New Invt Mgt Kesoram

A PROJECT REPORT ON

. The greater the time lag, the higher requirements for inventory. It also provides a cushion for future price fluctuations.

In a complex industry like Kesoram Industries Limited it studied clearly of how the thing are being performed and what is the real impact of these on industry and how effectively the inventory is utilized is interested to be known by researcher because of its great significance in the research.

The investment in inventories constitutes the most significant part of current assets / working capital in most of the undertakings. Thus, it is very essential to have proper control and management of inventories.

The purpose of inventory management is to ensure availability of materials in sufficient quantity as and when required and also to minimize investment in inventories.Meaning and Nature of Inventory:

In accounting language, inventory may mean the stock of finished goods only. In a manufacturing concern, it may include raw materials, work- in progress and stores etc., Inventory includes the following things:

a) Raw Material: Raw material from a major input into the organization. They are required to carry out production activities uninterruptedly. The quantity of raw materials required will be determined by the rate of consumption and the time required for replenishing the supplies. The factors like the availability of raw materials and Government regulations etc., too affect the stock of raw materials.b) Work in progress: The work in progress is that stage of stocks which are in between raw materials and finished goods. The quantum of work in progress depends upon the time taken in the manufacturing process. The quantum of work in progress depends upon the time taken in the manufacturing process. The greater the time taken in manufacturing, the more will be the amount of work in progress.c) Consumables: These are the materials which are needed to smoother the process of production but they act as catalysts. Consumables may be classified according to their consumption add critically. Generally, consumable stores doe not create any supply problem and firm a small part of production cost. There can be instances where these materials may account for much value than the raw materials. The fuel oil may form a substantial part of cost.

d) Finished goods: These are the goods, which are ready for the consumers. The stock of finished goods provides a buffer between production and market, the purpose of maintaining inventory is to ensure proper supply of goods to customers.

e) Spares: The stock policies of spares fifer from industry to industry. Some industries like transport will require more spares than the other concerns. The costly spare parts like engines, maintenance spares etc., are not discarded after use, rather they are kept in ready position for further use.

All decisions about spares are based on the financial cost of inventory on such spares and the costs that may arise due to their non availability.

BENEFITS OF HOLDING INVENTORIES

Although holding inventories involves blocking of a firms and the costs of storage and handling, every business enterprise has to be maintain certain level of inventories of facilitate un interrupted production and smooth running of business. In the absence of inventories a firm will have to make purchases as soon as it receives orders. It will mean loss of time and delays in execution of orders which sometimes may cause loss of customers and business.

A firm also needs to maintain inventories to reduce ordering cost and avail quantity discounts etc.

There are three main purpose of holding inventories.

1. The transaction motive: Which facilitates continuous production and timely execution of sales order.

2. The precautionary motive: Which necessitates the holding of inventories for meeting the unpredictable changes in demand and supplies of materials.

3. The speculative motive: Which induces to keep inventories for taking advantage of price fluctuations, saving in re ordering costs and quantity discounts.RISK AND COSTS OF HOLDING INVENTORIES

The holding of inventories involves blocking of a firms fund and incurrence of capital and other costs.

The various costs and risks involved in holding inventories are:

Capital costs: Maintaining of inventories results in blocking of the firms financial resources. The firm has therefore to arrange for additional funds to meet the cost of inventories.

The funds may be arranged from own resources or from outsiders. But in both the cased, the firm incurs a cost. In the former case, there is an opportunity cost of investment while in the later case; the firm has to pay interest to t he outsiders.

1. Storage and Handling Costs: Holding of inventories also involves costs on storage as well as handing of materials. The storage of costs include the rental of the godown, insurance charges etc.

2. Risk of Price decline: There is always a risk of reduction in the prices of inventories by the supplies, competition or general depression in the market.

3. Risk of Obsolescence: The inventories may become absolute due to improved technology, changes in requirements, change in customer tastes etc.

4. Risk Determination in quality: The quality of materials may also deteriorate while the inventories are kept.

Objects of Inventory Management:

Definition of Inventory Management: Inventory Management is concerned with the determination of optimum level of investment for each components of inventory and the operation of an effective control and review of mechanism.

The main objectives of inventory management are operational and financial.

The operational objective mean that the materials and spares should be available in sufficient quantity so that work is not disrupted for want of inventory.

The financial objective means that inventory should not remain idle and minimum working capital should be locked in it.

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 great importance to understand the inventory management system of this industry.

The study helps a log to various departments to take steps to control the inventory process.In this competitive business world each and every business organization need inventory management system for determining what to order, when to order, where and how much to order so that purchasing and storing costs are the lowest possible without affecting production and sales. Thus, inventory management control incorporates the determination of the optimum size of the inventory-how much to be order and when after taking into consideration the minimum inventory cost.

The over all inventory management includes design and inventory control organization with proper accountability establishing procedure for inventory handling disposal of scrap, simplification, standardization and codification of inventories, determining the size of inventory holdings, maintaining record points and safety stocks, economic order quantity, ABC analysis and VALUE analysis and finally framing an INVENTORY MANUAL. OBJECTIVES OF THE STUDY:1. To examine the organization structure of inventory management in the stores of Kesoram Cements.

2. To discuss pattern, levels and trends of inventories in Kesoram Cements.3. To understand the various inventory control techniques followed by studies in Kesoram Cements.

4. To access the performance of inventory management of the Kesoram Cements by selected accounting ratios.

5. To know the inventory control techniques of Kesoram Cements.6. To avoid both under stocking and over stocking of inventory.

7. To eliminate duplication in ordering or replenishing stocks. This is possible with the help of centralized purchasing.

a. To ensure continues supply of materials, spares and finished goods so that production should not suffer and any time and customers demand should also be met.

b. To design proper structure for inventory management. A clear cut accountability should be fixed at various levels of the organizations.

METHODOLOGY OF THE STUDY:

Source of Data

The methodology Is to study the inventory perception towards Cement company with special reference to Kesoram 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 the Officers/ executives to edit the required information. 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.

LIMITATIONS OF THE STUDY:The study has the following limitations:

1. The study is purely based on secondary data.

2. The time span that is 45 days which it has became difficult to collect all the information. From the concern departments.

3. The reliability of the study depends upon the information furnished by the officials.

4. Due to time constraint it is difficult to go into details of the organization.5. The limitations of ratio analysis can be applicable of the study.INDUSTRY PROFILE Cement Industry has been decontrolled from price and distribution on 1st March 1989 and de licensed on 25th July 1991. However, the performance of the industry and prices of cement are monitored regularly. Being a key infrastructure industry.

The constraints faced by the industry are reviewed in the Infrastructure Coordination Committee meetings held in the Cabinet Secretariat under the Chairmanship of Secretary (Coordination). The Committee on Infrastructure also reviews its performance. The industry is subject to quality control order issued on 17.2.2003 to ensure quality standards.CEMENT INDUSTRY IN INDIA

In India it came to be established during the beginning of 20th century. In fact the cement era in India commenced with the establishment of a small cement factory at WASHERMANPET in 1904 by South India industry Ltd. a company that dates to 1879. The potential capacity of this plant was only 10,000 metric tones per annum. This was the first attempt of manufacturing Portland cement with cat carious seashells as a principal raw material. There was sufficient demand for that product, but because of technological defects and inadequate supply of raw materials, the plant did not operate economically, a later on collapsed. India is ranked forth in the world after China, Japan, and USA in cement production. Yet the per-capital consumption of cement in India however low at 70 to 80 kgs against the world average of around 220kgs.CEMENT INDUSTRY IN ANDHRA PRADESH

Cement was first manufactured in America in the year 1875. In India, in 1914 the India Cements Company Limited was established a cement factory at Portland. Andhra Pradesh is the second largest cement production state in India, one third of the limestone (138crore tones) is available in A.P.I.A.P. the cement production was started in 1936 with two factories. Of these two factories one is Andhra Cement Company Limited and another in Krishna Cement Factory. One is on the side of Krishna Cement Factory. One is on the side of Krishna River and another is in between Krishna and Guntur districts respectively.

