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“A study of impact of Inventory Management on operating efficiency with special reference to The

Travancore Cochin Chemicals Ltd., Udyogamandal, Cochin”

PROJECT REPORT

Submitted in partial fulfillment of the requirements of the degree of

MASTER OF BUSINESS ADMINISTRATION

Kannur University

ByMr. MUHAMED NIYAS

(Reg. No: A9GMBA1066)

IV Semester MBA

Under the guidance of

Prof. Lakshmi Saju

Chintech School of Management Studies

Chinmaya Institute Of Technology

Kannur

2010

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CERTIFICATE

This is to certify that the project report entitled

A study of impact of Inventory Management on operating efficiency with special reference to The Travancore

Cochin Chemicals Ltd., Udyogamandal, Cochin.

Is a bona fide record of work done by

MUHAMED NIYAS

(Reg. No.A9GMBA1066)

and submitted in partial fulfillment of the requirements of the degree of Master

Of Business Administration of the Kannur University

Place: Kannur Dr.K.K.FALGUNAN

Date : (PRINCIPAL)

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CERTIFICATE

This is to certify that the project report entitled

A study of impact of Inventory Management on operating efficiency with special reference to The Travancore

Cochin Chemicals Ltd., Udyogamandal, Cochin.

Is a bona fide record of work done by

MUHAMED NIYAS

(Reg. No.A9GMBA1066)

and submitted in partial fulfillment of the requirements of the degree of Master

Of Business Administration of the Kannur University

Place: Kannur Prof. LAKSHMI SAJU

Date : (Asst. PROFESSOR)

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DECLARATION

Date:

Muhamed Niyas

IV semester MBA

I hereby declare that the Project entitled “A study of impact of

Inventory Management on operating efficiency with

special reference to The Travancore Cochin Chemicals

Ltd., Udyogamandal, Cochin�” is my original work and it was

under the supervision of Prof.Lakshmi Saju, Asst. Professor, Chintech School

Of Management Study, Kannur.

I also declare that this report has not been submitted by me fully or partially

for the award of any degree, diploma, or any other similar title or recognition

before.

MUHAMED NIYAS

(Reg. No- A9GMBA1066)

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ACKNOWLEDGEMENT

I am very much grateful to Almighty God who led in the right

way to complete my project work successfully. A deal of time and

much effort have gone into developing and researching this project.

Many people have helped directly and indirectly for the completion

of this project.

I would like to express my sincere thanks to

Dr.K.K.Falgunan, Principal, Chinmaya Institute of technology, for

supporting and encouraging me and also rendering all kind of help to

do the project.

I am indebted to thank Prof. Lakshmi Saju, project

coordinator for helping me in times of distress and confusion in the

course of project work and for her scholarly guidance.

My special thanks to Mr. Jiju Francis, Finance Head,

Travancore Cochin Chemicals Ltd, for providing me with this

permission to undertake studies on recruitment process at Travancore

Cochin Chemicals, Udyogamandal, Cochin.

I wish to express my sincere thanks to Mr. P.C.Sathyan

(Personnel Department HOD) and Mr. Mohanan for their valuable

guidance and continuous encouragement given at every stages of the

project.

Last but not the least; I extend my sincere thanks to my parents,

friends and other faculty members for their moral support and

cooperation.

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INDEX

CONTENT

Title

Certificates

Declaration

Acknowledgement

Chapter 1: Introduction and Design of the Study

Introduction

Statement of the problem

Objective of the study

Sample design

Methodology and data collection

Tools of analysis

Chapter scheme

Chapter 2: Literature Survey

Chapter 3: Industry Profile And Company Profile

Chapter 4: Analysis and Interpretation Of Data

Chapter 5: Findings, Suggestions and Conclusions

Bibliography

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CHAPTER-1

INTRODUCTION AND DESIGN OF THE STUDY

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INTRODUCTION

India is a country of scarce resources and it is primarily responsibility

of each organization whether it is public sector, private sector, or a government

department to ensure optimum utilization of resources for production of goods

and services. Materials have come to occupy a very vital and critical position

in the resource position in the resource position of the country. Inventory

accounts for a major portion of the capital locked up in any organization.

Reduction of inventories will affect the profitability of the organization. The

Indian economy is growing and performance of the manufacturing sector has

regained its growth and it is indeed encouraging. The increased demand for

basic industrial chemicals such as the Chlor-alkali is a reflection of the growth

rate in national economy.

The production of Caustic Soda in the country has increased and several

manufacturers are undertaking new projects or increasing existing capacities in

this sector. So it is likely to increase demand for Caustic Soda and Chlorine

products. The main products of company are Caustic Soda, Hydrochloric Acid,

and Sodium Hypochlorite. Inventory management is a system of reports

maintained by the controlling department which reflect the physical movement

of stock and their current balance. It is the process of deciding what and how

much of various items are to be kept in stock. It also determines the time and

quality of various items to be produced.

In the project it is “A study of impact of Inventory Management on

operating efficiency with special reference to The Travancore Cochin

Chemicals Ltd., Udyogamandal, Cochin”

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STATEMENT OF THE PROBLEM

Better inventory management and distribution is one key business area

of any company. The company should know what is to be produced and at

which warehouse the available stocks are located. Factors influencing

inventory demand and the interaction between production planning and control

and inventory control are considered as a key parameter of measuring the

efficiency of any manufacturing organization. The efficiency objective is given

more significance than the cost objective in these organizations. Importance of

stocks in an organization, role of stocks in the supply chain and the importance

of inventory management plays a vital role in decision making. Improper

investment in inventory leads to capital blockage as well as stock out

situations. High investment in inventory will result in high interest burden. By

improving the inventory management techniques the interest burden can be

reduced.

Here the problem definition is;

How inventory management affect the operating efficiency of The

Travancore Cochin Chemicals Ltd.?

OBJECTIVE OF STUDY

To find out the impact of inventory management on operating efficiency.

To determine changes in inventory position of the company.

To find out EOQ and reorder level.

To measure turnover, ABC analysis of the Company.

To determine various ratios for analyzing inventory level and operating

efficiency of company.

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METHODOLOGY AND DATA COLLECTION

Research methodology is a way to systematically solve the research

problem. There are different types of research and they are descriptive

research, analytical research, and exploratory research. In this study I have

used the analytical research because the major purpose of analytical research is

to analyze the state of affairs as it exists at present. Analytical research

includes survey and in-depth analysis of variables. The research plan calls for

gathering primary and secondary data.

One can visualize the fact that a detailed study is required in each

practical situation for better results. Any effort which is directed to such study

for better result is known as research. A system of models, procedure and

techniques used to find the result of research problem is called research

methodology.

RESEARCH DESIGN

The research type is used in this study is “Descriptive research”. A

descriptive research is carried out with specific objective and hence it result in

definite conclusion.

METHODS OF DATA COLLECTION

In this research, the collection of data is from various sources and there

are two types.

1. Primary Data

2. Secondary Data

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PRIMARY DATA

Primary data collection was mainly done through interaction with the

officials of different departments such as accounts department and stores

department.

SECONDARY DATA

Secondary data was collected from annual reports, books of accounts,

Internet, books, journals, etc.

NATURE OF DATA

Information for this work has been collected from previous records viz.

profit and loss account, stores ledger, and Balance sheet of the past five years.

Both primary and secondary data have been used for the study.

TOOLS OF ANALYSIS

The following tools were used for the purpose of analysis:

Determination of stock level

Determination of EOQ

Inventory turnover ratio

ABC Analysis.

1. STOCK LEVELS:

In order to minimize the unnecessary blocking of the capital in the

material stock and to avoid the interruption in the smooth production process

certain levels of stocks are to be determined in advance. The determination of

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levels of stock helps in achieving the objectives of the inventory control. The

main stock levels to be determined are:

1. Maximum Stock level

2.Minimum Stock level

3.Average Stock level

4.Re-order level

5.Danger level of buffer stock or safety stock level

MAXIMUM STOCK LEVEL:-

The stock level above which the stock of any raw material is not

allowed to go is called as maximum stock level. It depends upon the

following factors.

