INTRODUCTION

BRIEF DISCUSSION ABOUT THE PROJECT

Material is a very important factor of a production. It includes physical commodities used to manufacture the final product. It is the inventorial and does not get waste and exhaust with the passage of time as labor is wasted with the passage of time whether in used or not. The other feature of material is that, is firm, where as other elements of cost like labour and other services cant be easily varied once they are established. From this it can be concluded that material is most flexible on controllable input. It is the first and most important element of cost. Materials account for nearly !" of the cost of production which is clear from analysis of financial statements of a large number of private and public sector organi#ations. According to the Indian association of materials management of $ paisa in a rupee are spent on materials by Indian industries, % paisa on labor and the rest of % rupee of cost is spent on over heads. Importance of material control lies in the fact that any saving made in the cost of materials will go a long way in reducing the cost of production and improving the profitability of the concern. &tudies by experts in this field have highlighted the facts that if an organi#ation can affect '" saving in material cost, it would be as good as increasing the production or sales by about ( ". )roper control of material is necessary from the time orders for purchasers of materials are placed with suppliers until they have been consumed the ob*ect of material control is to attack material cost on fronts, so that the cost of material may be reduced. In other words, efforts are to be made to reduce the cost of materials when it is purchase, stored and used. +efore coming to the discussion of material control, we may clear that purchase of materials will include both direct and indirect materials. ,irect materials and indirect materials are both treated as stores items, where as stock of finished goods id not treated as a stores item, direct and indirect materials purchased for stock purpose to be issued to different *obs, works orders of departments as and when re-uired. .n the other hand, finished goods are treated as stock. /e may also refer to the commonly used term 0I1231T.456 which includes the stock not only of raw materials but also stores and spares, work7in7progress and finished goods. The stock materials are only a part of the inventory held by a manufacturing unit.

Origin and growth of the organization:

8usalava International 9imited was established in the year %: $. It was earlier known as +harat industries where it was started as a small work shop. +ut later the name was changed to 8usalava International 9imited. To manufactured cylinder liners under the brand name of 0TIGER PO International 9imited is Mr. ;hukkapalli 8usalava. Today #TIGER PO cylinder liner manufacturing business. 8usalava International 9imited has nearly (< years of industrial manufacturing experience in the field. 1early '!" of the production goes to original e-uipment. 8usalava International 9imited had geared up to meet the technological changes and world standards. It also in the stood the competition in the world market which arose done to the establishment of world trade organi#ation. 8usalava International 9imited has consistently delivered -uality automotives components in line with the specific of automobile ma*ors in India and for the aftermarket spare parts segments to various countries like =.&, Italy, 1ew >ealand, +angladesh, ?ustralia, Malaysia, Thailand, Mauritius, and the Middle 3ast.

ER!" The chairman of 8usalava

ER! brand is the most dynamic name in the

RE$EARC% &ET%ODO'OG(:
Methodology is a systematic procedure of collecting information in order to analy#e and verify a phenomenon. The collection is done through two principle sources vi#. %@ A@ )rimary data &econdary data

)* Primar+ Data:
It is the information collected directly without any reference. In this study it was mainly through interviews with concerned officers and staff, either individually or collectively. &ome of the information had been verified of supplemented conducting personal with observation.

The data incl,des:

Interviews with 8usalava International 9td. employees. .rgani#ation chart has been drawn through observation.

-* $econdar+ data:
The secondary data was collected from already published source such as )amphlets, annual reports, returns and international records.

The data incl,des:

Methodology under study has been collected from the annual reports of 8usalava International 9td., in house maga#ines, )ublications, books, Bournals on Management and /ebsites.

PERIOD O. $TUD(:
? period of consecutive five years i.e. from A!!C to A!%A has been considered for the purpose of the study.

O/0ECTI1E O. T%E $TUD(

To understand the importance of auto components industries in India.

To examine the management of kusalava international ltd.

To study the inventory management in kusalava.

To analy#e and asses the efficiency of inventory by using ratio analysis. To know the procurement levels of the inventoryt.

To examine the problems in inventory management in kusalava.

NEED O. T%E $TUD(:

For the purpose of the study, 8usalava International 9td. is selected, as being it is a monopoly. &ponge iron manufacturing unit in the country at the time when it was established in %:<! as a public sector unit, specially to meet raw materials re-uirements of mini steel plants. It seems that one of the important problems faced by public enterprises id ineffective control measures especially out dated and unused inventory control measures. Therefore, it is felt -uite appropriate to make a micro study on inventory control methods and policies of the 8usalava International 9td. &o as to find out the responsible factors that caused for high inventory cost.

$COPE O. T%E $TUD( %. The study is conducted at kusalava International 9td., 2i*ayawada.
A. The information collected for the study had been taken from documents which had been let out by the public documents such as annual reports of the company. (. Most of the information has been kept confidential and as such was not passed an as part of the policy of the company. $. The study of information is mostly depending upon the secondary data. '. The study covers a period of five years from A!!C7A!%A.

'I&ITATION$ O. T%E $TUD(

The study was conducted with the data available and the analysis was accordingly. The analysis is made on the basis of secondary data. Time is the main constraint in completing the study with in the stipulated period allowed. It became difficult to analy#e and study the performance of 8usalava International 9td. The availability of data pertaining to ' years is one of the constraints. ?s there is more dependency on secondary data realistic conclusion may not be possible to be made. The study was conducted within the selected unit of 8usalava International 9td., ?davinekkalam.

INDU$TR( PRO.I'E A,to Com2onents Ind,str+

The Indian auto components industry has an estimated production of =&D %! billion. The spiraling demand from domestic and international auto companies has seen this sector emerging as one of the fastest growing manufacturing sectors in India and globally. The ?uto components industry is predominantly divided into five segmentsE

3ngine parts ,rive Transmission F &teering )arts &uspension F +rake )arts 3lectrical )arts +ody and chassis

?ccording to the AC&A G?uto ;omponents Manufacturers ?ssociation of India@, the sector is set to grow at a ;?H4 of %' per cent till fiscal A!%A. This sector is now working towards an open market. ? large number of *oint ventures with leading global manufacturers have already been set up in the auto7components sector. ?nd with India estimated to have the potential to become one of the top five auto component economies by A!A', the pace is expected to pick up even further. Moreover the automotive components industry is perceived as a lucrative sector with tremendous potential for foreign direct investments. The year A!! 7!C saw the auto components sector soar with exports touching the =&D ( billion mark and investments continuing unabated. The ?;M? estimates the global sourcing of components from the country to double from =&D A.:' billion to =&D '.: billion in A!!<7!:, and touch =&D A! billion in seven years owing to the huge and growing markets both within India, and overseas. Domestic In3estments

The market is so large and diverse that a large number of players can be absorbed to accommodate buyer needs. The sector not only has global players looking to invest and expand but leading domestic component companies are also pumping in huge sums into expanding operationsE

+harat Forge invested =&D %(' million in its )une plant for increasing domestic capacity to A$!,!!! tones. ?mtek ?uto is expanding capacity of its castings unit to C!,!!! tons per annum GT)?@ from (!,!!! T)?. &ona 8oyo plans to have capacity of three million pieces of manual steering gears, '!!,!!! units of hydraulic power steering and A'!,!!! units of electronic power steering G3)&@, apart from doubling the capacity of steering columns from one million parts.

4ico ?uto is investing =&D A( million to expand capacity. ?pollo Tyres plans to invest =&D $ :.'< million in the next three years to increase its production capacity both in India and abroad. 8esoram Industries is planning to set up three new tire units in the northern state of =ttaranchal to take its tire7making capacity to C($ metric tons per day.

/ith such accelerating interest by both domestic and foreign investors, the Indian auto component industry is set to growth exponentially.

.oreign In3estments
India en*oys a cost advantage with respect to casting and forging as manufacturing costs in India are A' to (! percent lower than their western counterparts. &eeing the growing popularity of India in the automotive component sector Ga whopping =&D '(! million in terms of foreign direct investment@, the Investment ;ommission has set a target of attracting foreign investment worth =&D ' billion for the next five years to increase IndiaIs share in the global auto components market from the existing !.$ per cent to (7$ per cent.

;hrysler is setting up a local sourcing unit in ;hennai and is expected to start sourcing for its global plant by next year. )al finger ?H, the ?ustrian hydraulic lifting, loading and handling systems manufacturer, has *oined hands with /estern ?uto 99;, ,ubai, the vehicle dealership arm of 3T? &tar group, have invested =&D %.C million to set base in India.

IF;I 2enture ;apital Funds 9imited is launching a private e-uity fund in association with Herman consultancy =+F7+ worth =&D %$$. C million focused entirely on domestic automotive components industry.

