A Study on inventory management

With Reference to
Thandava co-operative sugars Ltd., payakarao peta

A project report submitted to JNT University, Kakinda is partial

fulfillment for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
Submitted
By
Mr.N.pratap
Regd.No11L31E0059
Under the Guidance of
Prof. M.SRINU (MBA
Department of Management Studies

DEPARTMENT OF MANAGEMENT STUDIES

VIGNANS INSTITUTE OF INFORMATION TECHNOLOGY
(Approved by AICTE, New Delhi& Affiliated to JNTU,
Kakinada)
VISAKHAPATNAM
2013-2015
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DECLARATION

I hereby solemnly declare that the project report entitled

INVENTORY MANAGEMENTis genuine and bonafide work
done by me and is not submitted to any other university or
published anytime before.

The project work is for the partial fulfillment of the

requirement for the award of M.B.A degree of JNT University,
Visakhapatnam.

NEKKANTI PRATAP
Place:

(Student Signature)

Date:

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ACKNOWLEDGEMENT

I express my deep sense of gratitude with profound

happiness to the following personalities who lend their esteemed
encouragement in completing the project work successfully.

I take this opportunity to place on record my grateful

thanks to my project guide Mr.p.srinivas, Department of
Management studies for his valuable guidance in the preparation
of my project work.

I specially thank Mr. T.P.SIVARAM PRASAD managing

director and Mr. P.RAMANA RAO chief account officer for their
valuable co-operation and guidance during the training, my
project guide in Spencers Retail Limited., for her continuous
guidance and help throughout the development of this project
work by providing me with required information. I also thank all
the staff members of Spencers Retail Limited for rendering their
help to complete this project.

Finally I thank all other teaching and non-teaching staff who

have directly and indirectly helped to complete this project work
by spending their valuable time.
D.CHAMUNDESWARA RAO

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CERTIFICATE

This is to certify that this project work entitled A Study on INVENTORY

MANAGEMENT in THANDAVA CO-OPERATIVE SUGARS LIMITED,
P.R.PETA is a bonafide work of D.CHAMUNDESWARA RAO Submitted in
partial fulfillment of the requirement for the award of the Degree of Master of
Business Administration by JNT University, KAKINADA.

HEAD OF THE DEPARTMENT

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CERTIFICATE OF THE GUIDE

This is to certify that the Project entitled A Study on

INVENTORY

MANAGEMENT

in

Thandava

co-operative

sugars limited is being submitted by D.CHAMUNDESWARA

RAO in partial fulfillment for the award of the Degree of Master of
Business Administration from JNT University is a record of
bonafide work carried out by his under my guidance and
supervision.

Place: Chebrolu.

(Miss.

m.SRINIVAS)
Date:

Project

Guide

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INDEX
CHAPTER-1

INTRODUCTION
NEED FOR THE STUDY
OBJECTIVES OF THE STUDY
METHODOLOGY
LIMITATIONS

CHAPTER-2
INDUSTRY PROFILE
COMPANY PROFILE
CHAPTER-3
INVENTORY MANAGEMENT

CHAPTER-4
INVENTORY CONTROL TECHNIQUES
DATA ANALYSIS AND INTERPRETATION
CHAPTER-5
SUMMARY
CHAPTER-6
FINDINGS & SUGGESTIONS
BIBLIOGRAPHY

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CHAPTER -1
INTRODUCTION
NEED FOR THE STUDY
OBJECTIVES OF THE STUDY
METHODOLOGY
LIMITATIONS

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INTRODUCTION

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INTRODUCTION TO INVENTORY MANAGEMENT:

Inventories are assets of the firm and require investment and

hence involve the commitment of firms resources. The inventories need
not be viewed as an idle asset rather these are an integral part of firms
operations. But if the inventories are too big, they become a strain on the
resources, or if they are too small, the firm may lose the sales. Therefore,
the firm must have an optimum level of inventories.

CONCEPT OF INVENTORY MANAGEMENT:

The dictionary meaning of "Inventory" is a detailed list-stock of
goods in this". A practical definition from the material management
angle would be "Items of stores or materials kept in stock to meet future
demands of production, repairs, maintenance, construction etc". Since
the materials held in the inventory are idle resource, another definition
of inventory would be "an idle resource of any kind which has an
economic value".
The inventory means and includes the goods and services being
sold by the firm and the raw materials or other components being used in
the manufacturing of such goods to be offered to customers whenever
demanded by them. The common types of inventories for most of the
business firms may be classified as,

TYPES OF INVENTORIES:
Generally the inventories are classified into three categories and they are
as follows;
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1. Finished goods: These are the goods, which are either being purchased by the firm,
or are being produced or processed in the firm. These are just ready for
sale to customers. Inventories of finished goods arise because of the time
involved in production process and the need to meet customers demand
promptly. If the firms do not maintain a sufficient finished goods
inventory, they run the risk of losing sales, as the customers who are
unwilling to wait may turn to competitors.
2. Work-in-progress: It refers to the raw materials engaged in various purchase of
production schedule. The degree of completion may be varying for
different units. Some units might have been just introduced; while some
others may be 40%compleete or others may be 90%complete. The workin-progress refers to partially produced goods.
3. Raw materials: The raw materials include the materials, which are used in the
production process, and every manufacturing firm has to carry certain
stock of raw materials in stores. These units of raw materials are
regularly

issued transferred to production department Inventories of

raw materials are held to ensure that the production process in not
interrupted by a shortage of these materials.

NEED FOR THE STUDY

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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 dayto-day activities. An efficient inventory management 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.
The efficient with whom the Inventory is managed will invariable
determine the efficiency of the production 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 equipments, 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.

OBJECTIVES OF THE STUDY

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 To make a detail study on the existing sugar industry in general

and inventory management in particular to Thandava Co-operative
Sugar Industry.
To study the pattern of organization management and inventory
factors of Thandava Co-operative Sugar Industry.
To analyze the inventory classification and its management and
control.
To study the relevant costs, cost saving measures and find out
drawbacks.
To study the general concept of inventory management.
To find out the inventory management and procedures in Thandava
Co-operative Sugar Industry.
To examine the methods and techniques of inventory control in
Thandava Co-operative Sugar Industry.
To summarize and suggest the observations.

To have an insight in to the company future plans and

diversification strategies.
To study the profile and general management of Thandava Cooperative Sugar Industry.
To have an overview of the purchase and store department

METHODOLOGY

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The methodology in this content involves the process of

collection of data from primary and secondary sources and interpreting
the same by using the analytical tools and techniques utilizing the
consequent finding to put forward liable and insightful suggestions to
the company.
Generally Data collection is classified into two categories and
they are as follows;
1. Primary Data
2. Secondary Data
Primary data is the data which is collected for the very first
time and secondary data is the data which is gathered from the past data
as a further references.

A large part of primary data was collected in the course of my

interaction with the personnel concerned departments and also
developed in consultation with costing manager, material manager and
officers. The data collected was regarding various aspects of inventory
management like lead-time, ordering cost, carrying cost and working of
online computerized stores system.

1. The secondary source of data is the ISO manual of material

department; purchase department of Thandava Co-operative Sugar
Industry.
2. Companys annual reports, audit reports, balance sheet and other
company records journals.
LIMITATIONS OF THE STUDY

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Some Information is some highly confidential so it is very

difficult to get the data from the organization.

The result realized are applicable to this firm only the major
constraints on this endeavor. Where the policy of time and
information, the scope of the work is confined to the inventory
management rather than material management as a whole.
The management of time for project completion is also a factor
that limits extensive study of the nature of projection process and
its implications on inventory aspects.
It is based on the data supplied by the factory personnel.
The schedule information is not available.
More dependency on secondary data.
The analysis of inventory management is based on information
available and if any mistake would be reflected in the study.

