CHAPTER 1

INTRODUCTION

MEANING AND NATURE OF INVENTORY:

Inventory can be referred to as sum of the value of raw materials fuels and lubricants, spare parts, maintenance consumables, semi processed materials and finished goods, stock at any given point of time. In large companies inventory place a most significant part of the current assets. The business has about 15 to 30 assets. Inventory is composed of assets that will be sold in feature in the normal course of business operations. The assets which firms stores as inventory is anticipation of need are raw materials, work in progress and finished goods. of inventories in total

MEANING OF INVENTORY MANAGEMENT:

Inventory management consists of maintaining for a given financial investment an ade!uate of something in order to meet and accepted pattern of demand. Inventory considers control over costs of inventory on one hand and handles the si"e of inventory on other hand. #ontrolling investments in inventories constitute crucial part in current assets.

An efficient inventory controllin !y!te" #ill $eci$e, $hat to purchase $hen to purchase %ow to purchase &i"e of purchase 'nd from where to purchase (&uppliers) The main purpose of inventory management is to ensure 1. +. 3. *e!uired !uantity of availability of raw materials ,inimi"e the investments in inventories ,aintain reasonable stock levels not e-cess or not under stocks.

INVENTORY CONTOR%:
Inventory control is the system devised an adopted for controlling investments in inventory. It involves inventory planning and decision making with regard to the !uantity and time of purchase, fi-ation of stock levels, maintenance of stock records and continuous stock . taking.

O&'ECTIVE( OF INVENTORY CONTRO%:

Inventory control includes not only of the physical stocks but also of the funds invested on it.

T)*t t#in o+,ective! of inventory control *re1. +. To maintain a balanced inventory. To keep the amount invested in inventory as low as possible without hampering either flow of the production or deliveries of finished goods. To avoid both under stocking and over stocking of inventory. To eliminate duplication in ordering or replenishing stocks. This is possible with the help of centrali"ed purchasing. To ensure continues supply of materials, spares and finished goods so that production should not suffer and any time and customers demand should also be met. To design proper structure for inventory management. #lear cut accountability should be fi-ed at various levels of the organi"ations. To ensure right !uality goods at reasonable prices. &uitable !uality standards will ensure proper !uality of stocks. The price analysis, the cost analysis will ensure paying of proper prices. To facilitate furnishing of data for short term and long term planning and control of inventory.

NEED FOR INVENTORY MANAGEMENT:

In this competitive business world each and every business organi"ation need inventory management system for determining what to order, when to order, where and how much to order so that purchasing and storing costs are the lowest possible without affecting production and sales. Thus, inventory management control incorporates the determination of the optimum si"e of the inventory/how much to be order and when after taking into consideration the minimum inventory cost. The overall inventory management includes design and inventory control organi"ation with proper accountability establishing procedure for inventory handling disposal of scrap, simplification, standardi"ation and codification of inventories, determining the si"e of inventory holdings, maintaining record points and safety stocks, economic order !uantity, '0# analysis and 1'234 analysis and finally framing an I5145T6*7 ,'53'2.

O&'ECTIVE OF THE (TUDY

The main ob8ective of the pro8ect work is to study and analy"e and preparation I5145T6*7 ,'5'94,45T in :3'*I #ement.,

T)e o+,ective! *re:

1. +. 3. <. 5. >.
?.

;urchasing procedure of the inventories. #lassification of inventories. #odification of inventories. 'naly"e the records of stock levels. 'naly"e the =IT system of :3'*I #ement. 'naly"e the two bin system. 'naly"e the inventory turnover ratio.

METHODO%OGY
To attain the ob8ective of studying the inventory of :3'*I #ement Industries 2td. The information has been collected in two ways@ 1. ;rimary data +. &econdary data

Pri"*ry D*t*@
In ;rimary data the analysis of purchasing procedure, inventory data, inventory turnover ratio, stock levels, '0# analysis, Two bin system, =IT has made possible by the discussions with various administrative e-ecutives and other concerned people of :3'*I #ement industries 2td.

(econ$*ry D*t*:
The &econdary data has been collected from annual reports of organi"ation, internet and books.

Met)o$olo y:
Aor analysis purpose I am used following techni!ues 1. '0# 'nalysis, +. *atio 'nalysis 3. 46B ,ethod etc

Co".*ny/! co".etitor! *re Orient Ce"ent- %0T- Ultr*tec) *n$ ACC Ce"ent %i"it*tion!: 1 + The study period of <5 days as prescribed by university The study is limited unto the date and information provided by :3'*I #ement Industries 2td and its annual reports 3 The report will not provide e-act 0udgetary &ystem status and position in :3'*I #ement Industries 2tdC it may vary from time to time and situation to situation. < This report is not helpful in investing in :3'*I #ement either through disinvestments or capital market. 5 The accounting procedure and other accounting principles are limited by the company changes in them may vary the actual and budget performance.

CHAPTER II

REVIE1 OF %ITERATURE

INVENTORY MANAGEMENT 23UARI CEMENTINDU(TRIE(

INTRODUCTION: 4very enterprise needs inventory for smooth running of its activities. It serves as a link between the production and distribution process. The greater a time lag, the higher the re!uirement of inventory the unforeseen fluctuation of inventory demand and supply of goods, fluctuating inventory prices, necessitate the need for inventory management. The investment inventory constitutes the most significant part of the current assets inventory of the under taking. Thus it is very essential to have a proper control and management of inventory.

Me*nin *n$ n*t4re of inventory:

The general meaning of inventory is stock of goods or list of goods inventory. In accounting language it means stock of finished goods. Aor inventory manufacturing concern it includes raw materials, work in progress, consumables finished goods and spares etc. 15

R*# "*teri*l!:
If forms a ma8or input inventory in organi"ation. The !uantity of raw materials re!uired will be determined by the rate of consumption.

1or6 in Pro re!!:

The work in progress is that stage of stocks, which are in between raw materials and finished goods.

Con!4"*+le!:
These are the material, which are needed to smoothen, the process of production. These do not directly go into production, but act as catalyst.

Fini!)e$ Goo$!:
These are the goods, which are ready to sale for the consumers. The stock of finished goods provides as buffer between production and market.

(.*re!:
&pares also from a part of inventory. The stocking policies differ from industry to industry. Inventories cost account for nearly 55 percent of the cost of production, as it is clear from an analysis of financial statements of large number of private and public sector organi"ations. &o, It essential to establish suitable procedures for proper control of materials from the time of purchase order placed with supplier until they have been consumed properly and accounted for.

Definition:
The term inventory refers to assets, which will be sold in future in the normal course of business operations. The assets, which the firm stores as inventory in anticipation of need, are raw materials, work/in/progressDprocess, and finished goods.

Inventory often constitutes a ma8or element of a total working capital and hence ft has been correctly observed, E9ood inventory management is good financial managementF.
I nventory control is a system, which ensures the provision of the

re!uired !uantity at the re!uired time with the minimum amount of capital. Inventories are the second largest asset category for the

manufacturing firms ne-t to plant and e!uipment. Inventory control includes scheduling, the re!uirements,

purchasing, receiving and inspecting, maintaining stock records and stock control. Inventory control is a matter of coordination. ' proper material control helps in improving the input/output ratio.

O+,ective of inventory "*n* e"ent:

The main ob8ective of inventory management is operational and financial. The operational ob8ect means availability of materials and spares in sufficient !uantities for undisturbed flow of production. and minimum working capital should be locked in it. The financial ob8ective means investments in inventories should not remain idle

THE OTHER O&'ECTIVE( ARE@

1) To ensure continues supply of inventories to the production. +) To avoid over stocking and under stocking. 3) To maintain optimum level of investment in inventories. <) To keep material cost under control, to keep low cost of production. 5) To eliminate duplication in ordering or replacing stocks. >) To minimi"e losses through, deterioration, pilferage, wastage and damages.

?) Gesigning structures for good inventory management. H) ;erpetual inventory control of materials. To ensure right !uality of goods at reasonable prices. 'nalysis of prices cost and value.

10) To facilitate data for short and long term planning and control of inventory.

NEED FOR INVENTORY CONTRO% :

If a cost accounting system is to be effective there must be a proper control of inventory and supplies form the time orders are placed with suppliers until they have been effectively utili"ed in production.