� Rate of consumption

� Lead time or reorder period

� Storage capacity

� Availability of working capital

� Economic order quantity

� Carrying cost or holding cost

� Govt. policy

� Re-order level

Maximum Stock Level= Reorder level + Re-order quantity - (Minimum

consumption rate x Minimum lead time)

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MINIMUM STOCK LEVEL:-

Minimum stock level is the lowest quantity of any raw material which

should always remain as balance in hand i.e. below which the raw material

should not be allowed to fall. It depends upon the following factors:-

� average rate of consumption

� average lead time

� re-order level

It is also called as buffer stock.

Minimum Stock Level = Reorder level – (Normal consumption x Normal

reorder period)

AVERAGE STOCK LEVEL:-

The level which is normally carried by the business looking towards

the nature and the requirements of the business.

Average Stock Level= (Minimum Stock Level + Maximum Stock

Level) /2

OR

(Minimum Stock Level + Re order quantity)/2

REORDER LEVEL:-

The reorder level is that level at which a fresh order should be placed for

the purpose of supply of the raw materials. It depends upon:-

� Lead time

� Rate of Consumption

� EOQ

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Reorder level=Maximum Consumption Rate x Maximum Lead

Time

DANGER / SAFETY STOCK LEVEL:-

This is a level fixed usually below the minimum level. When the stock

reaches this level, very urgent action for purchase is indicated. This

presupposes that a minimum level contains a cushion to cover such

contingencies.

Reorder level – (Average Rate of Consumption x Average Lead

Time)

2. ECONOMIC ORDER QUANTITY:-

One of the major inventory management problem is to be resolved is

how much inventory should be added when inventory is replenished. If the

firm is buying raw materials, is has to decide lots in which it has to be

purchased on each replenish. If the firm is planning a production run, the

issue is how much production to schedule. These problem, are called order

quantity problems, and the task of the firm is to determine the optimum or

economic order quantity. It is that order quantity lot size which should be

purchased by the business so that the inventory cost of the business becomes

minimum.

___________

EOQ = 2 x C x O

I

Here:-

C is annual consumption, O is ordering cost, and I is carrying cost.

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3. TURNOVER RATIOS

INVENTORY TURNOVER RATIO

Inventory turnover ratio indicates the number of times inventory

replaced during a given period normally a year. The ratio establishes the

relationship between costs of goods sold and inventory level. The inventory or

stock turnover ratio satisfies the efficiency of the firm’s invernotry

management. It is calculated by dividing the cost of goods sold by the average

inventory.

Inventory turnover ratio = Sales

Closing Inventory

RAW MATERIAL TURNOVER RATIO:-

Raw material turnover ratio = Sales

Raw material

The ratio reflects the rate of utilization of raw material. A higher

turnover ratio indicates higher utilization of raw material. However a very

high ratio is not good from the organization point of view as the same may

lead to bottleneck in production due to stock out of raw material. On the

other hard a low turnover of raw material is an indication of accumulation of

inventory. The efficiency of utilization of raw material can also be judged

from raw material holding period which is determined by dividing the number

of days during the year by inventory turn our ratio.

RAW MATERIAL HOLDING PERIOD

Raw material holding period = 365

Raw material turnover ratio

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The holding period must not be too high or too low. A high holding

period leads to accumulation of R.M causing high carrying cost in term of

shrinkage in values, pilferage, theft ,administrative cost, were housing

charges, lightening, heating etc. whereas too low holding period leads to high

ordering cost and there may be interruption in production process.

WORK IN PROGRESS TURNOVER RATIO

Work in progress turnover ratio = sales

Work in progress

A higher turnover ratio indicates lower inventory accumulation and vice

versa. Conversion period can also be determined by dividing the number of

days in a year by WIP turnover ratio.

WORK IN PROGRESS HOLDING PERIOD

Work in progress holding period = 365

Work in progress turnover ratio

FINISHED GOODS TURNOVER RATIO

Finished goods turnover ratio = Sales

Finished goods

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FINISHED GOODS HOLDING PERIOD

Finished goods holding period = 365

Finished goods turnover ratio

A high holding period is not good from the organization point of view as

the same leads to higher working capital requirements.

4. ABC ANALYSIS

It is a system of inventory control. It exercises discriminating control

over different items of stores classified on the basis of the investment involved.

Usually the items are divided into three categories according to their

importance, namely, their value and frequency of replenishment during a

period.

(i) ‘A’ Category of items consists of only a small percentage i.e., about

10% of the total items handled by the stores but require heavy

investment about 70% of inventory value, because of their high

prices or heavy requirement or both.

(ii) ‘B’ Category of items is relatively less important; they may be 20%

of the total items of material handled by stores. The percentage of

investment required is about 20% of the total investment in

inventories.

(iii) ‘C’ Category of items does not require much investment; it may be

about 10% of total inventory value but they are nearly 70% of the

total items handled by store.

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PRESENTATION OF DATA

Tables and charts are used to present the data.

CHAPTER SCHEME

The project report has been presented in the following format:

The first chapter deals with the introduction and design of the study which

consists of introduction, statement of problem, objectives of the study,

Methodology, tools for data collection, tools of analysis and chapter

scheme.

The second chapter gives a brief description of literature survey.

The third chapter includes industry profile and company profile.

The fourth chapter states the analysis and interpretation of data.

The fifth chapter gives the findings, suggestion and conclusions.

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CHAPTER 2

LITERATURE SURVEY

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Literature Review

Some of the studies in the area have been reviewed by the researcher in the

following pages:

According to Webster’s Dictionary (1993), the term “inventory” actually

means a list of items with descriptions and quantities of each. In manufacturing

terms, in addition to manufacturing tools, equipment, raw materials, hardware

and measurement instruments which are the focus in this article, inventories

also include component parts, work-in-process and finished product or goods.

Inventories constitute a major element of working capital. It is, therefore,

important that investment in inventory is property controlled. Inventory

management covers a large number of problems including fixation of

minimum and maximum levels, determining the size of inventory to be carried,

deciding about the issues, receipts and inspection procedures, determining the

economic order quantity, proper storage facilities, keeping check over

obsolescence and ensuring control over movement of inventories.

The main objective of inventory control is to achieve maximum efficiency

in production and sales with the minimum investment in inventory. Inventory

comprises of stocks of materials, components, work-in-progress, and finished

products and stores and spares.

1. Dr. T.P. Ghosh, Director of Studies, ICAI, C-1, Sector-1, NOIDA-

201301 The Institute of Chartered Accountants of India.

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Stocks have a clear strategic impact, they have a clear effect on the

organizations profit, margins, return on assets and other financial measures of

performance, as well as affecting measures of customer service, such as lead

time, availability, perceived product value and reliability. Their ability to

decouple production and sales is also a factor in long term capacity planning,

production and productivity.

Stocks give a buffer between production and sales, so that these do not

have to match exactly. This gives two considerable benefits. First, smooth

operations are much more efficient than variable one, with easier planning,

regular schedules, routine workflow, fewer changes etc. Second, the

organizations do not have to install enough capacity to match peak sales- with

facilities lying idle and giving low productivity during quieter periods. Any

variation between production and sales is covered by changes in stock. When

production is higher than sales, stock builds up; when sales are higher than

production, stock declines. These changes in stock might be simple

adjustments to the finished goods, or they might be changes to work in

progress caused by varying the speed of operations.

2. Donald waters, Inventory control and management, John Wiley & sons

ltd, The Atrium, Southern gate, Chichester, West Sussex PO198SQ,

England, Page No. 44.

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Addressing the utility of manufacturing inventory systems in general,

Vollmann, Thomas E. berry, William Lee Whybark and David Cla (1997)

noted that a key management issue is determining the inventory control

system’s performance. They also indicated that in manufacturing industry

performance is measured by such factors as inventory carrying costs and

inventory turnover. But in educational institutions the goal is different. Unlike

manufacturing enterprises which employ inventory systems for commercial

production, educational manufacturing programs employ them for teaching.

Therefore, for educational programs, performance is usually measured in

terms of the system’s benefits to the users, namely: professors, students, staff

etc.

Unlike a traditional tool management system, modern tool inventory

control systems facilitate the management of tools and integrate the database

with other company or school systems. According to Hogan (2000), such a

system provides full information on tool allocation, availability, usage, cost

etc. Such a system also provides a tracking capability and tool quality support

efforts in quality standard requirements. Virtually all the tool inventory

systems investigated in this study have full tracking capability.