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CHAPTER - 2
INDUSTRY PROFILE
COMPANY PROFILE

HISTORY OF THE SUGAR INDUSTRY

Introduction:

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India has been known as the original home of sugar and

sugarcane. Indian methodology supports the above fact as it contains
legends showing the origin of sugar cane.
India is the second largest producer of sugar cane next to Brazil.
Presently, above 4 million hectares of land is under sugarcane with an
average yield of 70 tons per hectare.
India is the largest single producer of sugar including traditional
sugarcane sweeteners, khandasari and Gur equivalent to 26 million tons
raw value followed by Brazil in the second place at 18.5 million tones.
Out of 7 States for last 10 years. India has ranked No.1 position in 7 out
of last 10 years. During 1998-99 India produced 17.0 million tons (155
lakh tones white sugar) while Brazil had produced 18.5 million tones.
Traditional sweeteners Gur & Khandasari are consumed mostly by
the rural population in India. In the production of alternate sweeteners,
Gur & Khandasari were produced where better standard of living and
higher income groups were there. The sweeteners demand has shifted to
white sugar currently; about 1/3rd sugarcane production is utilized by the
Gur and Khandasari sectors.
Being in the small-scale sector, these two sectors are completely
free from controls and taxes, which are applicable to the sugar sector.
The advent of modern sugar processing industry in India began in
1930 with grant of tariff protection to the India sugar industry. The
number of sugar mills increased from 30 in the year 1930-31 to 135 in
the year 1935-36 and the production during the same period increased
from 1.20 lakh tones to 9.34 lakh tones under the dynamic leadership of
the private sector.

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The sugar industry is one of the largest Agro based industries in

India.

It plays an important role in the national economy.

Sugar

industry holds the pride of place as an instrument of rural development.

The extension of sugar cultivation in setting up new sugar
factories, since independence have greatly contributed to the socioeconomic development of some rural tracks in the country with an
investment of 2000 crores. The sugar industry provides employment to
nearly 4 lakhs workers, above 8 million farmers and engaged in sugar
cane cultivation in India. The industry is largely concentrated in the
state of Uttar Pradesh, Bihar, Maharashtra, TamilNadu, Andhra Pradesh
and Karnataka.
In the beginning there was no progress in the sugar
industry. Production was granted in this industry since 1932. Efforts
were put to establish the modern industry. Little ahead away would be
made in earlier years as the varieties of cane growers did not process
good milling quality and the yield per acre was low on account of which
the cost of production of sugar was very high. Sugar cane is grown
healthy in all parts of India.

SUGAR IMPORTS:
Sugar import is allowed under open general license (OGL)
customs duty at 60% besides countervailing duty of Rs 850 per tones
equivalent to 7.5% is levied on imported sugar.
Imported sugar also subject to the monthly release
mechanism and stock holding limits as applicable to domestic sugar.
Importers are also required to surrender 30% of imported sugar as levy
at prices notified by the government.

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SUGAR POLICY:
Under the present policy of partial decontrol of 30% of
production by each unit is supplied for public distribution system know
as levy sugar government at notified prices admittedly bellow 20% of
the actual cost of production the levy sugar is distributed to the public
irrespective of their economic status. The balance 70% is sold in the pre
market against monthly release issued by the government.
This policy has been continuing since 1767 -1768 except for
briefly periods of de control mainly during the year of surplus
production and accumulated sugar stock.

CONSUMPTION TRENDS IN RURAL &URBAN:

In urban cities and towns with higher income and better
standard of living the sugar consumption is relatively higher in the states
with the higher GDP, such as Punjab, Haryana the sugar consumption in
the urban areas is much higher and consumption in the urban areas is
much higher and compared favorable with the consumption trends
obtaining in the developed countries as would be evaded from the table
per capital consumption of sugar in urban and rural in kgs.
CONSUMPTION OF SUGAR IN URBAN AND RURAL IN INDIA
(KGS):
GROUPS

URBAN

GROUP-1

RURAL

AVERAGE

ABOVE RS.
9500

PUNJAB

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71.5

22.2

46.85

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HARYANA

66.5

18.5

42.5

MAHARASTRA

40.9

19.7

30.3

GUJARAT

40.9

18.1

29.5

KERALA

41.5

12.7

27.1

TAMILNADU

29.1

12.8

20.95

KARNATAKA

23.3

11.1

17.2

WEST BENGAL

21.0

10.2

15.6

ANDHRA

19.7

9.9

14.8

GROUP-2

PRADESH
GROUP-3

RS.5500-7500

UTTAR PRADESH

35.2

10.4

22.8

RAJASTAN

31.6

10.6

21.1

MADHYA

24.4

9.9

10.35

445.6

166.1

299.05

PRADESH
ALL INDIA

DEVELOPMENT OF SUGAR INDUSTRY

There were only 30 factories in India during the year 1931. The
number of factories in operation has grown from 29 to 140 in 1950-51
out of which 100 factories were in northern part of India. During the
next decade the number of factories increased to 174 out of which 11
factories were in the sub-tropical regions of northern India. Finally, the
number of factories was grown to 200 in 1965-66 to 338 in 1984-85 and

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now presently 420 sugar factories running under the various

managements. Co-operative sugar factories contribute more than 50%
of total sugar factories.

There are nearly 230 co-operative sugar

factories in India.
In recent years, the location factories have influenced under
the disposal of sugar industry to the south. The sucrose is content in the
sugarcane grown in tropical regions in greater than sub-tropical regions
and the development of cane in the south mainly responsible of bringing
about location changes in the industry.
The sugar industry organized 3 sectors vise, the private and
public and the co-operative.

The co-operative sector of the sugar

industry represents the sugar factories organized on co-operative lines.

Co-operative is a form of organization in which the mentors
units due to common economic necessity and they try to fulfill this
necessity by forming an organization. This is an association where
people unit to avoid exploitation by middleman.
In case of sugar co-operatives, the economic necessity of
sugar cane farmer is to get a remunerative price for sugar cane.
The production during the first year plan i.e. 1955-56 was
18.34 lakhs tones. The production during the third year was very low
i.e. 9.81 lakhs tones. The sugar production during or t and of the second
five-year plan 1960-61 stood at 330.21 lakhs tones against the target if
22.90 lakhs tones. Thus there was a good achievement in fulfilling the
targets. The end of the third five-year plan 1973-74 against the actual
target of the year 47 lakh tones. It was low against the actual target of
the year 47 lakh tones. It was low against the target. The production
during the year 1979-80 which last year of fourth, five year plan was
38.58 lakh tones. The production during 1969-70 the first year of the
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fourth five-year plan was all time record of 45.7 lakhs tones. However
the production could not be maintained at this level during 1970-71
seasons and sit is declined to 38.2 lakh tones. During that period with a
large curry forward stock of about 22 lakh tones from the precious
season. The total availability of sugar was still higher at 60 lakh tones.
Due to abundance of stocks the government had controlled sugar
from 25.05.1971. However, the production during the year 1971-72 was
declined to 13.10 lakh tones.

As a result of sharp decline in the

production of sugar with the cones quest reduction on available. Sugar

price should be upward trend releasing the difficult situation the industry
voluntarily offered to supply 60 percent of the released monthly notes at
fixed price of Rs. 150 per quintal to need the requirements of domestic
consumers. The industry had also offered further 35% production of
exerts.
The sugar cane farmers in this country are poor and do not be
have the requisite capital to install a complete plant and therefore the
government contributed the share capital in the way of providing loan
from state government and various financial institutions. These cooperatives have democratic control and equitable distribution of the
returns. A portion of the return is ear-marked by all the factories for
socio-economic development of the area in which these factories are
situated. Thus co-operative through are business organization, have a
social purpose and social obligation, not only towards the members of
the units who setup the co-operatives, but also towards the people who
live in the area of surroundings.
SUGAR INDUSTRY IN ANDHRA PRADESH

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Sugar industry is mostly situated in the regions where the land is

fertile and suitable for growing in A.P.

It is one among such fertile

regions of India and has been a sugar cane cultivating state for a long
time. It is one of the major sugar productions of Khardasari and Gur till
recent past although sugar factories existed in India since 1920.
It was only in 1950, that A.P. had a chance of establishing these
factories in A.P.
A.P. Govt. announced a proposal for establishment of 5 more
sugar units in co-operative sector in April 1982.
178 thousand acres are under sugar cultivation which constructs
7% of the total acres in India.
During the recent years, this was decreasing and this figure has
come down to the thousand hectors during 1980-91 which was around
5% of the average figure of India. The figure for A.P. was 76 tones in
1965-66 when it was 43.7 tones per hector for India almost 80% higher.
The yield per hector in A.P. is compared to that of massproducing state like U.P. where then exit 38.2 tones per hectors in 197879 and Bihar where 27-12% per hector in 1978-79 was present.
The total sugarcane produced in the state is just 8% of the total
production in India is 1950-51. The total production is 49.10 thousand
tones out of 69.22 thousand tones for 1978-79 this figure has gone up to
9,482 thousand tones which is 36.2% of the total production. This
production for all India in 1978-79 is 38.2%.
The total sugar cane produced in the year 1986-87 season of
A.P. was Rs 8,800 thousand tones. So the contribution of A.P. in the total
production is 5.52%.

