A Study On Inventory Managemen

A STUDY ON INVENTORY MANAGEMENT IN
INSTRUMENTATION LTD, PALAKKAD

SUMMER PLACEMENT PROJECT
submitted by
RAIJA.K. R.
REG. NO: 1235F0256
under the guidance of
Prof. C.VINOTHA ,MBA, M.PHIL;

in partial fulfillment of the requirements for the award of the Degree of
MASTER OF BUSINESS ADMINISTRATION

of the Bharathiar University, Coimbatore
2012 - 2014
GURUVAYURAPPAN INSTITUTE OF MANAGEMENT

(Affiliated to Bharathiar University)
COIMBATORE - 641 105

Guruvayurappan Institute of Management
1
DECLARATION
I RAIJA.K.R,student of Guruvayurappan Institute of management,

Coimbatore, hereby declare that the project work titled A STUDY ON INVENTORY
MANAGEMENT IN INSTRUMENTATION LTD, PALAKKAD which is submitted
to Bharathiar University in partial fulfillment of the requirements for the degree of
Master of Business Administration, is a record of original research work done by me
under the guidance of, Prof. C.VINOTHA, MBA,M.PHIL of Guruvayurappan
Institute of Management, that this is genuine and has not been submitted elsewhere for
any other degree or diploma
PLACE:
DATE :
RAIJA.K.R
REG NO:1235F0256

2
ACKNOWLEDGEMENT
First and Foremost I would like to thank the Almighty, origin of all knowledge, for the
abundant blessings he has showered upon me.
I would like to express my sincere gratitude to Dr. VERGHESE MATHEW,
B.Sc (Engg), MBA, Ph.D, DGM (Germany) FIIE, Director, Guruvayurappan
Institute of Management, Coimbatore.
Dr. THOMAS T. THOMAS, B.Sc , MBA , PGDPR&J , Ph.D, Principal,
Guruvayurappan Institute Of Management, for their active support and guidance
during the course of my studies in the institute.
Words cant describe the source of motivation and inspiration that my faculty guide
Ms. C. VINOTHA ,M.B.A, M.Phil has rendered. I thank her for the support, advice
and encouragement and without her valuable advices and suggestions this report
would not have been successful.
With great pleasure i express thanks to Mr.C.BALAKRISHNAN, Deputy Manager
(P&A),Mr.T.Radhamohan,SeniorOfficer(P&A),Mr.Ramachandran,Manager(F&A)
,Mr.A.K.Keshavadas,Junior
Officer
Accounts(F&A)
of
Instrumentation
Limited,Palakkad for their necessary help and guidence in completion of my project

work.
I would like to thank my family, friends and well wishers for their encouragement in
completing the project work.
I take this opportunity to extend thank to all who has helped me and encouraged me
all throughout in bringing the best of this project.
RAIJA.K.R
Reg No: 1235F0256

3
TABLE OF CONTENTS
CHAPTER
NO
1.0
DESCRIPTION
PAGE NO
INTRODUCTION
1.0.1 INTRODUCTION OF THE STUDY
1.0.2 NEED OF THE STUDY
1.0.3 SCOPE OF THE STUDY
10
1.0.4 OBJECTIVE OF THE STUDY
10
1.1
INDUSTRY PROFILE
11
1.2
COMPANY PROFILE
14
1.3
THEORETICAL FRAME WORK
50
2.0
REVIEW OF LITERATURE
62
3.0
RESEARCH METHODOLOGY
68
4.0
DATA ANALYSIS AND INTERPRETATION
71
5.0
FINDINGS AND RECOMMENTATION
102
6.0
CONCLUSION
105
BIBLIOGRAPHY
106

4
LIST OF TABLES
TABLE NO
TITLE
PAGE NO
The percentage of current asset to

4.1.1
inventory of ILP.
76
4.1.2
Inventory Turnover ratio
77
4.1.3
Inventory Holding Period
79
Ratio Of Material Consumption To

4.1.4
Turnover
80
4.1.5
Inventory To Current Asset Ratio
82
4.1.6
Inventory To Workingcapital Ratio
84
4.1.7
Debtors Turnover Ratio
85
4.1.8
Creditor Turnover Ratio
87
4.1.9
Input Output Ratio
88
4.1.10
Workingcapital Turnover Ratio
90
4.2.1
Trend Anaysis Of Workingcapital
91
4.2.2
Trend Analysis Of Cash
93
4.2.3
Trend Analysis of Debtors
94
Relationship Between Inventory And

4.3.1
Current Asset
96
Relationship Betweeen Rawmaterial And

4.3.2
CurrentAsset
97
Relationship Between Inventory And

4.3.3
Raw material
99
LIST OF CHARTS

5
TABLE NO
TITLE
PAGE NO
Organization Chart Of The Purchase

1.2.1
Department
23
1.2.2
Organization Chart Of Stores Department
27
1.2.3
Organization Chart Of Receipt Store
29
1.2.4
Organization Chart Of Component Store
32
1.2.5
Products Of ILP
33
1.2.6
Organization Chart Of PPC Department
42
Organization Chart Quality Control

1.2.7
Department
46
4.1.1
Inventory Turnover ratio
78
4.1.2
Inventory Holding Period
79
Ratio Of Material Consumption To

4.1.3
Turnover
81
4.1.4
Inventory To Current Asset Ratio
83
4.1.5
Inventory To Workingcapital Ratio
84
4.1.6
Debtors Turnover Ratio
86
4.1.7
Creditor Turnover Ratio
87
4.1.8
Input Output Ratio
89
4.1.9
Workingcapital Turnover Ratio
90
4.2.1
Trend Anaysis Of Workingcapital
92
4.2.2
Trend Analysis Of Cash
93
4.2.3
Trend Analysis Of Debtors
94
4.4.1
FSN analysis
103

6

7
DEDICATED
TO GOD ALMIGHTY
MY DEAR PARENTS
AND
FRIENDS
1.0 .1 INTRODUCTION TO THE STUDY
Inventory is the business largest asset .It is stock of item used in business. Inventory
represent one of most important asset that most businesses posses, because the
turnover of the inventory represents one of the primary sources of revenue
generation and subsequent earnings for the companys shareholder and
owners.Inventory is very vital to every company that is without inventory no
company would survive. Inventory is meant for protection and for economy
in cost.
Keeping inventory of sufficient stock will help to face lead time component, demand
and supply fluctuation and any unforeseen circumstance in the procurement of
materials. Though to have inventory is must, inventory is such a thing that will pile up
and creep into the area of profits to turn them as losses and can put the company in
red. It is therefore, necessary to have Control over inventory to save the company

8
from piling up inventories and to avoid losses. Better said than done, is the word that
suits inventory Control.
The management of inventory is a key concern of all business. If a company's
inventory level is too low, it risks delays in fulfilling it's customers orders. If the
inventory is too high, it is tying up dollars that can be better used in other areas. It also
risks obsolescence and spoilage. Successful businesses keep their inventory turns
high, but also keep their service level at or above the industry standard.
Inventory is a stock of goods required by an organization for its successful operation.
Inventory refers to materials procured, stored and used for day to day functioning of
the whole organization. Inventory is directly related to production and marketing
department, still the finance department has to play a vital role in the management of
inventory. The purpose of inventory management is to keep stock in such a way that
there is no overstocking or under stocking.
Inventory is one of the most expensive assets of many companies representing
as much as 50% of total invested capital. Inventory Control relates to a set of policies
and procedure by which an industry determines which materials it will hold in stock
and the quality of each that it will carry in stock.
Inventory is the largest item in the current assets category and must be accurately
counted and valued at the end of each accounting period to determine a companys
profit or loss. So the management of inventory is important.Inventory management is
the process of efficiently overseeing the constant flow of units into and out of an
existing inventory.
Inventory management is a very important function that determines the health of the
supply chain as well as the impacts the financial health of
balancesheet.Every
organization constantly strives to maintain optimum inventory to meet its

requirements and avoid over or under inventory that can impact the financial figures.

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1.0.2 NEED FOR THE STUDY

Inventories perform certain basic functions which are of crucial importance in the
firms production and marketing strategies. Effective Control over the utilization of
materials has much bearing on profit and here is an attempt to study the management
of materials. This study helps the company to detect and evaluate its own strength and
weakness and also give recommendation for the better inventory management.
Without inventory management it would be difficult for any company to maintain
Control and be able to handle the needs of customers.Inventories are necessary for a
firm to operate efficiently and almost all business transactions involve the delivery of
a product or services in exchange of currency.
1.0.3 SCOPE OF THE STUDY

Inventory is the major element in the working capital of any trading and
manufacturing concern. The scope of the present study extends to ensure proper
inventory management and cost Control. It provides a guideline for the management
of the materials of the company and helps to introduce necessary changes as and
where required.
The scope of inventory management concerns the fine line between replenishment
lead time, carrying cost of inventory, asset management,inventory forecasting,quality
management,
replenishment,
returns
and
defective
goods
and
demand
forecasting.Balancing these competing requirements lead to optimal inventory levels,

which is an ongoing process as the business need shift and react to the wider
environment

10
1.0.4 OBJECTIVE OF THE STUDY
PRIMARY OBJECTIVES
o To study the tools and technique of inventory management adopted at
Instrumentation Limited.
SECONDARY OBJECTIVES
o To analyse effectiveness of inventory management.

o To study the inventory Control measures in inventory management
o Analysis of inventory management by using ratio analysis.
o To study the inventory management procedure
1.1 INDUSTRY PROFILE

Instrumentation is defined as the art and science of measurement and Control of
process variables within a production or manufacturing area .An instrument is a
device that measures a physical quantity such as flow, temperature, level, distance,
angle, or pressure. Instruments may be as simple as direct reading thermometers or
may be complex multi-variable process analyzers.
Instruments are often part of a Control system in refineries, factories, and vehicles.
The Control of processes is one of the main branches of applied instrumentation.
Instrumentation can also refer to hand held devices that measure some desired
variable. Diverse handheld instrumentation is common in laboratories, but can be

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found in the household as well. For example, a smoke detector is a common

instrument found in most western homes.
A valve is a device that Controls the flow of a fluid. Today valve can Control not only
the flow but the rate, the volume, the pressure or the direction of liquids, gases, dry
materials, through a pipeline or similar passage way. They can turn on and off,
regulate, modulate, or isolate. They can rough in size from a fiction of an inch to as
large as 30 feet in diameter and can vary in complexity from a simple brass value
available at the local hardware stock to a precision designed ,highly sophisticated
coolant system Control Valve, made of an exotic metal alloy in a nuclear reactor
Valves can Control flow of all types from the thinnest gas to
highly corrosive,
super heated steam, abrasive sherries, toxic gases and radioactive materials. They can
handle temperature from cryogenic region to molten and pressure from highly
vacuum to thousands of pounds per square inch.
The valve is one of the most basic and indispensable components of our modern
technological society. It is essential to virtually all manufacturing process and very
energy production and supply system, yet it is one of the oldest products known to
man with a history of thousands of years.

Instrumentation can be used to refer to the field in which, instrument technicians and
engineers work, or can refer to the available methods of measurement and Control and
the instrument, which facilitate them.
For core industries like power , oil, gas ,petro chemical equipment which will help
to function and chemical etc. There is a good need for Control and instrumentation
equipment which will help to function
industries smoothly. A wide range of
electronics equipment and instruments are needed for Control and measurement of the
flow of gas, oil, valves, pressure, welding valves, etc are used.

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It is a very comparative industry where new technological development are concern

which will in function requires heavy instruments in Research and Development
(R&D) facilitate for the companies engaged in this field face high level of
competition. But there is good demand for these producers in the global market in the
highly industrialized world.
1.1.1 INSTRUMENTATION INDUSTRY IN INDIA

The Indian instrumentation industry is in for a sea change. From an age where there
was development of analytical instrumentation mainly in the Department of Atomic
Energy (DAE) and CSIR labs due to sanctions, very few of these technologies were
commercialised. But with new and emerging trends which are industry-specific
instrumentation like trace analysis instruments, fiber optic-based instruments and lifescience instruments developing, there is a need for a technology plan which will
foster closer relationship between the industry and academia, felt industry experts.
A technology plan will help to focus on newer technologies in generating IPR;
playing the role of funding agencies and providing incentives for commercialisation
of indigenously developed technologies. Since instrumentation is multi-disciplinary,
there is a vast scope for design-related activities, especially OEM manufacturing.

