate also may cause estimating errors when this simple formula is used.

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SAFETY STOCK INDUSTRYTo avoid customer service problems and the hidden costs of unavailable components,

companies hold safety stock. Safety stock inventory that protects against uncertainties in demand

lead time and supply changes. Safety stocks are desirable when suppliers fail to deliver either the

desired quantity on the specified date or items of acceptable quality, or when manufactured items

require significant amounts of scrap or rework. Safely stock inventory ensues that operations are

not disrupted when such problems occur allowing subsequent operations to continue. To create

safety stock a firm places an order for delivery earlier than when the item is typically needed.

The replenishment order therefore arrives ahead of time giving a cushion against uncertainty.

ANTICIPATION INVENTORY

Inventory used to absorb uneven rates of demand or supply. Which businesses often face,

is referred to as anticipation inventory. Predicable seasonal demand patterns lend themselves to

the use of anticipation inventory. Uneven demands can motivate a manufacturer to stockpile

anticipation inventory during periods of low demand so that output levels do not have to be

increased much when demand peaks. Anticipation inventory also can help when suppliers are

threatened with a strike or have sever capacity limitations.

PIPELINE INVENTORYInventory moving from point to point in the material flow system is called pipeline

inventory. Materials move from suppliers to a plant, from one operation to the next in the plant,

from the plant to a distribution center or customer, and from to distribution center to a retailer

pipeline inventory consists of orders that have been placed but not yet received.

Pipe line inventory=dl

The lot size can indirectly affect pipeline inventory.

COSTS OF HOLDING INVENTORY One operating objective of inventory management is to minimize cost. Excluding the cost

of merchandise the cost associated with inventory fall into two basic categories (i) ordering or

acquisition or setup costs and (ii) carrying costs.

Ordering Cost This category of associated with the acquisition of ordering of inventory. Firms have to

place the orders with suppliers to replenish inventory of raw materials. The expenses involved as

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referred to as ordering costs. A part from placing order outside the various production

departments have to acquire materials from stores.

Any expenditure involved here also part of the ordering cost. Including in the offering costs or

costs involved in (1) preparing a purchase a purchase order or requisition of form and (2)

receiving. Inspecting and recording the received to ensure both quality and quantity. The cost of

acquiring materials consists to electrical cost and stationary. It is there for, called a set up cost.

They are generally fixed per order placed. Irrespective of the amount of the order. The

acquisition costs are inversely related to the size of inventory they decline with the level of

inventory. But acquisition of large quantity would increase the cost associated with the

maintenance of inventory that is, carrying costs

Carrying Costs The second board category associated with inventory is the carrying costs. They are

involved in maintaining or carrying inventory. The cost of holding inventory may divide in to

two categories.

Those that arise due to the storing of inventory. The main component of this category of carrying

costs are (i) storage cost, that is, tax, depreciation, insurance, maintenance of the building.

Utilities and janitorial services: (ii) insurance of inventory against fire and theft; (iii) detritions

inventory because of pilferage, fire, technical obsolescence and price decline; (iv) serving costs,

such as labor for handling inventory, clerical and accounting costs

The opportunity cost of funds. This consists of expenses in razing funds to finance the

acquisition of inventory. If funds were not locked up in inventory, they would have earned a

return. This is opportunity cost of funds or the financial cost component of the cost.

The carrying costs and the inventory size are positively related and move in the same direction.

If the level of inventory increases, the carrying costs also increases and vice versa.

The sum of the order and carrying costs represent the total cost of inventory. This is

compared with the benefits arising out of inventory to determine the optimum level of inventory.

BENEFITS OF HOLDINGINVENTORY The second element in the optimum inventory decision deals with the benefits associated

with holding inventory. The major benefits of holding inventory are the basic functions of

inventory in other world inventories perform certain basic functions. Which are of crucial

importance in the firm’s production and marketing strategies

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The basic function of inventories is to act as a better to decouple or uncouple the various

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

are

purchasing

production and

selling.

The term uncoupling means that these interrelated activities of a firm can be caring on

independently. With out inventories, purchase and production would complete controlled by the

sales schedules. If the sale of a firm increase, these to would also increase and vice versa. In

other words, purchase and production function would depends up on the sales. It is, of course

true that in the long run, the purchasing and production activities are and in fact, should be tied to

the sales activity cannot be carried out efficiently. Inventories permit short term relaxation so

that each activity may be pursued efficiently. Stated differently, inventories enable firms in the

short run to produce at a rate grater than purchase of raw materials and vice versa, or to sell at a

rate greater than production and vice versa.

Since inventory enable UN coupling of the key activities of a firm each of then can be

operated at the most efficient rate. This has several beneficial effects on the firms operations. In

other words, three types of inventory, raw materials, work in process and finished goods.

Perform some use full functions. Alternatively, rigid typing of purchase and production to sale

schedules is uncoupling are as follows.

Benefits In PurchasingIf the purchasing of raw materials and other goods is not tied to production and sales,

several advantages would be available. In the first place, a firm can purchase large qualities that

are warranted by usage in production or in sales level. This will enable it to avail discounts that

are available on bulk purchase; moreover, it will thus be a significant in the costs. Second, firms

can purchase goods before anticipated or announced price increase. This will lead to a decline in

the cost of production; inventory thus serves as a hedge against price increase as well as short

ages of raw materials. This is a highly desirable inventory strategy.

Benifits In ProductionFinished goods inventory serves to uncouple production and sale. This enables

production at a rate different from that of sales. That is production can be carried on at a rate

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higher or lower than sales rate. This would be of special advantage to firms with seasonal sales

pattern. In their case, the sales rate will be higher than the production rate during a part of the

year and lower during the off season. The choice before the firm is either to produce at a level to

meet the actual demand that is higher production during peak season and lower production

during off season or produce continuously throughout the year and build up inventory which will

be sold during the period of seasonal demand. The former involves discontinuity in the

production schedule while the latter level production. The level production is more economical

as it allows firm to reduce the cost of discontinuities in the production process process. This is

possible because excess production is kept as inventory to meet future demands. Thus, inventory

helps a firm to coordinate is production scheduling so as to avoid disruptions and the

accompanying expenses. In brief, since inventory permits least cost production scheduling

production can be carried on more efficiently.

Benefits In Work In Process The inventories work in process performs two functions in the first pace, it is necessary

because production process is not instances. The amount of such inventory depends upon

technology and the efficient of production. The larger the stops involved in the production

process. The larger the work in process inventory and vise versa. By shortening the production

time, efficiently of the production process can be improved and size of this type of inventory

reduced. In a multi stage production process. The work in process inventory serves a second

purpose also. It uncouples the various stages of production so that all of them do not have to

perform at the same rate. The stages involving higher set up costs may be most efficiently

performed in the batches with a work in process inventory accumulated during a production run.

Benefit In Sales The maintenance of inventory also helps a firm to enhance its sales efforts. For one thing

if there are no inventories of finished goods, the level of current production. A firm will not be

able to met demand instantaneously. There will be a lag depending upon the production process

if the firm has inventory, actual sales will not have to depend on lengthy manufacturing process.

Thus, inventory serves to bridge the gap between current production and actual sales. A related

aspect is that inventory serves as a competitive marketing tool to meet customer demands. A

basic requirement in firms competitive position is its ability Vis- a- Vis its competitors to supply.

If it is not able to do so, the customers are likely to switch to suppliers who can supply goods at

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short notice. Inventory, thus, ensures a continued patronage of customers. Moreover in the case

of firms having a seasonal pattern of sales, there should be a substantial finished goods inventory

prior to the peak sales season, failure to do so may mean loss of sales during the peak season.

INVENTORY CONTROL TECHNIQUES Inventory control technique are employed by the inventory control organization with in

the framework of one of the basic inventory models, fixed order quantity system, fixed order

period system. Inventory control techniques represent the operational aspect of inventory

management and help realize the objective of the inventory management and control.