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India has been divided into three areas in the sugar recovery
attained by factories of Andhra Pradesh fell into medium recovery for
the date during the year 1986-87 was 9.6%.

Andhra Pradesh is the major lead regarding sugar production.

The sugar recovery is more then compared to average sugar crushing
season and the average recovery of India crushing season is low due to
more production of average recovery of India. Crushing season if low
due to more production of Gur and Khandasari. The farmers are
supplying to that of sugar factories and transport facilities.
There, the farmers are making for the nearby fields. The cane
price also is not favorable that is price of sugar cane fixed by the
factories is low. That is not commercial therefore the seasonal is short in
A.P. so the sugar production in A.P. is unfavorable.
Total no. of factories

- 33

Co-operative sectors

- 08

Public sector

- 07

Private sector

- 18

A.P. produced more than 310 lakhs tones out of a total

production in the year 1987-88. In 1979-80 the production was 34
thousand tones out of which 1,017 thousands tones of sugar production
which was 5.15% of total production in A.P has increased sugar
production in India.

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The total sugar consumed by A.P. excluding Khandasari

sugar was 292 thousand tones, where as in India it was 5,105 thousand
tones in 1987.
A.P always has been a surplus state as far as sugar is
consumed till 1977-78 during which years the total production was
5,405 thousand tones yearning a surplus production of more than 150
thousand tones. During 1978-79 the production of sugar has taken
consumption by the state was 44 thousand tones i.e., 311 thousand tones
as against 355 thousand tones consumption during 1970-80.
The defect has decreased a massive 93 thousand tones i.e.,
thousand tones. This mostly was due to lower production of sugar within
the state because of poor supply of cane to the factories. After that the
production was raised against the consumption of 483 thousands tones.
Thats why A.P. is performing a major role regarding sugar
production. The sugar recovery is more, when compared to average
sugar crushing season is low due to more production of Gur and
Khandasari. The farmers supply to Khandasari mills due to quick
payment and higher prices then of sugar factories.

PROFILE OF THANDAVA CO-OPERATIVE SUGAR FACTORY

Visakhapatnam district is one of the prominent sugarcane growing

areas in Andhra Pradesh. The Thandava co-operative sugars ltd,
No.c.181, 18 registered as a co-operative society under the 1964, the
society established as a 35 tones capacity 250 TCD factory for the
manufacture of vacuum per crystal sugar.
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This society is originally a 350 TCD plant which was considered

subsequently the most economic unit. The society obtained a license for
1250 TCD in the year 1964. The investment on this project was 8.3
crore. It operation shall be confined to the list of villages.
TUNI TALUKA 57 VILLAGES
YELAMANACHILI 41 VILLAGES
NARSIPATNAM - 33 VILLAGES
PRATHIPADU - 44 VILLAGES
This plant is one of the co-operative plants situated in Andhra
Pradesh. The sugar factory was established in area of 52 acres and 921/4
cents. It purchase value was 6, 61,184.10 lakhs. Basically this
agro-based industry is on bank of river Thandava. The factory begins
November/December depending upon the availability of cane. The date
of registration was 09-02-1957, and the starting was 21-08-1957. Sri
Laid the foundation stone S R V V KRISHNAM RAJU BAHADUR,
and JOHN THAMPSON, NIZAM SUGAR, & KCP supplied machines.
The Thandava Co-Operative Sugars is registered as a Cooperative Society under the A.P. Co-operative Society Act of 1957 for
this society the land was choose with low cost and beside the highway
and by the river bank of river Thandava which gives water to the plant.
Managing director is Sri G.V. RAMAIAH, M.Sc. (Ag.). The cost of the
land with registration of 57.92 acres is Rs. 6, 79,712 lakhs at the starting
factory they invest to crores at Payakaraopeta it belongs to
Visakhapatnam district.
The plant started production in 1964, with a capacity of 350
TCD (tones crushing per day) later in 1971. It was increased to 1250
TCD. After 10 years the new plant was constructed just by the side of

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old plant with a capacity of 1750 TCD. Still now plant is running
smoothly with profits with this plant 649 numbers employees are
recruited and around 1500 families are indirectly benefited.

STATEMENTS:
THANDAVA CO-OPERATIVE SUGARS LIMITED

MISSION STATEMENT

To be a powerful force in the sugar industry through:

High level of productivity and excellence;
Continual improvement in the quality of Human resources,
Products, services and technology.
Customer satisfaction;
Concern for occupational health and safety. And
Commitment to environment management.

Growth & Development:

Thandava co-operative sugar plant is take more care to growth
and development of the organization the capacity of the plant is 1750
TCD.

In that 12% of power will be used for plant auxiliary

consumption. So around 1800 units consumed per day for auxiliary total
export of A.P. Transco will pay tone per unit. But since 4 months they
are paying 2.84 per unit as per regulation commission rules.

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Share Capital Position:

The authorized Share Capital of the society under by law no.6 of
the by laws of the society is Rs: 1,338.34 lakhs crores. As on date the
society has a paid share capital of Rs.179.20 lakhs. The government of
Andhra Pradesh has contributed an amount of Rs. 1159.14 lakhs towards
their share in the capital structure of the society.

Membership:
Including government of Andhra Pradesh as on date there area
11,215 shares holders in the society, out of the above shareholder, 500
are female members. As the factory is situated in the backward areas of
Visakhapatnam and East Godavari district most of members are small
and marginal farmers belonging to the backward community out of
11,215 members (excluding government) about 7000 cane grower
members are growing cane and supplying to the factory only from 199091 season onwards. The cane plantation, agreements and supply have
been increased considerably on account of various cane development
activities taken by the management in the factory zone.

Cane area in the factory zone for 2012-2013 seasons:

The total expected cane area in the factory zone for 2012-2013
crushing season was 9,000 acres, out of which an area of 6,500 acres
with plant crop and 2,500 acres with ration crops. The total estimated
cane production will be 1.50 metric tones with an average yield of
19MTS (metric tones) per acre.

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CANE DEVELOPMENT ACTIVITIES UNDER TAKEN FOR

2013-2014:
Seed Transport Loan:
As the rate of 140 MTS out of which Rs. 65 will be recovered
from seed suppliers and Rs. 75/- from seed receiver.
Cane Price Payments:
For the year 2013-2014 the government of India has fixed the
minimum cane price as Rs.1, 41,895 per MTS linked to 9.50 percentage
recoveries. However in view of the growers welfare the company as
paid initially Rs.1, 500 as the advance and Rs.200 balance after closure
of the season 2013-2014.

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Comparative statement of the TCS efficiency with the last 6 seasons

Particulars

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

Date of start

17-12-08

27-11-09

26-11-11

26-12-12

22-12-13

31-12-14

Date of
closing

06-04-08

20-04-09

18-06-10

27-04-11

23-02-12

12-02-113

Cane
crushing
(M.T.)

1,59,621.307

2,20,872.178

2,73,880.939

1,64,765.873

77,232.575

50,237.191

Sugar
bagged

1,64,691

2,13,325

2,52,675

1,64,280

75,568

44,930

Recovery%
cane

10.30

9.62

9.23

9.82

9.65

8.92

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Steps taken to crush the Harvard cane within 24hours:

Factory was crush during three shifts of the day i.e.
A- 2:00am to 10:00am
B- 10:00am to 06:00pm
C- 06:00pm to 02:00am

Dues to the center financial institution:

Other outstanding borrowings:
From the government:

Rs.Ps.

Cane development loan

1, 51, 34,400.00

Short term loan government

20, 00,000.00

Cane development loan

11, 06,800.00

Term loan from government of AP

3, 41, 00,000.00
-------------------------

Total

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5, 23, 41, 200.00

Page

From others:
C.C.B long-term loan

43, 79,224.00

C.C.B cash credit, PR Peta

(1, 36,588.00)

A.P.C.O.B sugar pledge

15, 59, 30,162.11

APCOB midterm loan

6, 50, 00,000.00

APHDC Hyderabad

44, 07,983.00

APCOB M.T loan

1, 10, 27,000.00
-----------------------Total

Borrowings from govt.

24, 06, 07,781.11

5, 23, 41,200.00

Borrowings from others & agencies

24, 06, 07,781.11

--------------------------

Total

29, 29, 48, 981.11

Purchase Tax:
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The Government has increased purchase tax Rs.32% to Rs.

