1.

INTRODUCTION
1.1 INTRODUCTION TO THE STUDY
The research will be conducted on the assessment of inventory management
practice in Malabar cements Limited, Walayar, Palakkad. The research
provides a knowledge of conducting research and to give solutions for the
company affecting inventory management. Inventory is the stock of any item
or resource in campus where as inventory management is the process of
reducing inventory cost, keeping inventory from under or over stocking and
determining order and recorder points in order to achieve organizational goals.
Most studies show that in the company constitutes the major category of assets
on the balance sheet.
The main objective of this study is to assess the inventory management
practice of Malabar Cements Limited, Walayar, Palakkad.

1.2. OBJECTIVES OF THE STUDY

Primary Objective
To analyse the efficiency of Inventory Mangement of Malabar Cements
Limited, Walayar, Palakkad.
Secondary Objective
To identify the optimum level of inventory to minimize cost.
To determine the factors affecting the inventory management system of the
company.

1.3. NEED FOR THE STUDY

The research is believed to have the following importance.
The study will show the over all inventory management system of the
company.
The study will suggest solutions for the problem related to inventory
management function
It enables employees of inventory management evaluate them selves
It will indicate the strengths and weakness of the firm inventory
management practice.

1.4 SCOPE OF THE STUDY

The study is limited to assess the inventory management practice at specific
area of . The time duration of this research will be from February up to
May .This study is to find the facts and opinions of inventory management
In accordance with the present trends it aims mainly at finding out the
inventory control procedures.
This study gives the brief information about the inventory management of the
company.
The study was done by using annual reports, inventory manualetc.

1.5 LIMITATIONS OF THE STUDY

The study is estimated encounter the following constraints
The managers who concern the study many not volunteer to respond the
needed information in depth.
Complexity of inventory system is to the difficulty of gathering information.

1.6 INDUSTRY PROFILE

India is the world's second largest producer of cement after China, with cement
Companies adding nearly eight million tonnes (MT) capacity in April 2009,
taking the total Installed capacity to 219 MT. A few of the leading
manufactures are the Ultra Tech/Grasim Combine Dalmia Cements. India
Cements, Holeim etc. With the boost given by the Government to various
infrastructure facilities, road networks and housing facilities, growth In the
cement consumption is anticipated in the coming years.Infrastructure is
backbone of any economy which is Petroleum, Fertilizer, Iron, Steel,CoalBanking, Insurance, Power and Cement etc. The cement Industry is one of the
coreIndustries of the nation. Cement is a fundamental requirement of all
constructions activities.Cement is used in housing, bridges, roads, industrial
construction etc. As well as cement isBasic material which is used in all types
of construction.In ancient time buildings were constructed with sand stone,
bricks, lime and gypsumAnd in special case marbles were used. The house of
ordinary citizens was usually made ofMud and those same times of special
type of wood fire. In some cases lime and PozzolanaWere used for getting
beautiful finish for the interior surface. There were very skilled buildersAnd
masons famous for their work and art.
However, during 18th century slowly and gradually new types of material and
cement
Developed in Europe. Jama frost patented cement in 1811 and established
works at
Swanscomde, the first in the London district. Joseph Aspadin a British stone
mason, obtain a Patent for a cement Aspadin first patent is dated 21st October
1824, the patented on artificial Made by calcinations of an argillaceous lime
stone kwon as Port land cement because it Reasonable a stone quarried on the
isle of Portland near England with this investment Aspadin Laid the foundation
for today. Cement is a powdered material with water forms a paste that hardens
slowly. It is Made by various types of raw materials. The prominent raw

material composed in the mixture Is calcium carbonates as limestone and other

alumina silicates as clay or shale. During the
STRENGTH AND PROBLEMS OF CEMENT INDUSTRY:STRENGTH:The following are the inherent and acquired strength of the cement industry.
Cement is basic and strategic industry to build the infrastructure of Indian
economy.
1. Cement is an important for the housing construction that generates
maximum employment
In the economy.
2. Cement industry contributes the exports and give the profit of foreign
exchange to Country.
3. For cement industry special rural infrastructure and housing schemes as well
as five year Tax holding on income from investment in modern infrastructure
such as roads air
Consumption in medium term.
4. Cement industry contributes in tax excise duties by which income of
government is Increased.
6. Cement is a self-sufficient industry with negligible imports.
7. Cement has no substitute.
8. Fundamental technological progress in the cement industry has been
insignificant since, More than 30 years. Main improvements on existing
technology are concentrate in energy saving and distribution of cement bulk
transportation.
PROBLEMS OF CEMENT INDUSTRY:The following are main problems of the cement industry.
1. Inadequate production:The main factors responsible for shortfall in production are:

Drastic power cuts ranging from 20 to 75% in various cement

producing states.
Shortage of coal.
Inadequate availability of Wagons.
Limited availability if furnace oil.