Further, with the laboratories going in for automation, there is a huge potential for
application-specific instruments. The estimated market size for instrumentation
industry is about Rs 500-600 crore and Indian companies have a share of about Rs
100 crore and growing at 10-15% annually.
In the analytical instrument segment used for chemical analysis like liquids, solids
and gases - the global market is estimated at around $24 billion, growing at around 78% and the highest growth has been in the life science sector. Some of the top

13
companies contributing include Applera, Thermo Electron, Agilent Technologies,

Perkin Elmer, Qiagen.
India stood among the lowest in usage of instrumentation compared to its GDP
(0.17%) in the mid 80s. Due to the above gaps in technology, local instruments are
found to be considerably behind in performance, facilities, ease-of-use, ergonomy,
appearance and ruggedness. This gap cannot be bridged without greater attention of
local research, development, product innovation, and high quality production.
A few of the Indian industrial units are at most putting 2 to 3 personnel to the task of
development. Even then, these personnel are ot left to be dedicated to
development but are often drawn into other duties. The facilities put aside are
marginal and R & D often has to wait for QC and other departments to free-up the
facilities for tem. In the face of in pouring of imported technology, the Indian industry
has an inhibited outlook and hardly any long-term perspective for its in-house ressers
Manufacturers Institutions
1.2 COMPANY PROFILE

INSTRUMENTATION LIMITED is a public sector unit which was established in the
year 1964 at Kota, Rajasthan as its head quarters. The company was established for
the manufacture of wide range of electronic and pneumatic instruments in
collaboration with renowned leaders like Toshiba, Japan ; H&B Germany.
The second unit of INSTRUMENTATION LTD was set up in PALAKKAD in 1974
in technical collaboration with the International reputed firm M/S YEMATEKE

14
HONEYWELL COMPANY LTD, JAPAN for the manufacture of industrial Control

Valves. The main products manufactured are global type Control Valves, safety relief
valves, butterfly valves and allied items. The market served is process industries like
refineries, petro chemicals, power plant, fertilizers plant, etc.
The company is a Govt. of India enterprise. It was established to satisfy the
increased demand for a high technology instrumentation schemes. The company
started with the turnover of about 2crores in 1988-1989. Inspite of stiff competition
from about 9 competitors who have entered the field in the recent past, the company
could achieve a high growth.
IL, PALAKKAD is the first Control Valve manufacture in India to receive ISO 9001
certification and recertified for upgraded 2000 version in Feb 2004.The company has
adopted latest manufacturing technology of Japan. The valves are designed and
manufactured in conformation with International pressure vessel codes. The unit has
taken up development and manufacture of critical components for special projects for
Ministry of Defence as a part of its diversification plan.
To update the technology of design work, computer aided design system has been
established. The company has given due importance in R&D right from inspection
stage. The R&D center have developed a number of products, some of which have
won innovation awards. Main strength of IL, PALAKKAD was steady and rapid
absorption of technology leading to faster indigenization. Based on the technology
obtained through collaborators, in house developments could take place which in turn
added to product range significantly, such developments served to rapidly reduce
countries dependence on import.
The performance of the unit is exemplary since its inception. The unit enjoys
leadership in Control Valve segment of process instrumentation in India. There is a
separate division for repair of Control Valves of any make. This is benefited too much
company in avoiding shutting of plant for want of repair. The manufacturing facility

15
and testing of valves is treated as one of the best in the world. The company produces
around 10000 valves per year.
The company has branches and regional offices extensively to cater to sales and
timely after sales support. The unit conducts regular customer education programmes
for the benefit of customers, executives, and supervisory staff at Palakkad. Theoretical
and practical knowledge is imparted to the participants to carryout preventive
maintenance as well as minor modifications or renovation. Recently Indian Oil
Corporation has selected IL training team to impart training to customer at Oman.
The unit has full fledged after sales service department which is adequately stocked
with inventory spare parts and is in a position to respond to all sorts of problems with
regard to various types of valve within the shortest possible time.The company has
been taking active part in curriculum development in the local engineering college
and in medical aid and has set up a cancer detection centre at Palakkad.
A team of highly qualified, well trained and dedicated employees make the operations
of the company profitable and the life of the employees meaningful and colorful. The
industrial relations are at its best in the unit.All activities of IL, PALAKKAD from
order registration to dispatch have been computerized in a most modern style.
1.2.1 VISION
Manufacture and supply quality products to customer.
1.2.2 MISSION
High level customer satisfaction through better quality products and

timely delivery

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Excellence with economy.
Production and greater productivity of company growth and national

prosperity.
Team work and mutual trust.
Respect and concern for individuals.
1.2.3 OBJECTIVE
To carry on in india or any other part of the world all kind of business of
manufacturing,storing,packaging,distribution,transporting,repairing,maintaing,trading
of all kind of Control Valves.
Manufacturing of all kind of low product for dedicated application across wide
ranging related to fluid Control & Control Valve.
Testing and calibration of all types of Control Valves and allied products are for
simulation of field parameters. Special testing like dynamic response setting, nelium
leak testing, radio graphic inspection etc are in hi-tech CBV test laboratory for
importing distinct advantages
1.2.4 SWOT Analysis
Strength
o Product is of high quality
o Morale of employee is very high
o Financial level of company is good

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o R&D is strong
o Monopoly in production of Control Valve
Weakness
o
o
o
o
o
o
High employee turnover

Lack of cordination among group
No systematic internal checking
Lack of technical upgradation
Lack of departmentalisation
Lack of computer & internal facilites
Opportunity
o
o
o
o
o
Wide spread demand for product

Efficiency of workers can be enhanced
Plant capacity can be enhanced
Increased future collaboration with yamatake ltd
Negotitation to extend its export matters
Competition
Technological changes
Threat
1.2.5 LOCATION OF THE FIRM

INSTRUMENTATION LTD, PALAKKAD is located in the National Highway 47 at
distance of 40km west of Coimbatore city in Tamilnadu and 8km east of Palakkad city
in the state of Kerala.
1.2.6 ISO CERTIFICATION

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Instrumentation Limited Palakkad, is the first Control Valve manufacturer in India to

receive ISO 9001 certification and recertified for upgraded 2000 version in February
2004.
1.2.7 VARIOUS DEPARTMENTS

The following are the various departments in IL
Commercial department
Engineering department
Design department
Production and Planning department
Material management department
Ancillary department
Production department
Plant maintenance department
Quality Control department
IT department
Finance and accounts department
Personnel and administrative department
Civil department
Security department
1.2.8 MAJOR CLIENTS
Bharat Heavy Electricals Limited (BHEL)
TATA Consulting Engineers
National Thermal Power Corporation
Steel Authority of India Limited (SAIL)
Cochin Refineries
Larson and Tubro

19
Reliance Industries
State Electricity Boards of All States
Kerala minerals and metals limited
Keltron
GAIL
IOCL
ACC
FEDO
Chemtex engineering
Larson & Tubro
Cochin refineries
1.2.9 TRADE UNIONS

There are two trade unions in the company, they are
INTUC
CITU
1.2.10 FACILITIES
1.2.10.1 TECHNICAL EXPERTISE/AFTER SALES SERVICE

20
Being in the field of Control Valves for the last 30+ years, ILP have got the best
manpower trained in the fields of research, design, application engineering,
manufacturing, testing, field claim abatement techniques and these personnel
invariably get together to suggest optimum design features for solving problems faced
during commissioning or normal operation of plants.
We have also a full fledged after- sales service department which is adequately
stocked with inventory of spare parts and are in a position to respond to all sorts of
problems with regard to various types of valves within shortest possible time.Besides,
an extensive network of Branch Offices and Regional offices is available to cater to
sales and timely after-sales support.
1.2.10.2 CUSTOMER-EDUCATION PROGRAMME

Regular customer education programmes for the benefit of both Executive and
supervisory levels are conducted at Palakkad. In these programmes, theoretical and
practical knowledge is imparted to the participants in order to carry out preventive
maintenance as well as minor modifications/ renovations that might be required at a
later stage.
Recently, Indian Oil Corporation Ltd. has selected our training team to impart training
to customers at OMAN.
1.2.10.3 MANUFACTURING FACILITIES

The facilities for manufacture and testing of valves - Control Valves, Butterfly Valves,
Rotary Plug Valves, Safety Relief Valves, Pressure Reducing Valves, Bellows Sealed
Valves, Electrical Actuators etc. - established at Palakkad plant are one of the best in
this part of the world.
ILP is the only company in India to have all in-house facility to manufacture globe
type Control Valves ranging from " to 30" size and rating up to ANSI 2750 special
class and Butterfly valves up to size 2400 NE.

21
A team of Engineers and Technicians trained for the past so many years are available
to bring out the best quality product. The plant is also equipped with sophisticated
CNC lathes, CNC drilling, machining centre and vertical turret lathe with a swing of
4.3 Meter, roller burnishing machine, vertical turret lathes and productivity is of a
very high order ensuring quality and reliability.
A Clean room facility is created for manufacturing of Bellows Sealed Valves. We have
with us special NC machines which not only ensure very high degree of accuracy but
also repeatability and higher productivity. It is a fact that many leading valve
manufacturers in the world have started buying castings from India. Instrumentation
Ltd,Palakkad can claim for having developed many of the sources for supply of
castings for Control Valve requirements.
It enjoys a much better rapport with the suppliers to bring out the best quality aspects
to the castings. More so, because the proximity to the supplier is well enjoyed by way
of frequent interaction with the foundries right from the stage of pattern making
through mould making and pouring and hence, ILP is fully aware of the actual quality
levels of the castings procured by them which may not be the case of the people who
do not have the facility to keep a close watch of such critical castings.
1.2.10.4 RESEARCH AND DEVELOPMENT

R&D Centre is equipped with the state-of-the-art CAD/CAM facilities. This centres'
work stations are supplied by Hewlett Packard loaded on which are the SDRC Ideas
Software for Design, modelling and FEM analysis along with 'Solid Works' for solid
modelling.
This workstation is connected to PCs with AutoCAD 2005 on Windows 2000
network. This workstation is directly connected to a CNC machine supplied by
HEYLIGENSTAEDT, Germany, for computer aided manufacturing.Bellows sealed

valves developed through in-house R&D were awarded the Import Substitution Award
by the Government of India for
1990-91.

22
1.2.10.5 TESTING
The Quality Assurance and Inspection Standards adopted by INSTRUMENTATION
LIMITED conform to the latest international standards and all the products moving
out of Palakkad plant bear a stamp of high degree of quality and reliability. Excellent
test facilities are available where hydrostatic testing of large size valves can be
conducted with ease.
Many of these test facilities include presses, providers apart from variety of fixtures,
test flanges designed and manufactured over the years. Some of the special tests
conducted by IL/facilities include dynamic response testing, helium leak testing,
radiographic inspection, ultrasonic and magnetic particle testing, CV test etc.
1.2.10.6 INFORMATION TECHNOLOGY CENTRE

Complete business application starting from business enquiry, order processing till
after sales service are computerised on the latest state of- the- art technology power
PC rupees 6000 machine supplied by IBM, whose backbone is the world renowned
RDBMS ORACLE 7.33 and D2K as front end.
1.2.10.7 PURCHASE DEPARTMENT

Purchase department is an important function of material management as the moment
an order is placed for the purchase of materials. A substantial portion of the
companys working capital is committed which effects the cash flow position of the
company.
In
IL, PALAKKAD, the purchase department plays important role because
purchasing has its effect on every vital factor concerning the manufacture, quality,
cost, efficiency and prompt delivery of goods to customers. Its function is to procure
materials, supplies, services, machines and tools at the most favourable terms
consistent with maintaining the desired standard of quality. The head of this
department is known as the purchase manager

23
Chart 1.2.1:Organization chart of the purchase department is as follows
Senior Manager (Material)
Manager (Material)
Engineer (Material)
Objectives Of Purchase Department
To make continuous availability of materials.
To make purchase competitively and wisely at the most economical price.
To purchase proper quality of materials.
To develop good suppliers relationships.
To develop alternate source of supply.
To adopt most advantageous method of purchase to ensure smooth delivery of

materials from suppliers.
To serve as an information centre on the materials, knowledge relating to

prices, sources of supply, specification, mode of delivery, etc.
Receiving purchase requisition

A purchase requisition is a form used as a formal request to the purchasing department
to purchase materials. This form is prepared by the store keeper for regular stock
materials and by the departmental head for special materials not stocked
at regular items. The requisition is approved by an executive, such as the plant

superintendent or work manager, in addition to the one originating the requisition.