60% per million tone as from 2004 to 2010 company has paid
Rs.30.14 Lakhs.
2004-05

9577278.42

2005-06

13252330.7

2006-07

16432856.3

2007-08

9885952.38

2008-09

4633954.5

2009-10

3014231.46

Working capital:
For the year 2009-2010 the company had for sanction of
Rs.20.00 crores. For working capital limits with AP state co-operative
bank ltd. Hyderabad on the date an amount 5, 74, 68,674 out standing
under the cash credit sugar pledged amount.

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Comparative statement of the TCS efficient with the last 3

seasons:
S.NO PARTICULARS

2007-08

2008-09

2009-2010

Date of start

26-12-2007

22-12-2008

31-12-2009

Date of closing

27-04-2008

23-02-2009

12-02-2010

Cane crushing

1,64,765.873 77,232.575

50,237.191

1,64,280

43,810

(MTS)
4

Sugar Bagged

75,568

The record of the factory during the year 2006-2007 cane crushing
is 2, 73,880.939 metric tones and produced 2, 52,675 sugar bags.I.S.S
grade standards accept this season sugar.

OBJECTIVES OF THANDAVA CO-OPERATIVE SUGARS

LTD:

To establish a factory for manufacture of sugar, jaggery and

other subsidiary bye-products and allied industries and for the
purpose.
1) To raise the share capital and to borrow funds either on this
security of the property of the society of otherwise from co[Type text]

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operative societies of Govt. industrial finance corporation, life

insurance, corporation and other sources.
2) To purchase to take on base or otherwise acquire land houses
and other buildings or railway siding that may be necessary or
expenditure for the above purpose.
3) To purchase and install the machinery.
4) To purchase sugar cane and other raw material from members
or non members and also to undertake cultivation of sugarcane.
5) To own land or hire transport vehicles in the business of the
society.
6) To construct or take rented godowns at the place of
manufacture and as well as outside for storage and sale of the
product.
7) To carry on with all other activities necessary for the
establishment and running of the factory.
8) To process and sell sugar molasses and other by products
produced to the best advantage.

Factors contributed for increased production in the factory:

1. Developing the high yielding/higher recovery percentage
varieties of cane.

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2. Development of irrigation facilities in the rain fed area of the

factory, zone from the factory cane development council fund
and sugar development fund.
3. Following proper cultural practices in cane cultivation.
4. Maximum crushing of cane in peak recovery period.
5. To reduce the time gap between harvesting and crushing of
cane.
6. Timely application of fertilizers and pesticides.
7. To educate the cane growers to supply matured and clean cane.
8. Development of seed nurseries and supply pure and better
varieties of seed and thus improve yields and recovery.
9.

Supply of micronutrients to reduce micro nutritional

deficiencies in the soils.

10.

To developed approach roads and fields communication to

save delay in transpiration.

11.

By arranging kissan meal and conferences with sugar cane

expects.
12.

To encourage month-wise staggered plantation with

improved varieties by providing incentives.

13.
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Crushing at the rated capacity.

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14.

Coordination of work among the staff of the internal

departments.

FUNDS OF THANDAVA CO-OPERATIVE SUGARS:

Funds may be raised by the society by
1) Entrance Fee
2) Issue of share
3) Deposits
4) Loans & over drafts
5) Debentures
6) Donation & grants

Shares:

Authorized capital of the society Rs. 8, 00,000%

EXPORTS AND IMPORTS:

Export:

The difference in crushing period in India and other major

producers exporters like Brazil and Australia can be utilized to top

the export market in a big way for the purpose of comparison the
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crushing season for different. Sugar cane producing countries like

India.

COUNTRY

IMPORTS:

CRUSHING SEASON

Europe

March-Sept.

Mexico

Nov.-July

USA

Oct.-June

Brazil

June-May

Africa

April-Nov.

China

Jan-Dec.

Pakistan

Nov-May

India

Oct.-June

The govt. Controls import of sugar through import

policy and custom duties based on a demand-supply mismatch in the

country.

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EXPORTS:

The substantial increase in the volume of free

international trade in sugar present on excellent opportunity to the

Indian sugar industry to embark on regular plan for sugar exports.

AUDITING:

Thandava Co-operative Sugars Ltd. has been auditing

by Sri Brahmayya & co. Charted accountant, Vizag.

ORGANIZATION SET-UP OF THANDAVA CO-OPERATIVE

SUGARS

CHAIRMAN: He shall organize overall meetings of the board and

general body. He shall be responsible for bringing all policy matter
before the board and general body and shall see the effective
implementation of the resolution posses by the set of bodies in his
absence vice-chairman will preside over the board and general body.

MANAGING DIRECTOR:
of the sugar factory.

Managing director is a chief executive

He is the key of the organization.

His

responsibilities are tremendous. Million of rupees may be made are

lost by his directions. The managing director formulates the factorys

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operation purchased and sales for the consideration of board of

directors and when approved and ensures their executives through
direction of departmental heads for guidance of board of directors.
He hall be fully informed about the factory overall active ties. And
must instruct and guide departmental heads in their works. He is
accountable to chairman and board of directors.

DEPARTMENTS: The organization has 5 departments.

The

departmental heads are accountable to managing director. Managing

Director Co-ordinates all the activities of the organization are as
follows.

Administrative Department
Accounts Department
Agriculture Department
Engineering Department
Manufacturing Department

ADMINISTRATIVE DEPARTMENT:
The administrative department officer and chief personal office
is the heads of these departments.

He is the next to managing

director. He shall be exercise such powers and performs such duties

as may be entrusted to him from time to time by the M.D. under the

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administrative officer. There are 7 departments, which are directly

responsible to him.
They are secretarial department, general administration,
and sales purchase stores. Godowns, time office and security
department in addition to the above activities, he also looks
after welfare and medical care of the employees. The department also
develops good relations between management and trade union.
The department is the backbone of the whole organization.
In the absence of both the M.D. and administrative office the board
makes necessary arrangements in the approval of the register for the
conduct of the society during their absence.

ACCOUNT DEPARTMENTS:
Accounts department headed by chief account officer. He is
responsible for his department. The department is divided in to area
i.e.

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1. General Accounts
2. Store Accounts
3. Cane Accounts
His duty involves preparation of balance sheet and
correspondence with their inventories merchant banks financial
institutions etc, he has to maintain up to date all accounts of the
factory and prepare balance sheet cost reports. Financial statements,
share reports, periodical budgets, cash flow statements and all income
tax returns and all formalities. He has obtained all work relating to
money transactions, advice management through the M.D. the
financial implication of any schemes of expenditure.

ENGINEERING DEPARTMENT:
The chief engineer heads this department.

The pant and

machinery of the factory are under control of chief engineer. He

formulates the techniques of current and economic crushing of sugar
cane shutting to the machinery and equipment responsible for keeping
in day today check on milling boiler and power house performance
and stem steam and power consumption at various sections of the
factory.

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He personally directs repair over handling and creation of

major equipment. He periodically review engineering stores stock
position and furnishes indents for purchase for his decrements civil
season turbines, boilers mill house electrical, the main parts of the
engineering section such as revalidation modernization layout and
replacement labour and staff policy to management and ensures that
all factory regulations and scrupulously contend and completed with
all the concerned.

MANUFACTURING DEPARTMENT:
Chief Chemist heads this department side of the factory from
juice to final bagging of sugar. The department is to see the good
quality of the sugar production. He has to co-ordinate the work of
manufacturing department with that of the engineering and
department.

AGRICULTURE DEPARTMENT:
Chief agriculture officer heads this department- The duties of
the chief agriculture officer can be divided in two distinct spheres.

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a. Cane Development
b. Cane Procurement
There are 5 agriculture officers. The duties and
responsibilities of the agriculture officer to develop sugar cane plants
registered and also to meet the cane growers and issue proper
instruction to them.

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CHAPTER-3
INVENTORY MANAGEMENT

INVENTORY MANAGEMENT:
Inventory management involves the control of the assets being
produced for the purposes of sale in the normal course of the

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companys operation. Inventories includes raw material inventory,

working process inventory, finished goods inventory.
The purpose of holding inventories is to allow the process of
purchasing, manufacturing and marketing of it primary products.

ROLE OF INVENTORY MANAGEMENT:

AVOID LOSSES OF
SALES
PURCHASE
GAIN QUANTITY
DISCOUNTS
FIRMS
HOLDING
INVENTORY

PRODUCE
REDUCE ORDER
COST
SELL
ACHIEVE EFFICIENT
PRODUCTION

DEFINITION OF INVENTORY MANAGEMENT:

Material management is that coordinated function responsible
to plan for, acquire, store, move and control materials, to optimize
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usage of families, personnel, capital funds and to provide service to

the user in line with the organizational aims.