,aterials are e!uivalent to cash and they make up an important part of the total cost. It is essential that materials should be properly safeguarded and correctly accounted. ;roper control of material can make a substantial contribution to the efficiency of a business. The success of a business concern largely depends upon efficient purchasing, storage, consumption and accounting. In a large firm the planning and routing department is responsible for arranging how and where the work is to be done and issue instructions. It sets definite time schedules so that necessary materials are delivered to the proper department in proper time not too long before hand neither lest it should interfere with other work nor after they are re!uired as this result in idle time. 0usiness firm keep inventories for different purposes. 4very firm big or small trading or manufacturing has to maintain some minimum level of inventories. 0ased on some motives the inventories are maintained. *5

Tr*n!*ction "otive!:
4very firm has to maintain some level of inventory to meet

the day/to/day re!uirements of sales, production process, customer demand etc. In this finished goods as well as raw material are kept as inventories for smooth production process of the firm.

+5

Prec*4tion*ry "otive :
' firm should keep some inventory for unforeseen

circumstances also like loss due to natural calamities in a particular area, strikes, lay outs etc so the firm must have some finished goods as well as raw/materials to meet circumstances .

c5

(.ec4l*tive "otive:
The firm may be made to keep some inventory in order to

capitali"e an opportunity to make profit due to price fluctuations. REA(ON( AND &ENEFIT( OF INVENTORY: The optimal level of maintaining inventory is a sub8ective matter and depends upon the features of a particular firm, 7i8 Tr*$in fir": In case of a trading firm there may be several reasons for holding inventories because of sales activities that should not be interrupted. ,ore over it is not always possible to procure the goods whenever there is a sales opportunity as there is always a time gap re!uired between purchase and sale of goods. Thus trading concern should have some stock of finished goods in order to undertake sales activities independent of the procurement schedule. &imilarly, a firm may have several incentives being offered in terms of !uantity discounts or lower price etc by the supplier of goods. There is trading concern inventory helps in a de/inking between sales activity and also to capitali"e a profit of opportunity

due to purchase made at a discount will result in lowering the total cost resulting in higher profits for the firm. 7ii8 M*n4f*ct4rin fir": ' manufacturing firm should have inventory of not only the finished goods, but also of raw materials and work/in/progress for following reasons.
7* 8

Uninterr4.te$ .ro$4ction !c)e$4le:

4very manufacturing firm must have sufficient stock of raw

materials in order to have the regular and uninterrupted production schedule. If there is stock out of raw materials in order to have the regular and uninterrupted production schedule. If there is stock out of raw material at any stage of production process then the whole production may come to a half. This may result in custom dissatisfaction as the goods cannot be delivered in time more over the fi-ed cost will continue to be incurred even if there is no production.

Aurther work/in/progress would let the production process run smooth. In most of manufacturing concerns the work in progress is a natural outcome of the production schedule and it also helps in fulfilling when some sales orders, even if the supply of raw/materials have stopped.

7+8

In$e.en$ent !*le! *ctivity :

Inventory of finished goods is re!uired not only in trading

concern but manufacturing firms should also have sufficient stock of finished goods. The production schedule is a time consuming process and in most of the cases goods cannot be produced 8ust after receiving orders. Therefore, every firm has to maintain minimum level of finished goods in order to deliver the goods as soon as the order is received.

E((ENTIA%( OF INVENTORY CONTRO% :

The important re!uirements of Inventory control are@

The proper co/ordination among the departments involved in buying, receiving, inspecting, ciorage, consuming and accounting.

#entrali"ation

of

purchasing

under

the

control

of

competent buyer whenever possible. ;roper scheduling of material re!uirements. ;roper classification of materials with codes, material standardi"ation and simplification. The operation of a system of internal check to ensure that all transactions involving materials and e!uipment are checked by properly authori"ed and independent persons.

The storage of materials is well planned and kept in properly. ;lanned and kept in properly designated location, sub8ect to ade!uate safeguard and supervision.

The operation of a system of perpetual inventory so that it is possible to determine at any time, the amount and value of each kind of material in stock.

' suitable method of valuation of materials is essential because it affects the cost of 8obs and the value of closing stock of materials.

O+,ective! of Inventory Control:

The main ob8ectives of inventory control are@ To maintain a large si"e of inventory for efficient and smooth production and sales operation. To maintain a minimum investment in inventories to ma-imi"e profitability. To ensure a continuous supply of raw materials to facilitate uninterrupted production. To maintain sufficient stocks of raw materials in periods of short supply and anticipate price change. ,aintain sufficient finished goods inventory for smooth sales operation and efficient customer service. ,inimi"e the carrying cost and time. #ontrol investment in inventories and keep it at an optimum level.

A$v*nt* e! of Inventory Control :

The following are suggested advantages@ 4liminates wastage in use of material, It reduces the risk of loss from fraud and theft. It helps in keeping perpetual inventory and other records to facilitate the preparation of accurate material reports to management, To reduces the capital tied up in inventories, It reduces cost of storage, It furnishes !uickly and accurately the value of materials used in various department. It prevents delays in production due to lack of materials by supplying, proper !uantities at the right time.

Di!*$v*nt* e! of Inventory Control:

4very firm has to maintain optimal level of inventories. It not the following will be the result in form of losses. 6pportunity cost@ 4very firm has to maintain inventory for that some investment is needed it is known as 6pportunity cost and handle the investment in inventory are more the funds are blocks up with inventory. 4-cessive inventories@ It will lead to firm losses due to e-cessive carrying costs and the risk of li!uidity. It is also referred as Ganger level.

 Inade!uate Inventory@ it is another danger which results is production hold/up and failure to meet delivery commitments .In ade!uate raw materials and work /in /process inventors will results in fre!uent production interruptions .It finished goods are not sufficient customers may shifts to competitors. Ganger due to physical decoration@ It is one of the reasons with the inventories due to maintaining stocks at high levels they will be deteriorated due to passage of time, sometimes due to mishandling or improper storage facilities.

Co!t! involve$ in inventory:

4very firms maintains inventory depending upon re!uirement and other features of firm for holding such inventory some cost will be incurred there are as follows@

7*8

C*rryin Co!t 9
This is the cost incurred in Ieeping or maintaining an inventory

of one unit of raw materials, work/in /process or finished goods. %ere there are two basic cost involved .

7i8

Co!t of !tor* e :
It includes cost of storing one unit of raw materials by the firm.

This cost may be for the storage of materials. 2ike rent of spaces occupied by stock, stock for security, cost of infrastructure, cost of insurance, and cost of pilferage, warehousing costs, handling cost etc.

7 ii8

Co!t of fin*ncin

This cost includes the cost of funds invested in the inventories .It includes the re!uired rate of return on the investments in inventory in addition to storage cost etc. The #arrying cost include therefore both real cost and opportunity cost associated with the funds invested in the inventories. The total carrying cost is entirely variable and rise in directly proportion to the level of inventories carried. Total carrying cost J(carrying #ost per unit) - ('verage inventory)
7 +8

Co!t of or$erin

The cost of ordering includes the cost of ac!uisitions of inventories. It is the cost of preparation and e-ecution of an order including cost of paper work and #ommunicating with the supplier. The total ordering cost is inversely proportion to annual inventory of firm. The ordering cost may have a fi-ed component, which is not affected by the order si"e@ and a variable component, which changes with the order si"e. Total 6rdering #ost J (5o. 6f orders) - (cost per order).
7c8

Co!t of !toc6 o4t:

It is also called as %idden cost. The stock out is the situation

when the firm is not having units of an item in stores but there is a

demand for that Item either for the customers or the production department .The stock out refers to "ero level inventory .&o there is a cost of stock out in the sense that the firm face a situation of lost sales or back orders .The stock outs are !uite often e-pensive. 4ven the good will of firm also be effected due to customers dissatisfaction and may lose business in case of finished goods, where as in raw materials or work in process can cause the production process to stop and it is e-pensive because employees will be paid for the time not spend in producing goods. The carrying cost and the ordering cost are opposite forces and collectively. They determine the level of inventors in a firm. Total cost J(cost of items purchased) K(Total #arrying and ordering cost)

V*l4*tion of Inventory:
The methods of valuing inventory are combination of the actual cost and replacement cost plans. The chief advantage of the cost or net reali"able value rule is that it is conservative. %ence the methods of 1aluation of inventory are !uite independent of system of mincing.