2. Vollmann, Thomas E. -berry, William Lee-whybark, David Cla,

Manufacturing Planning And Control Systems, Mcgraw-hill-irwin,

North Ryde (1997).

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CHAPTER 3

INDUSTRY PROFILE

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Chemicals are essential to millions of consumer goods, enabling hi-tech

advances in industries as diverse as aerospace, computing, and

telecommunications. The chemical industry comprises companies engaged in

the conversion of raw materials; oil, natural gas, air, water, metals, that are

then used to make a wide variety of consumer goods, as well as inputs for

agriculture, manufacturing, construction, and service industries.

The chemical industry consists of companies engaged in the processing

and refinement of agricultural and industrial chemicals as well as gases.

Chemicals are used to make a wide variety of consumer goods, besides being

necessary in the agriculture, manufacturing, construction, and service

industries. The European Union and the US are home to the world‘s largest

chemical companies.

The chlor-alkali industry forms a significant part of chemical industry.

The chlor-alkali process is an industrial process for the electrolysis of sodium

chloride solution (brine). Depending on the method several products beside

hydrogen can be produced. If the products are separated, chlorine and sodium

hydroxide are the products; by mixing, sodium hypochlorite or sodium

chlorates are produced, depending on the temperature. Globally, the chemical

industry is mainly concentrated in three areas of the world: Western Europe,

North America, and Japan. The European community is the largest producer,

followed by the US and Japan. The chemical industry, one of the largest in the

US is an enterprise worth $674 billion.

INDUSTRY – GLOBAL SCENARIO

In 1850, World Chemical Industries managed to produce synthetic dyes which

were being used in the textile industries. In 1890, production of Sulphuric

Acid, Caustic Soda and Chlorine started at a mess level by the World

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Chemical Industries. Then came two revolutionary chemical products, the

first one was Rayon which was made from wood fiber and which changed the

total scenario of Textile industry. The second one‘s impact was even larger. It

was Synthetic Fertilizers which led to Green Revolution in agriculture

resulting in drastic improvement in agricultural crop yield.

Chemical industry is nearly a $3trillion global enterprise. Globally, the

chemical industry is mainly concentrated in three areas of the world:

Western Europe, North America, and Japan. The European community is

the largest producer, followed by the US and Japan. The recession had hit

the chemical industry hard. Shying from a lack of demand, chemical

companies shelved their growth strategies. With plants idled or running at

historically low rates, the companies looked for avenues to streamlines

operations and increase productivity. The global chemical industry is,

however, recovering from the recession- hit lows.

Caustic soda prices are currently rising globally as tight inventories in the

European and US markets support higher regional prices and pull price

upwards in other regions. The tight inventories reflect the uneven demand

recovery for chlorine and caustic across regions. As trade flows have become

more dynamic, caustic prices have become more globalized and supply or

demand imbalances in one region affect other regions more quickly than ever

before. China will continue to be the driver of global chlor-alkali capacity

expansion, adding the most capacity. Regional demand growth, particularly in

China, is expected to consume much of this region‘s production. The global economic

recovery will stimulate demand growth for both chlorine derivatives and

caustic soda.

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INDUSTRY – INDIAN SCENARIO

The chlor-alkali industry forms a significant part of the Indian chemical

industry. The key chemicals in the chlor-alkali industry are

Caustic soda

Chlorine (including liquid chlorine)

Soda ash

Majority of soda ash is used in the glass industry which accounts for 45%

of total consumption. Chemicals and soaps and detergents are other

major end uses, accounting for 25% and 11% of global soda ash

consumption respectively. Soda ash can also replace caustic soda in certain

industries like pulp and paper, water treatment and certain sectors in

chemicals.

The main drivers for the export of Alkali Chemicals are Flakes of Sodium

hydroxide (Caustic Soda), D isod iu m Carbon a te Light (Soda Ash),

Sodium Hydroxide in Aqueous Solution (Soda Lye) and other Disodium

Carbonate. This year India has exported mainly to UAE, Sri Lanka, USA,

Oman, Kenya, and Bangladesh.

Indian Caustic soda industry has been largely able to meet entire

requirement of caustic soda in India. The Indian industry was self-sufficient

in its requirement ever since 1975. Caustic soda has been in the list of imports

permitted under OGL particularly for actual users since 1980-81. The imports

were, however, limited because of the pricing policy of the Indian industry.

The capacities installed by the producers in Chinese Taipei, Indonesia, and

EU (excluding France) are far higher than the requirement in their own

country. Further, with the imposition of anti-dumping duties on a number of

other countries, the producers in the subject countries are finding it

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lucrative to export top India. The excess capacities in these countries have put

tremendous pressure on the producers to look for markets in these countries.

Resultantly, the exporters from Chinese Taipei, Indonesia, and EU (excluding

France) have quoted very low prices for exports to India. It would also be

relevant to point out that the producers in these countries have at times not

directly offered for supplies to India, substantial volumes have been offered by

traders in third countries for supply of caustic soda originating in these

countries. The offers being by traders, naturally, these traders have taken

care of their margins also. The prices quoted by the producers in these

countries are, therefore, still lower. The petitioners believe that the prices

offered are far below the associated cost of production. Thus, the exporters

from Chinese Taipei, Indonesia, and the EU (excluding France) have

resorted to dumping of caustic soda in the Indian market.

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COMPANY PROFILE

The Travancore Cochin Chemicals Limited, Udyogamandal is a State Public

Sector Undertaking owned by Government of Kerala. Reflecting the quality

policy of commitment and excellence TCC has a good track record of

operation and healthy industrial relations. A heavy chemical industry engaged

in the manufacture and marketing of Caustic Soda, Chlorine, and allied

chemicals, TCC is accredited with ISO 9001:2008 certification.

HISTORY

The Travancore-Cochin Chemicals Ltd., popularly known as TCC was

established in 1950. The idea of establishing the unit was conceived by M/s

Sheshasayee Brothers the then Managing Agents of FACT.

After the Second World War, M/s Sheshasayee Brothers were under

financial crisis and were unable to make huge investments for modernization.

They approached the Divan of Travancore – Cochin and he took over the

bulk of shares and named as Travancore Mettur Chemicals with FACT

and MCIC (Mettur Chemicals andIndustrial Corporation) as partners. In

1951 the partnership was registered as a Public Limited Company, with the

State Government contributing the major share of equity and the company was

then named as TRAVANCORE-COCHIN CHEMICALS LTD. M/s

Sheshasayee Brothers continued to be the managing agents for the next 10

years. Now the Government of Kerala holds 79% shares of the company.

Commercial production of Caustic Soda from the plant of 20 TPD capacities

was started in 1954 January. TCC is the first unit in India to manufacture

Rayon grade Caustic Soda.

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STAGES OF GROWTH

1956 – A continuous Caustic Fusion Plant 20 TPD for producing Caustic

Soda Flakes.

1958 – Chlorine Liquefaction Plant

1960 – Capacity enhanced to 30 TPD further to 40 TPD

Established new plant for manufacture of Sodium Hydrosulphate 3 TPD

capacity

1967 – 7 TPD Sodium Hydrosulphate, 60 TPD Caustic Fusion Plant, 4

TPD Iron Free Sodium Sulphate

1975 – Added another 100 TPD Caustic Soda Membrane Unit thereby

increased the production capacity 200 TPD own Water Treatment Plant.

(By 1988, many of the old unit were dismantled)

1997 – 100 TPD Caustic Soda manufacturing unit using Membrane

technology capacity 125 TPD

1998 – New CCF Plant in place of existing 60 TPD

2005 – Addition 25 TPD

2006 – Addition 25 TPD

At present total installed capacity is 175 TPD Caustic Fusion Plant for 100

TPD

VISION

TCC is committed to supply quality chemicals at competitive prices to

customers. Customer satisfaction, concern for environment and safety are

given priorities

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MISSION

� Utmost level of conservation of all resources including energy

� Cost effectiveness in all the operations

� Regular upgrading of technologies used in processing

� Compliance with laws and statutory regulations

THE OBJECTIVES OF THE COMPANY

The main objectives to be pursued by the company on its incorporation are:

To produce and market chemicals and Caustic Soda economically

and in an environment friendly manner.