MEANING OF INVENTORY: The inventory refers to the stockpile of the product a firms
offering for sale and 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 store as inventory in anticipation of need can be classified into
(1)Raw Materials
(2)Work-in-progress (Semi finished goods)
(3) Finished Goods

(1) Raw Materials: Inventory contains items that 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.

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Inventory 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 multi stage
production process.

(3) 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 viewpoints 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 an important
activity in the organization.

OBJECTIVES OF INVENTORY MANAGEMENT:

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The objectives of the inventory management consist of two

counter balancing parts:
To maximize the firms investment in inventory
To meet a demand for the product by efficiently organizing the
firms production and sales operation.

THE MAIN AIM OF INVENTORY MANAGEMENT: The main aim of Inventory Management they should be to avoid
excessive and in adequate levels of Inventories & to maintain
sufficient Inventory for the smooth production & sales operations
effort should 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
Control investment in Inventories & keep it at an optimum level.

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CAUSES OF INVENTORY
External causes: - Customers, Suppliers etc.
Internal causes: - Market, policy, production and SCM.
Problems with high inventory
Interests, 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 times

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 New and campaign product

Non-moving products.

ROLE OF FINANCE MANAGER IN INVENTORY

MANAGEMENT: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 resources by
minimizing the total inventory cost. The techniques of inventory
management are very useful in data mining. The cases the board
frame works for maintaining 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. 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.
STORES, SPARES AND PURCHASES: 1.

Store Keeping.

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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
Different towards inventory.
Structure of inventory mocks.
Factors influencing inventory.
Classification of inventory.

STORE 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

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materials, are called stores and the building or space where these are
kept is known as Storeroom.
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 than government of the
current assets is invested in stores. Thus for efficient and economic
utilization of fond the importance of store cannot be ignored.

Functions Of Store Keeping: The main functions of store keeping can be outlined as
1 Receiving of goods in stores against damage and
pilferage.
2 Custodian of goods in stores against damage and
pilferage.
3 Effective utilization of stores space.
4 To provide service to the organization in most
economic way.

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5 Proper identification and easy location of them.

Objectives Of Store Keeping:1 Easy location of the items in store.

2 Proper identification of items.
3 Speed issue of material.
4 Efficient utilization of space.

FUNCTIONS

AND

ACTIVITIES

OF

MATERIAL

DEPARTMENT:
Material department has the following
Activities
Indenting of materials
Procurement of materials
Receipt of materials
Inspection of materials
Storage of approved material
Return/Replacement of rejected material
Issue of material to user departments

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 Disposal of waste materials

INVENTORY HANDLING AND WORKING OF STORES

DEPARTMENT IN TCS:
The working of stores department starts with the indent from
user department then the materials department place the indent to
suppliers, receiving the storage, inspection and issuing materials to
user departments.

PROCESS

FOR

RECEIVING

MATERIIALS

IS

ITS

INSPECTION.
Receipt of materials shall be of two types.
Self Consignment ( By Road / Post / Hand )
On Door delivery basis ( By Road / Post / Hand )

Self Consigned Materials:

After receipt of LR / RR from the concerned stores section
head shall verify the LR / RR particulars for the material ordered
particulars of LR / RR shall be recorded in LR / RR register.

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The stores assistant shall visit the respective transport officer /

RR copies to verify the no. of packages, physical condition of packing
and receipt of document like partys delivery chalana and transport
copy of invoice (modvat copy of invoice) and if any damage / nontallying of packages or documents shall arrange to get the materials
delivered from the transport office to the stores.
A case of any damages / missing of packages the stores
assistant shall take certification document from transport fee /
damages in order to claim transit insurance.
The certificate shall be submitted to concerned stores section
head.

DOOR DELIVERY BASIS MATERIAL:

The door delivery materials shall be delivered directly at the
receipts section of the stores. Upon receipt of materials and the
delivery documents at the stores the stores section head shall verify
the delivery documents for the following.
Security in ward stamp.
Correctness of material with regard to delivery documents.
Physical condition of material.

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The quantities indicated by TCS weightiest slip shall be

considered as final and finding by all parties for the purpose of
payment. Incase of TCS weigh bridge is not in operation for what
ever the reasons may be the weighment shall be taken at out side
weigh bridge by the head (materials) in such cases, the weightment
recorded at such bridges shall be final and binding by the parties.
Any damager quantity variation shall be noted on vendors
delivery challan / LR / RR and necessary. Intimation shall be send to
the vendor for action. Either for intimated to the insurance department
for claiming insurance.
The concerned stores section head shall prepare and authorize
stores in ward receipt (SIR) for the incoming materials.

UN-LAUNCHING OF INCOMING MATERIALS:

The bulk materials will be unloaded at the designated stores
yard as per layout map of stores.
Non-bulk materials shall be unloaded at the designated underinspection area of the stores.
The consignment after inspection declared as approved shall be
unloaded and stored at appropriate designated places to facilitate
tractability and FIFO issues where ever necessary.

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STORAGE OF INSPECTED MATERIA

Purchased materials will be stored issued for further
processing only at the acceptances of the material by the concerned
departments on the SIR.

BULK MATERIALS:
If the SIR indicates conformance to specification, the stores
office shall replace the under-inspection display board / jag
identifying the consignment with accepted indicator (green color).
Up date the computers system for stock control.
File the stores copy of the SIR in accepted SIRs file.
If SIR indicates non-conformance of specifications / the section
head shall replace the under-inspection.
Display board / log identifying the consignment with a rejected
indicator (red color).
Send the account copy to SIR to stores accounts.
File the stores copy of the SIR in rejected SIRs file.

NON-BULK MATERIALS:
If the SIR indicates conformance to specifications, the stores
officer shall,
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- Move the material from the under inspection area to its

designated.
- Bin-stores area along with the receipt tag.
- Up date the computer for stock control.
- Send the account copy to SIR to stores accounts
- File the stores copy of the SIR in SIRs file.
Non-bulk of materials from different consignment shall be
stored separately along with their respective lags to facilitate FIFO
issues.
The concerned stores heads periodically review the Qumran
time are to ensure prompt of the material, back to the vendors.
The concerned stores officer ensures that the storage facilities
provided for the materials are capable for preventing damage and
deterioration.
All hazardous materials will be stored separately as per
components will be stored in our conditioned rooms.
The storage godown must be provided with proper ventilation.

ISSUE OF MATERIALS TO USER DEPARTMENTS:

Materials drawn by the user departments from stores against
SIV stores issue vouchers duly signed by authorized person.

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Stores issue vouchers contain description of the materials,

cost center code, unit of measurement and quantity of material
required and the name of user department.
All materials issued of FIFO basis except in case of any
specific requirement from the user department.
Issue of materials done only from accepted materials lying in
stores.
The concerned stores section heads are authorized to issue
materials against SIVs.
In case of partial non-availability of the requisitioned
materials / items / the concerned section head intonated the
requisitioning Authority accordingly.
Prior to issue of materials the concerned stores assistants
clerks will record the six number of the received consignment on to
the SIV.
The material items issued will be updated on to the computed
system by concerned stores assistants/clerks.
Copy of the SIV shall be sent to the stores a/cs office
concerned stores section head maintain SIVs in the sequence of date.

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IDENTIFICATION OF MATERIALS & STORES:

That should be a place forever thing and everything should be
in its place. Provision of a good identification system in stores assists
those who try to keep everything in place. Depending on the stores
can have a variety of item in stock if may not be possible to remember
and decade these items inside the simply by their names.
One can do the task.
Tagging the items with a piece of paper or cloth.
Labels may be fixed on the items.
The coded number (or) any other identification mark may
be imposed on the items.
Painting on color-coding of items.

ADVANTAGES OF CODING ITEMS:

An asset in keeping records.

Facilitate quick identifications.
Mechanized accounting is possible.
Eliminates the chances of duplication of items.

METHOD OF CODING:

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Generally alphabets, numerals or a combination of both in

used for codification of items. The following methods can be used for
code construction.

1. Mnemonic Method:
Here alphabets closely associated with the name of the item
are used for example CT be used for chemical liters. This
method is useful when few types of items are to be stored.
2. Random Method:
Here both alphabets and numbers can be used randomly but
the method is arbitrary.
3. Scientific Method:
The items are divided into a number in to a number of
groups and each group is given some code. Then further subgrowing of an item is done on the basis of its shape and function
etc., the complete code of the item is written by combining the
sub codes of groups for that item.
TCS follows the same scientific coding method, these are
major classified in ten groups they are,
MAJOR CLASSIFICATIONS:

Primary materials
Sugar Crushing machine spares (including process)
Utility spares
Electrical spares

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Instrumentation spares
General group spares
General consumable items
Repairs and maintenance
Capital items

Availability Indicates (ninth digit)

For indigenous
For improved
Purpose of Stores:Store plays a vital role in the operation of a company. It is in
direct touch with the user department to the manufacturing divisions.
Further, stores is often equated directly with money, money is locked
up in the stores.