In 1995, one more factory was established at Panyam in Kurnool Dist., named as Panyam Cement and mineral industries. At the same time one more factory has been established at Maacherla in Guntur district. At the end of July 1985 the total capital invested on cement industry was Rs.427.81 lakhs and provided employment for 1262 persons and 19 factories were functioning with a production of 85lakh tones.

Capacity, Production and Exports

India today boasts 129 large plants and over 300 mini cement plants with a capacity of 165 million tones and production of 134 million tones (2004-05).

It ranks second in the world among cement producing countries, with per capita consumption at 118Kg compared to the world avg. Of around 317. Per capita consumption is 366 Kg in Thailand, 626 Kg in China, 606 Kg in Malaysia and 1216 Kg in South Korea. This indicates a huge potential for increase in consumption.

The Cement Corporation of India, which is a central public sector undertaking, has 10 units. Besides, there are 10 large cement plants owned by various state Governments. Keeping in view the past trends, a production target of 133 million tons has been set for the year 2004 05. During the Tenth Plan, the Industry is expected to grow at the rate of 10% per annum and is expected to add capacity of 40 52 million tons.

Mainly through expansion of existing plants and use of more fly ash inthe production of cement. A part from meeting the domestic demand, the cement Industry also contributes towards exports. The export of cement and clinker during the last three years is as under:-

Export of Cement

(In million tons)

YearCementClinkerTotal

2005 063.473.456.92

2006 073.365.649.00

2007 083.314.828.13

Overview of the performance of the Cement Sector:

The Indian Cement Industry not only ranks second in the production of cement in the world but also produces quality cement, which meets global standards. However, the Industry faces a number of constraints in terms of high cost of power.

High railway tariff; high incidence of state and central levies and duties; lack of private and public investment in infrastructure projects; poor quality coal and inadequate growth of related infrastructure like sea and rail transport, ports and bulk terminals. In order to utilize excess capacity available with the cement Industry, the Government has identified the following thrust areas for increasing demand for cement:

(i) Housing development programs;

(ii) Promotion of concrete highways and roads;

(iii) Use of ready mix concrete in large infrastructure projects; Technological advancements

Indian cement industry is modern and uses latest technology. Only a small segment of industry is using old technology based on wet and semi-dry process. Efforts are being made to recover waste heat and success in this area has been significant.

India is also producing different varieties of cement like Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid Hardening Portland Cement, Sulphate Resisting Portland Cement, White Cement, etc. Production of these varieties of cement conforms to the BIS Specifications. It is worth mentioning that some cement plants have set up dedicated jetties for promoting bulk transportation and export.Infrastructure driven demand pushThe bulk of cement demand is from housing and commercial development of which metros account for a significant amount. It is estimated that Mumbai, which consumes almost six million tones, along with Pune, accounts for 45 percent of Maharastras cement consumption, Bangalore consumes four million tones and Chennai around 3 million tones, these are really the growth clusters. Today bulk of the demand is driven by housing and commercial construction and as infrastructure picks up, for example, Bangalore international airport, Hyderabad airport and modernization of Mumbai and Delhi airports. Another large consumer has been the roads sector. The off take was good when the NHDP programme was launched but there was a lull last year. Once again new orders have been placed and in 2006, the industry will pick up. The estimate is that from roads, sdemand is not more than 4-5 million tones but it makes a difference in the growth numbers.Narrowing demand-supply gap: The industry has a capacity of 165 million tons and in Jan 2006, dispatches were at almost 100%. On an overall basis, the industry does not do more than 90-92% because of constraints such as transport and raw material.

The industry has been adding capacity of 6-7 million per annum by Brownfield expansion and de-bottlenecking which is expected to partly cater to the requirement because it is growing by around 20 million tons per annum.Challenges before the industry:

Energy costs account for half of the cost of production of cement. Last year saw a 15-16% increase in coal prices and then diesel prices went up pushing up transportation costs.Freight problems

The importance of freight for the cement industry cannot be emphasized enough. While in the last few months railways have been steadily losing freight to road sector they have been confined cement to market-is around Rs.350-400 a ton or Rs.20 and bag that could go as high a Rs.800 for long leads. This would only easy the first level of sale and additional costs are involved to take it further.

Another issue, which will hit the industry hard, is that of logistics and a Supreme Court judgment on carrying capacity for trucks. Accordingly, a state govt. has been directed to enforce the discipline that trucks only carry a specified load. Many states and already implementing this and there is already an increase in freight rates and in some cases, it has gone up by 50%. Also, the requirement for trucks to carry the same freight has nearly doubled and in many places the industry is being forced to move to railways.High taxes

While the railways have had capacity to meet the requirement, it is expected that in March the commencement of peak season for the procurement of food grains, the railways would be constrained to provide adequate number of wagons.

So fright rates are up, railways cannot provide wagons and trucks are unlikely to be viable so there could be a serious dislocation of supplies going forward. According to the cement manufactures association total taxes and duties on cement come to around Rs.900 a ton or Rs. 45 a bag. So at a price of Rs.150 a bag in the market, taxes and duties account for one third. Which is high for such a basic product. This includes excise duty, sales tax and royalty on limestone.

The importance of limestone can only be underscored as for every ton of cement produced. 1.5tons of limestone is required. For limestone, royalty is on a per ton basis at Rs. 40 whereas for most minerals it is a percentage of the pithead cost. Effectively we are paying Rs.70 a ton for limestone as royalty. VAT is at 12.5% without any justification and it should be in 4% category, excise is at Rs.408 per ton when it should be around Rs.200.

Export Advantages

From a modest beginning if 1.6 lacks tons in 1989-90, Indian exports of cement/clinker have grown rapidly at about 30-40% and this year exports will cross 10 million tons.Major cement producers market shares:

Acc -12.8%

Abuja -10.7%

Grasim-10.4%

Ultra tech-9.5%

India cement-6.0%

Jaypee-4.1%

Lafarge-3.2%

Madras-3.2%

Overall, the industry is in a better state today than 2 years ago. Cement prices even today are way below global levels. So setting up Greenfield capacities is not attractive, as prices will not give attractive returns on investment. That is a minor reason why there is no Greenfield capacity coming up. It has to be born in mind that one third of the prices is accounted for by taxes and duties and nearly 20-25% by the freight component. So what produces earn at the factory gate is among the lowest in the world.

This year 2008 has commenced on a good note and in fact, December was a very good month wit dispatches at 12.5 million tons and January dispatches were in excess of 13 million tons.

This means capacity utilization is in the nineties which is healthy and will actually lead to firming up of prices. It looks like sales could be 137 million a ton for 2007-08(125 million tons in 2006-07) and so far growth has been 10%. There are enough reasons to believe it will sustain.

INDUSTRY PROFILE

The 85 year old Indian cement industry is one of the cardinal and basic infrastructure industries, which enjoys core sector status and play a crucial role in the economic development and growth of a country. Being a core sector is industry was subject to price and or distribution controls almost uninterruptedly from world war -II to 1982. When the government of India announced the partial decontrol manufacturing cement became increasingly attractive industry and the industry experienced substantial expansion.As the supply in response to the 1982 partial decontrol was significant in march, 1989. Price and distribution control were finally dispensed with. It was one of the first major industries in the country to be so deregulated.

DEFINATION OF CEMENT

Cement may be defined as it is a mixture of calcium silicate and aluminates which have the property of setting and hardening under water. The amount of silica, alumna who is present in each crust is sufficient to combine with calcium oxide [cao] to from the corresponding calcium silicate and aluminates.

CLASSIFICATION OF CEMENT

Cement is 3 types

i. Puzzolantic cement

ii. Natural cement

iii. Portland cement1. Puzzolantic cement:

It consists of silicates calcium and aluminum. It shows the hydraulic, properties when it is in the form of powder and being mixed with suitable proportion of lime. The rate of hardening is much slower and the comprehensive strength developed is about a half of Portland cement. It us found more resistant to the chemical action that others.