To maintain optimum levels of efficiency and productivity and

to secure optimum return on investments.

To maximize profits from projects taken up.

To continuously upgrade the quality of human resources of the

company and to promote organization development.

MILESTONES OF THE COMPANY

Moving with the times, TCC keeps up its technology regularly updated and

continue to be the competitive strength in the chlor-alkali industry. With

expanded plants and higher production capacity, TCC has come out to be the

profitable public sector undertaking. Over the years the company has achieved

recognition and awards for the remarkable performance in the industry with

regard to production, productivity, energy conservation and environmental

protection.

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1988-89– Best pollution control award under group – Heavy Inorganic Industries in

Kerala, from Kerala State Pollution Control Board.

1989 – Award for Best Performance in Safety in India under –Chemical

Industries group from National Safety council.

1989-90 – Prize for Productivity from Kerala State Productivity

Council.

1993– Best Performance Award for Energy Conservation in the State of

Kerala under group –Chemical and Fertilizers– above 3000 KVA from

Government of Kerala.

1994-95 – Best Performance Award for the Productivity in the State of

Kerala under group – Large Industries from Kerala State Productivity council.

1995-96 – Best Performance Award for the Productivity in the State of

Kerala under group –Large Industries from Kerala State productivity Council.

1998 – Best Performance Award for Energy Conservation in the State of

Kerala under group-major Industries from Energy management

Centre,Government of Kerala.

1998 – Performance Award for Energy Conservation under group ―Chlor-alkali

Sector� from Ministry of Power, Government of India.

2003 – Kerala State Energy Conservation Award (2000) in the category of

Large Scale Industry.

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2005 – National Energy Conservation Award Chlor-alkali Sector.

2006–Kerala State Energy Conservation

Award.

2008 – Best Pollution Control Award from Kerala State Pollution Control

Board.

2009 – Kerala State Pollution Control Award

(3rdplace)

QUALITY POLICY

The company is committed to enhance customer satisfaction by providing

products and related services complying with a continually improving Quality

Management System.

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DEPARTMENTS

Operations Department

Materials Department

Marketing Department

Technical Department

HRD / Training Department

Finance Department

Engineering Department

Projects Department

PRODUCT RANGE

The major products of the company are the following

Caustic Soda Lye

Caustic Soda Flakes

Chlorine

Hydrochloric Acid

Sodium Hypochlorite

CUSTOMERS

� Hindustan Lever Limited, Cochin, Kerala

� Indian Rare Earths Ltd., Udyogamandal, Kerala

� Tamil Nadu Paper Mills Limited, Pugalur, Tamilnadu

� Pigments India Ltd., Chalakudy, Kerala

� Indian Oil Corporation, Ernakulam, Kerala

� Mysore Paper Mills Ltd., Bhadravathy, Karnataka

� Fertilizers & Chemicals Travancore Ltd., Ernakulam, Kerala

� Travancore Titanium products Ltd., Trivandrum, Kerala

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� Kerala Minerals & Metals Ltd., Kollam, Kerala

� Hindustan Zinc Ltd (All units)

� Hindalco Ltd., Ernakulam, Kerala

� Hindustan Newsprint Limited, Kottayam, Kerala

� Kerala Chemicals & Proteins Ltd., Cochin, Kerala

� Hindustan Organic Chemicals Ltd., Ambalamugal, Kerala

� Kerala Water Authority, Trivandrum, Kerala

� Hindustan Insecticides Ltd., Udyogamandal, Kerala

� Cochin Minerals & Rutiles Ltd., Aluva, Kerala

� National Thermal Power Corporation (All Units)

� Binani Zinc Limited, Edayar, Kerala

� Steel Authority of India Ltd. (All Units)

� Karnataka Soaps & Detergents, Mysore, Karnataka

� Nuclear Fuel Corporation Hyderabad, Andhra Pradesh

� Kudramukh Iron Ore Ltd., Mangalore, Karnataka

� GTN Textiles, Hyderabad, Andhra Pradesh

� Kochi Refineries Ltd., Ernakulam, Kerala

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TCC AT PRESENT

TCC is in the industry over six decades. TCC comes under chemical industry.

TCC is the only chlor-alkali industry in Kerala. In India there are 38 chlor-

alkali units. The industry is known as mother industry as it provides its

finished products not for final consumption but for further production. The

company has helped in attracting user industries due to the assurance in

availability of raw materials. TCC owns 109 acres of land and around 776

people are working in TCC in three shifts. The plants are utilizing full

capacity.

FUTURE PLANS

TCC is in the process of setting up a power project of its own. Electricity is

one of the raw materials for the company. It contributes to about 60% of

the production cost. The company would go for cheaper source of power and

insulate itself from the future tariff hikes of the electric supply utility. A hydel

power project is under consideration of the company at present. Due to high

demand of the products, the company is planning to increase the production

capacity 50 TPD. In addition to the usual products, TCC is planning to

produce Sodium Chlorite and Sponge Iron. These products have high demand

in the market.

The main by-product of the company is Hydrogen. TCC is planning to

supply this Hydrogen to FACT. The company is also planning to start a

distilled water system within the company. The IT sector of the world is

developing in fast. TCC is going to become to become part of it. The company

is planning to start an IT park and community center with the co-operation of

panchayat authority. The construction works are in progress. Two projects,

hydel and coal based are under consideration at present.

36

PRODUCT PROFILE

� CAUSTIC SODA

� Item: CAUSTIC SODA LYE

� Item: CAUSTIC SODA FLAKES

� CHLORINE

� Item: LIQUID CHLORINE

� HYDROCHLORIC ACID

� Item: HYDROCHLORIC ACID

� SODIUM HYPOCHLORITE

� Item: SODIUM HYPOCHLORITE (INDUSTRIAL)

� Item: SODIUM HYPOCHLORITE (DOMESTIC)

RAW MATERIALS;

BARIUM CARBONATE

FLOCULENT

SULPHURIC ACID

HYDRATED LIME POWDER

SODA ASH

SUGAR

FURNACE OIL

SODIUM BISULPHATE

COMMON SALT

HDPE INTER BAG FOR FILLING NaOH FLAKES

HDPE BAG FOR EKO-CLEAN

37

CHAPTER-4

ANALYSIS & INTERPRETATION OF DATA

38

Consu

mption

(in

lakh

s)

I Consumption levels of inventories

Table no: 4.1

Year Rawmaterial

Work inprogress

Finishedgoods

Materialin transit

Storesand spares

Total

2005-2006 280 0 109 161 413 9632006-2007 248 0 308 64 425 10452007-2008 244 17 295 62 400 10182008-2009 535 29 247 90 603 15042009-2010 367 19 590 55 601 1632

Source: secondary data

Chart no: 4.1.1

Consumption level of raw materials

600

500

400

300

200

100

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This graph shows that the consumption level of raw material from 2005-2006

shows a diminishing trend up to 2007-2008. A positive increase in

consumption during the year 2008-2009 also falls during the year 2009-2010.

39

Consu

mption

(in

lakh

s)

Chart no: 4.1.2

Consumption level of work in progress

35

30

25

20

15

10

5

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

Work-in-progress is a work that has been started but not yet completed. This graph

shows that the work in progress shows nil during the year 2005-06 and 2006-07, and

17 in the year 2007-08, 29 in the year 2008-09, and 19 in the year 2009-10

40

Consu

mption

(in

lakh

s)

Chart no: 4.1.3

Consumption level of finished goods

700

600

500

400

300

200

100

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This graph shows that the finished goods was 109 in the year 2005-06, 308 in the year

2006-07, 295 in the year 2007-08, 247 in the year 2008-09, and 590 in the year 2009-

10. In the early years the finished goods shows variations and during the year 2009-

2010 it shows an increasing trend.

41

Consu

mption

(in

lakh

s)

Chart no: 4.1.4

Consumption of material in transit

180

160

140

120

100

80

60

40

20

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This graph shows that the material in transit was 161 during the year 2005-2006 and then

it shows a diminishing trend and reaches 64 in 2006-07, 62 in 2007-08, 90 in

2008-09, and 55 in 2009-10. The up and down variations shows the lowest value in the

year 2009-2010.