24
The purchase requisition is generally prepared in triplicate. The original copy is sent
to the purchase department. The duplicate kept by the storekeeper or the department
which initiates the requisition and the triplicate is sent to the authorizing
executive.The purchase requisition initiated by the storekeeper for regular items of
materials is called regular purchase requisition and the purchase requisition prepared
by the departmental head for special materials is known as special or occasional
purchase requisition.
Regular purchase requisitions are prepared when the items of materials reach at the
ordering levels ie, the level at which the order for replenishment should be placed.
This is done with a view to avoid the shortage of materials and make available
uninterrupted supply of materials to jobs of department.
Exploring the sources of supply and choosing the suppliers.
A source of supply of materials must be selected after a receipt of the purchase
requisition. The purchase department usually maintains for every group of materials a
list of the suppliers names and addresses. Quotations may be invited from these
suppliers by issuing tenders to them. On receipt of the quotation from the suppliers a
comparative statement of various quotations received should be prepared and the
desirable suppliers should be selected.
While selecting the suppliers to whom order is to be given for the purchase of
materials, the purchase department should keep in mind 1) manufacturing capacities
2) reliability of the suppliers 3) financial condition of the suppliers 4) the management
of the supplying firm 5) price quoted 6) quantity for which price quoted is applicable
7) terms of payment 8) terms of delivery and 9) specifications to which the products
are manufacture.
Thus, the suppliers from whom materials are purchased should be dependable and
capable of supplying materials of uniform quality at right time at reasonable prices.
The purchase manager should maintain all the necessary records keeping in mind the

25
most important objectives of the purchase rate at proper time to help smooth running
of the production function.
Preparation of purchase order
After choosing the supplier, the purchase department prepares a purchase order for the
supply of stores. The order is the written authorization to the suppliers to supply the
particular materials or material. Purchase order is a document which gives the
authority to the receiving departments to receive the materials ordered for and the
accounts department to accept the bill from the suppliers for payment.
Three to five copies of purchase order are prepared depending upon the size of the
organization.
The original copy is sent to the suppliers
One copy is sent to the receiving department
One is to the person who invited the purchase requisition
One copy is sent to the accounting department
The last copy is retained by the purchase department for future reference
Receiving and inspecting materials

In this organization a separate receipt and inspection department independent of
stocking location should be set up to receive and inspect materials. There are various
functions performed by receipt and inspection department.
Maintenance of purchase order files.
Receiving, unloading and unpacking the materials delivered by the suppliers

under delivery channel.
Checking quantity and physical condition of materials received.
Checking quality of materials received.

26
After checking the quality of materials, the department will submit a report as to the
quality and if some materials are rejected the reason there of.
Checking and passing of bills for payment
When the invoice is received from the supplier, it is sent to the store accounting
section to check both the authenticity and the arithmetic accuracy. The quantity and
price mentioned in the invoice are checked with the reference to stock received not
and the purchased order respectively. Having thus verified the invoice in all respect,
the stores accounting section certifies and passes the invoice for payment.
Various other functions of purchase department of INSTRUMENTATION LTD are;
Co-ordination of sales and production through budgetary Control techniques.
Maintenance of adequate internal Control over the material acquired by means

of reliable book and physical inventory.
Fixation of responsibility for the purchase of materials.
Simplifying the paper work.
Selection of personal for purchase of materials.
The purchase department is fully informed about the various sources of supply of
materials, stores and plant, etc. This department is also responsible for planning the
delivery of materials to ensure uninterrupted suppliers.
In INSTRUMENTATION LTD, PALAKKAD purchase functions are carried out by
two divisions.
Foreign purchase department
Indigenous purchase department

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These departments procure materials from outside suppliers. The foreign department
purchase materials from foreign suppliers and indigenous department from domestic
suppliers.
1.2.10.8 STORES DEPARTMENT

Stores are the reservoir of materials for uninterrupted production. The stores
department plays a very important role in the organization. This helps in minimizing
production cost and providing effective service. In this organization the bully and
heavy stores should be stored nearest to the department requiring them in order to
minimize the labour and transportation charges.
In this way, planned location of the stores department will avoid delay in the
movement of materials to the department in which there are needed. Efficient store
keeping helps us to protect the raw materials from losses due to damage and pilferage
and avoid overstocking and understocking ensure effective material Control.
Functions of Stores Department
To receive and store raw material
To store non confirming material and prevent unauthorized use
To store consumables like welding cod, paining, etc.
To receive all components delivered by customers or suppliers.
Chart 1.2.2: ORGANISATION CHART OF STORES DEPARTMENT

28
Senior Manager
Manager (purchase)
Deputy Manager (Store)
Supervisors
Store keeper
Security
TYPES OF STORES
Centralized store
De-centralized store
Centralized store with sub store
Centralized store
In this central store, the materials are received by and issued from one stores
department. All materials are kept at one central store. In this better Control can be
exercised over stores because all stores are housed in one department. Better layout of

29
stores is possible. Less storage space as stores are kept to a minimum. Less
botheration is inventory checks at all the stores located in one place. But in this store
there is increases transportation cost because one central store may not be near to
every department of the organizations. There is a greater risk in case of fire
breakdown in transport may stop production in departments.
De-centralized stores
In this type of stores, independent stores are situated in various departments. Handling
of stores is undertaken by the store keeper in each department. The departments
requiring stores can drawn from this respective store situated in this department. The
disadvantage of centralized stores can be eliminated if there are decentralized stores.
Such type of stores set up to meet the requirements of materials of each production
because of the heavy expenditure involved.
Central stores with sub stores
In this organization, departments are situated at a distance from the central store, so in
order to keep the transportation cost and handling charges to minimum, sub stores
should be situated near production departments. For each item of materials, a quantity
is determined and this should be kept in stock in sub store at the beginning of any
period.
At the end of the period the storekeeper of each sub store will requisition from the
central store the quantity of the material consumed to bring the stock up to the
predetermined quantity.
Besides, the department may be divided into six components and they are;
Receipt store
Component store
Raw material store

30
General/ Holding store
Quarantine store
Tool/production store
Chart 1.2.3 :Organization chart-Receipt store

Head of the department
Officer in charge
Supervisor in charge
Supporting staff
receipt group
Supporting staff
documentation group
1.2.10.9 RECEIPT STORE

The store receives all the materials from the vendors. Documents started from this
store.
Functions of Receipt store;
Receive all incoming products delivered by suppliers / customers.
Compare the quantity of materials as vouched by the supplier/ customers and

intimate discrepancies, if any to the concerned procurement agency

31
To provide intimation to concerned procurements agency in case of excess

supply of items.
Prepare and sent relevant voucher to quality Control for the received products.
Receive vouchers back from quality Control department credit accepted

product to Raw material store component store and non accepted product to
quarantine store.
The goods can be received in three ways;
Through transport (Arranged by company or supplier)
Courier is by
o Door delivery
o Collect from the office.
o Personality (hand to hand)
The payment is made by COD (cash on delivery) or on credit.
1.2.10.10 COMPONENT STORE

Functions
To store fully machined components, sub assemblers and accessories.
To maintain ROL items as per desired items
To periodically check the condition of shelf life items for deterioration and
take suitable actions.
To insure timely receipt and issue of materials for production.
To increase training is provided to all employees.

32
1.2.10.11 RAW MATERIAL STORE

This store is used to store raw materials like bar stock, casting, forging, pipes, etc and
semi-finished component used for production.
Functions
To store raw materials like bar stocking, casting, forging, pipes, etc and semi
finished components.
To monitor the stock levels as per ROL and raise indents whenever the level
reach ROL as requested by PPC.
MCV machined items from sub contractors are credited to the store by MCV
( Mechanized Credit Voucher)
1.2.10.12 GENERAL STORE/ HOLDING STORE

Functions
To store tools, production consumables like welding rods, paints, etc and
stationery.
To monitor the stock level as per the ROL and raise indent whenever the levels
reach ROL
The materials are issued when MWV (Material Withdrawal Voucher) is given
to store which contains the code no description units etc. The inspection of
stock is once in six months
1.2.10.13 QUARANTINE STORE

Functions
To receive non accepted materials from receipt store, bill further ordered
To store non confirming material and prevent any unauthorized use.

33
1.2.10.14 WASTE MANAGEMENT

Scraps are dumped in the scrap yard by issuing MRV (Material Return Voucher). It
disposes by giving tenders and sale it for a normal value.
Chart 1.2.4:Organization chart of Component store, raw material store and
holding store
Senior Manager (Material)
Senior Engineer
Component / Raw material Store
Senior Foreman
OA / Progress man SK/SSM
Holding Store
ISO
SR
Advantages of having store department
Correct knowledge of the location of different items.
Easy accessibility of the items.
Easy measurement and movement of material handling equipments and men.
Reduce spoilage of material at stores.

34
Ensure proper utilization of available store.
1.2.10.15 PRODUCTION FUNCTION

Chart 1.2.5: PRODUCTS OF INSTRUMENTATION LTD, PALAKKAD
PRODUCT PROFILE
CONTROL VALVE NUCLEAR VALVE SAFETYRELIEF VALVE ALLIEDPRODUCTS
GLOBE TYPE VALVES
FLOW
NOZZLE
BUTTERFLY VALVES
ORIFICE PLATE
CONTROL VALVES
It is a valve with pneumatic, hydraulic and electric or other externally powered
actuators that automatically, fully or partially opens or closes the valves to a position
directed by signals transmitted from Controlling instruments. A Control Valve plays a
very important part in automatic Control of modern plants which depends on the
correct distribution and Control of following liquids or gases.

35
The Control Valve has got basically two units namely an external actuators and the
valve body assembly. The valve shell constitutes still and firm parts. The materials for
valve bodies are cost iron, carbon steel, charm moly belnum, nickel steel, stainless
steel, etc
BUTTERFLY VALVES
Butterfly Valve is a Control Valve that utilizes a rotatable disk or a vane as a valve
closure member. It is the most common type of rotary valve used for Control. Its face
to face dimension is less so that it can be installed in a lesser space. Butterfly Valve
may be of water type (without flange) or flange type. They are designed based on
American water works authority (AWWA) standard. Different parts of a valve are disk
body, shaft seat, etc.
Types: soft sealed valve with no leakage metal to metal seals with standard leakage.
SAFETY AND RELIEF VALVES
Safety And Relief Valves are designed to protect systems or vessels from excessive
pressure. The relief valves are designed to release excessive pressure in systems
containing incompressible fluids where there is no chance of explosion under over
pressure. Safety Valves are designed to provide immediate relief of over pressure with
any fluid particularly compressible fluids which could cause explosion of work.
Electrical Actuators
Types: Linear and rotary type for ON-OFF and regulating duty
Manual Actuators
Types: Linear and rotary actuators with gearbox and hand wheel
Flow elements
Types: orifice plate, flow nozzle, virtual tubes

36
Special valves and products

Below seated valves: In collaboration with M/S SEGAULE, S A France pressure
rating up to ANSI 2500 16S, Bellows available in materials like SS316L, Hastelloy c,
Inconel, Monel, etc
Antis urge valves: (VAZ) special high pressure drop valve for gas service in pressure
rating of ANSI 2500 lbs with LO-dh trim and class 4 leakage
Teflon valve: For extreme corrosive conditions
High pressure drop Valve: For liquid application with high pressure drop services
from inches to 6 inches size. Rating ANSI 150 to ANSI 2500 lbs. Special anti
cavitations cascade trim
Pilot operated Valve: From inches to 6 inches size pressure rating ANSI 2500 lbs
leakage class 5
1.2.10.16 MATERIAL HANDLING

The system concept in material handling.The system approach to handling is
distinguished by its disregard of the traditional regard boundaries of function and
departments. Thus more detailed investigation and analysis make it easier to
diagnosis, conceptualism design and evaluate complex columniation of sophisticated
hard work, organizational inter relationships and infrastructure flow. Usually results in
an integrated composite of facilities, activities and information flow and encompasses
as much of the total problem environment as is feasible and economical.
System procedure
The procedure for analyzing a material handling problem from system point of view
is more comprehensive. The general phases and step involved are as follows:
Problem Identification
Identify the problem

37
Determine the scope of the problem
Define the problem
Establish objectives
Problem Investigation
Determine what data to collect
Establish waste plan and schedule
Collect data
Develop weigh and analysis data
System synthesis
Structure alternate system
Select feasible system
System Design
Define proposed system
Develop and design system components
System Implementation
Procedure equipment
Training of personnel
Installation of equipment
Present material handling systems

38
The material is bought by truck and unloaded by using cranes (in heavy bay) force lift
and also by hand, casting are placed in the yard outside the machine shop where each
suppliers has been allotted separate area. Heavy casting are moved by force lift,
jumpos and trolleys.
Receipt store inspect the supplied materials for length, number and quantity, as may
be the case. These items are stored in specific locations. Racks are provided for stored
materials are offered to quality Control for inspection. Casting is pre-inspected.
Normal shortage period is about ten days. Some of the components are sent for
rework.Casting is either given to such contractors done by Ancillatory department or
machine in the shop itself. In the shop casting are given rough machining. The
handling is done by force lift and crane.
1.2.10.17 CODING OF COMPONENTS

Coding is the name of components using some codes. The objective of coding is to
classify components by their feature and to code these features so that components
having similar code number possess similar feature.Then the spare part is using an
alphabet followed by the drawing number. Then the item number of products is
written in the code.

Followed by the material code and the serial process which is denoted in two spares in
code.
In the total code will have approximately sixteen entities (both number and alphabet)
B 01 001 E Drawing No 1 660
Where,
B Economic year
01 Component number

39
001 Serial number
E Spare parts
1 Item number
660 Material code
40 Special process
After operation in fabrication shop the parts require finish machining. This is done on
lathe. The transportation is done by Jumbos and Trolley.The actuators is assembled
separately for different sixes area using EOT, EOTs and JIB cranes are used for
handling the parts.
Some finished components required for assembly are collected by production
planning and Control department (PPC) from the component stores and kept bit
mashed in separate bins. Finished goods brought for calibration using EOTs.The
calibrated products are taken to the painting room. These products are hung from the
hook provided on a rail. Rollers are provided for easy handling.
After painting products are kept on floor. At time of dispatch, the products brought to
packing area. EOTs are used for all movements and for holding the products while
packing.The trucks are brought near the packaging area and the packed products are
loaded using EOTs.
1.2.10.18
PRODUCTION
PLANNING
AND
CONTROL
DEPARTMENT
The PPC department interacts with various departments to plan the production
process and keep tracking the progress for the timely execution of orders.This
department receives production request from the commercial department. It
immediately prepares the bill of materials and here subsequently material
procurement requisition (MPR) is being sent to the concerned procurement agencies.