2. Natural cement:

This is natural occurring material. It is obtained form cement rocks. The cement rocks are claying lime stones containing silicates aluminates of calcium. The selling property of this cement is more than the Portland cement but is comprehensive strength is half of its.

3. Portland cement:

a) Ordinary Portland cement

b) Rapid hardening Portland cement

c) Low heat cement

d) White or colored cement

e) Water proof Portland cement

f) Portland slag cement

g) Portland puzzo

h) Sulphate resisting cement

i) Oil well cement

INDIAN CEMENT 1NDUSTERY - PRESENT STATUS

After the deli censing of the industry in July, 1991 it reacted positively to the policy changes. New capacities created and the volume of the production increased. From a situation of importing cement, the country started exporting due to high quality and cost effectiveness. After liberalization the black market in cement also disappeared

Currently INDIA stands second largest in the cement production world wide after china after India, japans and USA stands. On the other hand India's per capital consumption is only 100kgs. As compared to the world average of 260kgs. The industry has 59 companies owing 115 plants.

In the mailer of exports, the government considers cement as extreme focuses are& However Indian cement in the global market is not very competitive due to high power and full costs. In order to improve its position in the international market. Technological up gradation is essential in terms of process up process up gradation product diversification costs reduction quality control and energy savings

OVERVIEW OF THE INDUSTRY

The word cement means any substance applied for sticking things .But cement is most vital and important material for modem construction as a binding agent .In the ancient times ,clay ,bricks and stones have been used for construction Work.

The Romans were using a binding or a cementing material that would harden Under water. The first systematic effort was made by SMEATION who Under took the erection of a new lighthouse in 1756.he observed that the production Obtained by burning limestone was the best cementing material for work under water.

After eighty years brunch chemist produced hydraulic cement by burning finely ground delay used in the form of paste .cement invented by. JOSEPH ASPDIN in 1824. Since hardened Cement paste resembled Portland stone found in England be named it a s Portland cement A name that has ensured even Portland cement was list manufactured in USA in 1975 In Portland cement was produced for the rust lime in 1940. by south India industries limited Madras. This unit had capacity of 30 tones per dayBy 1913 however three units started their operations with a combined installed capacity of 75000 tons per annum. In 1914 indigenous production fees for short of domestic demand necessitating an import of 1, 65,723 tones. Shipment difficulties and foreign Trade during the first world war acted as a catalyst for the . Development of indigenous Industry, and by 1924 the total installed capacity grew to 5,59,800 tones per annum.

In 1963 all the cement companies with the exception of SONE VALLEY PORTLAND CEMENT COMPANY LIMITED merged to form the ASSOCIATED CEMENT COMPANIES LIMITED. This has more facilitated a cost reduction as well as uniformly in quality. By 1947 the installed capacity of the industry raiscdto2.2miIlion tones per annum. After partition 5 of the cement producing units in the country went to Pakistan and total installed capacity of 18 units that remained in India was 1.5 million tons per Annum. This is increased to 3.8million tones by 1950-51.

In the three decades between 1950-1980 the capacity expansion was between 7-8 million tones pe/decade the target set in respect of additional capacity generation was released with impetus given by the partial decontrol announced in 1982. Several units locked up project for expansion of capacity and modernization which contributed towards increased production.INDIAN CEMENT INDUSTRY PRESENT STATUSAfter the dealing of the industry in July 1991 it reacted positively to the policy changes new capacities created and the volume of production increased from a situation of importing cement the. country started exploring due to high quality and cost effectiveness after liberalization the black market in cement also disappeared currently India stands second largest in the cement production worldwide after china on the other hand per capita consumption in India is only books as compared To the world average of 260kgs the industry has S9 companies owning 1 is plants in the matters of exports. The government considers cement as a extreme Focus area .however Indian cement in the global market is not very competitive Due to high power and full costs. In order to improve its position in the international market technological up gradation is essential in terms of process Product diversification cost reduction quality control and energy saying.

ABOUT THE INDUSTRY

These chapter examiners a profile of cement industries ltd. i.e. .its history location organization structures etc.

LOCATION;

Kesoram cement industry is one of the leading manufacturer of cement in India it is a day process cement plant the plant capacity is 8.25 lakh tones per annum .it is located at basanthnagar in Karimnagar district of Andhra pradesh Basanth nagar is 8km away from the ramagundam railway station linking madras to newdelhi the chairman of the company is syt.B.K.Birla

HISTORY:

The first unit at Basanthnagar with a capacity or 2,1 lakh tons per annum incoresponding suspension-preheated system was commissioned during the year of 1969 the second unit Was setup in year 1971 with a capacity of 2.1 tens per annum and the third unit with a capacity of 2.5lakh tons per annum went on stream in the year 1978 the coal for this company is being supplied iron singareni collories and the power is obtained from APSEB the power demand for the factory is about 21MW kesoram has got 2DG sets of 4M"W each Installed in the year 1987.

Kesoram Cement as set up a 15kw capacity power*plant to facilitate for unintellpted power supply for manufacturing of cement starts at 24 august 2007 per hour 12 mw, actual power is 15mw. Birla supreme in popular brand of kesoram cement from its prestigious plant of Basanthnagar in A.P which has outstanding track record in performance and productivity serving the nation for the last two and had decades It distinction by Bagging several national awards .It also has the distinction optimum capacity utilization. Kesoram offers a choice of top quality portioned cement for light heavy constructions and allied applications quality is built every fact of the operations.

The plant layout is rational to begin with the limestone is rich in calcium carbonate a key factor that influence the quality of final product the day process technology used in the latest computerized monitoring overseas the manufacturing process samples are sent regularly to the burenu of Indian standards national council of constructions and Building material for certification of derived quality norms

The company has vigorously undertaking different promotional measures their product through different media which includes the use of newspapers, magazines hoardings etc

Kesoram cement industry distinguished itself among all the cement factories in India by bagging the national productivity award consecutively.For two veat but the year 1985 -1987.(he federation of Andhra Pradesh chamber of commerce and industries also conferred an kesoram cement an award for.the best Industrial promotion expansion efforts in the year 1981.kesoram also bagged FAPCCl Awarded for "best family planning effort in the state " for the year 1987-1988.

One among the industrial giants in the country today serving the nation on the industrial front kesoram industrials Ltd has a cheque red and eventful history dating Back to the twenties when only a textile mill under its banner 1924 it grew from Strength to spread and activities 10 newer fields like Rayan pulp Transport paper spun pipes Refractivity tires and other products

Looking to the wide gap between the demand and supply of a vital commonly cement Which plays Ul important role in national building activity the government of India had de-licensed the cement industry in the year 1966 with a view to attract private entrepreneurs to augment the cement industry production kesoram rose to the occasion And divided to setup a few cement plants in the country Kesoram cement undertaking marketing activities extensively in the states of Andhra Pradesh Karnataka Tamilnadu, kerala maharastraha and gujrat in AP sales depots are located in different areas like karimnagar warangal nizambad vijayawada and nellore In other states it has opened around 10 depots.

THE AWARD WON ARE:Kesoram cement bagged prestigious awards like national awards for productivity and technology and conservation and several state awards for year 1984 kesoram cement is best family planning effort in the federation of Andhra Pradesh chamber of commerce And industry and also national award for two successive years 1985-86& 1986-87.lt has also bagged the national award for energy efficiency for the year 1989-90 for the performance among all cement plants in India .thus award stall-by national council For cement and building material in association with the government of India .

Kesoram bagged the prestigious Andhra Pradesh state productivity award in 1987-1989 also Annexed state award for industrial management in 1988-1989.and also "Best Industrial promotion expansion efforts " in the state and yajamanya ratna and best efforts an industrial unit in the state to develop rural economy was bagged for its contribution towards the year 1991.it also bagged the "may day award" of the government of India For the best management and the pandit jawaharlal Nehru silver rolling trophy for the industrial productivity effort in the state of andhra Pradesh by FAPCCI and also the Indira Gandhi memorial national award of the government of Andhra Pradesh for the year 1993.