Several techniques of inventory control or in use and it depend on the convince of the

firm to adopt any of the techniques. What should be stressed of ever is a need to cover all items

of inventory and all stages of receipt from suppliers to the stage of their use. The techniques most

commonly used are the following.

. Always better control (ABC) classification

. High, medium and low (HML) classification

. Fast moving, slow moving and non moving (FSN

ABC ANALYSIS One of the widely used techniques for control of inventories is the ABC (Always

Better Control) analysis. The objective of ABC control is to vary the expense associated with

maintaining appropriate control according to potential savings associated with a proper level of

such control. The ABC approach is a means of categorizing inventory items into three classes

‘A’, ‘B’ and ‘C’, according to the potential amount to be controlled.

The following procedure is suggested for developing an ABC analysis:

List each items carried in inventory by num or some other designation

Determine the annual volume of usage and rupee value of each item.

Multiply each items annual volume of usage by its rupee and value.

Compute each items percentage of total inventories in terms of annual usage in rupees.

Select the top 10 percent of all items which have the highest rupee percentages and classified

them as ‘A’.

Select the next 20 percent of all items with the next highest rupee percentage and designate

those ‘B’ items.

The next 70 percent of all items with the lowest rupee percentages are ‘C’ items.

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HML CLASSIFICATIONS The High Medium and Low (HML) classification follows the same procedures as is

adopted in ABC classification. Only differences is that in HML in classification unit value is the

criterion and not the annual consumption value. The items inventory should be listed I the

descending order of unit value and it is up to the management to fix limits for three categories.

The HML analysis is useful for keeping control over consumption at departmental levels for

deciding the frequency of physical verification, and for controlling purchases.

FSN ANALYSISFSN stands for Fast Moving slow moving and Non-moving. Here classification is based

on the pattern of issues from stores and is useful in controlling obsolescence.

To carry out an FSN analysis the data of receipt or the date of issue, whichever is later, is

take to determine the number of months. Which have lapsed since the last transaction, the items

are usually grouped in periods of 12 months.

FSN analysis is helpful in identifying active items which need to be reviewed regularly

and surplus items which have to be examined further. Non moving items may be divided further

ad their disposal can be considered.

Material Requirement Planning MRP is a new soluation to an old problem having stock of materials always on hand when

needed with out carrying excess inventory. Highly dependent on computer technology mrp is

most helpful to firms with finished goods are end product. Which are made from a number of

components add which are also subjects to un even or lumpy demand. The technique separates

the vartios components and co ordinates and purchasing delivery with production yhis result in

materials arriving exately when need for production and , at the same time reduce lengeth of the

time when material are held in stock. MRP plans and controls goods on order and generates date

for determining when specific materials will be needed to meet the previously planned

production schedule.

JUST IN TIME(JIT)

Popularly known in its acronym JIT in time is highly discussed in materials management

circles these days. The concept is already known as ZIPS (Zero inventory production system)

MAN( Materials as needed) , NOT (Nick of time), ZIN (Zero inventories).

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As a concept JIT means that virtually no inventories are held at any stage of production and that

the exact numbers of units is brought to each successive of production at the right time.

The JIT concept assumes certain which are found wanting in our industries. What is

required, for ex for it successful implantation us a complete restructuring of the industry, so that

all ancillary industries and suppliers of inventory operate in the vicinity of the main industry to

avoid problems of transportation. If the supplies are located at considerable distance and there is

more is more then one supplier, problem in delivery are bound to rise. There should be one

supplier and products supplied must be of the quality to prevent rejection and consequent delays.

Another pre- requisition for the successful implementation of the ZIN concept is the introduction

of he redesign cooling and auxiliaries to achieve rapid change over set ups in order to reduce

batch sizes.

Methods of valuation of inventories

Specific identification method.

According to this method each item of the inventory identified with its cost. The total of the

various cost to identify constitute the value of inventory. This method is generally used when the

materials or goods or have been purchased for a specific job or customer. Such materials or

customer. Such materials or goods when received are earmarked for the job or customer.

Such materials or goods when received are earmarked for the job or costumer for home they are

purchased and are issued or sold to the particular job or customer whenever demanded.

This technique of inventory valuation came be adapted only by a company which is handling a

small number of items. In case of manufacturing company having a number of inventory items.

It is almost impossible to identify the cost of each individual item of inventory. Thus, this

method is in appropriate in most cases on account of practical considerations. Moreover, the

method opens door to income manipulation when like items is purchased at different prices.

First In First Out method(FIFO)under this method. It is assumed that the materials or goods first received are the first to

be issued or sold. Thus, according to this method, the inventory on a particular date is presumed

to be composed on the items which are acquired most recently.

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AdvantagesThe method has the following advantages

it takes into account the current market conditions while valuing materials issued to different

jobs or calculating the cost of goods sold.

the method is based on cost and therefore , no unrealized profit or is made on account of use

of this method.

the method is most suitable for materials which are of a bulky and non perishable type

Disadvantages it involves complicated calculation and hence increases the possibility of clearical reasons

Comparison between different jobs using this same type of material becomes sometimes

difficult. A job commenced a few minutes after another job may have to bear an entirely

charge for materials of the particular lot.

following circumstances:

The FIFO method of valuation of inventories is particularly suitable in the

The materials or goods are of a perishable nature.

The frequency of ppurchases is not large.

There are only moderate fluctuations in the prices of materials or goods purchased.

Materials are easily identifiable as belonging to a particular purchase lot.

LAST IN LAST OUT METHOD(LIFO)

This method is based on the assumptions that the last item of materials or

goods purchased is the first to be issued or sold. Thus,according to this method, inventiry consist

of items purchased at the earliest cost.

AdvantagesIt takes into account the current market conditions while valuing materials issued todifferent jobs

or calculating the cost of goods sold.

The method is based on cost and therefore,no unrealised profit or is made on account of use

of this method.

materials or goods is recovered from the production or sales at the earlist.however the method

involves too many calculations as in the case of lifo method.the method has therefore.not been

adopted widely.

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ECONOMIC ORDER QUANTITY(EOQ) EOQ or optimum quantity is the order size which the total cost compromising ordering

cost plus carrying cost is the least. EOQ can be calculated with the help of a mathematical

formula.

Following assumptions are implied in the calculations:

1. Demand for the product is constant and uniform throughout the period.

2. Lead time (time from ordering to receipt) is constant.

3. Price per unit of product is constant.

4. Inventory holding cost is based on average inventory.

5. Ordering costs are constant, and

6. All demands for the product will be satisfied(no back orders are allowed)

In constructing any inventory model this first step is to develop a functional relationship between

the variables of interest and the measure of effectiveness. As EOQ is concerned with cost here

the following would pertain:

TC=DC+(D/Q)*S+(Q/2)H

Where TC= total cost

D= annual demand

C= purchase cost per unit

Q= quantity to be ordered (the optimum amount is termed the EQO)

S= cost of placing an order

H= holding cost per unit of average inventory per annum

On the right side of the equation. DC is the annual purchase cost

For then units,(D/Q)*S is the annual ordering cost and (Q/2)*H is the annual holding cost

The second step in the model is to calculate order quantity Q, for which, the total cost is

the minimum. In the basic model, this may be done by simple algebra if we recognize that DC is

not a decision variable and hence not a factor in the ordering decision. Then, total cost is

minimum at the point where, the cost is equal to the cost of carrying, or

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(DS/Q)= (Q/2) H

Which is turned is solved as follows:

EOQ= `\ (2DS)/H

MINIMUM – MAXIMUM TECHNIQUEThe Minimum – Maximum system is often using in connection with manual inventory

control system. The minimum quantity is established in the same way as any re- order point. The

maximum is the minimum quantity plus the optimum lot size. In practice a requisition is initiated

when, a withdrawal reduces the inventory below the minimum level. And the order quantity is

the maximum minus the inventory status after the withdrawal. If the final withdrawal reduces the

stock level substantially below the minimum level the order quantity will be higher than the

calculated EOQ

The effectiveness of a Minimum – Maximum system is parameters are or established. If

this parameter are based upon arbitrary judgment with a limited factual basis. The system will

limited in its effectiveness, if the minimum – maximum are based on an objective rational basis

the system can be vary effective

Understanding inventory

Despite its importance to the supply chain inventory is not universal well understood. It is

variously characterized both positive and negative, as on economic asset to a non income

producing use of capital funds.Only when considered in lite of all quality, clint service and

economic factors from the view of purchasing. Manufacturing , sales and finance does the whole

picture of inventory become clear. No matter the view point, effective inventory management is

essential to supply chain competitiveness.