The functions 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 preservation to the
various items.

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3 To meet the demands of the consuming departments by proper

issues.
4

and account for the consumption.

To minimize obsolescence, surplus and scrap through proper

Codification, preservations and handling.

5 To highlight stock accumulation, discrepancies and abnormal

Consumption and effect control measure.
6

To ensure good housekeeping so that material handling,

material Preservation, stocking, receipt and issue can be done
adequately.

STORES LEDGER:
The stores ledger is very important because this facilitates the
calculation of the value of goods used for production purposes. It
indicates the issue of materials purchase of materials, finished goods.
There are several methods for calculating the issue price of the
materials.

(1) FIFO: Under this method is first issued from 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.
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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 replacements of materials will be low.

(2) LIFO: The issues 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.

(3) 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.

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(4) Perpetual Inventory System:The Charted Institute of Management accounts, London

defines the perpetual inventory as an a system of records maintained
by the controlling department, which reflects the physical movements
of stock and their current balance. Bin cards and the stores ledger
help the management in maintaining this system as they make a
record of the physical movements of the stock on the receipts and
issues of the materials and also reflect the balance in the stores
.Thus ,it is a system of ascertaining balance after every receipt and
issue of materials through stock records to facilitate regular checking
and to avoid closing down the firm for stock taking .to ensure the
accuracy of perpetual inventory records (i.e. bin cards and stores
ledger),physical verification of three stores is made by a program of
continuing stock taking.

(5) Simple average price:A price which is calculated by dividing the total of the prices of the
material to be priced could be drawn by number of the prices used in
that total.
Simple average price is calculated by dividing the total of
unit purchase prices of different lots in stock on the date of issue by
the number of prices used in the calculation and quantity of different
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lots is ignored. This method may lead to over-recovery or underrecovery of cost of materials from production because quantity
purchased in each lot is ignored.
Suppose, following are three different lots of materials in
stock when the material is to be issued:

(6)Weighted Average Price:A price which is calculated by dividing the cost of materials
in the stock from which the materials to be priced could be drawn by
the total quantity of materials in that stock.
The weighted average price takes into account the price and
quantity of the materials in store. In the example, the weighted
average price is

(7) Standard Price: Standard price is the predetermined price and both the
receipts and issues will be valued at this price. Therefore, this price is
neither the cost price nor the market price. The method is used by
concerned which follow standard costing. The difference between the
actual purchase price and the standard price is charged to an account
known as Purchase Price Variance Account.
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Location 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 dispatch. In stores layout, governing
criteria are easy movement of materials, good housekeeping, and
sufficient space for men and materials handling equipments, such as
shelves, 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 variety 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, large
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 an optimum
level. These factors are considered 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

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of power, etc., become quite important. It is also important 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 workday in and day out
in the stores receiving, checking, stocking, handling and issuing

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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:
1 Safety consciousness should be instilled in the minds of
stores, personnel through training programmers, visual aids
and literature.
2 Safety appliances, such as goggles, hand gloves, etc, must
be provided and their use must be encouraged.
3 Good housekeeping is essential. This means that gangways
must be clean, adequately wide so that movement of forklifts,
trolleys and
Industrial tractors are smooth. Stocking must be in
appropriate locations so that handling is minimum.
4 All stores equipment must be kept in good order. This
Includes adequate maintenance practice with regard to
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forklifts, overhead cranes, trolleys, conveyors, etc. Operation

must be trained in safety so that safety precautions are not
overlooked.
5 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.

Cost Aspects and Productivity:It is erroneously covered that stocks for high efficiency must
utilize every cubic meter of space. Very often such stocking may
drastically cut the speed of materials movements and create
bottlenecks apart from affecting overall safety.
Therefore maneuvering needs for handling equipment and for
minimizing the time required for stocking, and issue, must be borne in
the mind at the planning stage in order to ensure real efficiency.
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 and
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
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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.

CHAPTER -4
INVENTORY CONTROL TECHNIQUES
DATA ANALYSIS AND INTERPRETATION
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INVENTORY CONTROL
Inventory control renders to The process whereby the
investment in materials and parts carried in stock is regulated within
predetermined limits set in accordance with the inventory policy
established by the management.
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

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determining what, when and how much to purchase and how much to
have to stock for a given period of time.

The Need for Inventory Control: The rewards of inventory control system cannot be over looked
in the Indian context the idea behind this is,
1 Conserving valuable foreign exchange.
2 Release of capital.
3 Reduction in cost.

The primary objective of Inventory control is: To minimize the idle time caused by shortage of inventory and
inventory Availability of inventory.

INVENTORY CONTROL TECHNIQUES:

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INVENTORY CONTROL TECHNIQUES

Selective inventory control

1. ABC Analysis

Inventory management
techniques

1. EOQ (Economic Order Quantity)

2. XYZ Analysis

A. Ordering Cost.

3. VED Classification.

B. Carrying Cost.

4. FNS Classification.

2. System of Re-ordering.

5. SOS Classification.
6. S-D-E Analysis
7. HML Analysis
8. JIT Analysis
ECONOMIC ORDER QUANTITY: One of the major 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 in
which it has to be purchased on cash replenishment. These problems
are called order quantity problem and task of the firm is to determine
optimum inventory level involves two types of costs:

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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
EOQ (economic order quantity) =2AO /C
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EOQ=Economic Order Quantity

A=Total annual requirement for the item
O=ordering cost per order of that item
C=carrying cost

IMPORTANCE OF EOQ:
In a real situation demand is never deterministic even if demand
remains known over a range of problem values the starting point for a
design of an inventory system is EOQ even though by itself it is hot
an inventory system another importance of EOQ is its justifying the
conventional ABC and also elaborating it.
EOQ = S (M. Co)/ SCc
The annual ordering cost is them = MCo / EOQ
The annual carrying cost is

= (EOQ / 2) S.Cc

The total inventory cost per annum becomes =

MCo/EOQ + (EOQ/2) S.Cc.

ASSUMPTION OF EOQ:
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1. The firm knows with quantity the annual consumption of a

particular item of inventory.
2. The rate of consumption is steady over time.
3. The orders placed to replenish inventory are received at exactly
that point in time when inventories reach zero.
4. The ordering and carrying costs are constant over the range of
possible inventory levels.

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.

A Class Items:
A Class items are those which account 10 to20% having usage
value of 70 to 80%. Thus a high-test control should be exercises on
item A.

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B Class Items Maintenance:

As per the theory 20 to 30% of items account for the some
percentage of value. These are less important than A class items but
are costly enough to warrant more attention to their consumption.
These items cannot be over looked but need lesser degree of control
than those in class A.

C Class Items Maintenance:

The usage value of the C class items are low so there is a lesser
and no need for strict control when there is a need. For these items
ordered in large quantities.
VED Analysis:
VED analysis represents classification of items based on
critically the analysis classifies the items into 3 groups called vital,
Essential, And Desirable

HML Analysis:
HML analysis is the price-based analysis. This analysis is
generally used for control of spares. The items m under this analysis
is are classified into 3 groups, which are called High, Medium,
and Low.
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F-S-N Analysis:
F-S-N analysis is based on the consumption figures of the items.
The Items under this analysis are classified into 3 groups.
F-Fast moving
S- Slow moving
N- Non moving
X-Y-Z Analysis:
X-Y-Z analysis is based on value of the stock on hand. Items
whose inventory values are high are called X items while those
inventory values are low are called Z items and items are those
which have moderate inventory stock.

S-OS Analysis:
S-OS analysis is based on seasonality of the items and it
classified the items into two groups.
S- Seasonal
OS- Off Seasonal
S-D-E Analysis:

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S-D-E analysis classifies the items into 3 groups called scare,

Difficult, and Easy.

JIT Inventory Control System Analysis: JIT Analysis is about Just

In Time Philosophy which aims at eliminating waste from every
aspect of manufacturing and its related activities.

INVENTORY TURNOVER RATIO:

This ratio indicates the efficiency of the firm of selling its
products. It is calculated by dividing the cost of goods sold by the
average inventory.
If the cost goods sold is known then inventory turnover ratio
can be computed by dividing sales by average inventory of the yearend inventory.