During the last 3 years the government of Andhra Pradesh has given the following awards Best awards for the year 1994.Best industrial relation award for 1994.TO keep the ecological balance they have also undertaken massive tree plantation in The economy and government of India has nominated township areas and them for VRIKSHMITHRA award Best effort of an industrial unit in March 1996In the year March 2007 "Best management award 2007" for the best management practices In kesoram cement presented by chief minister.

CEMENT PRODUCTION WORLDWIDE

Country19811983198619891990World ranking

CHINA831081062102101

JAPAN88857382872

USA65617170723

INDIA21253645484

ITALY4340364415

GERMANY3028242740 '6

Today in the cement industry is producing 58.3 million tones per annum indication surplus conditions while its demand is 56.7 million tones lies per annum Now The cement market has become 'buyer market' which was a selling market till 1970'sAnd so the quality &brand taken an upper edge for cement marketing.

Today installed at the India cement industry is 771 lakh tones but in India 106 Major plants are producing 583lakh tones leaving the balance for exports.

PROFILE OF THE COMPANY

One among the industrial gains in the country today serving the nation on the industrial front kesoram industries limited has a tenured and extent full history dating hock to the twenties when the industrial house of Birlas enquired it. With only a Textile mill under its banner in 1924, it grew from strength and spread its activities to newer fields like Rayon pulp Transparent Paper. Spun pipes and Refectory Tyers oil mills and refinery Extraction.

Looking to the wide gap between the demand and supply of vital commodity cement which it plays on important role in Nation Building, the government Private entrepreneurs to argument the cement production Kesoram rose to the occasion and decided to set up few cement plants in the country.

Kesoram cement is one of the prestigious units in the renowned Kesoram industries group that is one of Indias leaden industrial conglomerates, under the leadership of Mr.B.K.Birla, the famous personality of Indian Industry, who owes branches all over India.

Kesoram cement Industry is one of the leading manufacturer of cement in India Kesoram cement is a division of Kesoram Industries limited. It is a dry process cement plant. It is located at Basant Nagar in Karimnagar District of Andhra Pradesh with the plant capacity is 8.26 lakhs tones per annum. It is 8Kms away from the Ramagundam Railway Station Lining Madras to New Delhi.PLANTS SETUP:

The first cement point of Kesoram with a capacity of 2.1 lacks tones per annum incorporating Humboldts suspension preheated system was committed during the year 1969.

The second unit was setup in the year 1971 with capacity of 2.1lacks tons which added to the above plant capacities.

The third plant with a capacity of 2.5lacks tons per annum, which went on stream in the year 1978.

The coal for this company is obtained by singareni collieries and the power is obtained from APSEB. The power demand capacity for the factory is about 21M.W. Kesoram has got 20G sets of 4MN each installed in the year1987. Kesoram cement belongs to the Birla group Companies one of the industrial giants in the country. Kesoram cement industries distinguished itself among the cement factories in India by bagging the national productivity award for two successive years i.e., in 1985-86 and 87. Kesoram cement also got the FAPCCI award for best family planning effort in the state for the year 1987-88. Kesoram also bagged NCBCNS national award for energy conservation for the year 1989-90. The Kesoram industries look for the welfare of the employees and it provide various facilities which the employees and it provide various facilities which the employee feels satisfied with in the organization and after the work they fees satisfies the worker and works families by providing various welfare schemes and by providing recreational facilities of a glace. To keep the ecological balance, company has also undertaken massive tree plantation in and around Basanth Nagar and nearby villages there by eliminating the pollution and they have been nominated by the government of India for VRUKSHAMITRA AWARD but effort of an industrial unit in the state for rural development 1994-95 presented by CM in march 1996.BRANDS:

Kesoram brands with namely Birla Supreme and Birla supreme gold (53 grades) has made a niche with outstanding quality and commands a premium in the market. The latest offering, Birla Shakthi is also very well received and is the most sought offer brand now.AWARDS:

National productivity award for 1985-86.

National productivity award for 1986-87.

National award for energy conservation for 1980-90.

National award for mines safely 1985-86, 1986-87.

Prestigious state award yajamanya ratna and but management award for the year 1980.

Best FAPCCI award for but family planning effort in the state 1987-88.

FAPCCI award for best workers welfare 1995-96.

Best industrial productivity award of FAPCCI.

Best management award of state government 1993.

It has got Vanamitra award from the government of Andhra PradeshKESORAM GROUP OF INDUSTRIESa)TextilesKesoram Industries Ltd,

42, Garden Reach Road

Calcutta-700024.

b)RayonKesoram Rayon Triennia (P.O.),

Dist : Hoogly, West Bengal.

c)Spun PipesKesoram Spun pipes & Foundries,

bansberia (P.O.), Dist: Hoogly,

West Bengal.

d)Cement Kesoram Cement,

Basantnagar-505187,

Dist : Karimnagar, Andhra Pradesh

e)Cement Vasavadatta Cement,

Sedam-585222,

Dist : Gulbargah, Karnataka.

f) Tyres Birla Tyres,

Shivam Chambers,

53, Syed Amir Ali Avenue.

Calcutta-700019.

Product Profile

The main brands of cement manufactured are:

RAASI GOLD (53 Grade)

RAASI SUPER POWER

RAASI 43 Grade cement.

All the brands are known for its best quality standards.

Industrial RelationsKIL,KNR is known for its best Industrial Relations practices in this region and won many awards from Govt. of A.P. and Chamber of Industries.

Norms

Raw Mill Clinker Cement

Lime stone 96%

Iron ore 2.5%

Laterite 1.5%

Raw Mill 1.5 tonnes

Coal 20%

Clinker97%

Gypsum 3%

Directors of Kesoram Industries LimitedChairman Syt. B.K. Birla

Directors

Smt. K.G. Maheshwari

Shri. Pramod Khaitan

Shri B.P. Bajoria

Shri P.K. Chokesy

Smt. Neeta Mukerji

(Nominee of I.C.I.C.I.)

Shri D.N. Mishra

(Nominee of L.I.C.)

Shri Amitabha Ghosh

(Nominee of U.T.I.)

Shri P.K. Malik

Smt. Manjushree Khaitan Secretary

Shri S.K. ParikSenior Executives Shri K.C. Jain (Manager of the Company)

Shri J.D. Poddar

Shri O.P. Poddar

Shri P.K. Goyenka Shri D. Tandon

Auditors

Messrs Price Water house

Subsidiary Companies of Kesoram Industries

Bharat General & Textile Industries Limited

KICM Investment Limited

Assam Cotton Mills Limited

Softshree Estates LimitedTHEORETICAL FRAME WORKINVENTORY

A tangible property held finished goods, work in process, raw material including maintenance and consumables.

Inventory management is a very important function that determines the health of the supply chain as well as the impacts the financial health of the balance sheet. Every organization constantly strives to maintain optimum inventory to be able to meet its requirements and avoid over or under inventory that can impact the financial figures.

Inventory is a quantity or store of goods that is held for some purpose or use (the term may also be used as a verb, meaning to take inventory or to count all goods held in inventory). Inventory may be kept "in-house," meaning on the premises or nearby for immediate use; or it may be held in a distant warehouse or distribution center for future use.Meaning of inventory

The inventory refers to the stock pile of the product a firm offering for sale the components that make up the product. In other words, inventory is composed of assets that will be sold in future in the normal course of business operations. The assets which firms stores as inventory in anticipation of need can be classified into

Raw materials

Work in progress (semi finished goods)

Finished goods

Raw materials:

Inventory contains items are purchased by the firm from others and are converted into finished goods through the manufacturing process. They are important inputs for the final product.

Work in progresInventory consists of items currently being used in the production process. They are normally partially or semi finished goods that are at various stages of production in a multistage production process.