?uto parts maker 4obert +osch of Hermany will invest =&D A!%.$ million in its Indian subsidiaries over the next two years. Bapans .mron ;orporation, the leading manufacturers of automation components has set up the companyIs first production base on the subcontinent.

&wiss company 4eiter ?utomotive India aims to increase its production capacity in India and extend its product range to heat shields Fiat is setting up a group purchasing office in India as part of its strategy to cut costs by buying more components from low7cost centers such as India and ;hina.

,aimler, Jero *oint venture will invest =&D %.% billion in ' years to manufacture light and medium ;2s initially, and heavy7duty vehicles by A!%A.

Destination India The ?;M?7Mc8insey 2ision A!%' document forecasts the potential for the Indian auto component industry to be =&D $!7$' billion by A!%'. Investments and exports in this segment are witnessing continuous growth. Hlobal automobile manufactures see India as a manufacturing hub for auto components and are rapidly ramping up the value of components they source from India due toE

The cost competitiveness in terms of labor and raw material Its established manufacturing base

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Fine -uality of components manufactured in India Gused as original components for vehicles made by Heneral Motors, Mercedes, I23;. and ,aewoo among others@.

?s a result Bapanese and +ritish component manufacturers are seeking *oint7ventures in India. ,elphi, the auto component division of Heneral Motors is planning to set up plants in India. 4obert +osch, auto parts maker of Hermany has relocated manufacture of certain products to MI;., India. ;rosslink International /heels, MalaysiaIs leading automobile security provider has set up its manufacturing unit at +addi to make India the export hub for the &??4; region. Foreign auto makers, including Ford Motor ;o., Heneral Motors ;orp., Jonda Motor ;o., Toyota Motor ;orp., ,aimler;hrysler ?H and Jyundai Motor ;o., are all looking to increase their presence in India and use it as an export hub. The Indian automotive export industry has made a global mark. +oth the automobile industry along with the component industry is contributing to Indias overall export effort. ?ccording to ?;M?, more than a third G( per cent@ of Indian auto component exports head for 3urope, with 1orth ?merica featuring a close second at A per cent.

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The Indian automotive industry has grown at a ;?H4 of %$ percent p.a. over the last ' years sales of vehicles reaching around : million vehicles in A!!'7! . It has the potential to emerge the largest in the world. )resently, India isE And largest two7wheeler market in the world $th largest commercial vehicle market in the world %%th largest passenger car in the world and is expected to be the C the largest market. The industry has emerged as a key contributor to the Indian economy.

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The developments in the Indian auto component industry can be traced to trade liberali#ation during the %::!s that resulted in an influx of multinational automotive companies like ford, general motors, Jyundai, Mercedes7+en#, )eugeot and 2olvo into India. The entry of these foreign auto companies during the early :!s changed -uality standards and impacted the complexity of the parts re-uired by .3Ms. ;onsumers reacted favorably to the expanded set of offerings and conse-uently the demand for cars in India surged. For example, the sale of foreign brand cars grew from almost nothing before the entry of Jyundai in %::C to %'" of the car market in the year %::<7:: to more than A'" of the car market in A!!$7!'. the auto market, consisting of passenger vehicles, commercial vehicles, two wheelers, three wheelers and tractors, expanded from a sales level of (.( million vehicles G$%C,C A passengers vehicles alone@ in the year %::'7: , to nearly .< million vehicles G:!!,C'A passenger vehicles@ during A!!(7!$. The Indian auto component industry responded to these challenges by adding capacity and modem #ing existing plants. The total sales volume of auto components has increased from DA.: billion in the year %::: to DC billion in the year A!!$. Many firms entered into technical collaboration and e-uity partnership global tier7one suppliers. Hlobal tier7one suppliers like ,elphi and 2isteon set manufacturing units in India. ,uring this period, there was significant growth in multinational companies GD% billion in A!!(7!$, as against D!.AC billion in %::C exports are still very compared to annual global auto component sales, which was DC(! billion, they are a significant share of the sales G approximately %!7%A"@ components firms. +efore Maruthi, the auto component industry was characteri#ed by low volumes, high fragmentation, negligible auto machine and conse-uently poor -uality. This was simply because the automobile industry did not have any volumes worth talking about. Maruthi challenged all that Gin the process, Indian car producers in the first year itself by making AA,'!! vehicles@ for the first time the Indian market hand volumes worth speaking of a product that was exportable and proper systems.

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They key of course is the export7worthiness of the Maruthi <!!, >en, something total alien to the industry before. &o as Maruthi grew crossing the %, !!,!!! mark by %:<:7:!, the component industry boomed in tandem. In the meantime, other Bapanese ma*ors like Jonda, 5amaha, Toyota and Mitsubishi also flagged off two7wheelers and light commercial vehicles production. This paved the way for foreign collaborations in the component sector, and till date some :' Bapanese alliances have been struck. Maruthi itself floated %% *oint ventures GB2s@ and has as many as (C' vendors. That was *ust the first step in the process of Indian component marks producing globally competitive products. The next best thing to happen to this sector was the recession of %::A7:(. To maintain their viability, ancillary had little choice but to focus on export markets, and step up -uality. This is evident in the spate of I&. :!!!7 certifications those component makers began to receive. .f the roughly ('! companies in this sector, at least %(! have bagged I&. :!!! certification, something no other industry can boast of. The step up process has not ended with the Bapanese innovation. Hradually manufacturers from all parts of the world are making a beeline for India. Res,ltE ;omponent makers are now exposed to different, more complex and advanced development processes. 3arlier, they were dealing with *ust one culture, one standard Bapanese. Today we have the 8oreans, the ?mericans, the 3uropeans and the French coming with their global suppliers in to the country. Ford, for instance, is flagging off the ford ?;H G?utomotive component group@ and general motors have brought in ,elhi. Toyota too, is creating a Toyota village around its manufacturing unit in the south, as is Jyundai, which will house all its ancillary suppliers in an industrial park. In the south, auto archly has been taken over by =& Ma*or 4ockwell. &aks ?ncillaries has suffered the same fate. Boint ventures though, are imperative and at last count there were at least (AA collaborations with foreign auto ma*ors.

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The Reason: ?ccess to technology to differentiate your product from the scores in the market. ;onsider the 4an group, which has hired off its clutch business with luck of Hermany into a '!E'! *oint venture. The guiding principle, behind the venture is the opportunity to bring new technology in to the country. /e are not getting the same satisfaction in the clutch business as we were getting from our other activities. .ur partner is probably number % in clutches world. /e believe that we will be able to achieve leadership position in a couple of years, says 4an group ;hair Man 9. 9axman. .ver the past ( years the Indian auto component industry has been consistently exporting at least A!" of its production. In %:: 7:C exports were worth a cool D (!! million G4s.%, %C! ;ores@. In ' years, overseas sales are expected to more than triple to all of D one billion.

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ORGANI$ATION PRO.I'E
Origin and growth of the organization: 8usalava International 9imited was established in the year %: $. It was earlier known as +harat industries where it was started as a small work shop. +ut later the name was changed to 8usalava International 9imited. To manufactured cylinder liners under the brand name of 0TIGER PO ER!" The chairman of 8usalava International 9imited is Mr. ;hukkapalli 8usalava. 8usalava International 9imited is one of the largest cylinder liner manufactures in I1,I?. Today #TIGER PO ER! brand is the most dynamic name in the cylinder liner manufacturing business. 8usalava International 9imited has nearly (< years of industrial manufacturing experience in the field. 1early '!" of the production goes to original e-uipment. 8usalava International 9imited had geared up to meet the technological changes and world standards. It also in the stood the competition in the world market which arose done to the establishment of world trade organi#ation. 8usalava International 9imited has consistently delivered -uality automotives components in line with the specific of automobile ma*ors in India and for the aftermarket spare parts segments to various countries like =.&, Italy, 1ew >ealand, +angladesh, ?ustralia, Malaysia, Thailand, Mauritius, and the Middle 3ast.

4UA'IT(5 EN1IRON&ENT AND $A.ET( PO'IC(:

/e are committed for the satisfaction of all interested parties byE &upplying -uality products on time +y providing ;lean, Hreen, Jealthy and &afe /ork 3nvironment ;omplying with all applicable 9egal and .ther 4e-uirements ;onservation of 4esources F )revention of )ollution ;ontinual Improvement in all the Integrated Management &ystem )rocess

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TP& PO'IC(
8usalava International 9td commits their selves to maximi#e K.verall plant 3ffectiveness by achievingE

>ero +reakdowns >ero ?ccidents >ero ,efects ? &afe and ;lean 3nvironment and eliminate all other losses through Total 3mployee Involvement.