2. Manufacturing cost problems:The major inputs for cement industry are lime-stone, coal, power, and gypsum
cement Is a high cost industry as a result. Cement has become frightening
expensive costs, both Manufacturing and non-manufacturing have gone up. It
is difficult to control cost.

3. Operational Inefficiency:Operational inefficiency affects the cost of production. Operational

inefficiency can be Affected by the internal factors as well as external factors
of the company.
4. Cost Escalation and rigid price:In the case of all other industries, there was rise in the cost of production of
cement.
But the special point in the case of cement industry was that some of the major
cost rises were Due to the government policies. The shortage of wagons for the
movement of cement was Always a serious.
5. Government policies Rules and Regulation:The various policies rules and regulations of the central and state government
not Only encourage the industry but have also adversely affected the industry.
The various steps
Taken by government viz., administrated prices of inputs, like in the excise
duty increase in Railway fright, low off take by government reduction in

loading capacity of trucks, compulsory Jute bag packaging high electricity

duty, sales tax, power tariff etc. Adversely affects the Industry.
6. Infrastructural problems:The cement industry is facing various problems. Infrastructure facility is one of
the Main problem faced by the industry. Infrastructural facility means the
facility of availability Of adequate quantity and quality of coal railway wagons
regularity of power supply, sea-port, Bridges, roads and canals, which is of
vital importance for optimizing capacity utilization in Cement industry. The
cement plants are located nearer to the lime stone deposit area, which Are not
properly connected with rail road, power and communication services which
affect to The cement industry.
7. Administration problem:Administration problem includes the workers problem, selling and distribution
of Cement problem etc.
8. Other problem:Other problems included the pollution problem, location problem, low export,
under Develop rural market etc.
1.7 COMPANY PROFILE
Malabar Cements Ltd., a fully owned Govt. of Kerala Undertaking, is
synonymous with superior quality cements, vouched by customers spread
across the state of Kerala. The Company was incorporated in April 1978 and
commenced production in April 1984 at its Walayar plant. At Malabar
Cements, product improvement is not just a one-time strategy for boosting
sales, rather a quest of excellence. Perfecting the product quality is everybody's
concern here. Our distinction begins with scientifically selecting the best raw
materials for clinker. Stringent quality control is exercised right from preblending raw materials, clinkerisation, clinker grinding, and finally to cement
packing.

Malabar Cements contributes to the developmental activities of the State by

supplying the basic construction material. Only Malabar Cements can supply
its cement, 'factory fresh', without any deterioration in the original strength
either due to moisture or humidity, within 12 hrs anywhere in Kerala. With a
production capacity of 4.2 lakh tons of cement per annum,the unit at Walayar
is the largest. As part of expansion programme, it has commissioned a 2.0 lakh
tons clinker-grinding unit at Cherthala in Alappuzha district in August 2003.
Thus the total installed capacity of MCL is 6.2 lakh tons. MCL is the first
public sector company to receive ISO Certification & to win the National
Award for best achievement in Energy Conservation. Till date, MCL has
experienced no loss of production due to labour unrest. In just over 15 years of
commissioning, Malabar Cements has been able to meet about 10% of total
cement consumption in Kerala. With the expansion plans in progress, the
figures are sure to rise further.
Cement is a necessary constituent of infrastructure development and a key raw
material for the construction industry. As late as the 70s, the State of Kerala
was virtually starving for cement. The state lacked a portland cement factory in
either private or government Sector. In 1961-62, the Geological Survey of
India located a limestone deposit in the Pandarethu valley of the Walayar
region on the northern side of the Palakkad gap. Located in dense forest area,
the hilly terrain was required heavy investment to mine. The State Govt.
ventured

to

put

up

Cement

factory

in

the

region.

The feasibility study conducted revealed that the construction of a 1200 tpd dry
process cement plant using the Pandarethu limestone is feasible. KSIDC
obtained an Industrial License for the manufacture of cement in November
1976 and decided to go ahead with the project and formed Malabar Cements
Limited to set up, own and operate the proposed cement plant. The plant was
successfully commissioned in 1984 and the commercial cement
started on

1984.

production

Now, The Company is all equipped to set precedence among public sector
units in the state. The launch of two Superior quality products under the brand
name Malabar Super and Malabar Classic, in the year 1994-95 gave a boost
to the market presence. Various modifications carried out since 1995 have
improved production and productivity of Malabar Cements. A 2.5 MW multifuel power plant was commissioned in June 1998 to complement 25% of the
total power requirement for the Walayar plant operations. As part of expansion,
the company has commissioned a 600 tpd Grinding Unit at Cherthala in
August 2003. The modernization of Cement Mill, completed in December
2004, helped to increase the cement production.
The company has upgraded the plant with state-of-the-art technology; Belt
bucket elevators, Kiln automation, modification of cement mill internals etc,
are few to mention. The 0.42 million tones capacity is less than 10% of the
cement consumption in Kerala and expansion will alow the company to
harness

the

markets

beyond

its

core

1978

1979

segment.