In balance sheet closing stock is shown under current assets and is also credited to manufacturing or trading accounts. The inventories are valued on the basis as follows.

#ost of raw materials in stock may include freight charges and carrying cost. 0ut such cost should not e-ceed market price,

$ork /in /process is generally valued at cost, which includes cost of materials, labor. 'nd the proportionate factory overhead, as it is reasonable according to degree of completion,

#ost of finished goods wound normally to be total or full cost it includes prime cost plus appropriate amount of the overhead. &elling and distribution cost is deducted on the other hand work in progress may be valued at work in progress may be 1alued at work cost, marginal cost, prime cost or, even at direct materials.

I((UE PRICING METHOD( : There are two categories@ 7i8 7ii8 Co!t .rice!: AIA6 (Airst in Airst out) 2IA6 (last in first out) &pecific price 0ase stock price %IA6 (highest in first out) Derive$ fro" co!t .rice!:

&imple average price

 $eighted average price ;eriodic simple average price ;eriodic weighted average price ,oving simple average price ,oving weighted average price 7iii8 Notion*l .rice!: &tandard price Inflated price *e/use price *eplacement price

Fir!t in Fir!t o4t 7FIFO8:

This is the price paid for the material first taken into stock from which the material to be priced could have been drawn.

3nder this method stocks of materials may not be used up in chronological order but for pricing purpose it is assumed that items longest in stock are used up first. The method is most suitable for use where in material is slow/moving and comparatively high unit cost.

A$v*nt* e!: ;rice is based on actual cost and not on basis of appro-imations such as no profits or losses arises by reasons of adopting this method. The resulting stock balance generally represents fair commercial valuation of stock. It is based on traditional principles.

Di!*$v*nt* e!:
The number of calculations in the stores ledger involved tends to be complicated with increase in clerical error. The cost of consecutive similar 8obs will differ if the price changes suddenly, In times of rising prices, the charge to production is unduly low as the cost of replacing the material will be higher.

%*!t in fir!t o4t 7UFO 8

This is the price paid for the material last taken into stock from which the materials to be priced could have been drawn. This method also ensure material being issued at the actual cost. Its use is based on the principle that costs should be as closely as possible related to

current price level. 3nder this method production cost is calculated on basis on replacement cost.

A$v*nt* e!:
;roduction is charged at the most recent prices so that it is based on the principle that cost should be related to current price levels. It obviates the necessity for continuously ascertaining the replacement price. 5either profit nor loss is usually made by using this method. In the times of rising prices there is no wind fall profit as would have been obtained under AIA6 method.

Di!*$v*nt* e!:

5eeds more clerical work. #ompassion among similar 8obs is very difficult. &tock valves relating to prices of the oldest cost on hand may be entirely out of the current replacement prices .

1ei )te$ *ver* e .rice:

This is the price which is calculated by dividing the total cost of material in the stock from which the material to be priced have been drawn, by the total !uantity of material in the stock. This method differs from all other methods because here issue prices are calculated

on receipts of materials and not on issue of materials. Thus as soon as new lot is received a new price is calculated and issues are then taken.

A$v*nt* e!:
This method is advantageous where the price varies widely as its use even out the effect of these wide variations. The basis of price calculations is a simple one involving only the division of total amount of material in stock by !uantity in stock. #alculation of new prices arises only when receipt of stocks are received. &tock records under this method give a fair indication of the stock values, which can be used in financial analysis.

Di!*$v*nt* e!:
This method is completed than simple average because it takes into consideration the total !uantities and total costs in stock.

;rofit or loss may be incurred as in simple average price, 's 2IA6 or AIA6 this method calls for many calculations, In order to calculate the accurate value of issues the average price must normally be calculated to four to five decimal places .

 (t*n$*r$ .rice:
It is the predetermination of fi-ed price on basis of a specification of all factors affecting price like the !uantity of materials in hand and to be normally purchased and rate of discount compared with e-isting price including or e-cluding freight and ware housing e-pense. ' standard price for each material is set and the actual price paid is compared with standard. It is paid e-ceeds the standard a loss will be reali"ed if not profit will be obtained. A$v*nt* e!:

This method is easy to operate. #omparing the actual prices with the standard price will determine the efficiency of purchase department. The effect of price variations is eliminated from 8ob costs. It reduces classical costs by eliminating detailed cost records. In times of inflation or price fluctuations is very difficult to fi- a standard price. This method also incurs a profit or loss on issues and closing stock.

Infl*te$ .rice :

This is the price, which includes a charge designed to cover the cost of contingencies or related costs. This price includes not only the cost involved in bringing the material to the purchases premises but also the loss due to evaporation and breakage etc. as well as carrying costs.

MATERIA% PURCHA(ING AND PURCHA(ING PROCEDURE

;urchase of material is one of the important functions of material management. 't times more than 50 Aunctions of ;urchase Gepartment 1. Geciding the items to be purchased based on demand. +. &election of sources of supply. 3. #ollection the price information. <. ;lacing the ordered. 5. Aollow/up the ordered. >. #hecking the invoices. ?. ,aintenance of purchase records.
H. ,aintenance of vendorsF relations.

of the total product cost is material.

PURCHA(E PROCEDURE ;urchasing procedure start with the initiation of purchase re!uisitions and ends with the receipt of materials in the stores. CENTERI3ED PURCHA(ING It is most important and relevant to large organi"ations operating deferent plants may or may not be located at different places. Aor a single

place organi"ation decentrali"ation might be feasible on a very limited place. 0ut where as , L , 2td., is a multiple plants operating organi"ation. In ,ahindra and ,ahindra #entrali"ed purchasing procedure is following to purchase of materials. #entrali"ed purchasing avoids duplications of efforts and working at cross purpose from one plant to another.

#entrali"ed purchasing permits consolidation of order of materials commonly used for two or more plants. The ultimately results in greater buying power, favorable contracts and trade agreements.

4asier to maintain the !uality of purchased parts D items through centrali"ed testing and inspection. testing and inspection facilities. It is also possible to conduct

#entrali"ed purchasing permits to avail facilities like !uantity discounts and cash discounts thus its helps to reduce cost.

It is beneficial to vendor also in case the si"e of order constituted ma8or proportion of his total production capacity

TECHNI:UE( OF INVENTORY MANAGEMENT :

,ain problems in inventory management are to answer. 're all items of inventory important if not what are items to be given more importanceM $hat should be the si"e of the order for replenishment is placedM $hat should be the over levelM

To answer these following techni!ues are used,

A&C An*ly!i! Econo"ic Or$er :4*ntity VED An*ly!i! RE;ORDER %evel (*fety (toc6 '4!t;in;ti"e Inventory

A&C An*ly!i! :
It is based on proposition that

,anagerial items and efforts are scare and limited &ome items of inventory are more important than others.

A&C ANA%Y(I(:
'0# analysis classifies various inventory into three sets or groups of priority and allocates managerial efforts in proportion of the priority the most important item are classified into class/', those of intermediate importance are classified as Nclass/0N and remaining items are classified into class/#E. The financial manager has to monitor the items belonging to monitor the items belonging to different groups in that order of priority and depending upon the consumptions. The items with the highest value is given top priority and soon and are more controlled then low value item. The re/rational limits are as follows. C*te ory ' 0 # Proce$4re: Items with the highest value is given top priority and soon. < of Ite"! 5/10 10/+0 ?0/H5 < of tot*l "*teri*l! ?0/H5 10/+0 5/10

There after cumulative totals of annual value of consumption are e-pressed as percentage of total value of consumptions, Then these percentage values are divided into three categories. '0# analysis helps in allocating managerial efforts in

proportion to importance of various items of inventory .

ECONOMIC ORDER :UANTITY:

'fter various inventory items are classified on the basis of the '0# analysis the management becomes aware of the type of control that would be appropriate for each of the three categories of the inventory items.