Growth of the com2an+:

8usalava International 9imited belongs to 8usalava group of companies. Its honorable chairman and promoter is Mr. ;hukkapalli 4amakrishna )rasad. The group of companies and their activities. %@. 6,sala3a &otors 7P* 'td E The company is involved in the activity of trading A /heelers and $ /heelers, it is the official dealer for T2& Motors and Jyundai ;ars in the cities of 2i*ayawada, Huntur, .ngole, +himavaram and Hudivada. A@. 6,sala3a InformaticsE &tarted off as an in7house software arm for developing an integrated 34) solution, the division has been spun off into a separate company in A!! . &ince then the company has been working on many pro*ects with overseas clients and has seen unprecedented growth. )lease visit www.kusalavainfo.com (@. 6,sala3a .inance: The company has been established way back in %:C! and is engaged in the business of financing automobiles. The company has been able to carve a niche of itself in the automotive sector by offering clients customi#ed financing options as per their needs. $@. 6,sala3a Power: The company is involved in the business of power generation and has a total generating capacity of ( M/.

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'@. 6,sala3a Realt+E The ;ompany is involved in the business of developing housing, apartments and shopping malls. @. /harat A,tomo8ilesE The company activities involve trading is automobile spare and represents a host of reputed manufacturers like +harat Forge for ;rank &hafts, Timken for +earing, Maple for )istons and 8usalava for 9iners. The company operations and network spread across entire south India. C@. 6,sala3a IncE The ;ompany is a trading firm located in Jouston, Texas, =&? and is involved in the activity of sourcing automotive components from India and ;hina to .3MIs in =&?. The company has products stocked in AA warehouses across =&? to supply to customers on a BIT basis. <@. $neha /iotechE The ;ompany is research firm, which focuses on development of products using biotechnology for agriculture, marine industry and humans as well. The products are used as a substitute to chemicals F fertili#ers in agriculture and a-ua industries and are used as substitutes to drugs for humans.

&ilestones in 9Tiger 2ower: &an,fact,ring:

%: $E 8usalava International 9imited comes into existence as ML& +harat Industries. )roductsE +rake drums ,uring the inception year itself supplies were started to .3M, +a*a* Tempo. %:CAE &tarted production of grey iron cylinder liners. &tarted supplies to ma*or road transport corporations G&T=Is@ %:<AE &upplies to replacement market with TIH34 )./347T.=HJ )?4T& +rand name. %:< E Installed the first ,ual Track Induction Furnace in India. %:<CE +ecame the ma*or source for ,efence 2ehicle Factory %::!E 3xported its first consignment to 1ew >ealand. %::AE Tiger )ower became the ma*or supplier of cylinder liners in ?fter Market %::$E 3merged as the 9argest cylinder liner manufacturer in India. %::'E 8usalava commissions its first overseas office in Jouston, Texas, and =&? I&.E :!!A certified. %:: E &ales figures crossed of % million =&,.

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8usalava becomes a limited company. %::<E M&7:!!! certified %:::E &tarted production of ,uctile Iron castings. A!!!E I&.LT& % :$: certified. A!!AE Turn .ver crosses %! millions =&,. A!!(E Introduced &ix &igma )rocess. ?warded by ?;M? for +est &ix &igma )ro*ect in A!!( A!!$E Introduced 9ean Manufacturing )ractices. 4eceived the best supplied award from 3I;J34 M.T.4&, for outstanding contribution to supply chain management. ?warded by ?;M? for +est &ix &igma )ro*ect in A!!$ again. A!!'E 3ntered into an agreement with the Market 9eader ,arton &leeves, =&? for supplying Jigh Hrade ,uctile iron liners to the ,rag 4acing Market. A!! E Total )M 8ick off on Buly (rd A!! . 8usalava commissions new plant at pantnagar, =ttarakhand. A!!CE Turn over crosses A! million =&,. 8usalava commissions new plant at 2isakhaptnam, ?ndhra )radesh.

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Organizational 'I&ITED

Chart

of

6U$A'A1A

INTERNATIONA'

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'ocations:
8usalava international 9td is located in ?utonagar in the city of 2i*ayawada situated in the state of ?ndhra )radesh in India. This Industry has two production units. =nit7% is situated in ?davinekkalam, which is A' kms from 2i*ayawada, where as =nit7A is situated in ?utonagar of 2i*ayawada. The main administration is at ?davinekkalam unit which is in the city of 2i*ayawada and other branches at 2ishakhapatnam and 4udrapur. ? part from these branches, other branches are situated out of our country like the ones in =&?, Middle 3ast. 3tc. There is a wide distribution are network of 8usalava International 9td at different places in India at

%@ ;.;JI1 A@ (@ $@ '@ @ C@ <@ :@ +?1H?9.43 J5,34?+?, )=13 M=M+?I ?JM?,?+?, I1,.43 4?I)=43 8.98?T?

%%@ )?T1? %A@ B?M&J3,)=4 %(@ 8?1)=4 %$@ B?I)=4 %'@ 9=,JI?1? % @ ;J?1,IHJ?4 %C@ ,39JI

%!@ )=1;JI

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Nat,re of Acti3it+: Prod,ct &an,fact,red )" C+linder 'iners

;ylinder liner is a cylindrical part to be fitted into an engine block to form a cylinder. It is one of the most important functional parts to make up the interior of an engine the cylinder liner, serving as the inner wall of a cylinder, forms a sliding surface for the piston rings while retaining the lubricant within. The most important function of cylinder liners is the excellent characteristic as sliding surface and these four necessary points.

Jigh anti7galling properties 9ess wear on the cylinder liner itself 9ess wear on the partner piston ring 9ess consumption of lubricant

The cylinder liner receives combustion heat through the piston and piston rings and transmits the heat to the coolant. ? cylinder wall in an engine is under high temperature and high pressure, with the piston and piston rings sliding at high speeds. In particular, since longer service life is re-uired of engines for trucks and buses, cast iron cylinders that have excellent wear7resistant properties are only used for cylinder parts. ?lso, with the recent trend of lighter engines, materials for engine blocks have been shifting from cast iron to aluminum alloys. Jowever, as the sliding surface for the inner cylinder, the direct sliding motion of aluminum alloys has drawbacks in deformation during operation and wear7resistance. For that reason, cast iron cylinder liners are used in most cases.

-" C+linder 'iners for Al,min,m /loc;s

Hlobal warming has started to show its adverse effects on the environment. To improve the fuel efficiency and adhere to latest 3uro norms automobile manufacturers are shifting towards aluminum engines. These engines have as cast cylinder liners with special surface on the outer diameter commonly referred to as spiny lock or stipple finish. To improve rigidity and high thermal conductivity properties of engine blocks, 8usalava has developed different specifications of cylinder liners that have high adherence to aluminum blocks at the time of die casting by controlling the coarseness of the outer casting surface with the special coating materials and in7process controls.

<" Gre+ = D,ctile Iron Piston Rings

8usalava has developed materials with special properties in grey and ductile iron by centrifugal casting process for critical sealing applications. These rings are being supplied to ?utomotive, 9ocomotive, Marine, and )ower generation, ?ircraft, ?erospace and Jydrocarbon grey iron materials. processing ?pplications. /e also supply rough machined rings to ring manufactures around the world in ductile and

>" Centrif,gal Castings

;entrifugal casting method was developed after the turn of the A!th century to meet the need for higher standards. &pinning molds generate centrifugal force on molten metal to position the metal within a mold. ?s the molten metal solidifies from the outside in, a casting with dense, close grain structure is created. ?s a result of close grain structure the centrifugal process offers products with better physical properties than castings made using the static casting method. )roper mold design, mold coatings, mold spinning speeds, pouring speeds, cooling rates and metal chemistry results in castings with higher yields, fewer impurities and greater strength.

4,alit+ $i? $igma

? method or set of techni-ues, &ix &igma has also become a movement focused on business process improvement. It is a -uality measurement and improvement program originally developed by Motorola that focuses on the control of a process to the point of N six sigma Gstandard deviations@ from a centerline, or put another way, (.$ defects per million items. ? &ix &igma systematic -uality program provides businesses with the tools to improve the capability of the business processes. 8usalava had started implementing these techni-ues in A!!A.The company had ' +lack belts and %$ Hreen +elts. ?nd it was awarded twice for its best pro*ects. It had tangible results in terms of -uality and production.

Infrastr,ct,re )" Plants

9ocation of )lant % ?ddress ?davinekkalam, 2i*ayawada. ?davinekkalem, ?giripalli Mandalam, 8rishna ,t, ?) O 'A%A%A, India ;ylinder 9iners, )iston 4ings, 2alve &eats F

)roducts ?rea .perations

centrifugal castings. %$.$( acres ;asting F Machining.