42

Consu

mption

(in

lakh

s)

Chart no: 4.1.5

Consumption of stores and spares

700

600

500

400

300

200

100

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This graph shows that the stores and spares are high in two consecutive years from

2008-2009 and 2009-2010 with 603 and 601 respectively and it was 413 in 2005-06,

425 in 2006-07, and 400 in 4007-08.

43

Consu

mption

(in

lakh

s)

Chart no: 4.1.6

Consumption of total inventories

1800

1600

1400

1200

1000

800

600

400

200

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This graph shows that during the early years the total consumption of inventories shows

slight fluctuations and from 2008-2010 it shows an increasing trend at very high rates.

The total inventory was 963 during the year 2005-06, 1045 in the year 2006-07, 1018

in the year 2007-08, 1504 in the year 2008-09, and 1632 in the year 2009-10.

44

II Classification of inventories:

Table no: 4.2

Items Total of 5 years % of total inventoryRaw material 1674 27.17Work in progress 65 1.05Finished goods 1549 25.14Material in transit 432 7.01Stores and spares 2442 39.63Total 6162 100

Source: Secondary data

Chart no: 4.2

Percentage of inventories

40%

7%

27%

1%

25%

Raw material

Work in progress

Finished goods

Material in transit

Stores and spares

Inference:

This pie chart shows that among the total inventory 39.63% belong to stores and spares,

27.17% belongs to raw material, 25.14% belongs to finished goods, 7.01% belongs to

materials in transit and 1.05% belongs to work in progress during the last 5 years from

2005-2010

45

Curr

entA

sset(

inla

khs)

III Calculation of Current ratio

The current ratio is calculated using the formulae

Current ratio = Current Asset

Current Liability

Table no: 4.3

Year Current asset Current liability Current ratio2005-2006 3576 5859 0.612006-2007 3717 5583 0.672007-2008 3457 5474 0.632008-2009 3636 4701 0.772009-2010 4007 4898 0.82


Chart no: 4.3.1

Current Asset

41004000390038003700360035003400330032003100

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This graph shows that the current asset during the year 2009-2010 is Rs.4, 007 (in

lakhs) which is much higher than its previous year 2008-2009 as Rs.3, 636 (in lakhs) and

the early years was much lower and those years show some fluctuations.

46

Curr

ent Lia

bility

(in

lakh

s)

Chart no: 4.3.2

Current Liability

7000

6000

5000

4000

3000

2000

1000

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This graph shows that the current liability shows a decreasing trend which was 5859

during the year 2005-2006, reduced to 4898 during the year 2009-2010.

47

Curr

ent R

atio

Chart no: 4.3.3

Current Ratio

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

The current ratio shows the ability of the firm to pay off its debt and the healthy

current ratio is 1. Here current ratio is 0.82 during the year 2009-2010 which is not healthy

and as compared to early years it is satisfactory that it is recovering at slow pace.

48

Liq

uid

Asset

(in

lakhs)

IV calculation of Quick ratio:

The Quick ratio is calculated using the formulae

Quick ratio = Liquid Asset

Current Liability

Table no: 4.4

Year Liquid asset Current liability Quick ratio2005-2006 2609 5859 0.452006-2007 2672 5583 0.482007-2008 2439 5474 0.452008-2009 2132 4701 0.452009-2010 2375 4898 0.48

Source: secondary data

Chart no: 4.4.1

Liquid Asset

3000

2500

2000

1500

1000

500

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This chart shows that the liquid assets shows fluctuations were in it was at its

maximum during the year 2006-2007 with Rs. 2, 672 (in lakhs) and during the year

2008-2009 it was at its minimum ; Rs. 2, 132 (in lakhs). During the year 2009-2010

the liquid asset is Rs. 2, 375 (in lakhs) which shows a positive movement.

49

Quic

kR

atio

Chart no: 4.4.2

Quick Ratio

0.4850.48

0.4750.47

0.4650.46

0.4550.45

0.4450.44

0.435

Quick Ratio

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This chart shows that quick ratio is 0.45 during the year 2005-2006, 0.48 in the year

2006-07, 0.45 in the year 2007-08, 0.45 in the year 2008-09, and 0.48 in the year

2009-10.

50

Sal

es

(in

lakh

s)

V Calculation of Inventory turnover ratio

Inventory turnover ratio is calculated using the formulae

Inventory turnover ratio = Sales

Inventory

Table no: 4.5

Year Sales Inventory Inventory turnoverRatio

2005-2006 10877 963 11.292006-2007 12321 1045 11.792007-2008 9390 1018 9.222008-2009 12063 1504 8.022009-2010 10752 1632 6.58


Chart no: 4.5.1

Sales

14000

12000

10000

8000

6000

4000

2000

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This chart shows that sales show a fluctuation during the last 5 years. During the year

2005-2006 sales was Rs. 10, 877 (in lakhs) which increased to Rs. 12, 321 (in lakhs)

during the year 2006-2007 and again decreased to Rs. 9, 390 (in lakhs) during the

year 2007-2008 and followed by an increase to Rs. 12, 063 (in lakhs) during the year

2008-2009 and again reduced to Rs. 10, 752 (in lakhs) during the year 2009-2010.

51

Inven

tory

turn

ove

rR

atio

Chart no: 4.5.2

Inventory Turnover Ratio

14

12

10

8

6

4

2

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This chart shows that the inventory turnover ratio was 11.79; at its maximum during

the year 2006-2007 and after wards shows a decreasing trend and reaches 6.58 during

the year 2009-2010 which is the lowest in the period of 5 years.

52

Convers

ion

per

iod

(in

days

)

VI Calculation of Inventory conversion period:

Inventory conversion period is calculated using the formulae

Inventory conversion period = No: of days (365)

Inventory turnover Ratio

Table no: 4.6

Year No: of days Inventory turnoverratio

Inventoryconversion period

2005-2006 365 11.29 322006-2007 365 11.79 312007-2008 365 9.22 402008-2009 365 8.02 462009-2010 365 6.58 55


Chart no: 4.6

Inventory conversion period

60

50

40

30

20

10

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This chart shows that inventory conversion period was 31 days during the year 2006-

2007 and it increased up to certain extend each year and it reaches to 55 days in the

year 2009-2010

63

Raw

mat

eria

ltu

rno

ver

rati

o

VII Calculation of Raw material turnover ratio:

Raw material turnover ratio is calculated using the formulae

Raw material turnover ratio = Sales

Raw material

Table no: 4.7

Year Sales Raw material Ratio2005-2006 10877 280 38.842006-2007 12321 248 49.682007-2008 9390 244 38.482008-2009 12063 535 22.542009-2010 10748 367 29.28


Chart no: 4.7

Raw Material Turnover Ratio

60

50

40

30

20

10

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This chart shows that the raw material turnover ratio was 49.68 during the year 2006-

2007 and it reduced to 38.48 during the year 2007-2008 and again reduced to 22.54

during the year 2008-2009 and after wards in 2009-2010 it increased to 29.28

64

Hold

ing

per

iod

(in

day

s)

VIII calculation of Raw material holding period:

Raw material holding period is calculated using the formulae

Raw material holding period = No: of days (365)

Raw material turnover ratio

Table no: 4.8

Year Raw material turnoverratio

Raw material holdingPeriod

2005-2006 38.84 9.262006-2007 49.68 7.242007-2008 38.48 9.352008-2009 22.54 15.972009-2010 29.28 12.29


Chart no: 4.8

Raw Material Holding Period

18

16

14

12

10

8

6

4

2

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This line chart shows that the raw material holding period was high during the year

2008-2009 with 15.97 and currently it reduced to 12.29 in the year 2009-2010

65

Work

inpro

gre

sstu

rnove

r ra

tio

IX Calculation of Work in progress turnover ratio:

Work in progress turnover ratio is calculated using the formulae

Work in progress turnover ratio = Sales

Work in Progress

Table no: 4.9

Year Sales Work in progress Ratio2005-2006 10877 - -2006-2007 12321 - -2007-2008 9390 17 552.42008-2009 12063 29 415.92009-2010 10748 19 565.6


Chart no: 4.9

Work in Progress Turnover Ratio

600

500

400

300

200

100

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This chart shows that the work in progress turnover ratio during the years 2005-2007 was

nil and there after it shows variations as 552.4 in the year 2007-2008, 415.9 in the year

2008-2009, and 565.6 in the year 2009-2010

66

Hold

ing

peri

od

(in

day

s)

X Calculation of Work in progress holding period:

Work in progress holding period is calculated using the formulae

Work in progress holding period = No: of days (365)

Work in progress turnover ratio

Table no: 4.10

Year Work in progress turnoverratio

Work in progress holdingPeriod

2005-2006 0 02006-2007 0 02007-2008 552.4 0.652008-2009 415.9 0.862009-2010 565.6 0.63


Chart no: 4.10

Work in Progress Holding Period

10.90.80.70.60.50.40.30.20.1

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

year

Inference:

This line chart shows that the work in progress holding period was 0.65, 0.86, 0.63,

during the year 2007-2008, 2008-2009, 2009-2010 respectively.