The determination of the appropriate !uantity to be purchased in each lot to replenish stock as a solution to the order !uantity problems necessitates resolution of conflicting goals. 0uying in a higher average inventory level will assure, &mooth production D sale operation and. 2ower ordering or setup costs. 0ut it will involve higher carrying costs. 6n the other hand small orders would reduce the carrying cost of inventory by reducing the average inventory level but the ordering costs would increase, as there is a likelihood of interruption in operations due to stock/outs. ' firm should not place either too high or small orders on the basis of a tradeoff between benefits derived from the

availability of inventory and the cost of carrying that level of inventory, appropriate or optimum level of order to be placed should be determined. The optimum level of inventory is popularly referred to as the economic order !uantity or economic lot si"e. It may be defined as that level of inventory order that minimi"es the total lost associated with inventory management. It is based on some assumptions, which are restrictive.

The firm knows with certainty the annual usage of a particular item of inventory.

*ate at which the firm uses inventory is steady over time.

The orders placed to replenish inventory stocks are received at e-actly that point in time when inventories reach "ero.

EO: c*n +e ill4!tr*te$ +y Trial and error approach, ,athematical approach. Tri*l *n$ Error *..ro*c):

In this approach the procedure of procuring the inventory is assumed the smaller the lot the lower is average inventory and vice versa and high average inventory would involve high carrying costs.

This approach is used for determination of 46B uses different permutations and combinations of lots of inventory purchases so as to find out the least ordering and carrying cost combinations. The carrying cost and ac!uisition cost for different si"es of order to purchase inventories are computed and the order si"e with lowest total cost of inventory is 46B .

M*t)e"*tic*l A..ro*c):
The 46B !uantity can use a short/cut method calculated by following 46BJ $here, ' J 'nnual usage of inventory 0 J 0uying cost per order # J carrying cost per unit

%i"it*tion!:
$hile using 46B it should be noted that it suffers from shortcomings, which are mainly due to the restrictive nature of the assumptions on which it is based. The important limitation is assumption of a constant consumption usage and, the instant replenishment of inventory is of doubtful validity There may be unusual and une-pected demand for stocks to meet such Ocontingencies the firm has to keen additional inventories like safety stocks. 'nother weakness is to assume known annual

inventories is open to !uestion and there is likelihood of a discrepancy between the actual and e-pected demand leading to wrong estimate of 46B.

VED ANA%Y(I( :
Vit*l E!!enti*l and De!ir*+le analysis is done mainly for control of spare parts keeping in view of the criticality to production. 1ital spares are spare the stock/out of which even for a short time will stop production for !uite some time. 4ssential spares are spares the absence of which cannot be tolerated for more than a few hours a day. Gesirable spares are those, which are needed, but their absence for even a week or so will lead to stoppage of production.

THE RE;ORDER %EVE%:

T)e reor$er level c*n +e $eter"ine$ *! follo#!: * J ,Ktu * J *eorder level , J ,inimum level of inventory T J Time gap D delivery time 3 J 3sage rate the re/order level is the level of inventory at which the fresh order for that item must be placed to procure fresh supply. The re/order level depends upon

 2ength of time between the placement of an order and receiving the supply. The usage rate of the item. The inventory is constantly being used up. The rate at which the inventory is being used up. The rate at which the inventory is being used up is called the usage rate. T)e reor$er level *n$ inventory .*ttern! )*ve +e !)o#n *! follo#! @ The figure shows that if the usage rate is constant, the orders are made at even intervals for the same amounts each time and the inventory goes to "ero 8ust before an order is received.

(*fety (toc6 :
The safety stock protects firm from Trade/ offs due to unanticipated demand for the items level of inventory investment is however increased by the amount of safety stock. &afety level is

ascertained in inventory as a part because there is always an uncertainty involved in time lag usage rate or other factor. 3sually smaller the safety level greater the risk of stock/outs. If stock/levels are predictable then there is a chance of stock out occurring. %owever stock inflows and outflows are unpredictable or lesser predictable it becomes to carry additional safety stock to prevent une-pected stock outs so usage rate is estimated if cost is low then no safety stock is needed. 'U(T;IN;TIME INVENTORY: The basic concept is that every firm should keep a minimum level of inventory on hand, relying suppliers to furnish stock 8ust in time as and when re!uired. =IT helps in emphasi"ing sufficient levels of stocks to ensure that production will not be interrupted. 'lthough the large inventories may be bad idea due to heavy carrying =IT is a modern approach to inventory management and the goal is essentially to minimi"e such inventories and there by ma-imi"ing the turnover.

=IT system significantly reduces inventory/carrying cost by re!uiring that the raw materials be procured 8ust in time to be placed into production. 'dditionally the work in process inventory is minimi"ed by eliminating inventory is minimi"ed by eliminating inventory buffers between different production departments. If =IT is to be implemented successfully there must be a high degree of coordination and co/operation between the supplier and manufacturer and among different production centers. =IT does not

appear to have any relation with 46B however it is in fact alters some of the assumptions of 46B model. The average inventory level under the 46B model is defined as 'verage inventoryJ 1D+ 46B K safety level =IT attacks this e!uation in two ways. 0y reducing the ordering cost 0y reducing the safety stock.

The basic philosophy in =IT is that the benefits, associated with reducing inventory and delivery time to a bare minimum through ad8ustment in the 46B modelC will more than offset the costs associated with the increased possibility of stock/outs.

CHAPTER III INDU(TRY PROFI%E0COMPANY PROFI%E

INTRODUCTION OF CEMENT:
The basic need of human being is food clothing and shelter love and affection Dpossession is on never ending process for a human being.

's the time passes on human beings their wants and wishes also changed from ancient times to modern times and among them the living pattern and construction works also have been changed from temporary construction of house to permanent construction and the basic material used in construction is P#ementQ. #ement the word derived from a 2atin word R#4,45TT3,F means stone chipping such as we used in roman. #ement the word as per o-ford, it is commonly used is any substance applied for soft stocking things. 0ut cement means is most vital and important material for modern constructions. It is a material which sets and hardness when mi-ed with water. #ement is basically used in construction as a building agent. In ancient times clay bricks and stones have been used for construction works.

The *omans were using a binding or a cementing material that would harden and water. The first systematic effort was made by P&,4'T65Q who undertook the e-ecution of a new light house in 1?5>. %e observed that ;roduction obtained by during lime stone was the best cementing material for work under water. The construction in lost centuries was with 2ime that was the main e!uipment used for construction work. The ancient constructions like Ta8mahal, Butbminar, ,ysore ;alace, *ed fort, #harmin etc., the evidence of lime construction.

THE INDIAN CEMENT INDU(TRY:

0y staring production in 1S1< the story of India cement industry is a stage of continuous of growth. India is the fourth largest cement producer after #hina, =apan and 3.&.'. so far annual production and demand has been growing a pace at roughly >H million tons with an installed capacity of H+ million tons. In 1S1< as the foundation of stable cement Industry was laid as sun above. It was Indian #ement #ompany at ;orbandar in 9u8arat. In 1S+0, the cement marketing corporation was formed to promote the sale and distribution of cement. ' significant development was made in 1S30 when all manufacturers mergers together to form the 'ssociated #ement #ompany 2imited. #ement Industry is the ma8or Industry it has taken rapid strides for a modest beginning at porbandar in 1S1< to the 1SH0Fs with over

understanding out of the >0 units, 1< units are in the public sectors remaining units are in private sector. Indian endowed with cement grade lime stones (S0 0illion tons) and coal (1S0 0illion tons). The basic raw material re!uired for cement manufacture and self sufficient in manufacturing cement making machineries. Guring nineties it had a particular impressive e-pansion with a growth rate of 10 . The strength and vitality of cement Industry can be gouged by the interest shown and support given by $orld 0ank, considering the e-cellent performance of the industry in utili"ing loans and achieving the ob8ectives and targets. The $orld 0ank is e-amining the feasibility of providing a third line of credit for further upgrading Industry in varying areas, which will make it global. Therefore, India today totally installed capacity of over 30 million tons, employing over a 100 thousand people directly and contributing amount of rupees H billion to IndiaFs 9G;.

TECHNO%OGY:
#ement technologies. The largely out molded well process technology. The more modern dry process that re!uires only 1S utili"ation. The latest percallinator technology through which optimum coal may be manufactured employing three alternative

utili"ation may be achieved. %ere the calcinatory or raw. ,aterial is partly or completed carried out before the feud enters the rotator kin besides saving power, the adoption of this technology enable an increase in installed capacity by 30/35 , the 30,000 tons per day plants being setup in the country use this technology.