40
Without the order from the production planning & Control department no production
is commenced in the production department.
FUNCTIONS OF PPC
To review contracts ant to plan schedule and monitor production
To co-ordinate special testing and to give work order and drawings to works
department
To provide information and current production status to commercial

department.
ChART 1.2.6: Organization of PPC department is as follow

ASSISTANT GENERAL MANAGER
SENIOR MANAGER (WORKS AND PPC)
MANAGER
DEPUTY MANAGER (PPC)
DEPUTY MANAGER (WORKS)
SENIOR ENGINEER (ASSEMBLY)

41
ENGINEER (ASSEMBLY)
1.2.10.19 PRODUCTION DEPARTMENT

INSTRUMENTATION LIMITED, PALAKKAD is following the traditional method
of manufacturing which is process specification of production. In this type the same
types of machines are grouped together.
Chart 1.2.6:The Organization chart of Production Department
SENIOR MANAGER
MANAGER
DEPUTY MANAGER (PPC)
DEPUTY MANAGER (WORKS)
SERVICE ENGINEER (ASSEMBLY)
ENGINEER (FAB)
SUPERVISOR
WORKERS

42
PERMANENT WORKERS
TEMPORARY WORKERS
In INSTRUMENTATION LIMITED, PALAKKAD 75% of total production is

Control Valves and remaining are flow nozzles, butterfly valves, etc, safety valves,
etc.
Control Valves are mainly used for regulating the flow fluids through pipes.The main
works of production department is to transform drawings, specifications, materials
and instructions into saleable is products and to do so with the most efficient use of
machines and men available.
The production department mainly divided into two sections;
Machine shop
Assembly shop
MACHINE SHOP
Machine shop performs the following functions;
To receive orders from PPC
To study drawings and technology sheet
To get necessary components from raw materials store
To load schedule and monitor processing of jobs on machines
To offer machined components to quality control
Monitor result of inspection
To return scrapped materials to store
To store and issue fitting tools, measuring instrument to sub contractors
To credit accepted components to component store

43
The intimate general stores of the tools and consumables to be maintained in

record level
The machine shop consists of about 24 lathes, 4 milling machines, 8 drilling

machines, 6 grading machines and CNCs. All the CNCs are located in the right end of
the machine shop, which is a separate chain.
The capacity and specification of each machine are different. Vertical turret lathe are
used for machinery very big components, which cannot be done in ordinary lathes.
Machines have provision for holding more than one tool.
ASSEMBLY SHOP
Functions:
To carry out assembling
To plan schedule and monitor the assembling of pids
To offer components to quality Control
To get the result of various test in final production
To identify finished products in unique manner
To pare, then sent to the assembling sections where they assembled, welded,
painted, etc after collaboration the products are inspected by inspection
manager.
The objections of inspections are;
To detect and isolate facility material or work and so to prevent waste
To prevent further works being done on pieces already specified

44
To protect the firms reputation by reducing the number of complaints from

customers
The test may be chemical or physical simpler and cheaper, complex and costly.
Rejected materials are recorded on a routine document which copies are passing to
stores department. A further copy being retained by the production department
concerned and constituted all authority to draw new suppliers. The products are then
packed in wooden container are too heavy, cranes are used for lifting the containers into
truck.
QUALITY
POLICY
OF
INSTRUMENTATION
LIMITED,
PALAKKAD
Our quality policy of INSTRUMENTATION LIMITED, PALAKKAD is to supply
quality products as per customers requirement. It enhances customers satisfaction
through continual improvement backed by timely after sales service.
A customer is the most important visitor to our premises.
He is not dependent on us. We depend on him.
He is not an interruption to our work. He is the purpose of it.
He is not an outside to our premises. He is a part of it.
We are not doing a favour in servicing him. He is doing as favour in giving us an
opportunity to do so.
Companys advice to employees regarding quality
You are an important person of this organization. You are the maker of the quality
products.
INSTRUMENTATION LTD, PALAKKAD, quality policy is to give total satisfaction
to their customers through design, manufacture and supply of products backed by
after sales service and customers education.

45
The total quality system ensures that the products are manufactured completely in
accordance with all requirements applicable safely codes, engineering and quality
standards and customer satisfaction. This system has been documented as quality
policy in quality assurance manual.
Quality objectives
Internal integration through effective communication.
Sharing responsibility through empowering.
Continuous updating of products and manufacturing technology.
Prompt after sales service.
Developing reliable vendors through interaction and education.
Continuous up gradation of employees skills.
Coding of components
Coding is the naming of component using some codes. The objective of coding is to
classify components by their features and to code their features so that components
having similar code number process similar feature.
In total code will have approximately sixteen entities (both number and alphabets)
B01001
E (Drawing number) 166040
001
01
Drawing No 1
660
Where; B- Economic year
Component number

46
001 serial number
E- Spare parts
1 item number
660-material code
40-special process
Chart 1.2.7: QUALITY CONTROL DEPARTMENT CHART

SENIOR MANAGER (QC)
MANAGER (QC)
ENGINEER (QC)
SUPERVISOR
WORKERS (QC)
The quality assurance and inspection standards adopted by INTRUMENTATION

LTD, PALAKKAD confirm to the latest International standard and all the products
moving out of PALAKKAD plant bear a high stamp of degree of quality and
reliability.
Excellent facilities are available where hydrastic testing of large size valve can be
conducted with care. Many of these testing facilities include pressure provided apart
from variety of fixtures, test flange designed and manufactured over the years.
The main function is to ensure that quality products are supplied.

47
Quality Control department function in two areas is;
Inward Quality Control
Assembly Quality Control
Inward Quality Control

It carries out of the testing of incoming items.
Assembly Quality Control
It carries out testing to finished products.The test may be chemical, or physical,
simple and cheap or complex and costly. Quality department follows the norms based
on ISO-9001. This follows the international plant standard like American Standards
for Material Engineering (ASME), American Water Works Authority (AWWA). Dush
International Standard (DIS).
Quality period slip
It includes;
Engineering Register
Order acknowledgement.
Production request.
Delivery chelan.
Packing slip
Warranty card.
Invoice.

48
Service report.
International Information request.
Inter office Memo.
Product credit voucher.
Customer purchase order file.
Quality assurance certificate.
INSRUMENTATION Limited has achieved a record turnover of Rs 100 crore in

2009-10 according to a statement by general manager of the unit, Sri N.K Srivastava.
The company has also recorded a provisional profit of Rs 22 crore.
The unit in Palakkad is being expended to handle bigger and critical valves weighting
upto 25 tones.During the 20010-11 fiscal, the unit has manufactured and supplied
2800 mm size butterfly valves for the Vizard Steel Plant and 24 inch Control Valves
for Pragathi 660 MW power plant in New Delhi. The turnover and order booking
targets for the 2010-11 fiscal is Rs 120 crore and Rs 130 crore respectively.

49
1.3 THEORETICAL FRAMEWORK

1.3.1 INVENTORY
A physical resource that a firm holds in stock with the intent of selling it or
transforming it into a more valuable state.The dictionary meaning of inventory is
stock of goods.In accounting language it may mean stock of finished goods only.In
manufacturing concern, it may include raw material, work in process and stores, etc.
International Accounting Standard Committee defines inventory as tangible property

held for sale in the ordinary course of business, in the process of production for such
sale or to be consumed in the process of production of goods or services for sale .The
American Institue Of Certified Public Account(AICPA) defines inventory in the
sense of tangible goods,which are held for sale in the process of production and
available for ready consumption
The raw materials, work-in-process goods and completely finished goods that are
considered to be the portion of a business's assets those are ready or will be ready for
sale. Inventory represents one of the most important assets that most businesses
possess, because the turnover of inventory represents one of the primary sources
of revenue generation and
subsequent
earnings
for
the
company's
shareholders/owners.
1.3.2 INVENTORY MANAGEMENT

Inventory is an asset that is owned by a business that has the express purpose of
being sold to a customer. This includes items sold to end customers or distributors. It

50
includes raw materials, work in process, and finished goods. The management of
inventory is a key concern of all businesses. If a company's inventory level is too low,
it risks delays in fulfilling it's customers orders.
If the inventory is too high, it is tying up dollars that can be better used in other areas.
It also risks obsolescence and spoilage. Successful businesses keep their inventory
turns high, but also keep their service level at or above the industry standard
Inventory management is a science primarily about specifying the shape and
percentage of stocked goods. It is required at different locations within a facility or
within many locations of a supply network to precede the regular and planned course
of production and stock of materials..
1.3.3 FUNCTIONS OF INVENTORY
Inventory is required to meet the anticipated customer demand. Customer

generally does purchasing without any pre-information to the seller or
producer. Many times, he is undecided about the model, make or quantity of
the purchase.
He would like to see the performance of all the available models.
After judging his need and expenditure, he would select one piece. It is almost
impossible to know how many pieces of a product would be needed each day.
Therefore, inventory serves as a buffer to the anticipated demand.
Inventory guards against stock-out situations. There could be many exogenous

factors due to which the arrival of raw material may be delayed. Inventory
works as the safety stock for such situations.

51
Inventory ensures smooth flow of production process. Satisfaction of customer

is dependent on the timely availability of finished goods and spare-parts.
Inventory plays an important role in it.
Inventory management is a high priority area in industry or service sector.

This is due to conflicting role of inventory. For example, the salesman wants
high level of inventory to keep the promises and quick delivery. On the other
hand, warehousing people of the same industry will prefer lower finished
goods inventory so that less storage space is needed
Ordering costs, the cost associated with individual order such typing,
approving, mailing, ect. Can be reduced, to great extent, if the firm places
large orders rather than several small orders.
1.3.4 INVENTORY CATEGORIES

The various forms in which inventories exist are;
Raw materials
Raw material are inventory items that are used in the manufacturers conversion
process to produce components,subassemblies or finished goods.The purpose of
holding raw material is to ensure uninterrupted production in the event off delaying
delivery.The amount of raw material to be kept by the firm depends on various factors
such as speed with which raw materials are to be ordered and procured and
uncertainity in the supply of these raw materials.
Work-in-process
It includes partly finished goods and material held between manufacturing stages.It
can also stated that those material which are used in the production process but are not
finally converted into final products are work-in-progress. Raw materials are realized
from inventory and moved to a work center. Direct labour or machines are used to add

52
value by putting the parts together as subassemblies, assemblies and then into final
product.
Finished goodsFinished goods is the completed part that is ready for the
customers to order. It help to reduce the risk associated with stoppage in
output on the account of strikes,breakdown,shortage of materials etc.
Consumables
Consumables are the products that consumers buy recurrently that is items which get
used up or discarded.It contain the items that will eventually be consumed during the
normal operation of institution.
Stores and spares
This category includes those product which are accessories to the main products
produced for the main purpose of sale.
1.3.5
TYPES OF INVENTORY
Movement inventories
Movement inventories also called as transit or pipeline inventory.Pipeline inventory

exist because material cannot be transported instantaneously between point of supply
and point of demand.
Buffer inventories
Buffer inventory also called as safety inventory.Its purpose is to compensate for

unexpected fluctuations in supply and demand as well asunpredictable events such as
poor delivery reliability or poor quality of suppliers products.Generally higher the
level of buffer inventory , the betterthe firms customer service.
Cycle inventory

53
It is held for the reason that one or more stages in the processcannot supplyall the
items it produce simultaneously.This type of inventory result from the need to
produce products in batches and amout of it depends on volume decisions.
Decoupling inventory
Inventory is used to allow work centers or processes to operate relatively

independently.When such inventory are held even if a machine breaks down the work
would not stop
Anticipation inventory
This type of inventory is accumulated to cope up with expected future demand or

interruption in supply.It is a way for manufacturers to maintain consistent operations
when the demand for the product is low.
1.3.6 NEED TO HOLDING INVENTORIES
Maintaining inventories involves tying up of the companys funds and incurrence
of storage and handling cost. If it is expensive to maintain inventories, why do
companies hold inventories? There are those general motives for holding inventories;
Transaction motive
According to this s motive, an enterprise maintains inventories to avoid bottlenecks in

its production and sales. By maintaining inventories, the business ensures that
production is not interrupted for want of raw materials, on the other hand and sales
also are not affected on account of non-availability of finished goods, on the other.
Precautionary motive
Inventories are also held with a motive to have a cushion against unpredicted
business. There may be sudden and unexpected spurt in demand for finished goods at

54
times. Similarly, there may be unforeseen slump in the supply of raw materials at a
time. In both cases, a prudent business world surely likes to have some cushion to
guard against the risk for such unpredictable changes.
Speculative motive
An enterprise may also hold inventories to take the advantage of price fluctuation.
Suppose, if the prices of raw materials are to increase rather steeply the enterprise
would like to hold more inventories than required at lower prices.
1.3.7 OBJECTIVE OF INVENTORY MANAGEMENT

The main objective of inventory management is to maintain inventory at
appropriate level so that it is neither excessive nor short of requirement .Thus,
management is faced with 2 conflicting objectives.
To keep inventory at sufficiently high level to perform production and sales

activities smoothly.
To minimize investment in inventory at minimum level to maximize

profitability.
Both in adequate & excessive quantities of inventory are undesirable for business.
These mutually conflicting objectives of inventory management can be explained is
from of costs associated with inventory and profits accruing from it low quantum of
inventory reduces costs and high level of inventory saves business from being out of
stock & helps in running production &sales activities
smoothly.
The objectives of inventory management can be explained in detail as under:-

55
To ensure that the supply of raw material & finished goods will remain
continuous so that production process is not halted and demands of customers
are duly met.
Minimizing inventory cost such as ordering , handling & carrying cost

To keep investment in inventory at optimum level. Proper Control of
inventories help management to procure materials in time in order to run the
plan efficiently.
To reduce the losses of theft, obsolescence & wastage etc.
To make arrangement for sale of slow moving items.
To minimize inventory ordering costs.