9ocation of )lant A ?ddress )roducts ?rea .perations

?utonagar, 2i*ayawada. +7$, Industrial 3state, 2i*ayawada O 'A!!!C, India ;ylinder 9iners, 2alve &eats. A. ?cres Machining.

9ocation of )lant ( ?ddress )roducts ?rea .perations 9ocation of )lant $ ?ddress )roducts ?rea

4udrapur, =ttaranchal. )lot 1o.%!, 1agar,4udrapur,=ddam&ing %'(,India ;ylinder 9iners (.(' ?cres ;asting F Machining.

&ector7A,II3

)ant

1agar,=ttaranchal7A (

&pecial 3conomic >one, 2isakhapatnam. 8usalava International 9td., ,uvvada,2isakhapatnam 7'(!!$ ,India ;ylinder 9iners C.% acres

2&3>,

#TIGER PO

ER! @ The To,gh Parts

#TIGER PO ER! @ TOUG% PART$ has dovetailed their process to give

peak performance with best -uality at affordable price O a tangible result.

/e are proud to say now 0TIGER PO ER! @ TOUG% PART$ is complete Hlobal. Most of the vehicle manufacture in the Indian domestic market has a tie7up with international manufactures like Ma#da, Jino, Mercedes +en#, Mitsubishi etc.,, 8usalava International 9imited supplies their product to the bellow .3Ms in India who has international collaboration.

'I$T O. DO&E$TIC O"E"&" C'IENT

)roduct wise market share comparison with competitor %. ;.M)?15 ?shok 9eyland 9td A. (. $. T39;. 3icher Motors +a*a* 9td '. . &wara* Ma#da 2.&.T. Tillers Ma#da Mitsubishi %!!.!!" %!!.!!" Tempo Mercedes +en# Mitsubishi ,aimler +en# C!.!!" %!!.!!" %!!.!!" ;.99?+I4?TI.1 Jino7Bapan F +ritish 9eyland T) &J?43 %!!.!!"

Tractors 9td ?nd for the international Market, 8usalava international 9imited had a start ' years back and supplying the products after -uality validation for the below customers. Interestingly, 8usalava has worked in tandem with the above international collaborated Indian .3Ms to achieve their stringent -uality re-uirement both in Foundry and Machining. The above .3Ms contribute (!" of 8usalava International 9imited turnover. Technical officers from 8usalava have played a vital role in establishing and understanding the International specification for the domestic .3Ms and had good report for working hand in hand to meet the drawing print specifications. ?nd for the International Market 8usalava International 9imited is supplying the products after -uality validation for the below customers.

DO&E$TIC A.TER &AR6ET:

6U$A'A1A had started supplying its products to the aftermarket under the brand name #TIGER PO ER! since %:<A. It has a dominating presence in the aftermarket and en*oys the confidence of ma*or engine rebuildersLreborers, .3Ms and mechanics. ;urrently it possesses a market share of ('" in India and (!" in =&?.3ven 3xports a ma*or share of its production to various countries across the globe vi#., Italy, =.8., France, 1ew >ealand, +angladesh, ?ustralia, Malaysia, Thailand, Mauritius and the Middle 3ast. It had wide7 spread, well established networks in India, =&?, ;anada and 3urope to serve its clients on A$xC bases. Tiger )ower offers a wide range of KThe Tough )artsI like ;ylinder 9inersL&leeves, 2alve &eat Inserts, 2alve Huides, Tappets, )istons, )iston )ins, Haskets, ?lfin 1ickel Inserts, cast sleeves for aluminum blocks, cast ironL,uctile Iron )ipes, Inertia 4ings. It caters to Marine, Industrial, ?utomotive, refrigeration, and compressors, Tractor, ?eronautical and Truck +usiness. It also caters to the aftermarket re-uirements by indirectly supplying the liners in +ulk to 9iner manufacturers.

Com2an+ Prod,ct:
8usalava manufacturers 9inersL&leeves in both cast iron and &.H. Iron, ;entric cast valve seat insert and ?lfin )iston inserts. ?s a new development 8usalava has started manufacturing the engineering items out of its own technology like ( mts., pipes for ash disposal for the thermal power plants, sugar crushers material, and motor frames for the heavy electrical motors.

$TRENGT%$:
Javing a Track record of $' years 3-uipped with the latest technology Gin houses@ in the industry to manufacture any variety of ;ylinder 9iners as per ;ustomer re-uirements meeting international standards Jighly automated with state of the art technology having the complete manufacturing facilities in house ;ontinuous 4F, in house to have an edge over the competition T& % :$: ;ertified ;ompany

 Hood brand image Ma*or supplier to domestic .3Ms like Tata Motors limited, ?shok 9eyland 9td, 3icher Motors 9td, +a*a* Tempo 9td, &wara* Ma#da 9td, 2&T Tiller 9td and International .3Ms as Tier A Hood ,istribution 1etwork all over India in the aftermarket and =&? /ide spread ;ustomer segmentation Implementation of 9ean Manufacturing ,edicated Manpower )rofessional approach to the market Multi7location facilities

Technolog+ U2 gradation:
8usalava has developed the basic technical re-uirement for the manufacturing of their products, and in line to develop the technical strength hires experts from Hermany for upgrading the foundry technology in line to the International practices. Till 8usalava has taken ( rounds of experts views to validate their process and to fine tune their existing process for better productivity. Most significantly, 8usalava deputes their technical managerial personal for the training in different institutes for betterment of their knowledge and practices. Mr. )rasad 4.8 ;hukkapalli, Managing ,irector of the company has visited Bapan under ?.T& programmed for %'days technical training in Muality &ystems during the first week of .ctober!A.

ERP $oftware:
8usalava has in house software development ;enter, and presently implementing self developed 34) &ystem of K8.nline integrating Finance, Manufacturing, ,istribution and J4 ?ctivities across I1,I? and =&? offices. ?t 8.nline, we understand the strategic role supply management must play in a corporation today and the significant impact a supply chain management strategy can have on earnings. &upply chain management solutions help companies transform supply strategy into a competitive advantage. /e combine expertise, technology and information to help you bring immediate value and profit your companys bottom line.

A $I&P'E EAA&P'E O. T%E $UPP'( C%AIN 'OOP $A'E$ NET OR6BU$A $A'E$ NET OR6 B INDIA

1I$ION: 0To produce Muality auto component products the matching best available in the world in
terms of innovative design features and endues at competitive cost deliverable in time and maximi#e customer satisfaction to ensure constant increase in market share and global presence for the company.6

&I$ION: %. To constantly strive for automation and technology up gradation of companys

plant process and product to maximi#e customer satisfaction and efficient use of resources at

companys disposal to optimi#e production and minimi#e cost. A. To trigger higher demand for companys products both in ,omestic and International Market and there by improve market share. (. To improve both top line and +ottom 9ine of the company to ensure optimum returns for all stake7holders of the company. $. To make 8usalava a true global conglomerate through professional management, corporate governance initiatives and strict adherence to regulatory compliances. M?1)./34 ,3T?I9& ,esignation Managing directorF directors 2ice presidents ;hief information officer Heneral managers 3ngineers &ales officers &killed workers &emi skilled workers =nskilled workers ?dministrative staff Total A!!(7 !$ ! ! ' (! A ': %! :C! %'< %( ! A!!$7 !' %! ! ! AC (A '< %!$ %%!$ %: %'(C A!!'7 ! C ! % A $! '( :: %!C% %:: %'!A A!! 7 !C C A % A< (' '( %(% %AA( A%% % :C A!!C7 !< C A % C A< $: '( %A( %! ! AA %'' A!!<7 !: C A % C A< '% '' %A< %!$( AA$ %'$ A!!:7 %! C ( A C A: '$ '< %(C %A!< A(% %C(

Total man 2ower in 6,sala3a International 'imited .,nctions of different de2artments Prod,ction:
)roduction department takes the raw materials and melts it down in the electrical induction furnace. It makes rough casting through centrifugal dice. In production department production engineer does operations according to all the liners drawings. These operations will be finished on different machines. It takes < O %! operations. ?fter completion of these operations finished liners will be sent to -uality control department to check the -uality of the liner manufactured.

&aterials:
Material department purchases the raw material on the parameters like good -uality in time delivery, credit facility and on the right time ac-uiring the raw materials cost variability.

&ar;eting :

Marketing departments sells the products through marketing representatives, sales offices and distributors. This department gets the orders from the customers through the representatives, sales offices and distributors. This department sends the senior engineers to check complaints of the customers. This department provides incentives to sell the product in the market.

.inance:
This department makes economic plans and helps in decision making through MI& which are needed in survival and profitability of the organi#ation. This departments work to the re-uirements of loans and take necessary steps to ac-uire them from banks and other financial institutions. It also prepares and sends yearly expenditure and net profits to the management. It took into the matters like fluctuations of profits, change in Hot policies and sales, market conditions and orders being placed.