TECHNO%OGICA% CHANGE(:
#ontinuous technological upgrading and assimilation of latest technology has been going on in the cement industry. ;resently S3 dry process technology and only ? semi/dry process technology. of the total capacity in the industry is based on modern and environment friendly of the capacity is based on old wet and

There is tremendous scope for waste heat recovery in cement plants and there by reduction in emission level. 6ne pro8ect for co/generation of power utili"ing waste heat in an Indian cement plant is being implemented with =apanese assistance under 9reen 'id ;lan. The induction of advanced technology has helped the industry immensely to conserve energy and fuel and to save materials substantially. India is also producing different varieties of cement like 6rdinary ;ortland #ement (6;#), ;ortland ;u""ling #ement (;;#), ;ortland 0last Aurnace &lag #ement (;0A&), 6il $ell #ement, *apid %ardening ;ortland #ement, &ulphate *esisting ;ortland #ement, $hite #ement etc. production of these

varieties of cement conform to the 0I& &pecifications. 'lso, some cement plants have set up dedicated 8etties for promoting bulk transportation and e-port.

TOTA% PRODUCTION:
The cement industry comprises of 1+5 large cement plants with an installed capacity of 1<H.+H million tons and more than 300 mini cement plants with an estimated capacity of 11.10 million tons per annum. The #ement #orporation of India, which is a #entral ;ublic &ector 3ndertaking, has 10 units. There are 10 large cement plants owned by various state 9overnments. The total installed capacity in the country as a whole is 15S.3H million tons. 'ctual cement production in +00H/0S was 11>.35 million tons as against a production of 10>.S0 million tons in +00?/0H, registering a growth rate of H.H< . ,a8or players in cement production are 'mbu8a cement, 'ditya cement, = I #ement and 2 L T cement. 'part from meeting the entire domestic demand, the industry is also e-porting cement and clinker. The e-port of cement during +00?/0H and +00S/10 was 5.1< million tons and >.S+ million tons respectively. 4-port during 'pril/,ay, +010 was 1.35 million tons. ,a8or e-porters were 9u8arat 'mbu8a #ements 2td. and 2 L T 2td.

The planning commission for the formulation of T Aive 7ear ;lan constituted a R$orking 9roup on #ement IndustryF for the development of cement industry. The $orking 9roup has identified following thrust areas for improving demand for cementC Aurther push to housing developments programsC ;romotion of concrete %ighways and roads, and 3se of ready/mi- concrete in large infrastructure pro8ects.

#ement industry has been decontrolled from price and distribution on 1 st march 1SHS and de/licensed on +5th =uly 1SS1. %owever, the performance of the industry and prices of cement are monitored regularly. 0eing a key infrastructure industry, the constraints faced by the 'ctual cement production in +00H/0S was 11>.35 million tons as against a production of 10>.S0 million tons in +00?/0H, registering a growth rate of H.H< . ,a8or players in cement production are 'mbu8a cement, 'ditya cement, = I #ement and 2 L T cement. 'part from meeting the entire domestic demand, the industry is also e-porting cement and clinker. The e-port of cement during +00?/0H and +00H/0S was 5.1< million tons and >.S+ million tons respectively. 4-port during 'pril/,ay, +00S was 1.35 million tons. ,a8or e-porters were 9u8arat 'mbu8a #ements 2td. and 2 L T 2td. The planning commission for the formulation of T Aive 7ear ;lan constituted a R$orking 9roup on #ement IndustryF for the development of cement industry. The $orking 9roup has identified following thrust areas for improving demand for cementC Aurther push to housing developments programsC

;romotion of concrete %ighways and roads, and 3se of ready/mi- concrete in large infrastructure pro8ects.

#ement industry has been decontrolled from price and distribution on 1 st march 1SHS and de/licensed on +5th =uly 1SS1. %owever, the performance of the industry and prices of cement are monitored regularly. 0eing a key infrastructure industry, the constraints faced by the industry are reviewed in the Infrastructure #oordination #ommittee meetings held in the #abinet &ecretariat under the #hairmanship of &ecretary (#oordination). The <<< #ommittee on Infrastructure also reviews its performance.

DI(TRI&UTION (Y(TEM:
Gistribution of cement was entirely under 9overnment control until 1SH+. at present the Industry has to make an agreement towards the levy !uota which is to be sold compulsorily to the 9overnment the rest of the output or open market !uota may be sold in the open market evolved prices the output lifted by the 9overnment is allocated state wise.

NEED AND IMPORTANCE:

In India we see rapid industrial development in the last few centuries. Indian industry is growing at considerable ratio which reveals India is a developing country. 'nd there are different industrial sectors are playing a vital role for the economyFs development. They are steel cement &6A. Information Technology ,edical &cience etc. 6ne among them was P#4,45T I5G3&T*7Q which plays a vital role for the countryFs development. In India cement industry is growing rationally and marketing is the king pin of all activities particularly to

thebusiness because of this changes in the e-ternal environment i.e., social, political, legal, technical and international environment and changes in marketing. There is increased in the salaries in all most in every market leading to competition is aspects of price, promotion etc., which help to increase the standard of living of people. The manufacturers of #ement like :3'*I #ement, India limited, 6rient limited, 3ltratech etc. are providing cement and they are distributing cement through wide network of dealers. :3'*I #ement is doing its business from decades and it is continuously contributing to the national economy. In even Industry now a days there is no special interest for particularly department like production or manufacturing but know a dayFs total !uality management plays a vital for the companyFs success. Gistribution channel which plays a vital role for the company success. Gistribution channels are link between the company and consumers.

Italcementi 9roup %istory@

Aounded in 1H><, Italcementi was !uoted for the first time on the stock markets, at the ,ilan &tock 4-change, in 1S+5, under the name of P&ociety 0ergamasca per la Aabrication del #ement e Gella #alce IdraulicaQ and has been operating since 1S+? under the name of Italcementi &pa.

:uari #ement is part of the Italcementi 9roup, the fifth largest cement producer in the world and the biggest in the ,editerranean region. $ith net sales over > billion 4uros in +01+ and a capacity of ?0 million tones. Italcementi 9roup combines the e-pertise, know/how and culture of a number of companies from more than ++ countries in < continents. This includes an industrial network of >3 cement plants, 15 grinding centers, 5 terminals, 13< aggregates !uarries and >13 concrete batching units. In India, with its inherent strengths, Italcementi 9roupEs :uari #ement is committed to give the building industry cement that is truly international.

' commitment to customer satisfaction has seen :uari #ement grow from a modest 0.5 million tone capacity in 1SS5 to 3.5 million tones today. :uari #ement is in the process of increasing this capacity to > million tons by +01+ through setting up of a new 5500 tons per day clinker line at 7erraguntla and a grinding center at #hennai. ' captive power plant with a capacity of <3 ,$ has already been set up at the #ompanyEs cement manufacturing $ith a > facility at &itapuram.

market share in the south Indian cement market and sales

of about 4uro 1HH million in +01+, :uari #ement has chalked out ambitious plans for the future. This includes strengthening its presence in the ,aharashtra, 6rissa and $est 0engal markets. $hile technology is 8ust one of its strengths, there are many other factors that contribute e!ually to :uariEs success. These include a high/level organi"ation and decentrali"ed !uality assurance teams to guarantee the full compliance with the customersE e-pectations.

6ur %istory@
&trong foundations for a company of strength. :uari entered the #ement business in 1SS< to operate the Te-aco #ement ;lant. In 1SS5, Te-acoFs ;lant at 7erraguntla was taken over by :uari and a #ement Givision was formed. The fledging unit came into its own in the year +00H when :uari Industries entered into a =oint 1enture with the Italcementi 9roup, the 5th largest producer of #ement in the world, :uari #ement 2imited was born. :uari #ement took over &ri 1ishnu #ement 2imited in +005. Today, the #ompany is amongst the topmost cement

produces

in

&outh

India.