Promotion of manufacturing efficiency:The manufacturing efficiency of the
enterprise increases if the right type of raw material are made available to the
production department at the right time.
1.3.8 FACTORS INFLUENCING INVENTORY

The inventory management of an organization has an impact on the whole system.
How much to buy at onetime and when to by this quantity. This two fundamental
things on which inventory Control depends. Many factors govern these fundamental
things. The prime factors that govern these two fundamental things are;
Requirements
Quality in stock or on stock
Lead time
Obsolesce
1.3.9 INVENTORY CONTROL TECHNIQUES

56
Inventory is being maintained as a cushion in supply of materials for continues

production without causing stock out situation. This cushion should not be suicidal to
any organization. The following scientific techniques and methods are being used in
Control of inventory.
Inventory management technique

Standardization
Selective inventory Control
Just in time
Perpetual inventory system
Inventory turnover
1.3.10 INVENTORY MANAGEMENT TECHNIQUES
Economic Order Quantity
EOQ is an important factor in Controlling the inventory.It is a quantity of inventory

which can be reasonably be ordered economically in time.It is also known as
Standard order quantity.In determining this ordering cost & carryong cost are taken
into consideration
Ordering cost;
The term ordering cost is used in case of raw-materials and includes the entire cost of
acquiring materials. It basically the cost of getting an item of inventory and it
includes the cost of placing the order
Carrying cost
Cost incurred for maintaining a given level of inventory is called carrying cost.
Reorder point
The order point is that inventory level at which an order should be placed to replenish
the inventory. To determine reorder point Lead time,the time normally taken in

57
replenishing inventory after the order has been placed and Economic order quantity
should be known.
Reorder Level= Lead time demand + Safety stock
Safety stock
The demand for material may fluctuate from day to day. The actual delivery time may
be different from the normal lead time. If the actual usage increase or the delivery of
the inventory is delayed the firm can face problem of stock out, which can be cost,
which can be costly. So in order to guard against the stock out the firm may maintain
a safety stock.
Maximum level
It is not the function of industry to carry stock in excess of what is required for current
operations, as otherwise the industry will be takingover the functions of
trader.Material Control requires laying down the upper limit of stock abovre which
the stocks will not rise , such limit is maximum limit
Maximum stock level = Reorder level + Reorder quantity (Minimum consumption
during reorder period * minimum reorder period)
Minimum level
This is the level below which stocks should not be fall.Carrying of minimum stock
avoids a situation of stocks out resulting in stoppage of production.This stock is buffer
stock or safety stock to be used under abnormal conditions or in emergencies and are
taken care of fluctuations in the lead time
Minimum stock level=reorder level- (Average consumption rate * Average lead time)
Danger Level

58
Danger level is the level below which actual stock of material should not be allowed
to fall under normal situations.If the actual stockof material falls below danger level,
there is imminent danger in the stopage of production.
Danger Level = Minimum Consumption* Minimum Reorder Period
Average stock level
Average stock level indicates the average stock held by the enterprise during the year.
Average Stock Level = ( Minimum Level +Maximum Level)/2
1.3.11 STANDARDIZATION
Standardization is very essential to Control the inventory, as by
standardization reduction is variety of material is possible. And because of the
reduction in variety the advantage is low order cost, low inventory, less storage stock,
conservation of material, variety reduction, less paper work, easy follow with
suppliers, less number of orders.
The importance of this field has been recognized since the days of F.W
Taylor who first drew attention to this fundamental need in any organization. Just as
work study is necessary preliminary to work specification, and the basic technique for
production Control, quality Control, material handling, estimated cost Control, etc.
Standardization preliminary necessity to design a basic technique on build Control
and standardization procedure.Perpectual inventory system is a method of recording
the store balance after every receipt and issue to facilitate a regular checking and to
prevent the closing down for stocktaking.After every recipt or issue the entry is made
in the bin card and the balance is adjusted.

59
1.3.12 SELECTIVE INVENTORY CONTROL

Selective inventory means variation in the methods of inventory Control from items to
item and this differentiation should be on selective basis by classification. A company
has to stock thousands of items of raw materials, standard parts, stores and spares, sub
contract items, tools, stationary etc. to have better Control over the inventory selective
inventory Control technique should used in isolation/or in conjunction.
The selective Control mean selecting the area of Control so that required objective is
achieved as early as possible without any lost of time due to taking care of full area
Minimum lost of energy and efforts.
At minimum cost without loss of time.
The following are the selective Control technique;
ABC analysis
FSN analysis
VED analysis
ABC analysis
ABC analysis is a selective Control technique which is required to be applied
when we want to Control value of consumption of the items in rupees obviously when
we want to Control value of the consumption of the material we must select those
materials where consumption is very high.
In any company manufacturing, there are number of items which are consumed or
traded it may run into thousands. It is found after number of studies for different
companies :

60
Value of consumption of
No. of items
Grade
70% of consumption
10% of no. of items
20% of consumption
15% of no. of items
10% of consumption
75% of no. of items
items (value in Rs)
A items these are those items which are found hardly 5% 10% but their
consumption may amount 70% 75% of total money spend on materials.
B items these are those items which are generally 10% 15% of the total items
and their consumption amount 10% 15% of total money spend on materials.
C items these are large number of items which are cheap and in expensive and
hence in significant. They are large in numbers running into hardly 5% 10% of
total money spend on material.
FSN analysis
This type of analysis is more concerned from the point of view of movement of the
item or issue of the item under this type of analysis.
F items are those items, which are fast moving i.e.in a given period of time,
say a month or year they have been issued up till number of items. Although fast
moving does not necessarily mean that these items are consumed in large quantities.
S items are those items which are slow moving in the sense that in the given
period of time they have been issued in a very limited number of time.
N non moving items are those, which are not at all issued for a considerable
period of time.
Thus, stores department whose concerned with the moving of items would like to
know and classify that the items are storing in the categories FSN. So that they can
manage operate and plan stores activity accordingly.

61
VED analysis
VED analysis is carried out to Control situation, which are critical. Identify material
according to their criticality to the production, which means the material, without
which the production will come to stop and so on from this point of view material
classified into three categories.
V - Vital categories of the items are those items for the want of which
production will come to stop.
E Essential group of items are those items because of non availability of
which the stock out cost is very high.
D Desirable group of items are those items because of non availability of
which there is no immediate loss of production and stock cost is very less and it may
cause minor disruption in the production for a short time.
2.0 REVIEW OF LITERATURE

Survey of the available literature relating to his field of study is a must for the
researcher so that he can keep himself updated in his field and related areas. Without
this it will not be possible for a researcher to make a worthwhile contribution. Review
of literature in this study deals with the importance and necessity for inventory
management in an organization.
Inventory management can help business to be more profitable by lowering their cost
of goods sold and by increasing sales. Inventory management is required at different
locations of a supply network to protect the regular and planned course of production
against the random disturbance of running out of materials or goods.. Following
paragraphs review the available literature:
2.1 Mansi Aggarwal (2006) in his article An Introduction to Inventory
Management said that the primary and foremost step in inventory management is

62
acquiring accurate information for inbound operations. The information so gained in

advance can be a crucial factor in improving the inbound productivity. Setting up of
an advanced inbound strategy and execution framework can be done without too
much of re-engineering effort for the supply chain. The perfect way to commence is to
make the best use of information available and establish a set of rules and regulations
to harness the information efficiently.
2.2 Steven Ronsworth(2005) mentioned in his article Inventory Management
Review that, when having inventory , a company does not ever want to have too
much of a product, nor does it want to have not enough of that product to meet
demand. Inventory management helps to ensure that a proper inventory is maintained
at all times. Steven also says that a proper inventory management has many benefits
for companies. Inventory management can help make it so that a company has the
exact inventory needed. No more , no less. Inventory management is also an effective
way to keep track of exactly what products a company has.
2.3 Philip Slater (2007)in his article (Inventory Management One Size Does Not
Fit All) says that if there is one great myth in inventory management it is that one
single technique will solve all inventory problems. Not that people believe that one
technique will solve all problems in all situations but that in any given company one
approach is all that is required to manage all inventory. He also pointed out that,
there is a wide range of techniques and approaches that people use to manage
inventory. these include JIT, ABC and FSN,VED analysis, Risk Management, safety
stock and EOQs. sometimes they are used on a standalone basis and sometimes in
conjunction with each other. All are worthwhile techniques when used appropriately.
2.4 Charles Atkinson , in his publication Point of sale,Inventory Control,Retail

and Money Management (October 25 , 2005) indicates that there are three types of
inventory that require management: raw materials, finished goods and work- inprogress. Raw materials can be cut down in a number of different ways, most notably
63
by ordering smaller batches with more frequency from suppliers (JIT). Finished goods
inventories can be cut down in multiple ways as well, most notably by either
producing only when you actually have an order (JIT) or by achieving more accurate
demand projections.
2.5 Experts argue that inventory levels should decline markedly as a result of the
implementation of improved inventory management systems such as JIT. A paper by
Rajagopalan and Malhotra Have Inventories Declined : An Empirical Study
(2001) indicates that while it appears that the general level of inventories has
decreased across all industries since the 1960s, it does not appear that the trend
accelerated in the 1980s or thereafter, as JITs proponents might suggest.
2.6 A more recent study by Chen,Frank, and Wu , Optimal Control and
Equilibrium Behaviour of Production-Inventory System(2003) indicates that,
when studying inventories on a firm level instead of on an industry level, there
appears to be a significant decrease in inventories since 1980. However , Chen, Frank
and Wu focus on the economy as a whole . They do not focus on a particular industry,
nor do they focus on distribution, as opposed to production systems.
2.7 Apart from the tools and techniques, Mike Schramm(2009) in his Five Tips To
Inventory Management has suggested certain tips to have a successful inventory
management. They are.
Sell the junk (even if you think its not junk).
Get a bank alt, and use it for everything
Gear up right.
Organize.
Regular maintenance is better than emergency cleaning.
2.8 Adam. J Fein in his article Building a Lean Supply Chain,(2006) said that
there is a widely held, but inaccurate, perception that new technologies have led

64
directly to declines in the inventory-to-sales ratio, an important indicator of buffer

inventory in the supply chain . in theory, information technology-based supply chain
practices such as just-in-time(JIT) inventory management, warehouse automation, and
the introduction of bar codes should have allowed companies to improve their
management of orders and stockpiles of materials.
2.9 Bruce D. Caldwell (2009) has mentioned some benefits of ABC Analysis in his
article The Benefits of ABC Analysis for Inventory Reduction.Using the ABC
concept to analyze Control inventory investment and turns is the simplest and most
efficient method. Most inventories are made up of hundreds and possibly thousands of
individual items necessary to manufacture a companys products.
2.10 Ashwathappa, Productions and Operations Mnagement(2008) has stated that
inventory management involves the development and administration of policies ,
systems and procedures which will minimize total costs relative to inventory decision
and related functions such as customer service requirements, production scheduling,
purchasing and traffic.
2.11 Lucey, Quantitative techniques for Management(2002) defined inventory

management as the recording and monitoring of stock level, forecasting future
demand and deciding when and how to order.
2.12 Juhi Gonzales in his article Inventory Control (1999) says inventory
management is making sure that items are available when customers call for it, but
not too much stock , so that inventory turnover goals are met.
2.13 Bardia in Accounting And Finance For Managers(1988) opines that for a
firm to be successful, the proportion of inventory to current asset should be kept at the
minimum. Also a high inventory turnover ratio which indicates faster movement of
materials is advantageous to the firms. He also points out that the proportion of
finished / semi-finished inventory should be kept at minimum.
2.14 Khadalwal(1985) on his book Inventory Management And Stock Evaluation
revealed that the selected units were found to have recorded slower and declining

65
rates of transmutation of working capital. The main reason responsible for this
situation is the high share of inventories in current assets which ranged between 40%
and 70% with an increasing trend during the period of study.
2.15 Jain in his book The Working Of Stock Exchanges in India (1988) has
highlighted various facts of working capital management in the state of Rajasthan. He
opined that the cash position of working capital should be improved by reducing
inventories and efficient collection of debts.
2.16 Rao(1990) in Equivalence of Inventory Control Models evaluates the
management of working capital and degree of efficiency of managing inventories in
the manufacturing undertakings of Andhra Pradesh public sector. The analysis of the
structure of inventory reveals that there was overstocking with regards to each and
every component overstocking with regards to each and every component of
inventory in the undertakings selected for study.