COST OF GOODS SOLD

INVENTORY TURNOVER

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= ----------------------------------

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RATIO

YEAR

AVERAGE INVENTORY

COST OF

AVG

GOODS

INVENTORY

SOLD

RATIO

2004-05

34013.49

8664.115

3.926

2005-06

33186.56

8358.785

3.970

2006-07

40606.22

8519.79

4.776

2007-08

47616.63

9713.83

4.902

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2008-09

49272.30

12003.105

4.105

2009-10

51045.65

12148.2206

4.201

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INTERPRETATION:
The inventory management of in Thandava Co-operative
Sugar Industry excellent indeed. This is clearly visible in the
connection maintained in six years of study period. Comparing with
normal standards used in practice on inventory turnover ratio of times
is necessary.
Average stock levels increased over years but cost of goods
was kept under. Even though the graph indicating fluctuations.

RAW MATERIAL INVENTORY TURNOVER TATIO:

The ratio indicates the efficiency of firms raw material
consumed. It is calculated by material consumed dividing by average
material inventory.

MATERIAL CONSUMED
RAW MATERIAL INVENTORY TURNOVER TATIO = --------------------------------INVENTORY

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YEAR

MATERIAL

INVENTORY

RATIO

CONSUMED

2004-05

14771.49

8624.29

1.713

2005-06

13299.09

8093.28

1.643

2006-07

18123.05

8946.30

2.025

2007-08

19208.86

10481.36

1.832

2008-09

18857.55

13524.85

1.394

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2009-10
19364.27

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12354.56

1.567

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INTERPRETATION:
From the above table it can be interpret that raw material
turnover ratio is low in 2009-10 is 1.567 in Thandava Co-operative
Sugar Industry will be slowly increased and decreased. It is high in
the year 2006-07 is 2.025

WORK IN PROGRESS TURNOVER RATIO:

Work in progress turnover ratio unable to company in
establishing the time gape between different stages in a production
cycle and the efficiency with the production cycle gets completed.
It is calculated from cost of production divided by average
work in progress inventory.

COST OF PRODUCTION
WORK IN PROGRESS TURNOVER RATIO

-------------------------------------AVG WORK IN PROGRESS

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YEAR

COST OF

AVERAGE

PRODUCTION

WORK IN

RATIO

PROGRESS

2004-05

34013.49

128.55

264.59

2005-06

33186.56

313.08

106.00

2006-07

40606.22

863.33

47.03

2007-08

47616.63

1157.39

41.14

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2008-09

49272.30

2030.35

24.27

2009-10

51045.65

1905.67

26.78

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INTERPRETATION:

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From this ratio it can interpret that work in progress is high

in the year 2004-05 is 264.59 and it was decreased in the year 200910 is 26.78 in the Thandava Co-operative Sugar Industry. Inventory
consists of items currently used in the production.

INVENTORY TO NET WORKING CAPITAL RATIO:

The net working capital is the difference between the current

assets and current liabilities. It may be either positive or negative.
When it is positive current assets exceed current liabilities. When it is
negative current liabilities exceed current assets. Raw material work
in progress, finished goods, supplies and indirect material consist
inventory.

INVENTORY
INVENTORY NET WORKING CAPITAL RATIO =

-----------------------------------NET WORKING CAPITAL

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YEAR

INVENTORY

NET

RATIO

WORKING
CAPITAL

2004-05

8624.29

6528.88

1.320

2005-06

8093.23

1115.82

7.523

2006-07

8946.30

5602.12

1.597

2007-08

10481.36

8665.77

1.209

2008-09

13524.85

7926.33

1.706

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2009-10

12354.56

7684.44

1.607

INTERPRETATION:
With reference to table the ratio is coming negatively because
the current liability is more than the current assets in the year of 200506.

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Working capital refers to the difference between the current

assets and current liabilities. During the year 2005-06 it is high for
Thandava Co-operative Sugar Industry.

SUNDRY DEBTORS TURNOVER RATIO:

This ratio is also called as receivable ratio. This ratio measures

the accounts receivable in trims of number of day of credit sales
during a particular period. This ratio is calculated as fallows.

NET SALES
SUNDRY DEBTORS TURNOVER RATIO

-----------------------AVG DEBTORS

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YEAR

NET SALES

DEBTORS

RATIO

2004-05

44339.06

2687.77

16.497

2005-06

44459.21

2632.95

16.885

2006-07

48702.68

3489.86

13.955

2007-08

57888.64

4587.70

12.618

2008-09

62794.85

3874.91

16.205

2009-10

71548.77

3958.10

18.076

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INTERPRETATION:

The debtor turnover ratio, which is at top of normal industry

expectations failed in the year 2007 due to adverse trading conditions
effecting Thandava Co-operative Sugar Industry. It shows the quickly
debtors are converted into cash.
CURRENT RATIO:

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Current Ratio may defend as the relationship between

current assets and current liabilities. The Ratio is also known as
working capital ratio. This ratio is an indicator of the firms
commitment to the need of its short term liabilities

CURRENT ASSETS
CURRENT RATIO

= --------------------------------CURRENT LIABILITIES

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YEAR

CURRENT

CURRENT

ASSETS

LIABILITIES

2004-05

15300.09

8771.21

1.744

2005-06

15602.95

14487.13

1.077

2006-07

18165.08

12562.96

1.446

2007-08

22010.34

13344.57

1.649

2008-09

23901.35

15975.02

1.496

2009-10

25364.58

16984.22

1.493

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RATIO

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INTERPRETATION:

From this above table it can be interpret that current ratio is high
in the year 2004-05 at 1.744 and lower in the year 2005-06 at 1.077 .
It measures the solvency position of the firm. The solvency
position is increasing gradually.

WORKING CAPITAL TURNS OVER RATIO:

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Working capital turn over ratio indicates the velocity of the

utilization of net working capital. This ratio indicates the number of
times the working capital is turn over in the course of a year. This
ratio measures the efficiency with which the working capital is being
used by the firm. The working capital ration indicates whether
working capital (which relates to current assets and current liabilities )
has been effectively utilized in making sales or not.

SALES
WORKING CAPITAL TURNS OVER RATIO =

-----------------------------NET WORKING CAPITAL

YEAR

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NET

RATIO

Page

WORKING
CAPITAL

2004-05

49487.92

6528.88

7.579

2005-06

49756.16

1115.82

44.592

2006-07

53303.00

5602.12

9.515

2007-08

62824.41

8665.77

7.249

2008-09

65733.39

7926.33

8.293

2009-10

69245.98

7684.44

9.011

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INTREPRETATION:
In the year 2005-06 the working capital turn over ratio was
44.592 it was increased to due to increasing sales. Working capital is
refers to the difference between assets and lie abilities. It refers to the
firms net working capital.

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INVENTORY TO CURRENT ASSETS RATIO:

Inventory is one of the current assets excess or adequate

inventory will create problems to the company, inventor to current
assets ratio include how much quantity of inventory constitutes to
current assets the large size of inventories maintained by firm a
considerable amount of funds is requires to commit in them.

INVENTORY
INVENTORY TO CURRENT ASSETS = -----------------------------CURRRENT ASSETS

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YEAR

INVENTORY

CURRENT

RATIO

ASSETS

2004-05

8624.29

15300.09

0.564

2005-06

8093.28

15602.95

0.519

2006-07

8946.30

18165.08

0.492

2007-08

10481.36

22010.34

0.476

2008-09

13524.85

23901.35

0.566

2009-10

12354.56

25364.58

0.487

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INTREPRETATION:
In the year 2008-09 the inventory to current assets ratio is higher
at 0.56. In the 2007-08 the inventory to current assets ratio is lower in
at 0.476.It reflects how efficiently the company managing its
resources.

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AVERAGE COLLECTION PERIOD RATIO:

If the period or number of days for which the book debts remain
outstanding an average collection period is computed by dividing the
number of days in a year by the debtor turnover.

365
AVERAGE COLLECTION PERIOD =

---------------------------------------DEBTOR TURN OVER RATIO

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YEAR

PERIOD

DEBTOR

RATIO

TURN OVER

2004-05

365

16.497

22.125

2005-06

365

16.885

21.617

2006-07

365

13.955

26.155

2007-08

365

12.618

28.927

2008-09

365

16.205

22.524

2009-10

365

18.076

20.192

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INTERPRETATION:
The average collection period is higher in the year 2007-08 at
28.927 and lower in the year 2009-10 at 20.192.It requires the number
of days the debtors converted into cash.