In3entor+ &anagement
Introd,ction:
3very enterprise needs inventory for smooth running of its activities. It serves as a link between production and distribution process. There is generally a time lag between the recognition of a need and its fulfillment. The greater the time lag, the higher re-uirements for inventory. It also provides a -uestion for future price fluctuations. The investment in inventories constitutes the most significant part of current assetsL /orking capital most of the undertaking. Thus, it is very essential to have proper control and management of inventories. The purpose of inventory management is to ensure availability of materials in sufficient -uantity as and when re-uired and also to minimi#e investment in inventories.

&EANING AND NATURE O. IN1ENTOR(:

In accounting language, inventory may mean the stock of finished goods only. In manufacturing concern, it may include raw materials, work7in7process and stores etc. Inventory includes the following thingsE

a*

Raw &aterial:

4aw material form a ma*or input into the organi#ation. They are re-uired to carry out production activities uninterruptedly. The -uantity of raw materials re-uired will be determined by the rate of consumption and the time re-uired for replenishing the supplies. The factories like the availability of raw materials and etc, to affect the stock of raw materials. government regulations

b@

or; in Progress E
The work in progress is that stage of stocks which are in between raw materials and finished good. The -uantum of work in progress depends up on the time taken in the manufacturing process. Together the time taken in manufacturing, the more will be the amount of work in progress "

c*

Cons,ma8les:
These are the materials which are needed to smoother the process of production. These materials do not directly enter production but they act as catalysts. ;onsumables may be classified according to their consumption and critically. Henerally, consumable stores do not create any supply problem and firm a small part of production cost. There can be instances where these materials may account for much value than the raw materials. The fuel oil may form a substantial part of cost.

d*

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

e*

$2ares:
The stocking policies of spares differ from industry to industry. &ome industries like transport will re-uire more spares than the other concerns. The costly spare parts like engines, maintenance spares etc are not discarded after use, rather they are kept in ready position for further use. ?ll decisions about spare are base o the financial cost of inventory on such spares and the costs that may arise due to their non7availability.

/ENE.IT$ O. %O'DING IN1ENTORIE$:

?lthough holding inventories involves blocking of a firmIs funds and the

costs of storage and handling, every business enterprise has to be maintaining certain level of inventories to facilitate uninterrupted production and smooth running of business. In the absence of inventories a firm will have to make purchases as soon as it receives order. It will mean loss of time and delays in execution of orders which sometimes may causes loss of customers and business. ? firm also needs to maintain inventories to reduce ordering cost and avail -uantity discounts etc. There are three main purposes of holding inventories. i. ii. iii. The transaction moti3e E which facilitates continuous production and timely execution of sales orders The 2reca,tionar+ moti3e E /hich necessitates the holding of inventories for meeting the unpredictable changes in demand and supplies of materials The s2ec,lati3e moti3e E which induces to keep inventories for taking advantage of price fluctuations, saving in re7ordering costs and -uantity discounts

RI$6 AND CO$T$ O. %O'DING IN1ENTORIE$

The holding of inventories involves blocking of a firms funds and concurrence of capital and other costs. The various costs and risk involved in holding inventories areE i. Ca2ital Costs E Maintaining of inventories results in blocking of the firms financial resources. The firm has therefore to arrange for additional funds to meet the cost of inventories. The fund may be arranged from own resources of firm outsiders. +ut in both the case, the firm incurs a cost. In the former case, there is an opportunity cost of investment while in the later caseP the firm has to pay interest to the outsiders. ii. $torage and handling costs E Jolding of inventories also involves cost on storage as well as handling of materials. The storage of costs includes the rental of the go down, insurance charges etc. iii. Ris; of 2rice decline E There is always a risk of reduction in the prices of inventories by the suppliers in holding inventories. This may be due to increase market suppliers, competition or general depression in the market. iv. Ris; of o8solescence E The inventories may become obsolete due to improved

technology, change in re-uirements, change in customer tastes etc. v. Ris; determination in C,alit+: The -uality of materials may also deteriorate while the inventories are kept.

O/0ECTI1E$ O. IN1ENTOR( &ANAGE&ENT :

Inventory management is concerned with the determination of optimum level of investment for each components of inventory and the efficient use of components and the operation of components and the operation of an effective control and review of mechanism. The main ob*ectives of inventory management are operational and financial. The operational ob*ective is that the materials and spares should be available in sufficient -uantity so that work is not disrupted for want of inventory. The financial ob*ective is that the materials and spares should be available in sufficient -uantity so that work is not disrupted for want of inventory. The financial ob*ective means that investment in inventory should not remain idle and minimum working capital is locked in it. The following are the ob*ectives of inventory managementE %. To ensure continuous supply of materials, spares and finished goods so that production should not suffer at any time and the customers demand should also be met. A. (. $. '. To avoid both over7stocking and under7stocking of inventory. To maintain investment in inventories at the optimum level as re-uired by the operational and sales activities. To keep material cost under control so that they contribute in reducing the cost of production and overall costs. To eliminate duplication in ordering or replenishing stocks .This is possible

with the help of centrali#ing purchases. . C. <. To minimi#e loses through deterioration, pilferages, wastages, and damages. To ensure perpetual inventory control so that materials shown in stock ledgers should be actually lying in the stores. To ensure right -uality goods at reasonable prices. &uitable -uality standards will ensure proper -uality of stocks. The price7analysis, the cost7analysis and value analysis will ensure payment of proper prices. :. To facilitate furnishing of date for short7 term and long term planning and control of inventory.

TOO'$ AND TEC%NI4UE$ O. IN1ENTOR( &ANAGE&ENT

? proper inventory control not only helps in solving the actual problem of li-uidity but also increase profits and causes substantial reduction in the working capital of the concern. )" Determination of stoc; le3els: ;arrying of too much and too little of inventory is determined 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 is too high it will be unnecessary tie up of capital. ?n efficient inventory management re-uires should maintain an optimum level of inventory where inventory costs are the minimum and at the same time there is no stock out which may result in loss or shortage of production. A* &inim,m stoc; le3el E It represents the -uantity below its stock of item should not be allowed to fall. Lead-time : ? purchase firm re-uires some time to process the order time is also re-uired by the supplying firm to execute the order. The time taken in processing the order and then executing it is known as lead time. Rate of cons,m2tion E It is the average consumption of materials in the factory. The rate of consumption will be decided on the basis of past experience and production plans. Nat,re of material E The nature of material also affects the minimum level. If a material Qis re-uired for such material. Minimum stock level can be calculated with the help of following formula.

Minimum stock level R 4e ordering level 7 G1ormal consumption ? normal re order period.@ 8* Re ordering le3el : /hen the -uantity of materials reaches at a certain figures then fresh order is sent to get material again. The order is sent before the materials reach minimum stock level. 4e O ordering level is fixed between minimum level and maximum level. 4e7ordering level R Maximum consumption ? Maximum 4e7order period.

c* &a?im,m 'e3el: It is the -uantity of materials beyond which a firm should not exceed its stocks. If the -uantity exceeds minimum level limit then it will be overstocking. .verstocking will mean blocking of more working capital, more space for storing the materials, more wastage of materials and more chances of losses from obsolescence. Maximum &tock 9evel R 4e7ordering 9evel S 4e7order Muantity O GMinimum consumption ? Minimum 4e7order period@ d* Danger $toc; 'e3el: It is fixed below minimum stock level. The danger stock level indicates emergence of stock position and urgency of obtaining, fresh supply at any cost. ,anger stock level R ?verage 4ate of consumption ? emergency delivery time e* A3erage stoc; le3el: This stock level indicates the average stock held by the concern. ?verage stock level R Minimum stock level S T x 4e7order -uantity. -" Determination of safet+ stoc;s: &afety stock is a buffered to meet some unanticipated increase in usage. The demand for materials may fluctuate and delivery of inventory may also be delayed and in such a situation the firm can face a problem of stock out.

In order to protect against the stock out arising out of usage fluctuation, firms usually maintain some margin of safety stock. Two costs are involved in the determination of this stock that is opportunity cost of stock outs and the carrying costs. If a firm maintains low level of safety fre-uent stock outs will occur resulting into the larger opportunity costs. .n the other hand, the larger -uantity of safety stock involves carrying costs.