Page | 18

INTRODUCTION

Cement is a key infrastructure industry. It has been decontrolled from price and

distribution on 1st march 1989 and deli censed on 25th July 1991. However, the performance of

the industry and prices of cement are monitored regularly. The constraints faced by the industry

are reviewed in the infrastructure co-ordination committee meetings held in the cabinet

secretariat under the chairmanship of (coordination). The cabinet committee on infrastructure

also reviews its performance.

CAPACITY AND PRODUCATION

The cement industry comprises of 125 large cement plants with an installed capacity of

148.28 million tones and more than 300 mini cement plants with and estimated capacity of 11.10

million tons per annum. The cement corporation of India, which is a central public sector

undertaking, has 10 units. There are 10 large cements plants owned by various state

governments. The total installed capacity in the country as a whole is 159.38 million tones.

EXPORTS

Apart from meeting the entire domestic demand, the industry is also exporting cement

and clinker. The export cement during 2004-05 and 2006-07WAS 5.41 million tones and in the

year 2008-2009 were 6.92 million tons respectively. Export during April- may, 06 was 1.35

million tones. Major exporters were Gujarat, Abuja cement ltd and L&T ltd.

HISTORY OF CEMENTS

Invention of cement of JOSEPH ASPARIN. A Leeds builder in bricklayer.

• 21st October, 1824 patented as Portland cement.

• 1904- Irish and American standards of Portland cement.

• 1912- Indian cement company limited established factory at porbandar

• 1951- Indian standards.

Page | 19

CEMENT MANUFACTURING PROCESS

The cement manufacturing process being when limestone, the basic raw material used to

make cement, is transported by rail to the plant from the limestone quarry.

The limestone is combined with clay, ground a crusher and fed into the additive soils,

sand, iron and bottom ash are then combined with the limestone and clay in a carefully

controlled mixture which is ground into a fine power in a 200hp roller mill.

Next, the fine power is heated as it passes the pre-heater tower into a large kiln, which is over

half length of a football fields and 4.2 meters in diameter. In the kiln, the power is heated to

1500 degrees Celsius. This creates a new product, called clinker which resembles pellets

about the size marbles.

• The clinker is combined with small amounts of gypsum and limestone and finely ground in a

finishing mill. The mill is large revolving cylinder containing 250 tons of steel balls that is

driven by a 4000ph motor. The finished cement is ground so fine that it can pass through a

sieve that will hold water.

• The cement manufacturing process consists of many simulations and continuous operations

using some of the largest moving machinery in manufacturing over 5000 sensors and 50.

• Computers allow the entire operation to be controlled by single operator from a central

control room

DIFFERENT TYPES OF CEMENT

There are varieties of cement based on different compositions according to specific end

uses namely ordinary Portland cement, Portland provolone cement, Portland blast furnace slag

cement, and specialized cement. The basic difference lies in the percentage of linker used.

ORDINARY PORTALND CENENT (OPC):

OPC, popularly known as grey cement has 95% clinker and 5% of gypsum and other

materials. It accounts for 56% of the total consumption. White cement is a variation of OPC and

is used for decorative purposes like rendering of walls: flooring etc. Contains a very low

proportion of oxide.

Page | 20

PORTALAND POZOLANA CEMENT (PPC)

PPC has 80% clinker, 15% pozolona and 5% gypsum and accounts for 18% of the total

cement consumption. Pozolona has siliceous and aluminous materials that do not possess

cementing properties but develop these properties in the presence of water. It is cheaply

manufactured because it used fly ash/ burnt coal, waste as the ingredient. It has a lower heart of

hydration, which helps in preventing cracks where large volumes are being cast.

PORTLAND BLAST FURNACE SLAG CEMENT (PBSFC)

PBSFC consist of 45% clinker, 50% blast furnace slag and 5%Gypsum and accounts for

10% of the total cement consumed. It has heat of hydration even lower than PPC and is generally

used in construction of dams and similar massive constructions.

PRICES

• Price fluctuations,

• Essentially determined by demand,

• Prices also vary with grades.

AVERAGE MAXIMUM RETAIL PRICE

DELHI CALCUTTA CHENNAI BANGALORE

Aug-2006 137 146 175 170

SEP-2007 137 139 175 161

OCT-2008 136 125 175 161

NOV-2009 136 125 172 140

JAN-2010 158 170 160 156

JAN-2011 228 220 240 236

MAY-2012 230 225 245 235

Over 370 companies in the organized sector

However, industry dominated by 20 companies who account for ever 70% of the market.

Individually no company accounts for over of the market.

MANUFACTURING PROCESS

Page | 21

The cement manufactured by using the wet, semi dry and processes. The wet process was popular

in the past as it provided better control over materials mixing process. However, the dry process

has now gained popularity globally because it space saving, energy efficient and economical

CAPCITY DISTRIBUTION ANDCOSUMPTION NORMS

ORICESS CAPACITY

(TTD)

% OF TOTAL POWER

KWH/MT

FULE

KCAL/KG

DRY 282486 93 120-125 750-800

SEMI-DRY 139010 5 115-120 900-100

WET 5260 2 110-115 1300-1600

TOTAL 301656 100

.

GEOGRAPHICAL DISPERSION

Limestone is the most important material input into cement manufacture. The plant

locations are primarily determined based on the proximity of ‘cement-grade’ limestone deposits.

These limestone deposits have been classified as “cluster”, some of which overlap two states.

PRODUCTION CAPACITY

Cement plants with a capacity of up to 0.3 mn are classified as mini cement plants and are

eligible for concessional excise duty. Though the minimum economic size of a cement plant is

1mn tpa, there are 300 white and mincemeat plants in India a collective capacity of only 9mn

(8per cent of the total domestic installed capacity ).most of the new cement plants beings set up

have a capacity of 1mn tpa or more. The average cost of setting up a minim cement plant is about

re. 1400 per ton, while for a large cement plant re. 3500 per tone

READY MIX CONCRETE INDUSTRY

ME-ready to use concrete a blend of cement, sand and aggregate and water mixed in

convenient proportion.

Launched first in Mumbai years ago is gaining in other metros in India

Typical cost of a plant-Rs.7.8 crs (US 1.6$ 1.6 to 108 mn) to set up a 100 cubic meter

(cum) plant with 4-5 transit mixers. Gestation period is around 3-4months.

Currently RMC is at a very nascent stage, accounts for 0.5% of the demand.

Page | 22

COMPANY NO.OF PLANTS CAPACITY (CUM/HR)

ACC 13 712

RMC READY MIX 4 440

L & T 5 330

FLETCHER CHALLENGE 3 320

HCC 2 240

UNITECH 2 152

JOG CONSTRUCTIN 1 120

STARMMAC 1 120

MADRAS CEMENT 1 56

BIRLA CEMENT 1 30

THREE UNITS OF ACC TO

BE COOMISSIONDE

COMPANIES PLANNING TO ENTER THIS MARKET

Priyadarshini cements in HYDERABAD.

• Saurashtra cements in navy Mumbai.

• Pioneer a world leader entering the market.

• Capacity additions expected in the next few years.

• Acc plans to treble its capacities.