67

Fin

ished

goods

turn

over

rati

o

XI calculation of Finished goods turnover ratio:

Finished goods turnover ratio is calculated using the formulae

Finished goods turnover ratio = Sales

Finished goods

Table no: 4.11

Year Sales Finished goods Ratio2005-2006 10877 109 99.782006-2007 12321 308 402007-2008 9390 295 31.832008-2009 12063 247 48.832009-2010 10748 589 18.25


Chart no: 4.11

Finished Goods turnover Ratio

120

100

80

60

40

20

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This chart shows that finished goods turnover ratio was 99.78 during the year 2005-

2006 and it reduced to 18.25 during the year 2009-2010 simultaneously.

68

Hold

ing

Per

iod

(in

day

s)

XII Calculation of Finished goods holding period:

Finished goods holding period is calculated using the formulae

Finished goods holding period = No: of days (365)

Finished goods turnover ratio

Table no: 4.12

Year Finished goods turnoverratio

Finished goods holdingPeriod

2005-2006 99.78 42006-2007 40 92007-2008 31.83 112008-2009 48.83 72009-2010 18.25 20


Chart no:4.12

Finished Goods Holding Period

25

20

15

10

5

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This chart shows that the finished goods holding period was 4 during the year 2005-

2006 and it increased to 11 during the year 2007-2008 and finally it reaches to 20 in the

year 2009-2010.

69

Yea

r

XIII Calculation of Debt equity ratio;

Debt equity ratio is calculated using the formulae

Debt equity ratio = Outside Fund

Share Holder’s fund

Table no: 4.15

Year Outside fund Shareholders fund Ratio2005-2006 5000 2131 2.352006-2007 5162 2131 2.422007-2008 4837 2131 2.272008-2009 4987 2131 2.342009-2010 5249 2131 2.46


Chart no: 4.13.1

Outside Fund

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

4600 4700 4800 4900 5000 5100 5200 5300

Out side fund (in lakhs)

Inference:

This chart shows that the outside fund or debt or external fund was Rs. 5, 000 (in

lakhs) in the year 2005-2006, and increased to Rs. 5, 162(in lakhs) in the year 2006-

2007, reduced to Rs. 4, 837(in lakhs) in the year 2007-2008, again increased to Rs. 4,

987 (in lakhs), and then increased to Rs. 5, 249 (in lakhs) in the year 2009-2010.

70

Yea

r

Chart no: 4.13.2\

Shareholders Fund

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

0 500 1000 1500 2000 2500

Share holders fund (in lakhs)

Inference:

This chart shows that the shareholders fund remains the same at Rs. 2, 131 (in lakhs)

during the years from 2005-2010.

71

Yea

r

Chart no: 4.13.3

Debt Equity ratio

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

2.15 2.2 2.25 2.3 2.35 2.4 2.45 2.5

Debt equity ratio

Inference:

This chart shows that debt equity ratio was 2.35 during the year 2005-2006, 2.42 in the

year 2006-2007, 2.27 in the year 2007-2008, 2.34 in the year 2008-2009, and 2.46 in the

year 2009-2010 which is the maximum in the 5 year span.

72

Net

Pro

fit(in

lakh

s)

XIV Calculation of Net profit ratio:

Net profit ratio is calculated using the formulae

Net profit ratio = Net profit x 100

Sales

Table no: 4.14

Year Net profit Sales Ratio2005-2006 523 10877 4.812006-2007 49 12321 0.402007-2008 28 9390 0.292008-2009 -281 12063 -2.332009-2010 -249 10752 -2.32


Chart no: 4.14.1

Net Profit

600

500

400

300

200

100

0

-100

-200

-300

-400

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This chart shows that the net profit during the year 2005-2006 was Rs. 523 (in lakhs), in

the year 2006-2007, net profit reduced to Rs. 49 (in lakhs), again in 2007-2008 net profit

reduced to Rs.28 (in lakhs) and afterwards in 2008-2009 net profit changes to net loss of

Rs. 281 (in lakhs), and further in 2009-2010 net loss increased to Rs. 249 (in lakhs).

73

Net

Pro

fitR

atio

Chart no: 4.14.2

Net Profit Ratio

6

5

4

3

2

1

0

-1 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

-2

-3Year

Inference:

This chart shows that the net profit ratio during the year 2005-2006 was 4.81 and in

2006-2007, it reduced to 0.40, in 2007-2008 again reduced to 0.29, and in the year

2008-2009, net profit ratio shift to -2.33, and further in 2009-2010, again reduced to -

2.32.

74

Yea

r

XV Calculation of EOQ of common salt:

Economic Ordering Quantity is calculated using the formulae

Economic Ordering Quantity = 2 C O

I

Table no: 4.15

Year Annualconsumption

Carrying cost Ordering cost EOQ

2005-2006 90308 158 1250 11952006-2007 99393 142 1250 12652007-2008 72669 118 1300 12652008-2009 81465 139 1350 12572009-2010 83937 85 1350 1632


Chart no: 4.15.1

Annual Consumption of Common Salt

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

0 20000 40000 60000 80000 100000 120000

Consumption (in MT)

Inferemce:

This chart shows that the annual consumption of common salt shows variations in the

last 5 years and the lowest consumption is in the year 2007-2008 with 72, 669 MT

and the maximum is in the year 2006-2007 with 99, 393 MT. during the year 2009-

2010 the annual consumption of common salt is 83,937 MT.

75

Yea

r

Chart no: 4.15.2

Carrying Cost of Common Salt

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

0 50 100 150 200

Cost (in lakhs)

Inference:

This chart shows that the carrying cost of common salt goes on decreasing over the years

and the cost in 2005-2006 was Rs. 158 (in lakhs) and it reduced to Rs. 85 (in lakhs) during

the year 2009-2010.

76

Yea

r

Chart no: 4.15.3

Ordering Cost of Common Salt

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

1200 1220 1240 1260 1280 1300 1320 1340 1360

Cost (in lakhs)

Inference:

This chart shows that the ordering cost of common salt goes on increasing and in the year

2005-2006, the ordering cost was Rs.1, 250 (in lakhs), in 2007-2008, it increased to Rs. 1,

300 (in lakhs), and again in 2008-2010 the ordering cost is Rs. 1, 350 (in lakhs).

77

Yea

r

Chart no: 4.15.4

EOQ of Common Salt

EOQ of Common Salt

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

0 500 1000 1500 2000

EOQ

Inference:

This chart shows that the economic ordering quantity of common salt was shown

variations in the year 2005-2006, 2006-2007, 2007-2008, 2008-2009 as 1, 195 MT, 1,

265 MT, 1, 265 MT, 1, 257 MT respectively. During the year 2009-2010 it increased to 1,

632 MT.

78

Yea

r

XVI Calculation of EOQ of Aluminium Sulphate:



I

Table no: 4.16



2005-2006 3 18135 1250 12006-2007 7 88105 1250 12007-2008 11 22354 1300 12008-2009 6 30259 1350 12009-2010 8.02 31006 1350 1


Chart no: 4.16.1

Annual Consumption of Aluminium Sulphate

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

0 2 4 6 8 10 12

Consumption (in MT)

Inference:

This chart shows that the annual consumption during 2005-2006 was 3 MT, in 2006-

2007 the consumption increased to 7 MT, in 2007-2008 the consumption further

increase to 11 MT, in 2008-2009 it reduced to 6 MT, and in 2009-2010 again

increased to 8.02 MT.