<" Economic Order 4,antit+ 7EO4*: The -uantity of material to be ordered at one time knows an economic ordering -uantity. This -uantity is fixed in such a manner as to minimi#e the cost of ordering and carrying costs. Total cost off material R ?c-uisition cost S carrying costs S ordering cost. Carr+ing cost: It is the cost of holding the materials in the store. Ordering cost: It is the cost of placing order for the purchase of materials. 3.M can be calculated with the help of the following formula EO4 D - COEI /here ; R ;onsumption of the material in units during a year . R .rdering ;ost I R ;arrying cost or interest payment on the capital.

>* AB/BC Anal+sis: 7Alwa+s 8etter control anal+sis* =nder ?+; analysis, the materials are dividing into ( categories vi#... ?, + and ; ?lmost %!"of the items contribute to C!" of value of consumption and this category is called I?I category. ?bout A!" of the items contribute about A!" of value of consumption and this knows a s category I+I materials. ;ategory I;I covers about C!" of items of materials which contribute only %!" of value of consumption

F* 0IT Anal+sis 70,st in time*: The goal of *ust in time analysis is manufacturing is not new. The basic desired for continued reduction material resources re-uirements is -uiet common. The means by which goal of BIT is now being accomplished is considered to be new. The primary goal of BIT is to achieve #ero inventories within an organi#ation as well as throughout entire supply chain. BIT the key theme is to work without buffer stockLwith minimal buffer stock. G" In3entor+ T,rno3er ratio: ?n inventory turnover ratio is calculated to indicate whether inventories have been used efficiently or not. The inventory turnover ratio also knows as stock velocity is normally calculated as salesL average inventory of cost of goods soldLaverage inventory. Inventory conversion period may also be calculated to find the average time taken for clearing the stocks. &ymbolically ;ost of goods sold Inventory Turnover 4atio R 77777777777777777777777777777777777 ?verage inventory at cost G.r@ 1et &ales R 7777777777777777777777777777777777 Inventory G?verage@

?nd, Inventory conversion period R

,ays in a year 777777777777777777777777777777777 Inventory Turnover 4atio

H" Classification and codification of In3entories: The inventories should first be classified and then code numbers should be assigned for their identification. The identification of short names is useful for inventory management not only for large concerns but also for small concerns. 9ack of proper classification may also lead to reduction in production. Henerally, materials are classified accordingly to their nature such as construction materials, consumable stocks, spares, lubricants etc, after classification the materials are given code numbers. The coding may be done alphabetically or numerically. The later method is generally used for coding. The class of materials is assigned two digits and then two or three digits are assigned to the categories of items divided into %' groups. Two numbers will be category of materials in that class. The third distinction is needed for the -uality of goods and decimals are used to note this factor. I" 1al,ation of in3entoriesB &ethods of 3al,ation: FIF. method 9IF. method +ase &tock method /eighted average price method

CRITERIA .OR 0UDGING T%E IN1ENTOR( $($TE&

/hile the overall ob*ective of the inventory system is to minimi#e the cost to the firm at the risk level acceptable to management, the more proximate criteria for *udging the inventory system are

;omprehensibility ?daptability Timeliness

Areas of im2ro3ement:
Inventory management in India can be improved in various ways.

Improvements could be affected through.

Effecti3e Com2,terization:
;omputers should be used merely for accounting purposes but also for improving decision making. 4eview of ;lassificationE ?+; F F&1 classification must be periodically reviewed. Im2ro3ed CoBordination: +etter co7ordination among purchase, production, marketing and finance department will help in achieving greater efficiency in inventory management.

De3elo2ment of 'ong Term Relationshi2s:

)rocedures for disposing obsoleteLsurplus inventories must be simplified.

Ado2tion of Challenging Norms:

;ompanies should set benchmarks with global competitors and use ideas like BIT to improve inventory management.

1al,ation of in3entories @ methods of determination

?lthough the prime consideration in the valuation of inventories is cost, there are a number of generally accepted methods of determining the cost of inventories at the close of an accounting period. The most commonly used methods are First7 in7first7out GFIF.@ average, and 9ast7in7first7out G9IF.@. The selection of the method for determining cost of inventory valuation is important for it has a direct bearing on the cost of goods sold and conse-uently on profit. /hen a method is selected, it must be used consistently and cannot be changed from year to year in order to secure the most favorable profit for each year.

)* The .I.O &ET%OD 7.IR$TBINB.IR$TBOUT &ET%OD*

=nder this method it is assumed that the materials or goods first received are the first to be issued or sold. Thus, according to this method the inventory on a particular date is presumed to be composed of the items, which were ac-uired

most recently. Ad3antages: The FIF. method has the following advantages %. A. (. It values stock nearer to current market prices since stock is presumed to be consisting of the most recent purchases. It is based on cost adP therefore, no unreali#ed profit enters into the financial accounts of the company. The method is realistic since it takes into account the normal procedure of utili#ing or selling those materials or goods, which have been longest in stock.

Disad3antages: The method suffers from the following disadvantages %. A. It involves complicated calculations and hence increases the possibility of clerical errors. ;omparison between different *obs using the same type of material become sometimes difficult. ? *ob commenced a few minutes after another *ob may have to bear an entirely different charge for materials because the first *ob completely exhausted the supply of materials of the particular lot. The FIF. method of valuation of inventories is particularly suitable in the following circumstances i. ii. iii. iv. The materials or goods are of a perishable nature. The fre-uency of purchases is not large. There is only moderate fluctuation in the prices of materials or goods purchased. Materials are usually identifiable as belonging to a particular purchase lot.

-* T%E 'I.O &ET%OD 7'A$TBINB.IR$TBOUT*

This method is based on the assumption that last time of material or goods purchased are the first to be issued or sold. Thus, according to this method inventory consists of items purchased at the earliest cost.

Ad3antages: This method has the following advantage. %. A. It takes into account the current market conditions while valuing materials issued to different *obs or calculating the cost of goods sold. The method is based on cost and therefore no unreali#ed profit or loss is made on account of use of this method. The method is most suitable for materials which are of a bulky and non7 perishable type.

<* /A$E $TOC6 &ET%OD:

This method is based on the contention that each enterprise maintains at all time a minimum -uantity of materials or finished goods in its stock. This -uantity is termed as base stock. The base stock is deemed to have been creating out of the first lost purchased, therefore it is always valued at this price and is carried forward as a fixed asset. ?ny -uantity over and above the base sock is valued in accordance with any other appropriate method. ?s this method aims at matching current costs to current sales, the 9IF. method will be most suitable for valuing stock of materials or finished good other than base stock. The base stock method has the advantage of charging out materialsLgoods at actual cost. Its other merits or demerits will depend on the method which is used for valuing materials other than the base stock.

>*

EIG%TED A1ERAGE PRICE &ET%OD:

This method is based on the presumption that once the materials are put into a

common bin, they lose identity. Jence, the inventory consists of no specific batch of goods. The inventory is thus priced on the basis of average prices paid for the good, weighted according to the -uantity purchased at each price. /eighted average price method is very popular on account of its being based on the total -uantity and value of materials purchased besides reducing number of calculations. ?s a matter of fact the new average price is to be calculated only when a fresh purchase of materials is made in place of calculating it very now and then as is the case with FIF., 9IF. methods. Jowever, in case of this method different prices of materials are charged from production particularly when the fre-uency of purchases and issuesLsales is -uite large and the concern is following perpetual inventory system.

In3entories 3al,ed at standard cost:

? very useful method of valuing inventories is at standard cost. /ith a standard cost system there is no need for spending a great deal of time and money tracing unit cost through perpetual inventory record

AC4UIRING RA

&ATERIA'$ .RO& T%E $TORE ROO&

Recognized 2rod,ction

need in

$tores reC,isition 1otifies storeroom clerk of need &aterials are sent to wor; 2lace 4e-uisition recorded in %. 4e-uisition used to summary entry A. (. is

for materials

record general ledger transferring )erpetual ,epartmental 4.MIs to /I) inventory records. cost records used to accumulate materials costs by responsibility centers determine process. and costs to for

individual production

$. used

Bob cost sheets when

manufacturing is of a *ob shop variety and costs must be kept by individual *obs

0o,rnal Entr+
To record total of re-uisition summary ,r. /ork in process ;r. 4aw materials inventory The first step is the recognition of the fact that materials are needed for production. /orkers, foreman and production control personnel are usually the people that recogni#e the need for material. The store re-uisition is prepared in order to obtain materials from the storeroom. The stores re-uisition is the basic document behind general and subsidiary ledger entries charging materials to work in process. The general 9edger entry resulting from stores re-uisitions is simply a transfer of materials from the raw materials inventory to the work in process inventory. &uch an entry is as followsE ,r. /ork in )rocess ;r. 4aw materials inventory.