Finished goods:

It represents final or completed products which are available for sale, the inventory of such goods consists of items that have been produced but are yet to be sold. The job of the final manager is to reconcile the conflicting view points of the various functional areas regarding the appropriate inventory levels in order to fulfill the overall objectives of maximizing the owners wealth.

Importance of inventory

Inventory plays cardinal role in every organization. The profit of the organization mainly depends on the inventory. Inventory is the second largest value in the organization it is the liquid asset and the current asset of the organization, inventory storage is in important activity in the organization.

OBJECTIVES OF INVENTORY MANAGEMENT

The objectives of the inventory management consist of two counter balancing parts:

a) To maximize the firms investment in inventory

b) To meet a demand for the product by efficiently organizing the firms production and sales operation.

These two conflicting objectives inventory management can also be expressed in terms of cost and benefits associated with inventory. An optimum level of inventory should be determined on the basis of the tradeoff between cost and benefits associated with the levels of inventory.

THE MAIN AIM OF INVENTORY MANAGEMENT

The main aim of inventory management they should be avoid excessive and inadequate levels of inventories & to maintain sufficient inventory for the smooth production & sales operation effort be made to place an order at the right time with the fight source to acquire the right quality at the right place & quantity.

Ensure a continuous supply of raw materials to facilitate uninterrupted production.

Maintain sufficient stocks of raw materials in periods of short supply & anticipated price customer service.

Minimize the carrying and time, and

Causes of inventory:

External Causes: - Customers, suppliers etc.

Internal Causes: - Market, policy, production and SCM.

Problem with high inventory: Interest, insurance costs.

Quality deterioration.

Wear and tear.

Storage and pilferage.

Inventory turnover ratio:

ITR = cost of production / inventory

Higher ITR = low inventories

Low ITR = high inventories

High inventory reasons:

Production

More low volume products

Large cycle campaign product

Non-moving products

Marketing:-

Uncertainty of orders Deviating sales forecastSupply chain management:

Improper planning

Excess / short RM supply.

Suggestions:-

Flexible production plans with tight monitoring.

Min & max inventory levels and their up to date revision.

Cost benefits analysis in on carrying costs.

Review and disposal of non-moving inventory.

Reliability should improve.

Dynamic approach is essential.

Coordination with market and plants.

Adherence to commitments and time-to-time review is must.

Selection of Site:- The following are the chief consideration which should determine the selection of a site.

(a) The site will be connected with road and rail, or if there is river transport, with water transport.

(b) The existence of facilities for disposal of water or effluent water is important. For this purpose sometimes it may be possible to use existing waste land. Health authorities will naturally have a say in the matter.

(c) The available land should be sufficient for purpose of the unit. In addition to factory buildings, it is often necessary to provide houses for the staff and workers.

STORES, SPARES AND PURCHASES:-1. Store keeping.

2. Store system.

3. Various stores operation.

4. Methods of pricing the material issues.

5. Receiving section and issue department.

6. Purchase department

7. Stores and spares.

8. Purchasing system.

9. Inventory.

STORK KEEPING

It is serving facility, inside of an organization responsible for proper storage of the material and then issuing it to respective department on proper requisition. Those items, which are not in use for some specific duration example spare parts and the raw materials, are called stores and the building or space where these are kept is known is store room.

According to Maynard the duties of stock keeping are i.e., to receive materials are to protect them while in storage from damage and unauthorized removal, to issue the materials the right quantities at the right time to the right place and to provide these service promptly at least cost.

It is an establishment fact that more govt of the current assets are invested in stores. Thus for efficient and economic utilization of fond the importance of store cannot be ignored.

FUNCTIONS OF STORE KEEPING:

The main function of store keeping can be outlined as

i. Receiving of goods in stores against damage and pilferage.

ii. Custodian of goods in stores against damage and pilferage.

iii. Effective utilization of stores space.

iv. To provide service to the organization in most economic way.

Proper identification and

OBJECTIVES OF STORE KEEPING:

a. Easy location of the items in store.

b. Proper identification of items.

c. Speed issue of material.

d. Efficient utilization of space.FACTORS OF PLANT LOCATION.Primary factors:-

Raw material

Market

Fuel and power

Transport

Labor

Secondary Factors:

Industrial atmosphere Special advantage of a place Soil and climate Personal factors Historical factors Political stabilityStages in Production control:

Planning

Routing

Scheduling

Loading

Dispatching

Inspection.Advantages of Production planning and control:- Efficient service

Avoidance of rush orders

Avoidance of bottlenecks

Inventory control

Economy in production time

Equipment utilizationTypes of layout: Product or line layout Process of functional layout Combined layoutFactors in plant layout:

Basis managerial policies and decisions

Nature of plant location

Type of industry and processes.

Economies in Production:

Use of automatic machinery

Division of labor

Utilization of boy-products

Timely and economical repairs and maintenance.Approach:

The importance of an integrated approach of material management with in the frame work of the Indian environment and presents a comprehensive coverage of all aspects of the subjects, such as the operational details of stores system and procedures and modern mathematical concepts also featured. Since the theory is based on the practical experience and research projects, it fulfills the needs for authentic literature in the field on materials management.Purpose of Stores:-

A store plays a vital role in the operation of a company. It is in direct touch with the user departments in its day-to-day activities. The most important purpose served by the stores is to providing uninterrupted service to the manufacturing divisions. Further, stores is often equated directly with money, money is locked up in the stores.

The function of stores can be classified as follows:-

1. To receive raw materials, tools, equipments and other items and account for them.

2. To provide adequate and proper storage and pre salvation to the various items.

3. To meet the demands of the consuming departments by proper issues and account for the consumption.

4. To minimize obsolescence, surplus and scrap through proper codification, preservation and handling.

5. To highlight stock accumulation, discrepancies and abnormal consumption and effect control measure.

6. To ensure good housekeeping so that material handling, materials preservation, stocking, receipt and issue can done adequately.

In India, owing to positions, 4 to 6 months inventories are not uncommon 77 and, in fact, for certain imported items, it could be as high as 24 months stock. In this context, stores management assumes greater importance.

Stores leader:-

The stores leader is very important because this facility the calculations of the value of goods used for production purpose of materials, finished goods. There are several methods for calculating the issue price of the materials.FIFO:-Under this method is first issued the earliest consignment on hand and priced at which that consignment was placed in the stores. In other words materials received first are issued first.This method is most suitable in times of falling prices because the issue price of materials to be jobs work orders will be high while the cost of replacement of materials will be low.LIFO:-The issue under this method are priced in the reverse order of purchase i.e., The price of the latest available consignment is taken. This method is sometimes known as the replacement cost method because materials are issued at the current cost to work orders expect when purchases were long ago.

This method is suitable in times of raising prices because material will be issued from latest consignment at a price which is closely related to the current price levels.

Base stock method:-Each concern always maintains a minimum quantity of material in stock. This minimum quantity is known as safety or base stock and this should be used when an emergency arises. The objective of this method is to issue the material according to the current prices.

Average method:-In this method stock is divided by the quantity.

Market Price:-The issue is made at the market prices.

Inflated prices:This method is used for any wastage in the materials ex.50 units are purchased at Rs. 10. In 50 units will go for wastage. The issue price will be 500/40=12.5Location and layout:

More often than not, in the matter of locating the stores, materials management is rarely consulted. The normal practice is to locate the stores near the consuming departments. This minimizes handling and ensures timely dispatching stores layout, governing criteria are easy movement of materials, good housekeeping, and sufficient space for men and materials handling equipments, such as shovels, racks, pallets and proper preservation from rain, light and other such elements.

These problems are more important in the case of items that have a limited shelf life.

Other important factors governing the location are the number of users and their locations, the volume and the verity of goods to be handled the location of the central receiving section and accessibility to modes of transportation such as rail or road.

Since stores have to be nearest to the sugar, largest organizations usually have stores near consuming department, whereas receiving is done centrally.