• Grasim is setting up four more plans.

• L & T plans to add another eight more.

CONCERNS

Cement industry going through a consolidation phase in the last few years.

mode for transportation for distances less than 250kms. Hewer, industry is heavily

dependent on roads or the railway infrastructure is not adequate shortage of wagons.

CAPACITYADDITIONS

Page | 23

Acquisitions have been the mainstay of the business.

• Regional imbalance resulting in cross regional movement limestone availability in

pockets has led to uneven capacity additions.

• Capacity additions have slowed down.

INDUSTRY INPUTS

Highly capital intensive industry.

• Nearly 55-60% of the inputs controlled by the government

• Facing problems due to power shortage.

• Coal availability and quality affecting predication.

Mini plants realization of the revenue lower large plants, survival diff

CEMENT INDUSTRY IN INDIA Cement is the preferred building material in India. It is used extensively in house hold

and industrial constructions. Earlier Government sector used to consume over 50 percent of

cement sold in India, but in the later decade its share has come down to 35 percent. Rural areas

consume less than 23 percent of the total cement. Availability of cheaper building materials for

non-permanent structures affects the rural demand.

Demand for cement is linked to the economic activity in any country. Broadly, it can be

categorized into demand for housing construction and infrastructure building. The real driver of

cement demand is creation of infrastructure. Hence cement demand in the emerging economies is

much higher than in developed countries where the demand has reached a plateau. In India the

Government spending on infrastructure will affect the demand for cement.

With the “Bharat Nirman” programme announced by the government to various

infrastructure projects, road networks and housing facilities, growth in the cement consumption

is anticipated in the coming years The favorable housing finance environment is expected to

fulfill the vast housing requirements both in rural and urban areas. The increase in infrastructure

projects by the government coupled with the construction of the North — South and East —

West corridor projects have led to an increase in consumption of cement. This increase is

expected to continue in the near future. The reduction in import duties is not likely to affect the

industry as the cement produced is at par with the international standards and the prices are lower

Page | 24

than those prevailing in international markets.

Cement is a typical industry characterized by the boom and bust syndrome. A huge

potential market and rapid growth in the early stages lead to a surge in interest and flurry of

interest. The projected growth rates point to lucrative market. The buoyant markets and huge

profits ranked in by players and a glut in capacity created. Competition increases, price fall and

margins come under pressure, additional capacity comes to halt, and weaker players will be out

of the market. Demand catches up and the cycle is repeated all ever again. Perhaps of all the

cyclical industries, the Indian cement industry exhibits this boom and bust cycle most visibly.

TemptationA huge potential market, easy availability of raw materials and cheap labour leads to a

fluny of activity and a surge in interest. An estimate of the potential that exists in the per capita

consumption of cement was low in India at 85 kgs. Although the growth of the industry depends

more on level of consumer spending rather than per capita consumption, less it serves as an easy

benchmark to estimate the potential that exists.

Fuel to fireThe projected growth rates in demand based on the potential per capita consumption

growth or other demand drivers like the expected GDP growth rate. Fuel stock market rallies.

Consider the boom in cement stocks in 1994. Every cement company was attracting valuations it

never dreamt about. Scarcity induced by lower capacities and to a large extent on non-

availability of power, drove the cement prices to the hilt. The kind of money minted by most

cement companies as well as investors in that period, made strategists plan enormous increases

in capacity. This explains why capacity creation starting 1 994 was enormous.

Government controlsThe factors that primarily control the price of cement arc coal, power tariffs, railways,

royalty and cess in limestone. Government controls all of these prices.

CoalThe consumption of coal in a typically dry process system ranges from 20 to 25 percent

of clinker production. This means per ton clinker produced 0.2 to 0.25 ton coal is consumed.

This contributes 35 to 40 percent of production cost. The cement industry consumes about ten

million tons of coal annually. Since coal fields like BCCL supply a poor quality of coal, NCL

and SCL has to blend a high grade coal with it. The Indian coal has a low calorific value (3500 to

Page | 25

4000 Kcal/Kg) with ash content a high as 25 to 50 percent compared to imported coal of high

calorific value(7000 to 8000 Kcal/Kg ) with low ash content 6 to 7 percent. Lignite is also used

as a fuel by blending it with coal. However this process is not very common.

ElectricityCement industry consumes about 5.5 billion units of electricity annually while one ton of

cement approximately requires 120 to 130 units of electricity. Power tariffs vary according to the

locations of the plant and on the production process. The state government supplies this input

and hence plants in different states like AP, MP experience power cuts to t he tune of 25 to 30

percent every year causing substantial production loss.

InfrastructureTo reduce uncertainty relating to power, most of the leading companies like ACC, Indian

rayon and Grasim rely on captive power generating wind mills.

Lime stoneThis constitutes the largest bulk in terms of input to cement. For producing one ton of

cement, approximately 1.6 ton of limestone is required. Therefore the cement plant location is

determined by the location of limestone mines. The major cash outflow takes place in way of

royalty payment to the central government and cess on royalty levied by the state government.

The total limestone deposit in the country is estimated to be 90 million tons. AP has the largest

share of 34 percent, Karnataka 13 percent, MP 8 percent, and Rajastan 6.5 percent. The plant

near the limestone deposit pay less transportation cost than others.

TransportationCement is packed in plastic bags or in paper bags nowadays. It is then transported either

by rail or road. Road transportation beyond 200 Km is not economical. Therefore railways are

moving 55 percent cement. There is also a problem of inadequate availability of wagons

especially on western railways and southeastern railways. Under this scenario, manufacturers are

looking for sea routes, this being not only cheap but also reducing the loss in transit. Today 70

percent of the cement moved worldwide is by sea compared to 1 percent in India.

However the scenario is changing with most of the big players like ULTRA TECH, ACC

and Grasim had set up their bulk terminals.

Infrastructure for future

Page | 26

The consumption of cement is determined by factors influencing the level of housing and

industrial construction, irrigation projects, roads and laying of water supply and drainage pipes

etc. the level and growth of GDP and its sectorial composition, capital formation, development

expenditure, growth in population, level of urbanization etc. in turn determine these factors. But

the domestic demand for cement is mainly from the housing activities and infrastructure

development. The government paved the way for the entry of private sector in road projects. It

has amended the National Highway Act to follow private toll collection and identified projects,

bridges express ways and big passes for private construction. The budget gave substantial

incentives to private sector construction companies. Ongoing liberalization will lead to an

increase in industrial activities and infrastructure development. So it hoped that Indian cement

should boom again in near future.

Installed capacityIndia is the second largest cement producing country, the first being China. The industry

is characterized by a high degree of fragmentation that has created intense competitive pressure

on price realizations. Spread across the length and breadth of the country, there are 120 large

plants belonging to 56 companies with an installed capacity of around 135 million tons as on

March 2005.

State wise capacityAs cement is a low value commodity, freight costs assume a significant proportion of the

final cost. A transportation cost tends the prices of cement in distant destinations uncompetitive.

For instance it is finally feasible to transport cement by over 250 Km, railways are mostly used

to transport cement over longer distances. However it is bulky in nature and infrastructure

bottlenecks render even rail transport unavailable over very long distances. Therefore,

manufacturers tend to sell cement at the nearest market first and sell in distance markets only if

additional realization is greater than freight costs incurred. This highlights the regional nature of

the cement industry.

SWOT ANALYSIS OF INDIAN CEMENT INDUSTRY

Page | 27

Strengths One of the best technologies in the world.

Quality of cement comparable to world standards.

No threat of cement import due to uneconomical, freight cost.

Large lime stone deposits.

Weakness Worsening power situation, foreign companies to invest sums of money to setup captive

power plant.

Quality control not available in the country and better quality coal imports only feasible

for port based units.

Infrastructure bottlenecks like transportation for raw materials and fuel supply.

Lack of port facilities impending export.

Lack of bulk transportation.

Lower per capita consumption of cement.