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COST OF GOODS SOLD RATIO:

Cost of goods sold ratio is obtained by dividing cost of goods

sold to the net sales. Cost of goods sold is the difference between net
sales to the gross profit.

COST OF GOODS SOLD

COST OF GOODS SOLD RATIO =

--------------------------------NET SALES

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YEAR

COST OF

NET SALES

RATIO

GOODS
SOLD

2004-05

34013.49

44339.06

0.767

2005-06

33186.56

44459.21

0.746

2006-07

40606.22

48702.68

0.834

2007-08

47616.63

57888.64

0.823

2008-09

49272.30

62794.85

0.785

2009-10

51045.65

71548.77

0.713

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INTERPRETATION:
Cost of goods sold ratio discloses the information related to cost
of goods sold and net sales. During the period 2006-07 and 2007-08
this ratio scores a highest ratios that is 0.834 and 0.823.The cost of
goods is refers to the difference between the net sales to the gross
profit.

FINISHED GOODS TO INVENTORY TURN OVER RATIO:

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This ratio is obtained by dividing finished goods to the inventory.

FINISHED GOODS
FINISHED GOODS INVENTORY TURN OVER RATIO = --------------------------INVENTORY

YEAR

FINISHED

INVENTORY

RATIO

GOODS

2004-05

1839.26

8624.29

0.213

2005-06

190.80

8093.28

0.024

2006-07

1163.43

8946.30

0.130

2007-08

2199.84

10481.36

0.209

2008-09

4420.48

13524.85

0.327

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2009-10

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4789.73

12354.56

0.387

INTERPRETATION:
This ratio obtains highest value in the year 2009-10 at 0.387 and
gets lowest value at 0.024 in the year 2005-06. It represents the final
products, which are available for sale.

INVENTORY CONVERSION PERIOD:

It is the ratio between days in a year to the inventory turn
over ratio. Inventory turnover is the fraction of net sales to the
average inventory.

DAYS IN A YEAR
INVENTORY CONVERSION PERIOD

= -----------------------------------------INVENTORY TURN OVER RATIO

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YEAR

DAYS IN A

INVENTORY

YEAR

TURNOVER

RATIO

RATIO

2004-05

365

3.926

92.969

2005-06

365

3.970

91.939

2006-07

365

4.776

76.423

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2007-08

365

4.902

74.459

2008-09

365

4.105

88.916

2009-10

365

4.201

86.88

INTERPRETATION:
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This ratio shows the relation between days to the

inventory turn over ratio. It is higher in the year 2004-05 at
92.969.and lower in the year 2007-08 at 74.459

RAW MATERIAL AND FINISHED GOODS LEVELS:

YEARS

AVERAGE RAW
MATERIAL
HOLDING

AVERAGE
FINISHED
GOODS HOLD

2004-05

100.99

16.85

2005-06

122.48

1.81

2006-07

67.03

8.97

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2007-08

53.85

13.90

2008-09

50.67

27.72

2009-10

57.89

23.15

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Series 1= Average Raw Material Holding

Series 2=Average Finished Goods Hold

INTERPRETATION:
The average raw material holding is higher in the year
2005-06 in 122.48 and lower in the year 2008-09 in 50.67. The
average finished goods is higher in the year 2008-09 in 27.72
and lower in the year 2005-06 in 1.81

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CHAPTER -5
SUMMARY

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SUMMARY
The THANDAVA CO-OPERATIVE SUGARS LIMITED
(NOC.181) was registered in 1957 under Andhra Pradesh Cooperative society registration Act. Sri S.R.V.V. KRISHNAM RAJA
BHADURU (laid) the foundation stone of this sugar factory in 1957.
The Thandava Co-operative Sugars Limited is established with
50 acres. The machinery was supplied and elected by ISGEC JOHN
THOMPSON, NIZAM SUGARS & KCP LTD. The crushing of the
factory is 1250 tons per day.
The Thandava Co-operative Sugars Limited located at
Payakaraopeta, Yelamanchili Taluka, Visakhapatnam District in
Andhra Pradesh, National Highway 5 (Chennai to Calcutta) about 100
km away. Administrative office located in the factory premises.
Co-operative Society should be organized on the principles of
voluntary services and it should provide maximize participation to its
members in decision making benefits and in evaluation of the
performance.

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A popular definition of the term co-operative is that is an

association of persons, or households usually of a limited means we
have agreed to work together on a continuous basis to pursue one or
more common interest and for that purpose it had formed as
organization, which jointly controlled and whose costs risks and
benefits are excitably shares in the membership. Equity social justice
and self-help are the major concern of co-operative.
In our country there are 213 co-operative sugar factories and in
our state 18 co-operative factories are running. Among them there are
only four factories running with profits and remaining 14 running in
losses.
Thandava Co-operative Sugars Limited agro based seasonal
factory has been providing employment to the surrounding villages
people to the factory. The factory has been supplying different loans
to the members sugar cane growers at the rate of subsidies less
interest to by measures factors modern appliance and denying bore
wells for increase sugar cane production.
In these way sugar cane growers raising this living standards.
The looks after each and every that is going on in the factory. He coordinate all the five departments activities.

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The administrative department is the back bone of this factory.

Under this department many things in the factory security office, time
office, stores, sugar god owns, marketing etc.
The administrative office also looks after the welfare of the
employees. Chief account officer has to attend all works relating to
the many transaction of the factory.

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CHAPTER -6
FINDINGS & SUGGESTIONS
BIBLIOGRAPHY

FINDINGS
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 The absence of proper inventory classification system based on a

variety of practical norms like consumptions rate importance in
production.
Lead time for the items is very high. This is much in a class
items.
The system computers must be further improved which will
reduce work load no proper policy for control inventory norms.
For example consumption rate.
The codification followed may result frequent misunderstanding
material requisition orders.
There is no proper and good communication between the
purchases and stores dept.., causes procedural delays.
Conversion period also varying from time to time i.e., raw
materials to finished goods.
Most of the employees are satisfied with there hygienic
conditions of canteen.
90% dissatisfaction towards crche facility.

89% of the employees are satisfied with the uniforms provided.

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 Most of the employees are satisfied with the scholarships

provided to children.

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SUGGESTIONS
Finding of items that reached the re order level and raise the
procurement indent is done by the stores clerk. But this can be
done by the system itself by setting the appropriate system
software programmed it will reduce the work load.
Investment in slow moving and non moving items is high and it
must be reduced, freely available items are also maintained at
stock levels. Excess investment in the available items must be
reduced as the transportation is at advanced stage. So no need to
maintain then at large quantity.
Centralization of stores in name itself indicating. But actually
there is a diver shifted stores and located at different places
which will lead to lack of communication and high over head
and maintenance charges. So they must come under one roof.
The delivery dates are delayed too, which should be checked.
The pricing policy should be revised and it should be in such
away that it covers at least the cost of production.
Training and development programs should be induce position
attitude participants.
Maximum utilization of capacity should be done.
Reduction in man power to a certain extent is advisable.
Simple codification procedure may exist to correct the lacunae
in the existing system.
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 Suppliers are located at a distance from the company. Suppliers

are scattered all over north Indian that resulted in higher lead
time. So there is a need to locate the local suppliers.
For efficient inventory management proper item classification
system is necessary i.e., establish of ABC and VEP analysis.
Conversion period of raw materials to finished goods is varying
from time to time; this variation can be reduced by better co
ordination of the activities of all departments concerned.
The ordering cost must be reduced by the sundry expenses like
telephone charges and traveling expenses.
For effective inventory management following techniques have to
be followed.
VED analysis vital / essential and desirable categories
F-S-N analysis fast moving slow moving and non moving
categories.
HLM analysis high cost, low cost and medium cost analysis.
SOS analysis seasonal and off seasonal analysi

BIBLIOGRAPHY

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1. FINANCIAL MANAGEMENT

I.M.PANDEY

2.FINANCIAL MANAGEMENT

S.N.MAHESWARI

3. FINANCIAL MANAGEMENT

KHAN & JAIN

4. PRODUCTION AND OPERATION

MANAGEMENT

MARTIN K STARR

5. PRODUCTION AND OPERATION

MANAGEMENT
6. COST ACCOUNTING

KANISHKA BEDI
B.M LALL NIGAM
& I C JAIN

7. FINANCIAL DECISION MAKING

JOHN.H.HAMPTON

Annual reports of Thandava Co-operative Sugars Limited from

2004 to 2010

[Type text]

Page 127