Items of common usage are stocked in the central stores so that inventory is kept at the planning level of layout.

In the case of warehouses stocking finished goods, factors such as proximity to ports, railway lines, quality of roads, availability of power, etc., become quite important. It also that the stores are constructed with a futuristic orientation, so that sufficient flexibility for expansion needs is inbuilt. The activities of receiving the goods, stocking in appropriate locations, material handling and issue must be done swiftly and economically. The stores building have adequate facilities for preservation of stores.

Sometimes facilities, such as cold storage, heating equipments, air conditioning and similar facilities may be required. These should be planned in advance. Comfortable working conditions must be provided to the stores personnel to get maximum efficiency and morale.

The important factors in the design of stores building can be summarized as follows:Lighting:-

Clear and adequate lighting is a must for a work environment. Lighting effects can be accentuated through a judicious choice of colors for the walls. For stores personnel who work day in and day out in the stores receiving, checking, stocking, handling and issuing goods, a pleasing environment goes a long way in reducing monotony. Any attempt to reduce these facilities will prove false in economizing in the long run.

Safety:-This factor is perhaps the most important aspects. In stores a large volume of goods are handled every day. Accidents considerably reduce the morale and effectiveness of the system. The following measures are necessary if accidents are to be checked: Safety consciousness should be instilled in the minds of stores, personnel through training programmers, visual aids and literature.

Safety appliances, such as goggles, hand gloves, etc.., must be provided and their use must be encouraged.

Good housekeeping is essential. This means that gangways must be clean, adequately wide so that movement of forklifts, trolleys and industrial tractors is smooth. Stocking must be appropriate locations sot that handling is minimum.

All stores equipment must be kept in good order. This includes adequate maintenance practice with regard to forklifts, overhead cranes, trolleys, conveyors, etc. operation must be trained in safety so that safety precautions are not over looker.

Healthy competition can be stimulated by installing safety awards and cash prizes which bring recognition to the concerned stores personnel for safety practices. This also motivates other to practice safety.

Provision of fire fighting facilities is necessary especially where inflammable materials are stored and handled. In fact large organizations have a well maintained the fighting equipment.

Keep the stores in preparedness. This has in the run reduced losses and reduced insurance expenses, fire extinguisher, fire escapes, alarms and sprinklers must be available the personnel should be familiar in handling them. Other factors which merit attention include provision of toilets, routine maintenance equipments, safe electrical warnings, etc..,Cost aspects and productivity:-

It is covered that every cubic meter of space must be utilized by stocks for high efficiency. Very often such stocking may drastically cut the speed of materials movements and create bottlenecks apart from affecting overall safety.

Costs involved in stores can be analyzed under two heads, viz.., fixed and variable. Fixed costs are to be incurred irrespective of the utilization of space stores; they include money spent on land buildings, rent interest, repairs, maintenance, insurance, etc.

Variable costs vary with the volume through output. They consist of handling cost, damages, deterioration, obsolescence, etc. Obviously when the throughout or the volume goods handled is high, the total cost per tone is low. This should be the aim of the stores manager in order to optimize the costs in stores.

Problems and development:-

It is an unfortunate fact that stores management has been regulated as a critical function. In the gamut of material management, a store is considered as the least glamorous and it never attracts talent. It is forgotten that the stores manager is probably the custodian of the single largest group of current assets and plays a pivotal role in ensuring smooth production besides assisting purchase activities through timely support. This is the major problem and challenge that faces stores manager today.

Many decisions in stores management, such as selection of tracks, bins, handling equipment, safety practices, codification, training personnel and accounting, call for considerable, sick and an ability to coordinate with other departments as well as with outsides agencies. These aspects should be highlighted and appreciated so that the stores function is given due to importance. Other areas in stores, such as records keeping movement analysis to reduce obsolescence, surplus and damage are critical to the profitable operation of the firm and the stores manager faces challenges in the areas as well.

In many organizations the scrap yard also comes under control of the stores manager. This is an entirely new responsibility calling for the ability to maximize returns on the disposal of scrap. The chief stores officer has under him separate officers for the functions of receipt, issue, kardex and sub-stores.

Besides coming into contact with the production, purchase maintenance, inspection and finance departments within his organization, he has to come into contact with the outsiders like suppliers, transport carriers and bankers. In order to meet such challenges the important of the stores function should gradually gain momentum and qualified engineers should be posted as chief stores officers reporting to the materials manager.ROLE OF FINANCE MANAGER IN INVENTORYMANAGEMENT

Optimum level of inventory and finding ensures to the problems of EOQ are the recorder point and the safety stock. These techniques are very essential to economize the use of minimizing the total inventory cost. The techniques of inventory management are very useful in data mining. The cases the board frame works for managing inventories.

To the majority of the companies, inventory represents a substantial investment. Thus the goal of wealth maximization is related to the financial manager has an important role to play in the management of inventory.

Although it is not his operating responsibility to control inventory. The financial should see that only an optimum amount is invested in inventory. He should be familiar with in inventory control techniques and ensure that inventory is managed well. Effect would be reduce inventory investment and increase the firms prospects of making profits.INVENTORY CONTROL:-

Inventory control renders to the process whereby the investment in materials and parts carried in stock is regulated within predefined limits set in accordance with the inventory policy established by the management. The inventory control is activity oriented process whereas inventory control is the management process and the later is the firms setup to be followed by the former.

Inventory control refers to a planned method of purchasing and storing the material at lowest possible cost without affecting the sales scheduled. Inventory control therefore, is a scientific method of determining what, when and how much to purchase and how much to stock for a given period of time.The needs for of inventory control:-

The rewards of inventory control system cannot be over looked in the Indian context the idea behind this is,

Conserving valuable foreign exchanges.

Release of capital

Reduction in cost

The primary object of inventory control is :-

To minimize the idle time caused by shortage of inventory and inventory availability of inventory.

To keep down capital investment in inventories. Inventory carrying cost and obsolescence losses.

INVENTORY CONTROL TECHNIQUES

Selective inventory control

Inventory management Techniques

1. ABC analysis

1. EOQ (economic order Quantity) 2. XYZ analysis

A. Ordering cost

2. FNS Classification

B. Carrying cost

3. SOS classification

2. System of Re-ordering

4. SOS classification

5. S-D-E Analysis

6. HML analysis

7. Vet classification

ECONOMIC ORDER QUANTITY:-

One of the inventory management problems to be resolved is how much inventory should be added when inventory is replenished. If the firm is buying raw materials, it has to decide lots to in which it has to be purchased on cash replenishment.

If the firm is planning production as per schedule. These problems are called order quantity problem and task of the firm is to determine optimum inventory level involves two type of costs:1. Ordering cost.

2. Carrying cost.

The economic order quantity is that inventory level, which minimizes the total of ordering and carrying costs.Ordering costs:-

The term ordering cost is used in case of raw materials (or supplies) and includes the entire costs of acquiring raw materials. They include costs incurred in the following activities. Requisitioning, purchase ordering, transport receiving, inspecting and storing (store placement), ordering cost increase in proportion to the number of orders placed the critical and staff costs, however, dont vary in proportion to the number orders placed, and one view is that so long as they are committed cost they need not to be revoked in computing ordering cost.Carrying costs:

Cost incurred for maintaining a given level of inventory are called carrying cost, they include storage, insurance, taxes, deterioration and obsolescences.

_________________________

2* Quantity required*ordering cost

EOQ (economic order quantity) = ---------------------------------------------

Carrying cost

ABC Analysis:-

ABC analysis is one of widely used inventory control tool. Under this we have to classify materials according to their importance and concentrate more on critical items. Importance of any item arises due to the two factors namely, consumption values and critically in use. Classification of materials according to importance has its basis on the promise vital few and trivial many.

The classification based on consumption value is called ABC analysis and the classification based on the critically of the items is called VED analysis (vital essential and desirable). Periodical consumption values are used as the basis for VED analysis. ABC is said to denote always better control, the method of classification of material is also known as selective method control. The basis of analyzing the annual consumption cost (or usage cost) goes after the principle vital few and trivial many.