79

Yea

r

Chart no: 4.16.2

Carrying Cost of Aluminum Sulphate

Carrying cost of Aluminium Sulphate

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

0 20000 40000 60000 80000 100000

Cost (in lakhs)

Inference:

This chart shows that the carrying cost of Aluminium Sulphate was Rs.18, 135 (in

lakhs) in the year 2005-2006, then it increased to Rs. 88105 (in lakhs) in the year

2006-2007, then it reduced to Rs. 22, 354 (in lakhs) in the year 2007-2008, and

further increased to Rs. 30, 259 (in lakhs) in 2008-2009, and Rs. 31, 006 (in lakhs) in

2009-2010.

80

Yea

r

Chart no: 4.16.3

Ordering Cost of Aluminium Sulphate

Ordering cost of Aluminium Sulphate

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

1200 1220 1240 1260 1280 1300 1320 1340 1360

Cost (in lakhs)

Inference:

This chart shows that the ordering cost of Aluminium Sulphate goes on increasing and in

the year 2005-2006, the ordering cost was Rs.1, 250 (in lakhs), in 2007-2008, it

increased to Rs. 1, 300 (in lakhs), and again in 2008-2010 the ordering cost is

Rs. 1,350 (in lakhs).

81

Yea

r

Chart no: 4.16.4

EOQ of Aluminium Sulphate

EOQ of Aluminium Sulphate

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

0 0.2 0.4 0.6 0.8 1 1.2

EOQ

Inference:

This chart shows that the EOQ of aluminium Sulphate is 0.6 during the year 2005-

2006, 0.45 in the year 2006-2007, 1.13 in the year 2007-2008, 0.73 in the year 2008-

2009, and 0.72 in the year 2009-2010.

82

Yea

r

XVII Calculation of EOQ of Barium Carbonate:



I

Table no: 4.17



2005-2006 673 1310 1250 352006-2007 724 1814 1250 312007-2008 617 1876 1300 292008-2009 486 3755 1350 182009-2010 437 3205 1350 19


Chart no: 4.17.1

Annual Consumption of Barium Carbonate

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

0 100 200 300 400 500 600 700 800

consumption (in MT)

Inference:

This chart shows that the annual consumption of Barium carbonate in the year 2005-

2006 is 673 MT and then increased to 724 MT in 2006-2007, and decreased

simultaneously to 617 MT in 2007-2008, 486 MT in 2008-2009, and 437 MT in 2009-

2010.

83

Yea

r

Chart no: 4.17.2

Carrying Cost of Barium Carbonate

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

0 500 1000 1500 2000 2500 3000 3500 4000

Cost (in lakhs)

Inference:

This chart shows that there is a vast change in the carrying cost of Barium carbonate and

the cost in the year 2005-2006 is Rs. 1, 310 (in lakhs), in the year 2006-2007 is Rs. 1,

814 (in lakhs), in the year 2007-2008 is Rs. 1, 876 (in lakhs), in the year 2008-

2009 is Rs. 3, 755 (in lakhs), and in the year 2009-2010 is Rs. 3, 205 (in lakhs).

84

Yea

r

Chart no: 4.17.3

Ordering Cost of Barium Carbonate

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

1200 1220 1240 1260 1280 1300 1320 1340 1360

Cost (in lakhs)

Inference:

This chart shows that the ordering cost of Barium Carbonate goes on increasing and in the

year 2005-2006, the ordering cost was Rs.1, 250 (in lakhs), in 2007-2008, it increased to

Rs. 1, 300 (in lakhs), and again in 2008-2010 the ordering cost is Rs. 1,

350 (in lakhs).

85

Yea

r

Chart no: 4.17.4

EOQ of Barium Carbonate

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

0 5 10 15 20 25 30 35 40

EOQ

Inference:

This chart shows that the economic ordering quantity of barium carbonate during the year

2005-2006 is 35, then reducing to 31 in 2006-2007, again reducing to 29 in

2007-2008, again reducing to 18 in the year 2008-2009, and then increasing to 19 in the

year 2009-2010.

86

consum

ption

(in

MT

)

XVIII Calculation of Reorder level of common salt:

Reorder level is calculated using the formulae

Reorder level = Average daily consumption x lead time in days + reorder level

Table no: 4.18

Year Average dailyconsumption

Lead time in days Reorder level

2005-2006 54.54 16 20874.642006-2007 34.67 58 22010.862007-2008 28.16 241 26786.562008-2009 54.49 66 23596.342009-2010 45.96 94 24320.24


Chart no: 4.18.1

Average Daily Consumption of Common Salt

60

50

40

30

20

10

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This chart shows that the average daily consumption of common salt was 54.54 MT,

34.67 MT, 28.16 MT, 54.49 MT, and 45.96 MT during the year 2005-2006, 2006-

2007, 2007-2008, 2008-2009, and 2009-2010 respectively.

87

Lea

dtim

e(in

day

s)

Chart no: 4.18.2

Lead time in Days

300

250

200

150

100

50

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This line chart shows that the lead time of common salt was 16 days in the year 2005-

2006, 58 days in the year 2006-2007, 241 days in the year 2007-2008, 66 days in the year

2008-2009 and 94 days in the year 2009-2010.

100

Reord

erle

vel

(In

MT

)

Chart no: 4.18.3

Reorder level of Common Salt

30000

25000

20000

15000

10000

5000

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

The reorder level of common salt was 20, 874 MT in the year 2005-2006,; 22,010 MT

in the year 2006-2007,; 26,786.56 MT in the year 2007-2008,; 23,596 MT in the year

2008-2009, and 24, 320 MT in the year 2009-2010.

101

Consu

mption

(in

MT

)

XIX Calculation of Reorder level of Aluminium Sulphate:



Table no: 4.19



2005-2006 0.04 11 5.442006-2007 0.04 20 5.82007-2008 0.03 29 5.872008-2009 - - -2009-2010 - - -

Source: Seconary data

Chart no: 4.19.1

Average Daily Consumption of Aluminium Sulphate

0.05

0.04

0.03

0.02

0.01

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This chart shows that the average daily consumption of Aluminium Sulphate was .04

MT, .04 MT, and .03 MT. during the year 2005-2006, 2006-2007, 2007-2008

respectively. During the years 2008-2010 the usage is recorded as nil.

102

Lea

dtim

e(in

day

s)

Chart no: 4.19.2

Lead time in Days

35

30

25

20

15

10

5

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This line chart shows that the lead time of Aluminium Sulphate was 11 days in the year

2005-2006, 20 days in the year 2006-2007, and 29 days in the year 2007-2008. In the year

2008-2009 and 2009-2010, the idle time is 0.

103

Reord

erle

vel

(in

MT

)

Chart no: 4.19.3

Reorder Level of Aluminium Sulphate

7

6

5

4

3

2

1

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

The reorder level of Aluminium Sulphate was 5.44 MT in the year 2005-2006,; 5.8

MT in the year 2006-2007,; and 5.87 MT in the year 2007-2008. There is no reorder level

in the year from 2008-2010.

104

Consu

mption

(in

MT

)

XX Calculation of Reorder level of Barium Carbonate:



Table no: 4.20



2005-2006 1 16 662006-2007 1.369 16 71.9042007-2008 0 0 02008-2009 0.09 17 51.532009-2010 0.12 15 51.8


Chart no: 4.20.1

Average Daily Consumption of Barium Carbonate

1.61.41.2

10.80.60.40.2

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This chart shows that the average daily consumption of Barium Carbonate was 1 MT,

1.369 MT, 0 MT, 0.09 MT, and 0.12 MT during the year 2005-2006, 2006-2007,

2007-2008, 2008-2009, and 2009-2010 respectively.

105

Lea

dtim

e(in

day

s)

Chart no: 4.20.2

Lead time in Days

18

16

14

12

10

8

6

4

2

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

This line chart shows that the lead time of Barium Carbonate was 16 days in the year

2005-2006, 16 days in the year 2006-2007, 17 days in the year 2008-2009 and 15 days

in the year 2009-2010.