34*ri *n$ It*lce"enti5 T)e !tren t) of t#o :uari #ement is one of the leading cement producers in &outh India. ' fully owned subsidiary of the 4uro > billion Italcementi 9roup, #ommitment to customer satisfaction has seen :uari #ement grow from a modest 0.5 million tone capacity in 1SS5 to 3.5 million tones today. 'nd earned a place among the most reliable cement producers in the country. Thanks to a careful plan of investments and take/overFs of other cement producers, the company e-panded, !uickly reaching a strong position on the market and becoming the leading cement manufacturer in Italy. 'fter several ac!uisitions abroad, in 1SS+ Italcementi achieved important international status with its take/over of #ements AranUois, one of the main global cement producers. In 1SS? Italcementi consolidated its verticalisation strategy with the ac!uisition of #alcestru""i, thus becoming Italian leader in the ready/mi-ed concrete sector. In ,arch 1SS?, all the international companies of the 9roup gathered under one single corporate identity. &ince 1SSH Italcementi 9roup has been pursuing its internationali"ation strategy by ac!uiring new cement works in 0ulgaria, Ia"akhstan, Thailand, ,orocco, India, 4gypt and the 3nited &tates.

6ur ,anagement@
$hile professional management and !uality workforce ensure superior results, the role played by the core management should not be discounted. $ith their vision and e-perience, they make sure that :uari #ement moves in the right direction. Towards becoming one among the leading cement producers in India.

M*4ri=io C*ne..ele ,anaging Girector #urriculum vitae

>ri!)n* (riv*!t*v* Girector ,arketing R*"e!) (4ry* N*r*y*n* Girector Technical C4rric4l4" vit*e E"iliy*n An$reev #hief Ainancial 6fficer C4rric4l4" vit*e (5(URE(H 1ice ;resident %* L I*

$ith an annual .ro$4ction c*.*city of appro-imately ?0 million tons of cement, Italcementi 9roup is the worldFs fifth largest cement producer. The ;arent #ompany, Italcementi &.p.'., is one of ItalyFs 10 largest industrial companies and is included in &L;D,I0 Inde- of the Italian &tock 4-change. Italcementi 9roupFs companies combine the e-pertise, knowhow and cultures of ?? co4ntrie! in < #ontinents boasting an industrial network of @A ce"ent .l*nt!, 1A rin$in center!, B ter"in*l!, 1?B * C4*rrie! and @1D concrete +*tc)in 4nit!. re *te!

In +01+ the 9roup had !*le! amounting to almost > billion 4uros. Italcementi, founded in 1H><, achieved important international status with the take/over of #ements Arancis in 1SS+. Aollowing a period of re/organi"ation and integration that culminates in the adoption of a single corporate identity for all 9roup subsidiaries, the newly/ born Italcementi 9roup began to diversify geographically through a series of ac!uisitions in emerging countries such as 0ulgaria, ,orocco, Ia"akhstan,

Thailand and India, as well as operating in 5orth 'merica. 's part of the plan to further enhances its presence in the ,editerranean area, in +00H the 9roup boosted its investments in 4gypt becoming the market leader. In +010 Italcementi ac!uired full control of the activities in India and signed an agreement to strengthen its position in Ia"akhstan while, in +011, it further strengthened its presence in 'sia and the ,iddle 4ast through the operations in #hina, Iuwait, &audi 'rabia. In +01+ the 9roup signed a 8oint venture in 2ibya to build a < million tonsDyear cement plant. 's a member of the $orld 0usiness #ouncil for (4!t*in*+le Develo."ent ($0#&G) Italcementi 9roup has signed the #ement &ustainability InitiativeFs 'genda for 'ction, the first formal commitment that binds a number of world cement industry leaders to an action plan that aims at satisfying present/day needs at the same time as safeguarding the re!uirements of future generations. To further confirm its commitment on these issues, the 9roup has taken over the co/#hairmanship of the #ement &ustainability Initiative for the period +011/+01+.

6ur ;roducts@
Ce"ent for every 6in$ of t*!6 :uari #ement manufactures and distributes its own main product lines of cement .$e aim to optimi"e production across all of our markets, providing a complete solution for customerEs needs at the lowest possible cost, an approach we call strategic integration of activities.

#ement is made from a mi-ture of H0 percent limestone and +0 percent additives. These are crushed and ground to provide the Nraw mealQ, a pale, flour/like powder. %eated to around 1<50V # (+><+V A) in rotating kilns, the PmealQ undergoes comple- chemical changes and is transformed into clinker. Aine/grinding the clinker together with a small !uantity of gypsum produces cement. 'dding other constituents at this stage produces cements for speciali"ed uses.

0lended #ements @
34*ri &len$e$ Ce"ent t)e eco;frien$ly- 4!er;frien$ly ce"ent @ :uari 0lended #ement has been developed in response to todayFs need for environment/friendly products that are cost/effective, durable and have minimal by/products. Gurability is a very important property in concrete. 'nd durability here means concrete that ensures the long life span of structures like homes and residences that are lifetime investments. &ince distress of concrete and early failure of structures is a common phenomenon, research over a period of time helped develop various remedial measures that improved durability and cost economics. 6ne of them being blended ;ortland #ement, with complementary po""olanic and cementations materials like fly ash, blast furnace slag, etc. 'nd :uari 0lended #ement is a fine e-ample of it.

6ur ;ortland #ement @

;roducts@

:uari 6;# is high !uality cement prepared from the finest raw aterial. 6wing to optimum water demand, it contributes to a very low co/efficient of permeability of the concrete prepared. This improves the density of the

concrete matri- and increases the durability of the concrete. :uari 6;# is high performance cement far e-ceeding the coral re!uirement of 0I&. It is this very durability that translates into long / lasting residential and commercial constructions of a wide variety.

34*ri/! e$ e $ith these uni!ue advantages, :uari #ement comes to you in two grades / <3 9rade 6;# and 53 9rade 6;#. :uari 6;# is high !uality cement prepared from the finest raw material. 6wing to optimum water demand, it contributes to a very low co/ efficient of permeability of the concrete prepared. This improves the density of the concrete matri- and increases the durability of the concrete. :uari 6;# is high performance cement far e-ceeding the coda re!uirement of 0I&. It is this very durability that translates into long / lasting residential and commercial constructions of a wide variety. 34*ri DA 0 BA Gr*$e Or$in*ry Portl*n$ Ce"ent 7OPC8 ; (tron ce"ent! for lon ;l*!tin con!tr4ction!5

%igher compressive strength

0etter soundness 2esser consumption of cement for ,/+0 grade concrete and above Aaster deshuttering of form work *educed construction time ;rimo #oncrete #ement / #oncrete *edefined

Pri"o ; T)e !4cce!! !tory:

In +011 :uari #ement launched its high/strength cement under the brand name EPri"o Concrete Ce"entE in 0angalore #ity. EPri"oE improves the density of the concrete matri- and increases the durability of the concrete, making it an immediate hit among construction and infrastructure pro8ects undertaken in and around 0angalore. *ecently ;rimo was also launched in Iochi and #hennai. 'n e-tensive marketing and distribution network across south India concretes :uari #ementEs success story. 5ew products, on the line of the e-tremely successful EPri"oE launch, will play a significant role in key markets.

Pri"o Concrete Ce"ent ; Concrete Re$efine$@

;rimo concrete cement is high !uality cement prepared from the finest raw material. 6wing to optimum water demand, it contributes to a very low co/efficient of permeability of the concrete prepared. This improves the density of the concrete matriand increases the durability of the concrete. ;rimo is a high performance cement far e-ceeding the codal re!uirement of I& 1++>S/ 1SH?. It is this very durability that translates into long/lasting residential and commercial constructions of a wide variety, such as dams, canals, highways, roads and flyovers. %igher compressive strength 0etter soundness 2esser consumption of cement for ,/+0 #oncrete grade

 and above Aaster deshuttering of form work *educed construction time

2ocations@ #6*;6*'T4 6AAI#4@

5o. 1, 10th ,ain, =eevanbhima 5agar, 0angalore / 5>0 0?5 Tel@ 0H0 / <11S<<0H Aa-@ 0H0 / <030+H<<D <030+HHH
4/mail@ "clmktW"cltd.com,"clhoW"cltd.com

$orks@ &itapuram ;.6.Gondapadu 5algonda / 50H +<> 'ndhra ;radesh Tel@ 0H>H3 / +3510? Aa-@ 0H>H3 / +35++S 4/mail@ svclspmW"cltd.com $orks@ Irishna 5agar ;.6. 7erraguntla Iadapa / 51> 311 'ndhra ;radesh Tel@ 0H5>3 / +?510< D +?5301