Items held in the stores can grouped into class A,B and C respectively based on their annual consumption values. It has been found in a large number of organizations that about 20% of the items contribute to 70% of the annual consumption value, 30% of the number of the number of items contributes about 20% of the annual consumption value and the remaining 50% of the items contribute 10% of the annual consumption value.

Hence consumption value need to be controlled at the highest level and these are the A items. The control of bottom 50% of the items that contribute only 20% of the annual consumption value, that are denoted as C items can be delegated to the lowest decision making levels while, the middle B items can be controlled by the middle levels of personnel.

The following figures bring out clearly the concept of ABC analysis.

Category value

items10%

% of annual Consumption

A item

20

70

B item`

30

20

C item

70

10The advantage of ABC method of inventory control is follows.

It becomes possible to concentrate all efforts in areas which need genuine efforts. This method produces better results and involves minimum control. In the case of an items careful attention is paid at every stage i.e., estimates of requirements, purchasing safety stocks, receipts, inspection and issues.

A close watch on high consumption items and their progress of replenishment etc, maintained. In the case items which are numbers and at the same in expensive are loosely controlled.

The items fall under B category may be dispensed within the record keeping system. This will help in saving time, money and labor without endangering production schedule, it is most effective and economical method as it is based on the selective method.

It helps in placing the orders, deciding the quantity of purchasing safety stocks etc. Thus saving the organization from the unnecessary stocks outs or surpluses.VED Analysis:-

VED analysis represents classification of items based on critically the analysis classifies the items into 3 groups called vital, desirable vital category encompasses those items for want of which production would come to halt. Essential group includes items whose stock out is very desirable group comprises of items which do not cause any immediate loss of production or their stock out entail nominal expenditure and causes minor disruption for a short duration.HML analysis:

HML analysis is the price based analysis. This analysis is generally used for control of spares. The items m under this analysis are classified into 3 groups which are called high, medium, low. To classify, items are listed in t he descending order of their unit price.

Ex:- the management may decide that all items of unit price above Rs 1000 will be of H category. Those with unit price between Rs 100 to Rs 1000 will be of Mcategory and those having unit price below Rs 100 will be of L category.F-S-N ANALYSIS:-

F-S-N analysis is based on the consumption figure of the items. The items under this analysis are classified into 3 groups.

F-fast moving

S-slow moving

N-non moving

To conduct the analysis the last date of receipt or the date of issue whichever is later taken into account and the period, usually in terms of number of months that has elapsed since the last movement is recorded.X-Y-Z ANALYSIS:-

X-Y-Z analysis is based on value stock on hand. Items whose inventory values are high are called X items those inventory values are low are called Z items and Y items are which have moderate inventory stocks.

Usually X-Y-Z analysis is used in conjunction with either ABC analysis or HML analysis.S-OS ANALYSIS:-

S-OS analysis is based on seasonality of the items and it classified the items into 2 groups.

S-seasonal

OS-off seasonalS-D-E ANALYSIS:-

S-D-E analysis is based on problems of procurement namely,

Non availability

Security

Longer lead time

Geographical location of suppliers&

Reliability of suppliers etc

S-D-E analysis classifies the items into 3 groups called scare, difficult, and easy. The information so developed is then used to decide purchasing strategies. Scare classification comprises of items which are in short supply imported through government agencies. Difficult classification includes those items which are available indigenously but are not easy to produce. Easy classification covers those items which are readily available.LEVEL SETTING:-

In order to have proper control on materials the following levels are set:

Re-order level

Ordering level

Minimum level

Maximum level

Average stock level

Danger level

Safety stock levelRe-order level:-

It is the point at which if stock of a particular material in store approaches the storekeeper should initiate the purchase requisition for fresh suppliers of the material. This level is fixed somewhere between the maximum and minimum levels in such a way that the difference of the quantity of the material between the re-ordering level and the minimum level will be sufficient to meet the requirements of production up to the time fresh supply of the material is received.Reorder level can be calculated be applying the following formula:-

Ordering level=minimum level consumption during the time required to get fresh delivery.

Another formula given by Weldon in his book cost accounting is follows:

Reordering level=maximum consumption X maximum reorder level period.Ordering level:-

This is the quantity of stock fixed between the maximum and minimum level of stock. When this level is reached, it becomes the duty of the store-in-charge to replenish the stock within reasonable time. This level is usually a little higher than the minimum level. In order to be prepared for such emergencies as abnormal consumption delay in delivery of new supplies etc., while fixing this level following points are taken into consideration:-

Time required for obtained fresh suppliers.

Possible unexpected requirements which cannot be avoided.

Possible unexpected delays in getting fresh suppliers because of rains war, about unrest etc.Minimum level:-

Formula level represents the level beyond, which the stock in hand is not allowed to exceed. This is because:

If the exceeds this level, it will

Involves more investment

Requires more space for storages

Amount to more wastage because of handling, spoilage, obsolescence

Involves more carrying cost

Excess stock will increase the cost of storage, thereby increasingly selling cost. Excess stock will involve unnecessary blockade of working capital and prevent its availability for a more profitable use. Stock in excess will prevent the management from taking advantages of price fluctuation and favorable market condition.The fixation of maximum level depends on the following factors:-

Rate of consumption of the material

Money available

Time required to obtain deliveries

Storage space available

Economic order quantity

Market conditions, seasonality and price fluctuation

Possibility of loss due to deterioration

T he following for the calculation of maximum stock level given by Weldon is as follows:-

Maximum stock level = Re-ordering+ Re-ordering-quality

(Minimum consumption X minimum re-ordering period)Average stock level:-

The average stock is calculated by the following formula.

Average stock level=minimum stock level+ of reorder quantity of minimum stock level+ maximum stock levelDanger level:-

This means levels at which normal issues are made only under specific instructions. The purchases officer will make special arrangements to get the materials which reach at their danger level so that the production may not stop due to storage of material danger level = Average consumption X maximum re-order period for emergency purchase.Safety stock level:-

This level is below the minimum level and represents the stage at which emergency and immediately steps have to be taken for getting the stock replenished. The inventory plays a vital role in the efficient operation of a company. Particularly; it is in direct touch with manufacturing departments, material departments and marketing department in its day to day activities. In all most an industries, about 60 percentage of the working capital in the materials. Efficient inventory managements can help to achieve better utilization of this investment with considerable degree of success. Providing all the required raw materials, consumable stores, components etc., to the manufacturing units at the right time and place, at the lowest possible cost and adopting inventory control measures, using good material handling practices are the principle objectives of stores management. In their words reducing the cost in all spheres of the manufacturing activities will help in increase the profits of the company. The efficient with whom the inventory is managed will invariable determine the efficiency of the producing and levels of profits of the enterprises. Hence inventory management has attained significant status in the present day business and industrial management. The increasing specialization in industry, widening range of technical equipment, fast development in science and technological field here forced the inventory management also to innovate and improve its performance and contribute to efficiency and economy in production.TABLE - 5.1.1

LEVEL OF INVENTORYANALYSIS PART-1

RATIO ANALYSIS (INVENTORY)S.NoParticulars2007-082008-092009-102010-112011-12

1Raw materials

Lime stone

(stacker 60 Per cent)

Iron ore

(stacker 25 Per cent)

Clay ash

(stacker 15 Per cent)3330.80

1387.83

832.705169.86

2154.11

1292.478392.21

3496.76

2098.0511109.76

4629.10

2777.4411265.50

4693.96

2816.40

TOTAL(clinker)5551.338616.4413937.0218516.2618775.86

2Work in process5386.488451.7413822.0218351.4618611.09

3Finished goods6251.559316.5914522.3219216.5419416.11

Total17189.3626384.7742331.3656084.2656803.06

The inventory level was found to be increased trend from 2007-2008 to 2011-2012. The overall inventory level position for the five years is satisfactory.CHART - 5.1.1

LEVEL OF INVENTORY

INVENTORY TURNOVER RARIO

. The inventory turnover ratio measures the number of times a company sells its inventory during the year.