2.17 Mohan Reddy in Management of Working Capital(1991) considered
inventory formed the major chunk of current assets of the sample private sector
enterprises studied. Bigger enterprises in the private sector carried the larger
inventories as compared to the smaller ones. Inventory turnover ratios has shown that
name of the private sector units carried on inventory unduly in the aggregate..
2.18 Kurian Jose Aerthail in (1999) conducted a study to Analyze the Efficiency of
Inventory Management System in KEL , mamala unit. The study revealed that due
to improved inventory management, the unit enables proper arrival of goods, reducing
lead-time
2.19 Arifa T. Mohammed in his book Stores and Inventory Managememt(2004)
conducted study on working capital management, the suggestion made by her was
that the unnecessary inventories should be avoided as it may cause loss to the
concern.
2.20 Renju Mohan P.T (2008) conducted study on stores inventory management at
Carborundum Universal Limited. There should be strict Control over the A class items
as well as the vital items.
Highly trained inventory managers and high-quality

66
software will help make inventory management a success. The ROI of inventory
management will be seen in the forms of increased revenue and profits, positive
employee atmosphere , and an overall increase of customer satisfaction.
2.21 M.Z Babai and Y .Dallery IESM, (May 2005), the literature dealing with
inventory management policies is very rich and has grown fast during the last year,
they classify these policies into 2 approaches according to the type of demand
information. In the first approach the policies suppose that there is no advance
demand information and the decisions are made in real time using the inventory
depletion.
3. 0 RESEARCH METHODOLOGY
INTRODUCTION
Research is a systematized effort to gain new knowledge.Research is an art of
scientific investigation. According to Clifford woody, Research comprises, defining
and redefining problems, formulation hypothesis of suggestion solution, collecting,
organizing and evaluating to determine whether they fit the formulation hypothesis.
A research is the systematic investigation into and study of materials and sources in
order to establish facts and reach new conclusion.
3.1 RESEARCH DESIGN

The present project describes the existing inventory system followed at
Instrumentation Limited. The research design used as analysis in nature of analytical.

67
A research design is the determination and statement of general research approach or

strategy adopted for a particular project.
It is the heart of planning. The research design adopted for the study is analytical in
nature.It is the specification of methods and procedures for acquiring the information
needed.The research design used in the study is descriptive research.
3.2 DATA COLLECTION

The source which are used mainly on secondary sources of data which is collected
from the audited books of accounts of ILP, Annual reports and financial statements
prepared and published by the concern.Journals , books and websites have been
referred to have an overview about the company.
3.3 PERIOD OF STUDY
The period of study covered from the year from 1st April 2007 - 31st march 2008 to 1st
April 2011-31st march 2012
3.4 TOOLS USED
o
o
o
o
Financial ratio
Correlation
Trend analysis
Inventory Techniques
3.5 LIMITATIONS OF THE STUDY
The study is limited for a period of five years. Hence result obtained can be
applied for the selected period.

68
The study is mainly done with the secondary data and figures drawn from
accounting records, this has some limitations and it affects the study also.
The financial ratios imply only the monitory aspects of the functions of the
firm. The ratios cannot be directly regarded as indicator of good or bad
performance of management.
Accuracy and correctness of tools like ratio analysis is depends upon the
accuracy of published accounts.
The time available for the study was the another constraining factor.
The inventory management of ILP is limited to the extent of

information made available through published documents and
personnel discussion.
4.0 DATA ANALYSIS AND INTERPRETATION

Introduction
Effective inventory Controls ensure effective inventory management through which
an organization can minimize their overall projects and liquidity of the respective
concern. In deals with the analysis of data and their interpretation for understanding
the inventory system followed at instrumentation Limited. The data has been collected
from the secondary sources and the interpretations are done on the basis of theories
INVENTORY CONTROL TECHNIQUES IN ILP

4.1 Ratio analysis
Introduction:

69
Ratio analysis is an important tool for analyzing the company's financial

performance. Ratio analysis is defined as the systematic use of accounting ratios in
order to weigh and evaluate the operating performance of a firm. Ratio is simply one
number expressed in terms of another number. It refers to numerical relationship
between two figures. It is obtained by dividing one figure by the other. Accounting
ratio is relationship expressed in mathematical term between two related figures in the
financial statements.
Objective of ratio analysis:

Ratio analysis is a powerful tool of financial analysis. The objectives of ratio analysis
are summarized as below:
Ratio are helpful in judging financial performance of an enterprise over a

period of time.
It may help the management in the task of planning and forecasting.
It is possible to test liquidity , solvency and profitability of the enterprise

through the technique of ratio analysis. It helps the management to take
decision regarding investment, purchases etc.
It helps to achieve coordination among various departments.
The primary objective of ratio analysis is to regulate and Control sales and costs
calculation of ratio is a clerical task which requires careful selection of the relevant
data from the financial statements. Appropriate ratios to suit the purposes of analysis
should be calculated and interpreted objectively.
According to nature of functions ratios can be classified as liquidity ratios , leverage
ratios, activity ratios , profitability ratios. For analysis about the inventory
management the appropriate ratio is activity ratios. It includes:
Inventory turnover ratio

70
Ratio of material consumption to turnover
Inventory to current assets ratio
Inventory to working capital ratio
Cash to current asset ratio
Cash turnover ratio
Debtors turnover ratio
Creditors turnover ratio
Input output ratio
Working capital turnover ratio
TABLE NO:4.1.1 THE PERCENTAGE OF CURRENT ASSET TO INVENTORY

FOR ILP.
CURRENT
YEARS
FIGURE
ASSET
SUNDRY
DEBTORS
% OF
INVENTORY
2007-08
45.34
187.82%
2008-09
63.20
244.86%
2009-10
63.83
240.32%
2010-11
72.24
233.10%
2011-12
65.08
167.99%
2007-08
.26
1.07%
2008-09
4.74
18.36%
2009-10
7.06
26.62%
2010-11
.43
1.38%

71
2011-12
.10
0.25%
8.83
36.58%
2008-09
11.43
44.29%
CASH AND
2009-10
11.42
42.99%
BANK
2010-11
13.25
42.75%
2011-12
13.63
35.18%
2007-08
Inference
The percentage of sundry debtor to inventory is highest in the year 2008-2009 and
lowest in the year 2011-2012 where cash and bank is highest in the year 20092010,loan and advances is highest in 2008-2009 and lowest in 2011-2012
4.1.2 INVENTORY TURNOVER RATIO

Inventory turnover ratio also known as stock turnover ratio establishes the
relationship between costs of goods sold and average inventory. Besides it helps in
determining the liquidity of a business concern, this ratio indicates how many times
during the period the firm has turned is inventory. It shows the rate at which
inventories are converted into sales and then into cash.
Cost of Goods Sold
Inventory Turnover =
Average Inventory
TABLE NO:4.1.2 THE INVENTORY TURNOVER RATIO FOR ILP.
Year
Net sales(in
Lakhs)
2007-08
75.37
Average inventory
Ratio
(in Lakh)
20.36
3.7

72
2008-09
91.74
24.98
3.67
2009-10
100.21
26.19
3.82
2010-11
101.96
28.77
3.54
2011-12
102.84
34.87
2.94
Inference
The inventory turnover ratio is maximum in the year 2009-2010. Higher value
indicate better performance.The company was able to sell their inventories quickly.
The Lowest Inventory turnover ratio is in 2011-2012. A low inventory turnover ratio
indicates an inefficient management of inventory.
DIAGRAM 4.1.1 : THE INVENTORY TURNOVER RATIO FOR ILP.
4.1.3 INVENTORY HOLDING PERIOD

73
Inventoryholding period shows whether the stock is fast moving or not. It is

calculated to see the average time taken for clearing the stock. The lower material
holding shows whether is any slow moving , fast moving or dormant stock. It is the
average time to convert our total inventory into sales. The lesser inventory conversion
period it is better because more fastly the inventory is converted into sales.
Material Holding Period=
Days in a year
Inventory turnover ratio
TABLE NO 4.1.3 : THE INVENTORY HOLDING PERIOD OF ILP.

Year
Days
Average inventory
Inventory Holding
turnover ratio(in
period
Lakh)
2007-08
365
3.7
98.64
2008-09
365
3.67
99.45
2009-10
365
3.82
95.54
2010-11
365
3.54
103.10
2011-12
365
2.94
124.14
Inference
The above table shows that the inventory conversion period for the 5 years
Inventory conversion period is minimum in 2009-2010 which indicate the
conversion of inventory to sales is faster. Maximum inventory holding period is in
2011-2012 .

74
DIAGRAM 4.1.2 : INVENTORY HOLDING PERIOD FOR ILP.
4.1.4 RATIO OF MATERIAL CONSUMPTION TO TURNOVER

Ratio of material consumption to turnover measures how frequently inventory taken
for production. This ratio shows the proportion of expenditure on material
consumption to turnover. It provide a measurement between the amount of raw
material verses the average amount of raw material in the inventory at any given
time.A higher ratio is good from the view point of liquidity. It is calculated as follows:
Ratio of material consumption to turnover = Expenditure on material
Turnover
TABLE NO 4.1.4: THE RATIO OF MATERIAL CONSUMPTION TO
TURNOVER OF ILP.
Year
Material
Turnover
Ratio
consumption
2007-08
31.86
75.38
.422
2008-09
46.49
91.75
.506
2009-10
51.76
100.21
.516

75
2010-11
48.77
101.96
.478
2011-12
68.06
102.84
.661
Inference
The above table shows a increasing trend of the ratio of material consuption to
turnover from 2007-2008 to 2009-2010. In 2011-12 the ratio of material consumption
to turnover is maximum which is not good for a company. The ratio is minimum in
the year 2008-2009 which is favourable
DIAGRAM 4.1.3: THE RATIO OF MATERIAL CONSUMPTION TO TURNOVER OF

ILP.
4.1.5 INVENTORY TO CURRENT ASSET RATIO

76
Inventory to current assets ratio establishes a relationship between inventory and the
total current assets. There by analyzing the level of investment in inventory and
consumption of total current assets.It is current asssets are those resources of firm
which are either held in the form of cash or a expected to be converted in cash within
the accountig period.
Inventory to current assets ratio=
Inventory
Current Asset
TABLE NO 4.1.5: THE INVENTORY TO CURRENT ASSET RATIO FOR ILP.

Year
Inventory
Current assets
Ratio
2007-08
24.14
79.46
.303
2008-09
25.81
106.10
.243
2009-10
26.56
109.55
.242
2010-11
30.99
117.36
.264
2011-12
38.74
118.99
.325
Inference
The inventory to current asset ratio in ILP has a increasing trend from 2008-2009 to
2011-2012.It is maximum in the year 2011-12.The lower the percentage of inventory
to the current assets, the greater the liquidity of current asset and versa. Low ratio is
shown in 2009-10.
DIAGRAM 4.1.4:THE INVENTORY TO CURRENT ASSET RATIO OF ILP

77
4.1.6
INVENTORY TO WORKING CAPITAL
A firm is financially sound if its amount of inventory does not exceed the amount of
working capital. This ratio is calculated to know whether there is any overstock in the
firm.It is a wise to reduce the the level of asset tied up in working capitalsince each
dollar freed is a dollar that can be used to pay down long-term debt,repurchase share
etc.
Inventory to working capital= Inventory
Working Capital
TABLE NO 4.1.6: INVENTORY TO WORKING CAPITAL FOR ILP.

Year
Inventory
Working capital
Ratio
2007-08
24.14
69.47
.34
2008-09
25.81
87.09
.29
2009-10
26.56
91.11
.29
2010-11
30.99
94.45
.32
2011-12
38.74
88.81
.43

78
Inference
Inventory to working capital ratio analysis it shows the proportion of inventory is less
when compared to working capital. The proportions are high in the year 2011-2012
and lower in the year 2008-2009 and in 2009-2010.
DIAGRAM 4.1.5: INVENTORY TO WORKING CAPITAL FOR

ILP.
4.1.7 DEBTORS TURNOVER RATIO

79
It indicates how many times the firm is collecting the cash from its debtors to whom
firm sells in credits. Trade debtors are expected to be converted into cash with a short
period. Debtors turnover ratio or accounts receivable turnover ratio indicates the
velocity of debt collection of a firm. In simple words it indicates the number of times
average debtors (receivable) are turned over during a year.
Debtors Turnover Ratio =
Net Credit Sales

Average Trade Debtors
TABLE NO 4.1.7: DEBTORS TURNOVER RATIO FOR ILP.
Year
Sales
Debtors
Ratio
2007-08
75.37
45.34
.166
2008-09
91.74
63.20
1.45
2009-10
100.22
63.83
1.56
2010-11
101.96
72.24
1.41
2011-12
102.84
65.08
1.58
Inference
The higher debtor turnover ratio is in the year 2011-2012 which is good for the
company.The table shows an increasing trend from 2007-2010 and decreased in
the year 2010-2011
DIAGRAM 4.1.6 :DEBTORS TURNOVER RATIO FOR ILP.