106

Reo

rder

level

(in

MT

)

Chart no: 4.20.3

Reorder Level of Barium carbonate

80

70

60

50

40

30

20

10

02005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Year

Inference:

The reorder level of Barium Carbonate was 66 MT in the year 2005-2006,; 71.904MT

in the year 2006-2007,; 51.53 MT in the year 2008-2009, and 51.8 MT in the year

2009-2010.

107

XXI Banking of ABC items according to usage value:

Table no: 4.21.1

Items Units Unit cost Total cost % oftotal cost

Ranking

Common salt 83937.74 1769.41 148520777.59 61 1Aluminiumsulphate

8.025 7397.89 59368.13 0.2 9

Bariumcarbonate

437.250 17428.829 7620755.83 4 3

Max floc Tfloculent

150 188.7 28305

Floculent 675 108.7 73403.13 0.3 8Hydrated limepowder

10.15 6986.2 70910

Soda ash 335.41 4684.70 4925396.94 2 5Sodiumbisulphate

51.15 20045.03 1025303.65 .4 7

Sulphuric acid 640.15 2063.80 1321146.85Sugar 4750 31.02 147390Furnace oil 2935.861 23823.87 69943577.28 29 2HDPE carboyfor Ecko clean20LT

40 132.34 5293.60 .02 11

HDPE bag forcaustic soda flakes 60 x 90CM

386250 12.919 4990010.98 2 4

HH HDPEliner 65cm x100cm x 200G

387900 4.636 1798679.5 0.7 6

PP multifilament twine840 / 1 x 2 (kg)

300.810 167.46 50374.67 0.2 10

240580693.15 100


ABC analysis of inventory items

Category % of items % 0f valueA 15 80B 35 15C 50 5

108

Table no: 4.21.2

ABC analysis plan

Items in orderof ranking

Itemsno:

% oftotal items

Value Cumulativevalue

CumulativePercentage

% oftotal value

Category

Common salt

Furnace oil

2 20 148520777.59

69943577.28

148520777.59

218464354.87

61

90

90 A

Bariumcarbonate

HDPE bag for caustic soda flakes 60 x 90CM

Soda ash

3 30 7620755.83

4990010.98

4925396.94

22608511.07

23107512.17

236000518.62

94

96

98

7 B

HH HDPEliner 65cm x100cm x200G

Sodium bi sulphate

Floculent

Aluminium sulphate

PP multi filament twine 840 / 1 x 2 (kg)

HDPE carboy for Eckoclean 20 LT

6 50 1798679.5

1025303.65

73403.13

59368.13

50374.67

5293.60

237799198.12

238824501.77

238897904.90

238957273.03

239007647.70

239012941.30

98.7

99.1

99.4

99.6

99.8

100

3 C


109

Inference:

CATEGORY NO:OF ITEMS % OF ITEMS % OF VALUEABC

236

18.1827.2754.54

9073

11 100 100

From the above table, it can be seen that 54.54% of the items come under the

category of ‘C’ class. 27.27% of the items are ‘B’ category and the remaining

items come under the category of ‘A’ category. It is because most of the raw

materials and spare parts using for the production process are relatively

cheaper.

110

CHAPTER -5

FINDINGS, SUGGETIONS AND CONCLUSION

111

FINDINGS

The con su mpt ion level of raw material shows an increasing

trend from 280 (in lakhs) in 2005-06 to 535 (in lakhs) in 2008-09 and a

decrease to 367 (in lakhs) in 2009-10.

The work in progress shows slight variations and it also shows that

the current plant layout is very much effective.

There is an increase in stock of finished goods and it is due to

reduced sales and it will affect the blockage of working capital also.

The level of material in transit is getting reduced at a greater pace and is

due to the reduced sales.

The stores and spares is increasing over years and strict inventory

controls are needed in stores and spares and otherwise leads to blockage

of working capital.

The major portion of inventory held in the raw material, finished goods,

and stores and spares during the span of 5 years.

It is found that the reorder quantity fixed for Common Salt was 20000

MT, Aluminium Sulphate - 5 MT, Barium Carbonate - 50 MT. Here

all these reorder levels are not maintained when calculated in terms

of daily consumption and lead time. Also the EOQ also change over

time..

.

112

From the analysis it is found that the Inventory turnover ratio

shows a decreasing trend and it was 8.02 in 2008-09, and 6.58 in 2009-

10. The inventory conversion period shows an increase from 46 days in

2008-09, and 55 days in 2009-10.

Working capital was -1065 (in lakhs) in 2008-09, and -891 (in lakhs) in

2009-10.

Net profit -281(in lakhs) in 2008-09, and -249 (in lakhs) in 2009-10.

Net profit ratio was -2.33 in 2008-09, and -2.32 in 2009-10

Current asset was 3636 (in lakhs) in 2008-09, 4007 (in lakhs) in 2009-

10. Inventory to current asset ratio was 41.36 in 2008-09, and 40.73 in

2009-10.

Debt equity ratio was 2.34 in 2008-09, and 2.46 in 2009-10.

Most of the raw materials and inventory using for the production process

are relatively cheaper; as a result 98.35% of the items come under the

category of ‘C’ class.

‘A’ category items accounts for 18.18%, ‘B’ category items accounts for

27.27% and the remaining 54.54% accounts for ‘C’ category items.

At the end of financial year 2009-10, 80% of total value of inventory is

contributed by ‘A’ category, 15% by ‘B’ category and 5% by ‘C’

category.

When calculating operating efficiency on the basis of sales, net profit,

and working capital, we can find that sales show variation over the

113

period of 5 years, net profit moves to negative, and working capital also

shows negative values in the span of 5 years. We also found that the

inventory control is not maintained and there exist overstocking of

finished goods, stock and spares, raw material.

114

SUGGESTION

The company should implement new inventory control such as just in

time or SAP so that the unnecessary blocking of raw material and

finished goods can be avoided.

The company should adopt new marketing strategies to capture market.

The increased consumption level of stores and spares is one of the

reason for the shortage of working capital and it must be reduced

Inventory turnover ratio showing a decreasing trend and conversion

period also increases. So the company must adopt strategies in order to

increase sales.

The imbalance between current asset and current liability (working

capital) is being reduced and it shows a good signal

The company should give considerable importance to ‘A’ category items

and the costs of such items should be controlled, so that costs of final

products can reduce.

The management should try to avoid under stocking and over

stocking of inventory and finished goods must be issued without delay

after getting the order.

115

CONCLUSION

In today's competitive business environment, inventory

management has proven to be one of the most critical aspects in each and

every organization. A study was undertaken on the topic ‘A study of impact of

Inventory Management on operating efficiency with special reference to the

Travancore Cochin Chemicals Ltd, Udyogamandal, Cochin. It is an in depth

study of inventory to evaluate the performance of the company in logistics

management. The organizations are holding the stocks to allow for variations

and uncertainty in supply and demand - they give a buffer between the

suppliers and customers, maintaining customer service even when there are

problems in the supply chain. Stocks do not exist in isolation, so the

management has to consider its impact on other parts of the organization.

There are no clear lines between the inventory management and procurement,

supply chain management, warehousing and broader operations.

So, the company has to set inventory management in its overall

importance and explicitly recognizing its importance. It is evident that the

investment in inventory should be fair; it should not be over investment or

under investment. Excess investment in inventory may leads to capital

blockage in the form of inventory and under investment in inventory leads to

stock out situations.

116

BIBLIOGRAPHY

117

BIBLIOGRAPHYBOOKS

1) KOTHARI C.R. Research Methodology, New Age International

publishers New Delhi.

2) David J Piasecki, Inventory Management Explained: A Focus on

Forecasting, Safety Stock and Ordering Systems, Ops Publishers.

3) D. Chandra Bose, INVENTORY MANAGEMENT, Himalaya

Publications, New Delhi.

4) Tony wild, Best Practice in Inventory Management, Penquin

Publishers, USA.

Journals

The Quarterly news letter of Travancore Cochin Chemicals Limited,

Volume 9, Issue 3, September- December 2009.

WEBSITES

1) http://www.inventoryops.com

2) http://www.tcckerala.com/

3) http://www.effectiveinventory.com

4) http://inventoryexplained.com

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