$tore ReC,isition
The stores re-uisition is the document that is used to notify the stores room that materials are to be released for production. For control purposes it is best to have the foreman and Lor specified production control personnel re-uisition the materials. In some plants the production control department may issue stores re-uisition at the same time that production schedules are issued. The foreman in such cases might be restricted only to the issuance of the re-uisition for materials re-uired in excess of estimated or standard -uantities. This excess stores re-uisition is usually a distinct form which might re-uire a supervisorIs signature as well as foremanIs signature. /aste of material canIt be hidden for long when excess stores re-uisition is used.

RECORDING T%E $TORE$ RE4UI$ITION @ T%E GENERA' 'EDGER:

The stores re-uisition is recorded in the general ledger and in various subsidiary ledgers. ?mong the usual subsidiary ledgers are the perpetual inventory cards, departmental cost records, and *ob cost sheets. In the general ledger, stores re-uisition are recorded by a transfer from raw materials inventory Ga credit@ to work in process Ga debit@ 3ach stores re-uisition is not the sub*ect of a general ledger entry. The stores re-uisition for a month are totaled, and this total is the sub*ect of the above general ledger entry. .rdinarily each stores re-uisition is recorded in a re-uisition summary, which is totaled each month to determine the dollar amount of the general ledger entry. ? re-uisition summary shown above provides departmental distinctions as well as distinction between direct and indirect materials. /hen the general ledger contains only one work in process account and one factory overhead account the monthly entry from the re-uisition summary would beE ,r. /ork in process Gfor direct materials@ ,r. Factory overhead Gfor indirect materials@ ;r. 4aw materials inventory. /hen the general ledger contains departmental account the monthly entry from the re-uisition summary would beE ,r. /ork in process O I ,r. Factory overhead 7 I ,r. /ork in process O II ,r. Factory .verhead O II ;r. 4aw materials inventory

Recording the store reC,isition @ a s,8sidiar+ ledger:

The ( subsidiary ledgers in which stores re-uisitions might be recorded are the perpetual inventory cards, departmental cost records, and *ob cost sheets. )erpetual inventory are very useful for inventory control purposes, whereas departments cost records are valuable aids in a accounting for each 0 area of

responsibility6 In addition, departmental cost records are indispensable aids in calculating unit costs when production is of continuous process nature for example a canning factory. &tores re-uisition can be recorded individually in subsidiary ledgers, or if summari#ations are possible re-uisitions can be recorded in summary form. The perpetual inventory cards are to be useful aids in controlling inventories, the stores re-uisitions must be recorded there in at least once each week or even daily for critical ma*or materials. ,epartmental cost records can take many different forms. Jowever, if they are to be complete, direct materials, direct labor and factory overhead must be a part of such records. The *ob cost sheet contains complete information on the costs pertaining to a *ob. ,irect labor direct material, other direct charges, and factory overhead are all included on a *ob cost sheet. .ther direct charges include such items as special tools and die which can be and are worthwhile tracing to individual *obs. Factory overhead per *ob is usually estimated in terms of direct labor costs or direct labor hours. This estimate is called the 0?pplied factory overhead6 per the *ob.

6U$A'A1A INTERNATIONA' 'I&ITED

'OCA' PURC%A$E INDENT

,ocument 1o E )4LFL! %% 4evision 1o )age 1o E !A, ,ated %7%%7A!!% E % of % Date: Comments 4,alit+ = 4t+ of

UNITBI $"No:

&ED of the P,r2ose

$ection: $2ecification ReC,ired 4t+

$l"N Descri2tion o &aterial

ReC,ired /+ $ection %ead

.orwarded /+ Assistant &aterials

A22ro3ed /+ &anager &anager 7Admin* E G& 7. = &*

? shown above, there is need only for physical -uantities since the inventory value is the physical -uantity multiplied by the standard cost. /ith the cost and value columns disposed off, a perpetual inventory card can include additional data such as -uantities on order, -uantities reserved, and -uantities available. These additional data are very useful for inventory and production control purposes. .n the basis of a few calculations concerning actual units cost, inventories at standard cost could easily be converted into inventories on a FIF., a 9IF. or an average cost basis.

In3entor+ of O8solescence:
.bsolescent inventories cannot be used or disposed off at values carried on the books. Fre-uent reviews should be made of all inventories and when obsolescence is indicated a re-uest for revaluation should be prepared for approval by management. The difference between original and obsolete value should be recorded by a charge to an operating account. Inventory obsolescence, and a credit to inventory. If the material is scrapped, this will be for the full inventory of the material. If it is anticipated that the material can be sold at reduced value or used in areas where it will be worthless than its original value, the entry would be only for the amount of write down. &ome companies carry a salvage inventory and transfer to its materials which may be sold or used at reduced values.

Calc,lation of In3entor+ T,rno3er Ratio

1et sales In3entor+ T,rno3er Ratio R UUUUUUUUUU.. Inventory G?verage@ A!%% R A!%! R A!!: R A!!< R A!!C R ':(!C!:'' UUUUUUU.. %A($!%(< '%A'(AC<: UUUUUUUU :CC %$ ! '!!:AA<<' UUUUUUUU. C('A'$ $<$<((C( UUUUUUU..... <('AAC (C!:':A!% UUUUUUUU ' :A'A(C R $.<% R '.A$ R C.$$ R C.!: R .'A

Calc,lation of In3entor+ Con3ersion Period

In3entor+ Con3ersion Period

,ays in a year R UUUUUUUUUUUU Inventory Turnover 4atio

A!%% R A!%! R A!!: R A!!< R A!!C R

( U..UUU $.<% ( UUUUU '.A$ ( UUUUU. C.$$ ( UUUUU. C.!: ( UUUUU. .'A

RC R C! R $: R '% R'

IN1ENTOR( TURNO1ER RATIO:

Inventory turnover ratio is calculated to indicate whether inventories have been used efficiently or not. The Inventory turnover ratio also known as stock velocity is normally calculated as salesL average inventory of cost of goods sold L average inventory. Inventory conversion period may also be calculated to find the average time taken for clearing the stocks. &ymbolically Inventory Turnover 4atio ;ost of goods sold R UUU.................... ?verage inventory at cost (EAR A!%% A!%! A!!: A!!< A!!C $A'E$ ':(!C!:'' '%A'(AC<: '!!:AA<<' $<$<((C( (C!:':A!% IN1ENTOR( %A($!%(< :CC %$ ! C('A'$ <('AAC ' :A'A(C .4 1et sales R UUUUU Inventory G?verage@

IN1ENTOR( TURNO1ER RATIO $.<% '.A$ C.$$ C.!: .'A

ANA'($I$:
From the above table, the inventory turnover ratio is high in the year A!!: since it is having low inventory. ?nd in the year A!%% Inventory turnover ratio is low when compared to all. The year A!!: inventory turnover ratio implies good inventory management.

C%ART:

INTERPREETATION:
In the year A!!:, the inventory turnover ratio was very high than the rest of the years. It implies good inventory management. In the year A!%%, it was $.<% it was very lower than the other years. It means excessive inventory or it may be overinvestment in inventory. 3xcessive inventory due to funds locked up, rental of space.

IN1ENTOR( CON1ER$ION PERIOD:

,ays in a year R UUUUUUUUUUUU Inventory Turnover 4atio IN1ENTOR( CON1ER$ION PERIOD C C! $: '% '

Inventory ;onversion )eriod

(EAR A!%% A!%! A!!: A!!< A!!C

IN1ENTOR( TURNO1ER RATIO $.<% '.A$ C.$$ C.!: .'A

ANA'($I$:
From the above table the inventory conversion period was decreasing exponentially from A!!C7A!!: and it indicates well to the firm. +ut in the years A!%! F A!%% it was increased.

C%ART:

INTERPRETATION:
Inventory conversion period was decreasing from A!!C7A!!:. It was very good to the firm. +ut in the years A!%! F A!%%, it was increased. +eing the price of the product was increasing F the sales were decreased. &o the inventory conversion period increased. +ut it should be decreased.

T%E PERCENTATEG O. IN1ENTOR( IN CURRENT A$$ET$:

Inventory The percentage of inventory in ;urrent ?sset R UUUUUUUUUU ;urrent ?sset (EAR IN1ENTOR( CURRENT A$$ET$ PERCENTAGE

A!%% A!%! A!!: A!!< A!!C

%A($!%(< ::<A :!C C('A'$ <('AAC ' :A'A(C

($$!(%'! A<'C$!$$$ AC'($$(A$ A($<%$C<' %'C:(:((!

('.<C ($.:( A$.$ A:.% ( .!$

ANA'($I$:
+y observing the above table the percentage of inventory in current assets is more in the year A!%%, it has ('.<C.

INTERPRETATION:
The kusalava international limited was giving more importance to inventory in current ?ssets. In the earlier year gave more preference to inventory. This will show the percentage of inventory in totals ;urrent ?ssets. More attention has to be played by the management towards inventory as it consists ('" of ;urrent ?ssets.