Opportunities Immense export opportunity in neighboring countries and middle east.

Expected infrastructure growth (7.1 percent during 1995 — 96) will add to the current

demand.

Back log for 41 million housing units.

Threats Large capacities coming up might see a glut situation emerge, especially in central and

north India putting pressure on the realizations in the said region.

Lack of funds with the government.

OVERVIEW IN ANDHRAPRADESH CEMENT NDUSTRY

Page | 28

Andhra Pradesh, the pivot of industrial prosperity in South India, welcomes you to its

resourceful land of minerals, which includes coal, oil & natural gas, bauxite, limestone, gold,

diamonds and more. A host of infrastructure facilities are offered by the State that include

industrial development areas, industrial estates, growth centers and special complexes like a

chemical complex, plastic complex, leather complex and a software technology park.

Characterized by a large pool of scientific and technical manpower (75 percent of India’s

engineering graduates come out of colleges located in the 4 Southern States of Andhra Pradesh,

Karnataka and Tamil Nadu), abundant natural resources, fairly well-developed infrastructure and

relatively stable and reform- oriented political leadership the region shows the potential of

achieving the type of sustained progress that was made by the ASIAN countries in the early

1980s. It is not surprising that manufacturing industries and particularly software exports are

helping these Southern States forge ahead.

Mineral — based industries Part of the ancient Gondwana plateau, Andhra Pradesh’s vast mineral wealth is still

not fully exploited. It is the only State in South India to have coal deposits. It is also an ideal

location for thermal plants. There are at present 6 coal based thermal power plants in the State,

generating about 5000 MWs of power. Recent explorations have indicated reserves of oil and

natural gas, both onshore and offshore. The first two fast track private power generating plant in

the country, the Gas based units at Jegurupadu (216 MWs) and Kakinada ( 208 MWs) have been

commissioned in 1996 and 1997 respectively. With good prospects of finding new gas fields in

the Krishna-Godavari deltas there is scope for setting up more gas-based fertilizer plants,

chemical units and power-generating units.

With the availability of wet gas, there is scope for fractionation plants in the coastal

region of the State. LNG import terminal at Kakinada port is being setup . A network of gas

pipelines is being laid in A.P for distribution of Natural Gas through pipelines for domestic

consumption in the coastal region of Andhra Pradesh. At present imports of LPG are serving

partly the growing consumer market for domestic and industrial fuel. There is good scope for the

use of LPG and LNG as automobile fuel in the country in future.

Andhra Pradesh has 30,400 million tons of limestone reserves, which constitute 38

percent of the country’s reserves. At present only 20.5. Million tons are being consumed largely

for the production of cement. With 40 existing cement factories, Andhra Pradesh is the second

Page | 29

largest producer of cement in India with 15 million tons of cement being manufactured per

annum.

In 1999, Larsen and Toubro commissioned a plant with a capacity of 2 million tons per

annum in the backward district of Anantapur with an outlay of Rs. 8 billion (US $184 million).

When it reaches its ultimate capacity of 6 million tons, it will be the biggest plant in Asia.

Gujarat Ambuja Cements Ltd. is setting up a plant with an investment of Rs.7 billion

(US $ 160 million) and with a capacity of 2 million tons per annum. The unit is programmed to

be commissioned at the end of 2001.

Andhra Pradesh also produces steel at Visakhapatnam Steel Plant and elegant building

materials like granite, marble and slate which are found in a wide variety of colors and grades.

With the current boom in infrastructure development in India, the building materials sector is

facing good prospects.

Andhra Pradesh has the second largest deposits of bauxite in India. The reserves,

estimated at 700 million, tons can sustain an alumina refinery and smelter with a capacity of over

1 million tons per annum.

Page | 30

INTRODUCTIONPart of the prestigious Dr. Birla group, a re.4000 core conglomerate, Zuari cement has

within a short time-span made its presence felt in the cement industry. It has done so by making

top quality cement.

Consistently, cement that has won the confidence and trust of millions in the country.

This commitment to quality has been it grow from a modest 0.5 million tone capacity in 1995 to

2 million tones today. Zuari’s quality drive originates in its state-of-the art cement plant, situated

at yerraguntla, renowned for ruche Narji limestone deposit, this plant is cement-manufacturer’s

envy

Yet, strategic location is just factor contributing to Zuari’s success. There are other equally

important reasons.

• Superior work-force.

• Cutting-edge technology.

• De-centralized quality assurance teams.

All these combine seamlessly to ensure that every bag of cement that leaves the plants is of

consistent quality, and worthy of bearing the zuari label.

Cement that will make sound concrete, arrest expansion and prevent thermal and tensile cracks.

Which is why across south India, zuari cement is preferred by the customer and recommended by

the expert? Be it for building dams, bridges, high-rise buildings and airports or a small apartment

block.

Worldwide excellence-alliance with italcementi Zuari industries limited has entered into 50:50 joint venture with italcementi group, the

largest producer and distributor of cement in Europe and one of the leaders in cement production

in the world.

Italcementi operates in13 countries including Canada, France Italy, morocco, the USA

and Bulgaria. Interlacement’s global industrial network includes more than 50 cement plants,

500 concrete batching units 150 quarries.

Zurai’s joint with italcementi gives sri Vishnu cement a global technological advantage which

reflects in the finesses of every grain of sri Vishnu cement.

Page | 31

HISTORY OF ZUARI CEMENTS

Zuari cement was started in 1944 to operate the cement plant of Texaco ltd.

Subsequently, Texaco’s cement business was taken over by the company in 1995. ZUARI

CEMENT’S MANUFACTURING FACILITY AT Yerraguntal in Andhra Pradesh is one of the

largest in south India places zuari cement among the top five manufactures in the south.

In 2000, italcementi group second largest producer and distributor of cement in Europe

and 5th largest cement producer in the world, entered into a joint venture with zuari cement and

zuari cement limited was formed..

COMPETIRORS

Coramandal cement.

Maha cement.

Nagarjuna cement.

• Lanco cement.

• Ultracteck cement.

• Bharathi cement. And

All other cement companies are competitors.

Vision

To be a world class local business building a better and sustainable future for all

stakeholders.

Mission

To create value in the building material sector through the innovative and sustainable use

of natural resources for the benefit of our communities clients.

Values

Five values lie at the heart of our group. These values not only define us but also act as a guide

for our daily activities.

Page | 32

Responsibility

Our long term commitment to sustainability seeks to cambia profitable economic

performance with protecting the environment and improving the quality of life for present and

future generations.

Integrity

The company places ethical behavior at the heart of all our businesses worldwide. We

earn the trust of our partner in business and in the community through accountability and

consistent corporate governance. Our daily commitment is to act with respect honestly and

transparency.

Efficiency

The company strives for operational excellence by combining the technical expertise and

cost management necessary to be a globally effective and efficient building materials

manufacture. We add value by delivering consistently high quality products and services

customized to each local market around the world.

Innovation

The company believe in the Importance of innovation not only in the development of new

products, applications and services, but also in our management approach. We must embrace

change and be open to new ideas in order to attract the best talents.

Diversity

Diversity is a source of energy and value that fuels our growth we aim to create an

environment of trust and belonging where differences add value and where everyone feels art of

our world

CORPORATE GOVERNANCE

The corporate governance supports regional and local initiatives to improve corporate

governance in middle-and income countries in the context of broader national or regional

economic reform programs.

“Corporate governance in only on part a wider challenge of corporate responsibility

Page | 33

ORGANIZATION STRUCTURE OF ZUARI CEMENT Ltd.,

MANAGING DIRECTOR

DIRECTOR FINANCE DIRECTOR MARKITENG

FACTORY MANAGER

PROCESS PLANT

PROCESSING

WORKER

PACKING

BOYS

LAB ASST SANITARY

WORKER

HELPER

ZUARI CEMENT COMPANY PROFILE

Page | 34

MANAGER ADMIN

& ACCOUNTS

MANAGER PURCHASE

QUALITY CONTROL

INCHARGE

Q.C.