Aa-@ 0H5>3 / +?51>< 4/mail@ "clyglW"cltd.com

Italcementi 9roup@
Italcementi 9roup at a glance $ith an annual .ro$4ction c*.*city of appro-imately ?0 million tons of cement, Italcementi 9roup is the worldFs fifth largest cement producer. The ;arent #ompany, Italcementi &.p.'., is one of ItalyFs 10 largest industrial companies and is included in AT&4D,I0 Inde- of the Italian &tock 4-change. Italcementi 9roupFs companies combine the e-pertise, knowhow and cultures of ?? co4ntrie! in < #ontinents boasting an industrial network of BF ce"ent .l*nt!, 1B concrete +*tc)in 4nit! rin$in F? center!, B ter"in*l!- AGA * re *te! C4*rrie!5 *n$

In +01+ the 9roup had !*le! amounting to over 5 billion 4uros. Italcementi, founded in 1H><, achieved important international status with the take/over of #ements AranUais in 1SS+. Aollowing a period of re/organi"ation and integration that culminates in the adoption of a single corporate identity for all 9roup subsidiaries, the newly/ born Italcementi 9roup began to diversify geographically through a series of ac!uisitions in emerging countries such as 0ulgaria, ,orocco, Ia"akhstan, Thailand and India, as well as operating in 5orth 'merica. 's part of the plan to further enhances its presence in the ,editerranean area, in +00H

the 9roup boosted its investments in 4gypt becoming the market leader. In +00S Italcementi ac!uired full control of the activities in India and signed an agreement to strengthen its position in Ia"akhstan while, in +010, it further strengthened its presence in 'sia and the ,iddle 4ast through the operations in #hina, Iuwait, &audi 'rabia. 's a member of the $orld 0usiness #ouncil for (4!t*in*+le Develo."ent ($0#&G) Italcementi 9roup has signed the #ement &ustainability InitiativeFs 'genda for 'ction, the first formal commitment that binds a number of world cement industry leaders to an action plan that aims at satisfying present/day needs at the same time as safeguarding the re!uirements of future generations. To further confirm its commitment on these issues, the 9roup has taken over the co/#hairmanship of the #ement &ustainability Initiative for the period +00S/+010. ,oreover, Italcementi has been included in PThe &ustainability 7earbook +01+Q the most comprehensive publication on corporate sustainability released yearly by &', (&ustainable 'sset ,anagement).

CHAPTER IV

DATA ANA%Y(I(

DETERMINATION OF (TOC> %EVE%(

#arrying of to much and too little of inventories is determinate to the firm. If the inventory level is too little, the firm will face fre!uent stock . outs involving heavy ordering cost and if the inventory level of inventory where costs are the minimum and at the same time their IG.5o.&tock/out, which may result in loss of sale or stoppage of production. 1arious stock levels are discussed below.

MINIMUM (TOC> %EVE%

This is the lower limit below which the stock of any item should not normally be allowed to fall. This is also technically known as safety or buffer stock. T)e .ri"e con!i$er*tion! in fiHin t)e "ini"4" !toc6 level or !*fety !toc6! *re: a. b. 'verage rate of consumption. 2ead time.

Mini"4" (toc6 %evel I Reor$erin level ; J

%e*$;Ti"e :
' purchasing firm re!uires some time to process the order and time is also re!uired by the supplying firm to e-ecute the order. The time taken

processing the order and the e-ecuting it is known as lead/time. essential to maintain some inventory during this period.

It is

Reor$er %evel :
*eorder level is fi-ed between the minimum and ma-imum levels. $hen stock of a material reaches at this point, the store keeper should initiate action for the purchase of material. The reorder level is slightly more than minimum stock level to guard against a. 'bnormal usage b. 'bnormal delay in supply Reor$er level I reC4ire$ $4rin t)e .erio$ for $elivery M*Hi"4" con!4".tion J M*Hi"4" .erio$

MAJIMUM (TOC> %EVE% :

,a-imum stock level represents the upper limit beyond which the !uantity of any item is not normally allowed to rise. The main ob8ect of establishing this limit is to ensure that unnecessary working capital is not blocked in stores. Theoretically, ma-imum stock level is the sum . total of minimum stock level and economic order !uantity.

,a-imum level J *eorder 2evel K *eordering !uantity . ,inimum consumption

AVERAGE (TOC> %EVE%:

T)e *ver* e !toc6 level i! c*lc4l*te$ *! !4c)@ Aver* e !toc6 I "ini"4" !toc6 level K L of re;or$er C4*ntity5

DANGER %EVE% :
This is generally fi-ed below the minimum stock level. 5ormal stock should not be below the minimum level. If it reaches the danger level at any point of time, urgent action for replenishment of stock must be taken to prevent stock out.

E(TIMATION OF (TOC> %EVE%( :

There are different techni!ues used in the calculation of the stock levels. *eordering Buantity *eordering ;eriod $eekly usage @/ ,a-imum usage 5ormal usage ,inimum usage / / / S00 units ?00 units 500 units / / +500 units

< . 5 weeks

Reor$erin %evel Reor$erin Perio$

M*Hi"4"

con!4".tion

M*Hi"4"

I FMM J B I DBMM 4nit!5 4- @/ #onsider P%o*$ >in Q for calculation purpose. #alculated of the load king vehicle as 500 units. 5ormal Gaily consumption J ?00 units 5ormal *eorder period J <.5 weeks *eorder level ,inimum usage J <500 units J 500 units J 5 weeks

,inimum *eorder periodJ < weeks ,a-imum *eorder period

MINIMUM (TOC> %EVE%

J*eorder 2evel . (5ormal consumption T 5ormal *eorder ;eriod)

J J J

<500 . (?00 T <.5) <500 . 3150 1350 3nits

MAJIMUM (TOC> %EVE%

J*eorder 2evel K *eorder Buantity . (,inimum consumption T ,inimum *eorder ;eriod) J J J <500 K +500 . (500 T <) ?000 . +001 5000 3nits

AVERAGE (TOC> %EVE%

J

,inimum stock K X of *eordering Buantity. 500 K (X T +500) 500 K 1+50 1?50 3nits J 1350 3nits J 1?50 3nits J 5000 3nits

J J J

,inimum &tock 2evel 'verage &tock 2evel ,a-imum &tock 2evel

INVENTORY TURN OVER RATIO

P' *atio which measures the number of times a firms average inventory is sold during a yearQ . Iohler. #omputation of inventory turnover ratios for different items of materials and comparison of the turnover ratios provide a useful guidance for measuring inventory performance. ' high turnover rate indicates that the material in !uestion is a fast moving one. ' low turnover rate on the other hand indicates over investments and looking up of working capital on undesirable items. PInventory or &tock turnover is measured in terms of the ratio of the value of materials consumed to the average inventory during the periodQ.

The ratio indicates the number of time the average inventory is consumed and replenished by dividing number of days for which the average inventory is held can be ascertained. #omparing the number of days in the case of two different materials, it is possible to known which is fast moving and which slow on that basis attempt may be made to reduce the amount of capital locked up and prevent over stocking of slow moving items. Aver* e Inventory I O.enin (toc6 K Clo!in (toc6 ?

Inventory t4rnover r*tio

M*teri*l con!4"e$

Aver* e Inventory

Inventory t4rnover in n4"+er of $*y! I N4"+er of $*y! in * ye*r Inventory t4rnover r*tio

INVENTORY TURNOVER RATIO #ost of goods sold INVENTORY TURNOVER RATIO J////////////////////////////// 'verage inventory
(*s in 000Fs)

7ear +00>/0? +00?/0H +00H/0S +00S/10 +010/11 +011/1+

#ost of sold +5>3<<+ ++10+10 +1>350H +<H<5HS 30<<5>1 <1+0S5?

goods 'verage inventory 35H0<H <3S>10 5+H333 5S>0?< >S?S<S 100H0>>

*atio ?.?> 5.03 <.0S <.1? <.3> <.0S

#%'*T 65 INVENTORY TURNOVER RATIO

Inter.ret*tion:
The inventory turnover ratio signifies the li!uidity of the inventory. ' high inventory turnover ratio indicates brisk sales. The ratio is therefore a measure to discover the possible trouble in the form of overstocking or overvaluation. The stock position is known as the graveyard of the balance sheet. If the sales are !uick such a position would not arise unless the stocks consists of un/saleable items. ' low inventory ratio results in blocking of funds in inventory which may ultimately result in heavy losses due to inventory becoming obsolete or deteriorating in !uality.