80
4.1.8 CREDITORS TURNOVER RATIO

In business operations, a firm has to make credit purchase and incur short term
liabilities. Suppliers of goods creditors are likely to take in repaying its trade
creditors. For this purposes, creditors payable turnover ratio is calculated. The two
components of the ratio are trade creditors and annual purchase.
Creditors turn over ratio=net credit annual purchase/trade creditors
TABLE NO 4.1.8: CREDITORS TURNOVER RATIO FOR ILP.
Year
Purchase
Creditors
Ratio
2007-08
75.37
7.51
4.24
2008-09
91.74
15.17
3.06
2009-10
100.22
14.27
3.62
2010-11
101.96
17.49
2.78

81
2011-12
102.84
17.43
3.9
Inference
The analysis of creditors turnover ratio reflects whether terms of credit allowed by
suppliers are liberal or not. Creditors turnover ratio is highest in the year 2007-2008
which is 4.24.In 2011-2012 ILP has a favourable creditor turnover ratio which is
3.9.Creditor turnover ratio is lowest in the year 2010-2011
DIAGRAM 4.1.7 : CREDITORS TURNOVER RATIO FOR ILP.
4.1.9 INPUT OUTPUT RATIO

Inventory Control can be exercised by use of this ratio. Input output ratio is the ratio
of the quantity of input of material to production and the standard material content of
the actual output.
TABLE NO 4.1.9: INPUT OUTPUT RATIO FOR ILP.
Year
Input
Output
Ratio
2007-08
46.05
66.96
.687
2008-09
63.56
85.27
.745

82
2009-10
73.13
96.25
.759
2010-11
72.54
93.69
.774
2011-12
94.76
102.65
.92
Inference
The analysis of input output ratio shows that above shows the tendency is fluctuating
year by year. This is not favorable to the company. The input output ratio is
increasing from 2007-2008 to 2011-2012.The ratio is highest in the year 2011-2012
which is 0.92
DIAGRAM 4.1.8 : INPUT OUTPUT RATIO FOR ILP
4.1.10 WORKING CAPITAL TURNOVER RATIO

Working capital turnover ratio is the ratio which shows number of time the working
capital requirements in sales. Working capital of a concern is directly related to
sales.It is used to analyse how effectively a company is using the working capital to
generate sales.

83
Higher the working capital turnover ratio the better it is because it means that the
company is generating lot of sales compared to the money it uses to fund the sales.
Working capital turnover ratio= Net sales
Net working capital.
TABLE NO 4.1.10:WORKING CAPITAL TURNOVER RATIO FOR ILP.

Year
Net Sales(in lakhs)
Net Working
Ratio
capital(in lakhs)
2007-08
75.37
69.47
1.08
2008-09
91.74
87.08
1.05
2009-10
100.22
90.99
1.10
2010-11
101.96
94.45
1.08
2011-12
102.84
88.90
1.15
Inference
The above table shows that the working capital requirements of the firm which is
highest in year 2011-2012 that is 1.15 and lowest 1.05 in the year 2008-2009.
DIAGRAM 4.1.9:WORKING CAPITAL TURNOVER RATIO FOR ILP.

84
4.2 TREND ANALYSIS

The financial statement may be analyzed by computing trends by series of increase.
This method determines the direction upwards or downwards and involves the
computation of the percentage relationship that each statement item bears to the same
item in base year. One year is taken as the base year. Usually, the first year is taken as
the base year.
Trend Analysis is the practice of collecting information and attempting to spot a
pattern, or trend, in the information. Although trend analysis is often used to predict
future events, it could be used to estimate uncertain events in the pasT
Trend percentage = current year amount/ Base year amount*100
4.2.1 TREND ANALYSIS OF WORKING CAPITAL

TABLE NO 4.2.1: TREND ANALYSIS OF WORKING CAPITAL
Year
2007-08
Working capital(In lakhs)
Trend percentage
69.47
100

85
2008-09
87.08
125.35
2009-10
90.99
104.44
2010-11
94.45
103.79
2011-12
88.90
94.12
Inference
The analysis shows that there is an increase in working capital from 2007-2008 to
2008-2009 then there is decrease in working capital from 2010-2011 to 20112012.
Diagram 4.2.1: Trend Analysis of Working Capital
4.2.2 TREND ANALYSIS OF CASH

86
TABLE NO 4.2.2: TREND ANALYSIS OF CASH

Year
Cash( In lakhs)
Trend percentage
2007-08
.261
100
2008-09
4.74
181.09
2009-10
7.06
148.94
2010-11
.428
6.06
2011-12
.104
24.29
Inference
The trend analysis of cash shows a vast decrease in the year 2010-2011.The trend
percentage on cash has a huge increase on the year 2008-09 and then decreases
rapidly in 2009-2010.
Diagram 4.2.2:Trend Analysis of Cash
4.2.3 TREND ANALYSIS OF DEBTORS

TABLE NO 4.2.3: TREND ANALYSIS OF DEBTORS

87
Year
Debtors
Trend percentage
2007-08
45.34
100
2008-09
63.20
139.39
2009-10
63.84
100.9
2010-11
72.25
113.17
2011-12
65.08
90
Inference
The analysis shows that there is an fluctuating effect on the value of debtors.It is
highest in the year 2008-2009 and lowest in the year 2011-2012
Diagram 4.2.3:Trend Analysis of Debtors
4.3 CORRELATION ANALYSIS

Correlation refers to the relationship between any two or more variables. The
correlation expresses the relationship or interdependence of two set of variables upon
88
each other in such a way that the change in value of one variable are in sympathy with
the change in another variable. Correlation co-efficient is a numerical measurement
showing degree of correlation between two variables.
Correlation analysis helps to indicate the degree of relationship between two
variables. There are so many methods used for measuring correlation.
Degree of correlation
Correlation exists in various degrees:
Perfect positive correlation
if it is perfect correlation , an increase in one variable is always followed by a

corresponding and proportional increase
Perfect negative correlation:It is negative perfect correlation , if a decrease

in one variable is always followed by a corresponding and proportional
increase.
Correlation for the concern

The present section aims at analyzing the correlation co-efficient under the following
combination of variables to study the relationship existing between them.
1.Relationship between inventory and current assets.
2.Relationship between raw materials and current assets.
3.Relationship between raw materials and inventory.

89
4.3.1 RELATIONSHIP BETWEEN INVENTORY AND CURRENT

ASSETS
The relationship between inventory and current assets is explained by the following table.
TABLE NO 4.3.1:: TABLE SHOWING RELATIONSHIP BETWEEN INVENTORY

AND CURRENT ASSETS.
Year
X=x-
X^2
Y=y-
Y^2
XY
2007-08
24.14
-5.1
26.15
79.46
-26.8
718.24
136.68
2008-09
25.81
-3.44
11.8
106.10
-.17
.02
.58
2009-10
26.56
-2.69
7.2
109.55
3.28
10.7
-8.82
2010-11
30.99
1.74
3.02
117.36
11.28
122.9
19.62
2011-12
38.77
9.52
90.6
118.9
12.63
159.5
120.23
670.19
531.35
1011.37
268.29
146.27
Correlation co-efficient r= XY/X^2*Y^2

XY=268.29
X^2=138.8
Y^2=1011.37
r= 268.29/138.8 * 1011.37
= -292.27/11.78 * 374.6
= .60

90
Inference
The table shows the relationship between inventory and current asset. It shows that
correlation between these two variables is.60. this indicates that these two variables
have positive correlation. That is inventory and current asset are changed in the same
direction.
Here x represent inventory.

y represent current asset.
X represents difference of x values from assumed mean of x values
Y represents difference of y values from assumed mean of y values
x represents the average of x values.
y represents the average of y values
4.3.2 RELATIONSHIP BETWEEN RAW MATERIAL AND

CURRENT ASSETS
The relationship between raw material and current assets is explained by the help of
following table.
TABLE NO 4.15 : TABLE SHOWING RELATIONSHIP BETWEEN RAW
MATERIAL AND CURRENT ASSETS.
Year
X=x-x
X^2
Y=y-y
Y^2
XY
2007-08
31.86
-17.52
306.95
79.46
-26.8
718.24
470.06
2008-09
46.49
-2.89
8.35
106.10
-.17
.02
.49
2009-10
51.75
2.37
5.61
109.55
3.28
10.7
7.77
-.16
.372
117.36
11.28
122.9
-6.88
18.68
348.94
118.9
12.63
159.5
236.36
2010-11
2011-12
48.77
68.06

91
21.9
670.19
531.35
1011.37
708.3

XY= 708.3
X^2= 670.19
Y^2=1011.37
= 708.3/670.19 * 1011.37
= 708.325.8 * 31.8
= .86
Working note:
x= x/ n
x= n= 5
x= 49.38
X= x- x
y= y/ n
y= 313.5
n= 5
y= 106.27
Y= y- y
Inference

92
The table shows the relationship between raw materials and current asset. It shows
that correlation between these two variables is .60. This indicates that these two
variables have positive correlation. That is raw materials and current asset are
changed in the same direction.
Here x represent raw material.

y represent current asset.
y represents the average of y values.
4.3.3 RELATIONSHIP BETWEEN INVENTORY AND RAW

MATERIAL
The relationship between inventory and raw material is explained by the help of
following table.
TABLE NO 4.3.3: TABLE SHOWING RELATIONSHIP BETWEEN INVENTORY
AND RAW MATERIAL.
Year
X=x-
X^2
Y=y-
Y^2
XY
2007-08
24.14
-5.1
26.15
31.86
-17.52
306.95
89.35
2008-09
25.81
-3.44
11.8
46.49
-2.89
8.35
15.72
2009-10
26.56
-2.69
7.2
51.75
2.37
5.61
-6.37
2010-11
30.99
1.74
3.02
-.16
.372
-1.06
48.77

93
2011-12
38.77
9.52
146.27
90.6
68.06
18.68
138.8
348.94
177.8
670.19
275.47

XY= 275.47
X^2= 138.8
Y^2= 670.19
r= 275.47/138.8* 670.19
= .90
Working note:
x= x/ n
x= 146.25
n= 5
x= 29.25
X= x- x
y= y/ n
y= n= 5
y= 49.38
Y= y- y

94
Inference
The table shows the relationship between inventory and raw materials. It shows that
correlation between these two variables is .90. this indicates that these two variables
have high positive correlation. That is inventory and raw materials are changed in the
same direction.
Here x represent raw material.
y represent inventory.
y represents the average of y values
4.4 INVENTORY CONTROL TECHNIQUES

4.4.1 ABC analysis
One of the widely used techniques for Control of inventories is the ABC(Always
Better Control) analysis. The objective of ABC Control is to vary the expenses
associated with maintaining appropriate Control according to the potential savings
associated with a proper level of such Control. The ABC analysis uses this principle
to divide inventories in 3 classes according to funds usage.
A items; which represent about 10% of the total inventory range and account for
almost 70% of the usage value, call for a light Control system. Order quantities and
order points are carefully determined. Close attention is paid to record accurately and
variables can be reviewed periodically.
B items which constitute about 20% of the total inventory ranges and account for
20% of the annual usage value, requires normal Controls. Variables can be reviewed
periodically.

95
C items are the remaining 70% of the inventory which involve only about 10% of
the usage value relatively loose Controls and less frequent reviews sufficient in their
case.ABC analysis is also called proportional parts value analysis or demand supply
method.
Here
Group A consist of inventory ranging between Rs 9,99,99,999 to Rs 99,99,998
Group B consist of inventory ranging between Rs 99,99,999 to Rs 99,998
Group C consist of inventory ranging between Rs 99,999 to Rs 1
TABLE NO 4.4.1:TABLE SHOWING ABC ANALYSIS

Group
Number of items
% of items
0.028%
388
1.83%
20721
98.13%
100
Inference
In ABC analysis 98.13% of inventory belongs to group C, 1.83% of inventory
belongs to group B and 0.028% of inventory belongs to group A
4.4.2
FSN Analysis
FSN stands for fast moving , slow moving and non moving. Here classification is
based on the pattern of issues from stores and is useful in Controlling obsolescence.
The carry out FSN analysis , the is later , is taken to determine the number of months ,
which have elapsed since the last transactions.