TABLE - 5.1.2

INVENTORY TURNOVER RARIO

S.NoYearCost of goods sold (` in lakhs)Average stock (in tones)Inventory turnover ratio

12007-0826630284874285.46 per cent

22008-0928444945031845.65 per cent

32009-103094850819401.53.78 per cent

42010-114010580945491.54.24 per cent

52011-124521886822538.55.50 per cent

Source: Annual reports of Kesoram Cements LimitedThe inventory turnover ratio was high in the year 2007-08 after that 2008-09 the inventory turnover ratio was decreased. The present value of inventory turnover ratio is good.

CHART - 5.1.2

INVENTORY TURNOVER RATIO

INVENTORY CONVERSION PERIOD

The inventory conversion period is the time required to obtain materials for a product, manufactured it, sell it.

TABLE 5.1.3


S.NoYearNo. of daysInventory turnover ratioInventory conversion period (in days)

12007-083655.46 per cent66

22008-093665.65 per cent64

32009-103653.78 per cent96

42010-113654.24 per cent86

52011-123655.50 per cent65

Source: Annual reports of Kesoram Cements Limited

The inventory conversion period is normally indicates the wealth of the company. The company wants to concentrates with its inventory conversion period.

CHART 5.1.3


ANALYSIS PART-2

EOQ ANALYSIS

TABLE-5.2.1

EOQ ANALYSIS FOR THE YEAR 2007-08ItemAnnual requirementOCPEOQTotal investment with EOQTotal investment without EOQSaving inventory cost

Iron Ore31500361.56512308179413861556821

Lime Stones15000401.251449801423451452252880

Clay Ash1400042214476711198213591523933

Sulphur1300034.51.7515371611080113392723136

Gypsum13500351.251448691262231306884465

Bauxite1150036.51.51507481133221161732851

Source: Annual report of Kesoram CementsLimited

The companys annual requirement for the year 2007-08 is 101000 tons of raw materials. They using investment with EOQ spent ` 787168. When the same in without investing EOQ is ` 882551. So the company saved ` 169432 in the year 2007-08.

CHART-5.2.1

EOQ ANALYSIS FOR THE YEAR 2007-08

TABLE-5.2.2


Iron Ore33500351.57512509562616967574049

Lime Stones1350041215474411606414011524051

Clay Ash16500551.5515411001710501710500

Sulphur14000351.516380813291615330420388

Gypsum1250036215467110467615330420388

Bauxite11000372.51605719278711875225965



CHART-5.2.3


TABLE-5.2.3


Iron Ore13500341.5651260837891539057046

Lime Stones13500361.516780513564215151515873

Clay Ash15000381.7516580713456716644513878

Sulphur14000371.7516476912746215438426922

Gypsum15000352.516564810854016677558235

Bauxite1120036.51.7517068411747612819110715



CHART-5.2.3


TABLE-5.2.4


Iron Ore34000361.595127112323121760594374

Lime Stones12500371.7517472712777014622618456

Clay Ash14000401.517586415249616457512079

Sulphur16000381.7517483414657518716140586

Gypsum18000362.7517568612193821219090252

Bauxite1700037118011222030822050621980

Source: Annual report of Kesoram Cements LimitedThe companys annual requirement for the year 2010-11 is 111500 tons of raw materials. They using investment with EOQ spent `875092. When the same in without investing EOQ is `1132819. So the company saved `2577276 in the year 2010-11.

CHART-5.2.4


TABLE-5.2.5


Iron Ore38000371.751051268135358268736133378

Lime Stones13500351.251858691618521675885736

Clay Ash1200038319555110909915777048671

Sulphur15000403.2518560811445518722572770

Gypsum17000401.25194104320364622111017464

Bauxite18000392.7520071514496524223597270

Source: Annual report of Kesoram CementsLimitedThe companys annual requirement for the year 2011-12 is 113500 tons of raw materials. They using investment with EOQ spent ` 869375. When the same in without investing EOQ is ` 1244664. So the company saved ` 375289 in the year 2011-12.CHART-5.2.5


FINDINGS

RATIO ANALYSIS (INVENTORY)

In inventory level of the company, the in inventory level has been increased year by yea. There is no problem in the inventory level of the Kesoram Cements Limited. In inventory turnover ratio the ratios of the year has been fined as low in the years of 2009-10 and 2010-11. After those periods the inventory turnover ratio has slightly increased in the year 2010-11. Even though that level is quite low when compare with 2008-09. In inventory conversion period is funded as good level. Even though they wants to keep the inventory conversion period as low.EOQ ANALYSIS

In EOQ analysis for the year 2007-08 to 2011-12 is good. For this year they followed EOQ with investment for purchase of goods. In EOQ analysis for the year 2008-09 to 2011-12 is good. For this year they followed EOQ with investment for purchase of goods. In EOQ analysis for the year 2009-10 to 2011-12 is good. For this year they followed EOQ with investment for purchase of goods. In EOQ analysis for the year 2010-11 to 2011-12 is good. In this year the EOQ with investment and EOQ without investment are same. In EOQ analysis for the year 2011-12 is good. All years of EOQ is followed only investment with EOQ. SUGGESTION

RATIO ANALYSIS (INVENTORY)

In inventory level of the company shows the increase of the raw materials, work-in-process and finished goods. The inventory level of Kesoram CementsLimited is well.

In inventory turnover ratio finded some problems. They want sell their product to outside also. Now they use their cement which are produced in Kesoram CementsLimited for their own purpose. They want to sell that to others also then only the ratio will be increased.

Kesoram CementsLimited sells the 25 per cent of the cements produced, remaining they used for own purpose. For sales to others they allowed more days as credit to their agents.

EOQ ANALYSIS

In EOQ analysis there is no problems finded in findings for the Kesoram Cements Limited. Even though they want to keep that situation in upcoming years also. Then only they can retain position. In EOQ analysis there is no problems finded in findings for the Kesoram Cements Limited. Even though they want to keep that situation in upcoming years also. Then only they can retain position. In EOQ analysis there is no problems finded in findings for the Kesoram Cements Limited. Even though they want to keep that situation in upcoming years also. Then only they can retain position. In EOQ analysis there is no problems finded in findings for the Kesoram Cements Limited. The EOQ was finded as same in the concept of EOQ with investment and EOQ without investment, even though they followed EOQ with investment. In EOQ analysis there is no problems finded in findings for the Kesoram Cements Limited. Even though they want to keep that situation in upcoming years also. Then only they can retain position.CONCLUSIONThe study covers the inventory management for effective inventory control. I have used a technique Economic Order Quantity Analysis named as EOQ Analysis for find out the rate with EOQ and without EOQ investment for purchasing of good in the manufacturing the cement in Kesoram Cements Limited. Hence the inventory management of the organization quite good. During the year 2007-2011 from this study I concluded that organization would be effective inventory management. The study will be use for Kesoram Cements Limited in various ways. BIBLIOGRAPHY

BOOKS

Asohok Banerjee - Financial Accounting A Managerial Emphasis Excel Books 2005

Collis Business Accounting Palgrave Macmillan 2007

Khan MY Jain P.K Management Accounting : Text, problems and cases 4th Edition Tata McGraw Hill 2007

Pandikumar Management Accounting Excel Books 2007

Ramachandran N Kakani Kumar Ram Financial Acccounting For Management Tata McGraw Hill 2006

Robert N.Anthony David F.Hawkins Kenneth A.Merchant Accounting Text and Cases Tata McGraw Hill 2007

S.K Bhattacharyya Jhon Dearden Costing for Management Vikas Publishing 2002

S.N Maheswari S.K Maheswari Accounting for Management Vikas Publishing 2006WEBSITES

www.google.com www.inventoryquzz.com

Source: Annual report of Kesoram Cement Corporation Limited

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