INVENTORY HO%DING RATIO 3>5 I5145T6*7 %62GI59 *'TI6J/////////////// Inventory turnover ratio (*s in 000Fs) 7ear Gays Inventory turn/ Inventory over ratio holding ratio +00>/0? 3>5 ?.1> 51 +00?/0H 3>5 5.03 ?3 +00H/0S 3>5 <.0S HS +00S/10 3>5 <.1? HH +010/11 3>5 <.3> H< +011/1+ 3>5 <.0S HS

Inter.ret*tion:
Inventory holding days e-press the 5o. of days it takes for the stock to get converted into sales. It is called stock conversion period. It is calculated as above. It means that 51 days period of time it took to convert from stock sales in +00>/0?, ?3 days in +00?/0H, HS days in +00H/0S, HH days in
+00S/10, H< days in +010/11 and HS days in +011/+01+.

I5145T6*7 '5'27&I& 'T I4&6*', 7ear

+00>/0? +00?/0H +00H/0S +00S/10 +010/11 +011/1+

Inventory <S503> 5>1>30 >3051H ?>53H0 1+50?5+ 131+<5>

(*s in 000Fs) #urrent assets S0SS<> 10?H+?< 1500S?? 1>HH?33 +30?>0< +50<>HS

in inventory L#' 5<.<0 5+.0S <+.01 <5.3+ 5<.+0 55.+3

Inter.ret*tion :
It shows the relationship between inventory L #urrent assets. The inventory position in :3'*I #ement has to level of inventories as compare to current assets in the increasing trend it has found that the current assets level has increased year by year and the inventory being part of it has also increased. It fluctuates certain intervals. This is due to increase in li!uidity involving #ash and 0ank balances.

YEAR( 6pening Inventory (*s. In 2akhs) #losing Inventory (*s. In 2akhs)

?M1? <SS?0 ?5SH3

?M11 <5>?5 <SS?0

?M1M <>S0< <5>?5

?MMF 55+53 <>S0<

?MMN 5155< 55+53

?MMG <3>S? 5155<

INVENTORY TURNOVER RATIO

INVENTORY CON(UMED 7R4.ee! in %*6)!8 <5S53?.10 335+H>.5+ +500+1.H< +11?+3.1 +35H5H.13 ++10+3.+3 AVERAGE INVENTORY 7R4.ee! in %*6)!8 <SS?0 K ?5SH3 + J >+S?>.5 <5>?5 K <SS?0 + J <?H++.5 <>S0< K <5>?5 + J <>3HS.5 55+53 K <>S0< + J 510?H.5 5155< K 55+53 + J 53<03.5 53>S? K 5155< + J <?>+5.5 INVENTORY TURNOVER RATIO <5S53?.10 >+S?>.5 I G5?F@ 335+H>.5+ <?H++.5 I G5M1 +500+1.H< <>3HS.5 I B5ANF +11?+3.1 510?H.5 I D51DB +35H5H.13 53<03.5 I D5D1@ ++10+3.+3 <?>+5.5 I D5@D INVENTORY TURNOVER IN NUM&ER OF DAY( 3>5.. ?.+S> I BM5M?G 3>>.. ?.01 I B?5?1 3>5.. 5.3HS I @G5GA 3>5.. <.+< I NN5MB 3>5.. <.<1 I N?5@B 3>>.. <.>< I GN5NG

YEAR(

,arch . +01+ ,arch . +011 ,arch . +010 ,arch . +011 ,arch . +010 ,arch . +00S

INERPRETATION:
' high turnover ratio indicates that the material in !uestion is a fast moving one and also a low amount of stocks are replacing stocks in large number of installment. In the year +010,+011,+01+, the stock turnover ratio is gradually decreasing and the inventory faced a bad position in these three years. 'nd from +00?,+00H,+00S, the stock turnover ratio continuously increased from 5.3H to ?.+S> and the inventory in number of days is low. This position indicates that the stocks are fast moving and get converted in to sales !uickly.

CEMENT PRODUCTION AND DI(PATCH

YEAR ,'*#% 31&T +010 ,'*#% 31&T +011 ,'*#% 31&T +01+ CEMENT PRODUCTION CEMENT DI(PATCH 7:UANTITY IN 7:UANTITY IN MI%5TONNE(8 MI%5TONNE( 8 +5,?S? 3<,1H> 33,>30 +5,<1> 33,?>> 33,HH5

INERPRETATION:
The inflow of raw materials and dispatch of finished goods from the organi"ation is in good position. In march 31 st +010 the difference between the vehicle production and dispatched is 3H1 and in march 31st +00S the close stock in the go down is also dispatched from the organi"ation and as well as in the year +011 31st march the stored vehicles are dispatched from the company. This indicates that the consuming storage cost is very low and risk related to preservation of the stock is very less.

CHAPTER @

FINDING( AND (UGGE(TION(

AI5GI59&

 The inventory turnover ratio signifies the liquidity of the inventory. A high inventory turnover ratio indicates brisk sales.

51 days period of time it took to convert from stock sales in 2006 0!" !# days in 200! 0$" $% days in 200$ 0%" $$ days in 200% 10" $& days in 2010 11 and $% days in 2011 2012.

A high turnover ratio indicates that the material in question is a fast moving one and also a lo' amount of stocks are replacing stocks in large number of installment. (n the year 2010"2011"2012" the stock turnover ratio is gradually decreasing and the inventory faced a bad position in these three years.

And from 200!"200$"200%" the stock turnover ratio continuously increased from 5.#$ to !.2%6 and the inventory in number of days is lo'.

(UGGE(TION( :
6n the personnel interaction with the financial department as well as with the primary and secondary dataFs the following are the conditions and suggestions arrived. They are@ The analysis is carried out for a period of five years i.e., +00>/0?/ to +011/+01+ is not sufficient to conclude the Inventory position of the company as we have taken up to study for a period of > weeks is too less still we strived out best in e-ploiting the present inventory position of the company. Inventory valuation is followed in weighted average method based on cost concept of the pro8ect costing is undertaken. The inventory is different items of productionC hence '/0/# analysis and Two 0in &ystem are followed. &ome items are found to be slow and non/moving. The slow/ moving items are spare and consumable goodsC hence whenever necessity arises these items are being used. 5on/moving items are also found in the inventory. The reasons for 5on/moving of Inventory from stores are studied. Gue to ,6B (,inimum 6rder Buantity) clause these items procured e-tra than the re!uirement. *aw material turnover ratio was low in the year +00>/< which was not a good sign in the earlier. The ratio is higher in the year +011/1+ which is S.0S which signifies a good sign.

 The high inventory ratio indicates efficiency of the firmFs inventory management. The material consumption was also increasing simultaneously with sales. The companyFs efficiency in turning its inventory is increasing. The companyFs utili"ation of inventory in generating sales is good. The yearly holding of all types of inventory is decreasing. This is positive trend. The overall inventory position of the company is satisfactory.

CONCLUSION:
To days business scenario inventory management is becoming very crucial part of the organi)ation. The system of inventory management in *uari is very effective. The organi)ation is basically and assembling unit and thus inventory place a most significant role in the decision making process. +rom the various calculations and figures relating to inventory management it is clear that the inventory classification of A items are maintain for 1 , # days" as a result it reduce investment in ra' material" reducing the lead time and also the large quantity discount because the stock are kept for 1 , # days. (n the classification of A-. items /0* procedure is follo'ing in *uari 1lant has launched the different type of 2A3-A3 card system for class . items. .lass A 4 - items are consider under the 5ust in time philosophy as the procurement time has been reduced up to greater e6tent by the proper co ordination of buyer and supplier. There is great improvement in the inventory turnover ratio from # years. (t is increased from 5.#$ to !.2%67 this position indicates that the stocks are fast moving and get converted into sales quickly in *uari

CHAPTER G

0I02I69*';%7

&I&I%OGRAPHY:

Y Y Y Y Y

#ost 'ccounting #ost 'ccounting #ost 'ccounting Ainancial ,anagement #ost ,anagement 'ccounting

. / / / /

1.I. &a-ena #.G. 1ashist &.;. Iyenger &.5. ,aheshwari Ihan L =ain *.;. Thrivadi

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