TECHNOLOGISTPRODUCTION

SUPERVISOR

NEED FOR THE STUDY

Inventory constitutes the most significant part of the current assets of large majority of

companies in India. On an average inventories are approximately 60% of current assets in public

Page | 35

FULL NAME Zuari cement ltd.

STATUS Non-listed

LEGAL FORM Limited liability company

OPERATIONAL STATUS Operational

LEGAL ADDRESS Krishna Nagar, YERRAGUNTLA,

Andhra Pradesh, PIN 516311.

DIRECTORS Saroj Kumar poddar, chairman

Rodolfo Danielli

Yves Rene Nanot

Goran L. Saifert

Maurizio caneppele, (managing

director)

Emilyanadreev (Director Finance).

EXECUTIVES K Srivastava: Director –marketing.

P.Sheoran : Director-Technical,

l. Srivastava : sr. vice president.

COMPANY SECRETARY L.R. Neelaknata.

BANKERS State Bank of India, Andhra Bank,

Standard Chartered Bank.

AUDITORS BSR & CO.,

Charted Accounts, BANGALORE.

REGISTERED OFFICE Krishna Nagar, YERRAGUNTLA,

YSR Kadapa (dist).

CORPORATE OFFICE No. 1,10th main, hall 3rd stage,

Jeevanbima Nagar, Bangalore.

limited companies in India. Because of the large size of inventories are maintained by firms a

considerable amount of funds is required be committed to them. It is therefore absolutely

improved to manage effectively in order to avoid unnecessary investment. Hence an attempt is

made to study the inventory management in Zuari Cement Ltd.

OBJECTIVES OF THE STUDY

The main objectives of the study are

• To find out optimum level of investment in inventory.

• To analyze the various inventory management control techniques used by the organization.

RESEARCH DESIGN The select ZUARY CEMENTS LTD is located at Yerraguntla in Y.S.R District. The data

collected through secondary sources and research design is analytical in nature

DATA SOURCES• In order to perform the search on “inventory management” in Zuari Cement Ltd., used second

data for obtaining information.

Secondary Data• This data is obtained directly from the company’s annual report, production selection, and

spare parts store section, charts, related company websites and other documents.

Period of the studyThe study period confines 4 years from 2009-10 t0 2013-14

Statistical tools for analysis

Last in first out(LIFO)&first in first out(FIFO).

Scope and limitations of the study

• The study covers inventory management techniques in Zuari, yerraguntla

branch only.

Page | 36

As of time constraint, the study concentrates on only inventory management techniques

only.

The financial matters are confidential in nature it is high risk to collect the data from the

company.

There is difference between the collected data as of the sources are annual reports and

website of the company.

Chapter layout

The study is organized into 6 chapters.

Chapter-1 : Introduction

Chapter-2 :Industry profile

Chapter-3 : Zuari cements ltd., A profile

Chapter-4 : Research methodology & design

Chapter-5 : Data analysis & interpretation

Chapter-6 : Findings and recommendations

Page | 37

The collected data has been analysed through ratios and bar diagram.Taable1.0

shows the inventory turn over ratio of zuari cement ltd.,for the Period of 2009-10

to 2013-2014.

INVENTORY TURN OVER RATIO = Cost Of Goods Sold / Average Stock

TABLE 1.0

INVENTORY TURN OVER RATIO OF ZUARI CEMENT

(Rs. in ‘000)

Particulars 2009-10 2010-11 2011-12 2012-13 2013-14

Consumption123892 119332 135898 147878 141530

Closing Stock9219 13146 14619 19807 19229

Turnover Ratio

(intermsof

Number of days)

27 10 39 49 50

In the above table2009-10 year ratio is 27 days and increased the 2011-12, is increased the 39

and 2012-13 increase in 49 2013-14 also increase.

In the above table 2009-10 ratio is 27 days and 2010-11 decreased the ratio is 10 days and 2013-

14 increased ratio days

Page | 38

The collected data has been analysed through ratios and bar

diagram.Taable1.1 shows the work in progress stock of zuari cement ltd.,for the

Period of 2009-10 to 2013-2014.

WORK IN PROGRESS. Stock = average work in progress×365

Total cost of products

1.Details of W.I.P. Stock

Page | 39

TABLE-1.1

WORK IN PROGRESS OF ZUARI CEMENT

(Rs. in ‘000)

Particulars 2009-10 2010-11 2011-12 2012-13 2013-14

W.I.P. Stock44878 34990 29601 33552 33977

Production184069 236039 244218 250000 ---

W.I.P.(in terms

of Number of

days)

89 54 44 49 --

In the above table 2009-10 year ratio is 89 days. and increased the 2012-13, 49 days.

In the above table 2009-10 ratio is 89 days and 2010-11 decreased the ratio is 54 days.and2011-

12 is 44 decreased

Page | 40

The collected data has been analysed through ratios and bar

diagram.Taable1.2 shows the finished goods stock of zuari cement ltd.,for the

Period of 2009-10 to 2013-2014.

Finished Goods Stock= opening stock+closing stock

2

Page | 41

Details of Finished Goods Stock

TABLE 1.2

FINISHED GOODS STOCK OF ZUARI CEMENT

(Rs. ‘000)

Particulars 2009-10 2010-11 2011-12 2012-13 2013-14

CEMENT

Closing Stock 12265 4722 2569 9162 85184

Gross Sales 221107 254318 252244 241286 257362

METAL

Closing Stock 10029 3761 6102 1221 6936

Gross Sales 221107 254318 252244 241286 257362

LIME STONE

Closing Stock 5961 3328 2758 5668 4325

Gross Sales 221107 254318 252244 241286 257362

Collection Period

Cement 20 7 4 14 7

Metal 17 5 9 2 10

Stone 10 5 4 9 6

Page | 42

In the above table 2009-10 is12265 to 4722,metal is 10029 to3761,lime stone is 5961 to 3328

year and decreased the 2013-14 lime stone 5668 yo 4325 days.

In the above table 2009-10 is days and 2011-12 increased the cement,metal,lime stone.

decreased the 2013-14lime stone is decreased the days.

Lead Time

Quality Discount

Obsolete Inventory Scrap

Service Lead

Material Planning

Cost of holding inventory

Ready Point

Stock

Variety Reduction

Page | 43

The collected data has been analysed through ratios and bar diagram.Taable1.2

shows the work in capital of zuari cement ltd.,for the Period of 2009-10 to 2013-

2014.

Work in capital= current assets-current liabulits

TABLE1.3

WORK IN CAPITAL OF ZUARI CEMENT

Particulars 2009-10 2010-11 2011-12 2012-13 2013-14

Raw Material 9219 13146 14619 19807 19229

Indirect Material 239 1244 -- 2960 49

Work in Process 44878 34990 29601 33552 33977

Finished goods 30462 12707 13295 29776 18827

Scrap 1088 580 1062 1022 1862

Goods in transit 2468 -- -- -- --

Less : Provision

for obsolescence1454 1141 1263 1731 1731

Page | 44

Working Capital Financing :

Funds available for a period of one year (or) less are called short term finance. Short-term

funds are used to finance working capital

The sources which the company is using for its working capital finance are :

Cash Credit

Trade Credit

Factoring

Bill discounting

Letter of Credit

Working capital Loan

Page | 45

Cash Credit

Under this facility the borrower is allowed to with draw funds in excess of the balance in

his current account.

Trade Credit

This refers to the credit that a customer gets from supplier of goods in the normal course of

business.

Factoring

It is an agreement in which receivables arising out of sale of goods/services are sold by a

firm (client) to the factor (a financial intermediary) as a result of which title to the goods /

services represented by the said receivables passes on to the factor.

The company is taking this factoring services from Canbank factors Ltd.