REBORDER 'E1E':
/hen the -uantity of materials reaches at a certain figures then fresh order is sent to get material again. The order is sent before the materials reach minimum stock level.re7order level is fixed between minimum level and maximum level. 4eordering levelRMaximum consumption V Maximum reorder period. ,elivery timeE $7 weeks. 1ormal usageE C weeks.

RA

&ATERIA'
(EAR
A!%% A!%! A!!: A!!< A!!C

REBORDER 'E1E' IN &ET

!$< $<$< (<$ ' $ '!$!

ANA'($I$:
From the above table the reorder level in MLT is high in the year A!!:. In the year A!%! the reorder level is decreased since the annual demand is high.

RA

&ATERIA'

INTERPRETATION:
In the year A!!:, at (<$ MLT of raw material, the order should be placed. +ecause the annual demand is high but the reorder level was decreased. It may be happened due to decrease in the demand of final product. 4e7.rder 9evelRMaximum usageVMaximum delivery Time

C('INDER 'INER$E
(EAR A!%% A!%! A!!: A!!< A!!C REBORDER 'E1E'$ IN NO$ ( :(%A! ($A(<$! (:%'A $ A:%(C$$ A(:C(%A

ANA'($I$:
From the above table the re7order level in 1.& high in the year A!!:. The reorder level in 1.& is low in the year A!!C.

INTERPRETATION:
+y comparing the re7order levels in all the years, it was (:%'A $ nos in the A!!:.?t the level of (:%'A $ nos the order was placed. &o definitely there should be high annual demand for the finished product where as in the year A!!C the reorder level was A(:C(%A nos but it was gradually increased that means annual demand was increased.

&INI&U& 'E1E': &inim,m stoc; le3el:

It represents the -uantity below its stock of item should not be allowed to fall. 'eadBtime: ? purchase firm re-uires some time to process the order time is also re-uired by the supplying firm to execute the order. The time taken in processing the order F then executing it is known as lead time. Rate of cons,m2tion: it is the average consumption of materials in the factory. The rate of consumption will be decided on the basis of past experience F production plans. Nat,re of material: the nature of material also affects the minimum level. If a material is re-uired for such material. Minimum stock level can be calculated with the help of following formula. Minimum stock levelRre order level7Gnormal consumption Vnormal re order period@

RA

&ATERIA':
(EAR A!%% A!%! A!!: A!!< A!!C &INI&U& 'E1E' IN &ET % (< %(%( %CA: '!C$ $'%'

ANA'($I$:
From the above table the minimum level is high in the year A!!<. The minimum level is low in the yearA!%!.

INTERPRETATION:
The above table reveals that the Minimum level was reduced by reducing the storage cost F to avoid the obsolete goods.

C('INDER 'INER$:
(EAR A!%% A!%! A!!: A!!< A!!C &INI&U& 'E1E' IN NO$ %!!!AA! :ACA:! %! !(<$ C<:%(: $:ACA

ANA'($I$:
From the above table the minimum level nos are maintained in the year A!!C F fro that year it was gradually increasing F there was a slight decrease in A!%!.

INTERPRETATION: In the year A!!C, they maintained only $:ACA nos as minimum level. +ut it was gradually increasing. That means the production was increasing. +ut in A!!:, the production is high so they maintained %! !(<$ nos as minimum level but in A!%! it slightly decreased because annual demand decreased.

&AAI&U& 'E1E':
It is the -uantity of materials beyond which a firm should not exceed its stocks. If the -uantity exceeds minimum level limit then it will be overstocking. .verstocking will mean blocking of more working capital, more space for storing the materials, more wastage of materials and more chances of losses from obsolescence. Minimum stock levelR4e7order level S 4eorder -uantity O Gminimum consumption V minimum re7order period@ RA &ATERIA': (EAR A!%% A!%! A!!: A!!< A!!C &INI&U& 'E1E' IN &ET ('C% A< ( (C C (($% A:C$

ANA'($I$: From the above table the maximum level is high in the year A!%% and it is low in the year A!!C.

INTERPRETATION: The maximum levels were increased because the sales increased.

C('INDER 'INER$:
(EAR A!%% A!%! A!!: A!!< A!!C &AAI&U& 'E1E' A!C:: < A!A%!%< A(%%!: %C%::A% %$%'!<A

ANA'($I$: The above table in the year A!!: demands maximum level increasing theA!%% the demand maximum level decreasing.

INTERPRETATION: ,ue to increasing of annual demand the maximum level varied. In the year A!%!, the maximum level decreases because the production was decreased due to low sales.

A1ERAGE 'E1E':
This stock level indicates the average stock held the concern. ?verage stock level R minimum stock level S T 4eorder -uantity. RA &ATERIA': A1ERAGE $TOC6 'E1E' IN &ET A!%% A!%! A!!: A!!< A!!C %:%%.' %'(A.' A!% .' '(A<.' $C$A

(EAR

The average stock level is high in the year A!!< F is low in the year A!%!.

INTERPRETATION: ?verage level for the raw material was calculated by taking maximum and minimum levels were taking into account.

C('INDER 'INER$:
(EAR A!%% A!%! A!!: A!!< A!!C A1ERAGE 'E1E' %% :A$

%!<%<(: %A(C%% :A! (

C'C$<'

ANA'($I$: The average level for cylinder liners is high in the year A!!: is %A(C%% . It is low in the year A!!C is C'C$<'.

INTERPRETATIONE Henerally kusalava international limited was maintaining these stock levels per annum. &tock was necessary to run the production. It was gradually decreasing.

.INDING$
I n this chapter an attempt is made to give the conclusions at a glance on inventory management of 8usalava International 9td. %. The following conclusions have been drawnE A. .ver all, the Inventory Management in 8usalava International 9td is up to the mark where by ade-uate supplies of materials and stores, minimi#ation of stocks outs and avoided costly interruptions in operations. (. It has kept down the investments in inventories, inventory carrying cost and obsolescence losses to the minimum through purchasing economies by the measurement of re-uirements on the basis of recorded experience. $. It also enables the management to make cost and consumption comparisons between operations and periods. '. For the year A!! 7!C because of low demand of the finished products of cylinder liners in the inventory reduced to (!.'< from ((.!: in the year A!!'7! . The maintenance of cylinder liners decreased from 'A.$$" in the year A!!(7!$ to A(.'" in the year A!!C7!<. +ecause of low orders. In this company the cylinder liners are maintained on the basis of purchase orders of the customers. C. The trend analysis shows that the investment on inventory raised from %($.<!" in the year A!!$7!' to %<:.:! in the year A!!C7!<.+ecause this company made investment on inventory on the basis of demand of the customers. <. ?lthough the sales are increased in the year in the year A!!C7!< the inventory turnover ratio decreased from :.:: in the year A!!'7! because of increase in the average stock maintained by the company " :. ?lthough increased sales in the year A!!C7!< the inventory conversion period increased from ( days in the year A!!'7! to $A days. +ecause of high average stock maintained by the company. Its not a good practice. to <.'(

%!. The percentage of inventory over total assets reduced from CC" in the year A!!$7!' to 'C" in the year A!!C7!<.This because in the year A!!C7!< although the assets are increased the inventory is kept very high. %%. The current ratio is A.%C in the year A!!!$7!'. +ecause the current assets and current liabilities are not properly maintained in that year. %A. The investment deployment ratio increased from <.%C" in the year A!!(7!$ to %'.$!" in the year A!!$7!'.?gain the investment deployment ratio reduced to <. C" in the year A!!C7!<.because of increase total assets and investments.

$UGGE$TION$
a@ ,isposal action for absolute and non7moving items to be takes up on priority. Identification of buyers to be done. b@ Implementation of buy back clause incorporated in the earlier e-uipment purchase

an order has to be taken up with the suppliers and returning of the unconsumed spare parts to be done. &uch items are too identified. c@ .rders are released mostly for all the items covered in the open order agreements.

4ate contracts immediately on their receipt. This has to be controlled. .nly the items re-uired for consumption are to be procured otherwise the items procured will not get consumed and become non7moving. d@ =tility of items costing more than %.!! lakh has to be reviewed to take further

action. e@ 9inking up alternate part numbers and elimination of duplicate code numbers. &o

that effective utili#ation of available items could be done and unnecessary purchases could be avoided.

/I/I'IOGRAP%(
Text +ooksE
Finance management Finance management Finance management Finance management GTheory F )ractice@ Financial ?ccounting )roduction management 4.8.&harma F 8.Hupta 8hanF Bain I.M.)?1,5 )rasanna ;handra &.).B?I1 F 8.9.1?4?1H ?shwatappa

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