96
The items are usually grouped in periods of 12 months. FSN Analysis is helpful in
identifying active item which need to be reviewed regularly and surplus items which
have to be examined further. Non moving items may be examined further and their
disposal can be considered.
TABLE NO 4.4.2:TABLE INDICATING FSN ANALYSIS

Group
Number of items
% of items
2210
15.39%
3399
23.68%
8744
60.92%
14353
100
Group F-inventory ranging between 1 year to 2 year.

Group S-2 year to 5 year.
Group N-Above 5 year
Inference
Here 60.92% of inventory belongs to group N, 23.68% of inventory belongs to group
S and 15.39% of inventory belongs to group F.
Diagram 4.4.1:Diagram showing FSN

97
5.0 FINDINGS & RECOMMENTATION
The percentage of current asset to inventory sundry debtors,cash and
bank,loan and advances have decreased in the year 2011-2012.

Inventory turnover ratio shows a fluctuating trend over the years. It has
been decreased to 2.94 in the year 2011-12 which is not good for the
company
Inventory conversion period of ILP has increased to 124 days in the year
2011-2012 which indicate the conversion of inventory to sales is lower

The material holding period is low in the year 2007-08. It indicates that
stock is fast moving and in the year 2011-2012 is very high which is not in
favour to the company.

The ratio of material consumption to turnover is maximum .667 in 2011-
2012 which is not good for a company

The debtors turnover ratio shows increasing from the year 2011-12 which
indicate efficient management of debtors by the company.The extension of
credit and collection of accounts receivable is efficient

Inventory to current asset ratio is fluctuating. Low ratio is good to the
company and it was shown in 2009-10. But in 2011-12 the ratio increases
which is not goodto the company.

98
The ratio to inventory to working capital shows an increasing trend which

is favorable to the company.It is maximum in the year 2011-2012 has a
favourable effect on the company.

The creditors turnover ratio is high in the year 2011-12. This is favorable
to the company .
The analysis of input output ratio shows that above shows the tendency is
fluctuating year by year. This is not favorable to the company

Working capital turnover ratio is highest in the year 2011-2012 which is
0.43 which indicate better performance
Correlation analysis shows the relationship between various variables like

inventory and current asset, relationship between raw material and current
asset, relationship between raw material and inventory. It shows a positive
correlation which has a favourable effect.

As per ABC analysis A category 0.028%, B category constitute 1.83% and
C category constitute 98.13% of the total number of items.

As per FSN analysis F category of items constitute 23.68 % , S category
constitutes 23.68% and N category constitutes 60.92% of the total number
of items.
5.1 SUGGESTIONS
Company have to shift some items of Group B to Group A and C to B for
more Control over the inventory which can reduce the inventory cost.
The Items of Nonmoving group (60.92%) can be reduced to have more
Control over the inventory
Perpetual inventory system and periodic review system should be considered
seriously and also ensure that materials are checked by authorized persons
It will be more better if the firm try to decrease the Inventory Conversion
Period through efficient management of them.

99
Efficient management of the debtors and creditors have to be maintainted

which is favourable for the development of the company.
The higher turnover ratio indicates efficient management of inventory because
more frequently the stock sold, so efficient steps have to be introduced to
improve the inventory ratio
6.0 CONCLUSION
This project on The study on inventory management gave me an opportunity to
understand the level of inventory management in the Instrumentation Limited
Palakkad. This research will help the organization to make necessary measure to the
inventories. This will certainly bring down the causes of inventory problems and help
the management of inventories. The high turnover ratio indicates efficient
management of inventory because more frequently the stock sold. So the organization
should try to improves the inventory turnover ratio.
Instrumentation Ltd Kerala- Rajasthan was established by 1964 has 4 units two at
Kota, one at Japura , one at Palakkad. The inventory system followed by the
instrumentation is satisfactory which is mainly due to the efficiency of employees.
The current study helped me to understand the current inventory control measures
practiced by ILP. The cordial and corporate relationship between management and
employees is the secret behind the success of this public sector company.

100
BIBILIOGRAPHY
BOOKS
Khan M.I and Jain PK, Basic financial management, The McGraw-Hill
publishing company limited, New Delhi.,2000.
Aswathappa & K.Shridhara Bhat,productions and 0perations
Management,Himalaya Publising House,Second edition,2008
Shashi.K.Gupta and R.K.Sharma,Management Accounting,Kalayani
publishers,11th edition,2007
Dr.S.N.Maheswari,Financial Management,Sultan Chand & sons,9th
edition,2004
D.Chandra Bose,Inventory Management,Prentice hall of India Private
Limited, New Delhi.
WEBSITES
http://www.ilpgt.in/
http://www.business dictonary.com/
http://www.entrepreneur.in/
http://www.wikipedia.com/

101
ANNEXURE
BALANCE SHEET OF ILP LTD FOR THE PERIOD 2007-2012
Particular
s
2012
2011
2010
2009
2008
2007
SOURCE
OF
FUNDS
(In Rs)
(In Rs)
(In Rs)
(In Rs)
(In Rs)
(In Rs)
Reserves
and
Surplus
85,70,315
14,78,08,7
57
15,88,87,03
5
16,02,83,2
16,34,5
45
2,540
10,85,76,
523
Loan
fundssecured
loan
4,87,62,17
1
5,22,86,40
8
4,86,37,345
4,96,69,11
7
3,27,89,635
2,79,56,8
66
Inter unit
accounts
87,95,00,2
78
77,29,69,2
91
72,69,75,21
9
68,30,32,7
29
52,19,28,40
2
40,96,58,
738
TOTAL
93,68,32,7
64
97,30,64,4
56
93,44,99,59
9
89,29,85,0
91
71,81,70,57
7
54,61,92,
127
Gross
block at
cost
19,17,28,5
60
16,73,14,5
10
16,62,66,53
3
16,12,69,3
31
15,99,16,00
3
15,81,58,
830
Less:
Depreciati
on
14,73,04,5
88
14,46,21,3
81
14,18,70,65
9
13,91,64,9
16
13,64,84,58
2
13,35,83,
967
APPLICAT
ION OF
FUNDS
Fixed
Assets

102
Net block
4,44,23,97
2
2,26,93,12
9
2,43,95,874
2,21,04,41
5
2,34,31,421
2,45,74,8
63
Advance
on capital
A/c &
capital
work in
progress
33,79,552
58,33,604
1,32,360
NIL
NIL
NIL
38,74,86,2
36
30,99,15,3
61
26,56,43,83
1
25,81,81,5
34
24,14,80,24
0
16,59,02,
878
NIL
NIL
NIL
NIL
NIL
Current
Assets,Lo
ans and
Advances
Inventorie
s
System
work
NIL
Sundry
Debtors
65,08,21,3
96
72,24,92,4
64
63,83,91,41
4
63,20,31,0
56
45,34,32,08
4
31,48,79,
897
Cash &
bank
balances
10,43,445
43,90,709
7,06,99,671
4,74,00,56
5
26,10,415
2,59,37,3
00
Other
current
asset
1,42,74,14
3
42,85,905
65,35,969
90,76,040
87,87,366
87,71,451
Loans &
Advances
13,63,21,4
05
13,25,78,8
92
11,42,84,13
1
11,43,86,3
62
8,83,30,958
7,05,35,3
93
118,99,46,
625
117,36,63,
331
109,55,55,0
16
106,10,75,
557
79,46,41,06
3
58,60,26,
919
29,41,04,5
16
22,56,19,5
48
18,25,25,71
0
18,77,61,1
32
9,01,56,652
5,93,37,8
01
68,12,869
35,06,060
30,57,941
24,33,749
37,45,255
50,71,852
30,09,17,3
85
22,91,25,6
08
18,55,83,65
1
19,01,94,8
81
9,99,01,907
6,44,09,6
55
Less:
Current
liabilities &
Provisions
Current
Liabilities
Provision

103
Net
current
asset
85,90,29,2
40
94,45,37,7
23
90,99,71,36
5
87,08,80,6
76
69,47,39,15
6
52,16,17,
264
TOTAL
93,68,32,
764
97,30,64,
456
93,44,99,5
99
89,29,85,
091
71,81,70,5
77
54,61,92,
127
PROFIT AND LOSS STATEMENT OF ILP LTD FOR THE PERIOD 20072012
Particulars
2007-2008
Turnover
75,37,67,77
9
Less: Excise duty
10,33,14,60
9
65,04,53,17
0
2008-2009
2009-2010
2010-2011
91,74,05,539
100,21,67,97
6
101,96,34,6
32
2011-2012
102,84,17,856
7,93,21,256
8,18,44,312
83,55,61,227
7,02,18,065
7,71,87,701
93,19,49,911
94,24,46,93
1
Accretion /
(Decretion) to
stock
1,21,75,704
1,28,02,625
2,22,19,886
(1,58,36,68
6)
Other revenues
70,63,787
44,13,341
84,06,333
1,03,54,872
94,90,96,598
6,49,23,447
1,25,76,440

104
66,96,92,66
1
Total
85,27,77,193
96,25,76,130
93,69,65,11
7
51,75,99,044
48,77,37,69
8
12,69,50,823
14,72,52,31
4
102,65,96,485
Inputs
Expenditure on
material
Employee
remuneration &
benefit
Service &
subcontracting
31,86,34,57
7
8,49,47,329
46,49,67,919
9,08,74,779
68,06,99,464
16,42,01,808
3,18,19,667
65,36,543
1,02,19,429
2,30,50,345
2,47,96,565
6,27,06,172
Other services
4,64,58,757
6,33,81,184
5,81,76,249
5,71,22,722
29,83,207
Depreciation
29,00,615
28,10,394
28,39,373
29,65,960
52,81,921
Interest
9,34,405
31,41,179
24,16,799
51,22,968
2,88,057
Provision
1,39,896
Total
46,05,52,12
2
Profit/ (loss)
before inter unit
adjustment
Inter unit
adjustments
20,91,40,53
9
2,29,065
63,56,23,949
21,71,53,244
3,01,824
4,44,489
73,13,34,457
72,54,42,71
6
21,12,41,673
21,15,22,40
1
7,89,16,189
6,84,21,000
4,56,88.000
5,68,70,000
6,71,08,000
6,34,82,000
16,41,33,673
14,80,40,40
1
Profit/ (loss) after

inter
unitadjustment
6,34,52,539
Extra ordinary
item
94,76,80,296
16,02,83,244
1,04,95,189
19,24,874
NIL
NIL
52,46,639
2,31,645

105
Balance of profit/
(loss) carried to
balance sheet
16,34,52,53
9
16,02,83,244
15,88,87,034
14,78,08,75
6
85,70,314

106

A Study On Inventory Managemen

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A STUDY ON INVENTORY MANAGEMENT IN

INSTRUMENTATION LTD, PALAKKAD

Prof. C.VINOTHA ,MBA, M.PHIL;

MASTER OF BUSINESS ADMINISTRATION

GURUVAYURAPPAN INSTITUTE OF MANAGEMENT

COIMBATORE - 641 105

I RAIJA.K.R,student of Guruvayurappan Institute of management,

Guruvayurappan Institute of Management

Limited,Palakkad for their necessary help and guidence in completion of my project

Guruvayurappan Institute of Management

1.0.1 INTRODUCTION OF THE STUDY

1.0.2 NEED OF THE STUDY

1.0.3 SCOPE OF THE STUDY

1.0.4 OBJECTIVE OF THE STUDY

THEORETICAL FRAME WORK

DATA ANALYSIS AND INTERPRETATION

FINDINGS AND RECOMMENTATION

Guruvayurappan Institute of Management

The percentage of current asset to

Inventory Turnover ratio

Inventory Holding Period

Ratio Of Material Consumption To

Inventory To Current Asset Ratio

Inventory To Workingcapital Ratio

Debtors Turnover Ratio

Creditor Turnover Ratio

Input Output Ratio

Workingcapital Turnover Ratio

Trend Anaysis Of Workingcapital

Trend Analysis Of Cash

Trend Analysis of Debtors

Relationship Between Inventory And

Relationship Betweeen Rawmaterial And

Relationship Between Inventory And

Guruvayurappan Institute of Management

Organization Chart Of The Purchase

Organization Chart Of Stores Department

Organization Chart Of Receipt Store

Organization Chart Of Component Store

Organization Chart Of PPC Department

Organization Chart Quality Control

Inventory Turnover ratio

Inventory Holding Period

Ratio Of Material Consumption To

Inventory To Current Asset Ratio

Inventory To Workingcapital Ratio

Debtors Turnover Ratio

Creditor Turnover Ratio

Input Output Ratio

Workingcapital Turnover Ratio

Trend Anaysis Of Workingcapital

Trend Analysis Of Cash

Trend Analysis Of Debtors

Guruvayurappan Institute of Management

Guruvayurappan Institute of Management

Guruvayurappan Institute of Management

organization constantly strives to maintain optimum inventory to meet its

Guruvayurappan Institute of Management

1.0.2 NEED FOR THE STUDY

1.0.3 SCOPE OF THE STUDY

forecasting.Balancing these competing requirements lead to optimal inventory levels,

Guruvayurappan Institute of Management