Bill discounting

Under the purchase (or) discounting of bills, a borrower obtain credit from a bank against

its bills.

Letter of Credit

This is an indirect form of working capital financing and banks assume only risk, the

credit being provided by the supplier himself. The purchaser of goods on credit obtains letter of

credit from a bank. The bank undertakes the responsibility to make payment to the supplier in

case the buyer fails to meet his obligations.

Thus, the modus operandi of letter of credit is that the supplier sells the goods on credit /

extends credit (Finance) to the purchaser, the bank gives a guarantee and bears risk only in case

of default by the purchaser.

Page | 46

Working capital Loan

Under this arrangement, the amount is provided to the company based on select

operational data provided by the company to the bank.

The company is under the obligation to send this select operational data Every month

within 7 days from the month ending.

The amount of working capital loan fluctuates based on this ‘select operational data’

Contents of SOD

Estimate for the current accounting year

Production estimates

Sales estimates

Sales

During the month

During the current year upto the end of the month

Production

During the month

During the current year upto the end of the month.

Receivables outstanding as at the end of the month

Sundry creditors for the purchase of raw material outstanding as at the end of the month.

Short term borrowings from the banks including bills purchased and discounted.

Page | 47

ABC Analysis

The inventory control technique that is being followed by the company is

AnalysiyDuring the year these were 4424 items in inventory. It is not describe to keep the same

degree of control on all the items. The firm should pay attention to those items whose value is

the highest. The firm should therefore, classify inventories to identify which items should receive

the must effort in controlling. The firm should be selective in its approach to control investments

in various types of inventories. This analytical approach is called the ABC Analysis and tends to

measure the significance of each item of inventories in terms of its value. The high value items

are classified of “A” items and would be under simple control. “B” items fall in between these

two categories and require reasonable attention of Management.

TABLE 1.4

Class No.of

Items

%of Items Class %

of items

Values

Rs. in

lakhs

% of

value

Over % of

value

A 456 10 40 443 68 68

B 1553 35 45 112 16 84

C 2415 55 100 112 46 100

4424 100 100

items Table shows how the A,B & C items are classified. Here the “A” items are only 10% of

total inventory but have a 68% of value, These items would require right control as they have

68% of items, “C” items have a 55% of totl inventory but have only 16% of the total value.

These itemswould require thleastcompany.

Page | 48

TABLE 1.5

INFORMATION COMPETITORS

(Rs. in Lakhs)

Particulars 2011-12 2012-13 2013-14

A.SKF

Debtors 9883 9172 7737

Gross Sales 44567 43967 49681

Collection

Period (in days)81 76 57

Particulars 2011-12 2012-13 2013-14

B. FAG

Debtors 4887 4838 5665

Gross Sales 20567 22300 27859

Collection

Period (in days)86 79 74

Particulars 2011-12 2012-13 2013-14

C. Timken

Debtors 3803 3946 6724

Page | 49

Gross Sales 16847 14823 16781

Collection

Period (in

days)

82 97 146

Note :

Collection Period in Days :

Ratio of Constituents to current Assets

TABLE 1.6 (RS,IN.000)

Page | 50

This table gives us the view of the investment in various current assets over a period of five

years.

The percentage connotes the proportion occupied by each of the component in total

current assets. Say for e.g. in the year 2009-2010 out of the total current assets amounting to Rs.

307248, 6% is occupied by cash, 54% is receivables and 40% is occupied by inventory. This

Page | 51

Inventory 40% 44% 47% 50-% 41%

Particulars 2009-10 2010-11 2011-12 2012-13 2013-14

Cash 17783 22638 2937 12537 27924

Receivable

s164496 149724 201765 95182 82246

Inventory 124969 133392 180202 105691 76809

Total

Current

Assets

307248 305754 384904 213410 186979

Ratio’s

Cash 6% 7% 1% 6% 15%

Receivable

s54% 49% 52% 44% 44%

percentage shows the amount blocked in each component of current asset.

Page | 52

FINDINGS OF THE STUDY

All the materials are increased from the 2009 to 2014 i.e. Rs 2789.71 to Rs 9245.63

because increased in the production capacity.

Slow moving items are Up and down with marginal different from 2009 to 2012 i.e.

3.86y% to 7.34% and there small decrease in non moving items continuously from 2009

to 2012 from Rs20.38 to Rs7.95.

The components of average are increased in the year 2009 to 2011 i.e. Rs 722.38 to Rs

1517.84, but it was decreased in the year 2014to 1094.61 because of less inventory.

As, it is observed that value of economic order quantities was continuously increased in

2009 to 2013 i.e. 258.23 units to 462.28 units due to continues increased in the

production capacity , but it was decreased in the year i.e. 434.17.

Implementation of inventory management and control on the cement manufacturing

industry has reduced the average costs of inventories which has lead to reduced carrying

costs.

SUGGESTIONS

price are needed, and awareness among initiators is to be increased to control the

generation of slow moving and moving item.

Introducing the new trends like JIT for some slow moving materials will definitely show

a positive impact on the costs and the variations in the average costs.

The production planning and material requirement planning should be informed to the

purchThe company should increase in the days of inventory holding it is well to the

organization.

New ways and means of disposing of scrap, surplus and obsolete items at a reasonable

ase department. So that they can identify number of alternative vendors.

Page | 53

The losses due to non moving items should be informed to corresponding department

initiators. So that the initiator can think economically to reduce the inventory.

FOR THE YEAR ENDED 31-12-2009.

(Rupees in lakhs)Particulars 2007 2008

Page | 54

Income

Sale of manufactured goods

Less : Excise duty

Net sales

Sale of traded goods

Other income

Expenditure

Cost of goods sold

Personal cost

Other expenses

Depreciation

Amortization of goodwill

Interest and other finance cost

Profit before tax

Provision for tax

- Current tax

- MAT credit of earlier years

- MAT credit for the year

- Fringe benefit tax

- Deferred tax charge

Profit for the year

Debit balance in profit and loss account brought forward

Balance in profit and loss account carried forward

47,905.48

6,388.76

41,516.722,404.44

432.61

44,353.77

16,825.32

1,777.20

9,234.53

2,200.41

-------

871.49

30,908.9513,444.82

982.00

------

------

28.00

------

12,434.82

(14,344.07)

(1,909.25)

1,16,900.24

17,521.3299,378.92

-------1,832.29

1,01,211.21

36,172.58

3,604.81

25,119.28

5,204.23

1,799.20

950.93

72,851.0328,360.18

6,542.84

(982.00)

(713.59)

115.83

5,339.36

18,057.74

(1,909.25

16,148.49

BALANCE SHEET AS ON 31st DEC 2009.

Particulars 2008

Page | 55

1.

2.

Sources of fundsShare capitalReserve & surplus

Loans fundsSecured loansUnsecured fundsdeferred tax liability (net)Total capital employed

Application of fundsFixed assetsGross blockLess: Accumulated DepreciationNet blockCapital work in progressNet fixed assets

Investments

Current assets, loans & advancesInventoriesSundry debtorsCash and bank balanceLoans and advances

Current liabilities & provisionsCurrent liabilitiesProvisions

Net current assets

42,796.14

38,050.4280,846.56

4,168.4512,286.485,659.361,02,960.85

89,683.7129,850.9359,832.7820,247.0680,079.84

10,051.06

3,971.012531.0012,012.168,821.9327,336.10

13,132.521,373.6314,506.1512,829.95

Total 1,02,960.85

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31-12-2010.

(Rupees in lakhs)Particulars 2008 2009

Page | 56

Income

Sale of manufactured goods

Less : Excise duty

Sale of manufacturing goods, net

Other income

Expenditure

Cost of goods sold

Personal cost

Other expenses

Depreciation

Amortization of goodwill

Interest and other finance cost

Profit before tax

Provision for tax

- Current tax

- MAT credit of earlier years

- MAT credit for the year

- Fringe benefit tax

- Deferred tax charge

Profit for the year

Debit balance in profit and loss account brought forward

Balance in profit and loss account carried forward

1,16,900.24

17,521.3299,378.921,832.29

1,01,211.21

36,172.58

3,604.81

25,119.28

5,204.23

1,799.20

950.93

72,851.03

28,360.18

6,542.84

(982.00)

(713.59)

115.83

5,339.36

18,057.74

(1,909.25

16,148.49

1,37,728.95

20,207.111,17,521.84

1,807.181,19,329.02

46,374.89

4,030.09

29,017.00

5,377.68

1,799.20

534.19

87,133.05

32,195.97

12,881.45

--------

--------

60.00

(518.20)

19,772.72

16,148.49

35,921.21

BALANCE SHEET AS ON 31st DEC 2010. (

Rupees in lakhs)Particulars 2009

Page | 57

1.

2.

Sources of funds Share capitalReserve & surplus

Loans funds Secured loansUnsecured fundsdeferred tax liability (net)Total capital employed

Application of funds Fixed assetsGross blockLess: Accumulated DepreciationNet blockCapital work in progressNet fixed assets

Investments

Current assets, loans & advances InventoriesSundry debtorsCash and bank balanceLoans and advances

Current liabilities & provisions Current liabilitiesProvisions

Net current assets

42,796.1457,823.14

1,00,619.28

10,342.3114,605.93

5,141.161,30,708.68

91,539.8736,353.1055,186.7771,347.95

1,26,534.72

5,100.00

6,071.352,640.094,773.47

10,803.0924,288.00

22,479.862,734.18

25,214.04(926.04)

Total 1,30,708.68

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31-12-2011.

Page | 58

(Rupees in lakhs)Particulars 2009 2010

Income

Sale of manufactured goods

Less : Excise duty

Sale of manufacturing goods, net

Other income

Expenditure

Cost of goods sold

Personal cost

Other expenses

Depreciation

Amortization of goodwill

Interest and other finance cost

Profit before tax

Provision for tax

- Current tax

- Fringe benefit tax

- Deferred tax charge

Profit for the year

Debit balance in profit and loss account brought forward

Balance in profit and loss account carried forward

1,37,728.95

20,207.111,17,521.84

1,807.18

1,19,329.02

46,374.89

3,545.79

29,503.27

5,377.68

1,799.20

534.19

87,135.0232,194.00

12,879.48

60.00

(518.20)

19,772.72

16,148.49

35,921.21

1,20,946.74

12,218.191,08,728.55

796.30

1,09,524.85

40,613.42

4,427.88

29,052.66

5,488.32

1,799.20

424.13

81,805.6127,719.24

11,520.00

16.45

(781.16)

16,963.95

35,921.21

52,885.16

BALANCE SHEET AS ON 31st DEC 2011. (R

upees in lacks)

Page | 59

1.

2.

Particulars 2010Sources of funds Share capitalReserve & surplus

Loans funds Secured loansUnsecured fundsdeferred tax liability (net)Total capital employed

Application of funds Fixed assetsGross blockLess: Accumulated DepreciationNet blockCapital work in progressNet fixed assets

Investments

Current assets, loans & advances InventoriesSundry debtorsCash and bank balanceLoans and advances

Current liabilities & provisions Current liabilitiesProvisions

Net current assets

42,796.1474,787.09

1,17,583.23

43,190.9516,251.30

4,360.001,81,385.48

94,463.8643,632.7750,831.09

1,01,290.641,52,121.74

16,764.09

4,378.433,922.79

21,081.897,482.89

36,866.00

19,445.184,921.17

24,366.3512,499.65

Total 1,81,385.48

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31-12-2012.

Page | 60

(Rupees in lacks)Particulars 2010 2011

Income

Sale of manufactured goods

Less : Excise duty

Sale of manufacturing goods, net

Other income

Expenditure

Cost of goods sold

Personal cost

Other expenses

Depreciation

Amortization of goodwill

Interest and other finance cost

Profit before tax

Provision for tax

- Current tax

- Fringe benefit tax

- Deferred tax (credit) /charge

- MAT entitlement credit

Profit for the year

Debit balance in profit and loss account brought forward

Balance in profit and loss account carried forward

1,20,946.74

12,218.191,08,728.55

796.301,09,524.85

40,613.42

4,427.88

29,052.66

5,488.32

1,799.20

424.13

81,805.61

27,719.24

11,520.00

16.45

(781.16)

-------

16,963.95

35,921.21

52,885.16

1,16,737.13

15,059.291,01,677.84

1,955.931,03,633.77

45,948.33

4,765.94

34,007.69

8,610.36

1,799.20

3,439.37

98,570.89

5,062.88

1,031.00

-------

3,000.00

(1,031.00)

2,062.88

52,885.16

54,948.04

BALANCE SHEET AS ON 31st DEC 2012.

Page | 61

(Rupees in lacks)

1.

2.

Particulars 2011Sources of funds Share capitalReserve & surplus

Loans funds Secured loansUnsecured fundsdeferred tax liability (net)Total capital employed

Application of funds Fixed assetsGross blockLess: Accumulated DepreciationNet blockCapital work in progressNet fixed assets

Investments

Current assets, loans & advances InventoriesSundry debtorsCash and bank balanceLoans and advances

Current liabilities & provisions Current liabilitiesProvisions

Net current assets

42,796.1476,849.97

1,19646.11

42,501.9313,358.907,360.00

1,82,866.94

1,93,075.6553,870.09

1,39,205.5644,859.34

1,84,064.90

6,850.27

9,061.614,123.754,550.46

11,510.1229,245.94

34,698.372,595.80

37,294.17(8,048.23)

Total 1,82,866.94

Page | 62

PR OFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31-12-2013.

(Rupees in lakhs)Particulars 2011 2012

Income

Sale of manufactured goods

Less : Excise duty

Sale of manufacturing goods, net

Other income

Expenditure

Cost of goods sold

Personal cost

Other expenses

Depreciation

Amortization of goodwill

Interest and other finance cost

Profit before tax

Provision for tax

- Current tax

- Deferred tax charge

- MAT entitlement credit

Profit after tax

Balance in profit and loss account brought forward

Balance in profit and loss account carried forward

1,16,737.13

15,059.291,01,677.84

1,955.93

1,03,633.77

45,948.33

4,765.94

34,007.69

8,610.36

1,799.20

3,439.37

98,570.895,062.88

1,031.00

3,000.00

(1,031.00)

2,062.88

52,885.16

54,948.04

1,63,335.89

19,274.811,44,081.08

2,178.64

1,46,259.72

60,225.83

5,126.83

46,770.92

11,339.49

1,799.20

5,607.36

130,869.6315,390.09

3,140.00

5,920.00

(2,880.00)

9,210.09

54,948.04

64,158.13

BALANCE SHEET AS ON 31st DEC 2013.

Page | 63

Page | 64

1.

2.

Particulars 2012Sources of funds Share capitalReserve & surplus

Loans funds :Secured loansUnsecured fundsdeferred tax liability (net)Total capital employed

Application of funds Fixed assetsGross blockLess: Accumulated DepreciationNet blockCapital work in progressNet fixed assets

Investments

Current assets, loans & advances InventoriesSundry debtorsCash and bank balanceLoans and advances

Current liabilities & provisions Current liabilitiesProvisions

Net current assets

42,796.1486,060.06

1,28,856.20

61,619.2715,502.7913,280.00

2,19,258.26

2,18,365.0066,948.98

1,51,416.0244,897.19

1,96,303.21

16,682.49

12,211.475,047.37

12,433.5624,236.0453,928.44

43,801.303,864.58

47,665.886,262.56

Total 2,19,258.26

BIBLIOGRAPHY

Financial Management - I.M. Pandey

Financial Management - R.P. Raustagi

Financial Management - Prasanna Chandra

Financial Management - Khan & Jain

Search engines

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Page | 65