1980

1982

1983

1984

1987

1994

1997

1998

2000

COMPANY POLICY

VISION $ MISSION

Growth Story
Some of the major milestones while on our growth
Feasibility Study for a cement plant at Walayar. - 1975
Industrial License for the manufacture of Cement - 1976
Date of Incorporation of Malabar Cements - 1978
Commencement of mining activities - 1981
Commissioning of Walayar Plant - 1984
Commencement of clinker production - 1984
Commercial Cement Production started - 1984
43-grade OPC cement Malabar Super launched - 1994
New product: Malabar Classic launched - 1994

Obtained

ISO:

9002

certification,

first

PSU

in

Kerala

to secure this certification - 1996

Installation of 2.5 MW multi-fuel power gen. set - 1998
Introduction of Malabar Aiswarya brand - 2003
Commissioned

of

600

tpd

cement

grinding

unit

at

Cherthala - 2003
Modernization of Cement Mill to close circuiting - 2005
Introduced ERP system for integrated operation of all functional areas. - 2007
Switched over to Quality Certification ISO : 9001 :2008 2010
ISO Certification
IS/ISO 9002 : 1994 certification obtained in November 1996. First PSU to
secure this certification.
Switched over to the revised standard ISO 9001 : 2000 in Aug2003.
Switched over to Quality Certification ISO : 9001 :2008 in 2010
Awards
Kerala State Pollution Control Board Award 1990-91
Secured first State award for Energy conservation - 1992
VSSC Rolling Trophy for safety measures - 1994 & 1995
NCBM

National

Award

for

the

Best

improvisation

in energy - 1998
Kerala State Energy Conservation Award - 1998
Govt. of Kerala awarded for outstanding achievement in Pollution
abatement - 2007
Introduced ERP system for integrated operation of all functional areas. 2007
Kerala Trade Award of Kerala Government - 2010
Kerala State Pollution Control Board Award - 2011
Kerala State Pollution Control Board Award - 2012

1.8 PRODUCT PROFILE

Malabar Cements uses the state of the art, dry process technology for the
manufacturing of super quality cement and the quality is much above the
national standards. For Various applications, the company has three brands viz,
"Malabar Super", "Malabar Aiswarya" & "Malabar Classic"

1. MALABAR SUPER
A fabulous product in every sense: Super in strength, Wonderful in
workability, Incredible in aging, Implausible in durability, and Fantastic in
strength gain. An AMAZING performer!

Tests carried out by Bureau of Indian Standards have established unshakeable

credentials of Malabar Super. Super strength accelerates setting time and fine
finish. Malabar super is superior in strength to ordinary '43' grade cement. It
attains the 28 days' strength required as per IS in just 7 days time. Not only
that, the strength attained in 28 days time is about 50 percent more than the IS
specification. The amazing strength of Malabar Super arises from it's
unequalled particle fineness, 33 percent more than the IS specification and
consistency in composition, made so by computerized process control system.
2. MALABAR CLASSIC

Superior in its class of cements, it offers better setting properties delayed initial
set and early final set offering more working time and reduced observation
time.

Structures achieve excellent dimensional stability with the heat resistant

properties of MALABAR CLASSIC. It also reduces heat generation during
hydration, making it a better workable finished product absolutely reliable. The
extra fineness welded into it allows MALABAR CLASSIC better coverage
and finish in wall and roof plastering. This in turn, reduces paint consumption.
3. MALABAR AISWARYA
It brings prosperity in many ways. It increases the life of your structures by
safeguarding against sulphate attack. Aiswarya offers high quality at reduced

price.

Aiswarya generates less heat of hydration, reduces the formation of getting

cracks. This product is best studied for constructions in soil and water with
excess alkali metals, sulphates, alumina, iron and acidic waters. To obtain the
best quality cement, only glassy granulated slag is used for product

manufacturing. With very low magnesium oxide content this provides shape
stability for concrete structures.

The Making of Cement

MCL manufactures cement through the most modern dry process method
based on world-renowned German technology. The major raw materials for
cement manufacture are limestone and laterite, which are natural minerals
obtained within the state. These raw materials provide all necessary ingredients
of cement like lime, silica, alumina and iron oxide. The entire manufacturing
process is computer controlled from a central control room and stringent
quality control measures are applied at all stages of production. We are in the
process of installing X - Ray Analyzer for better quality control. The state of
the art pollution control measures like bag filters are also being installed. The
process generally involves three stages of production.
1. Raw meal production.
The limestone obtained from captive mines is enriched with higher quality
limestone procured from nearby states as and when required. The raw mix
normally contains 95% limestone and 5% laterite. The raw materials are
crushed to around 20-25 mm size and the proportioned raw materials are
ground in a ball mill in dry condition to a very fine powder. The resultant
product is called raw meal and is stored in concrete silos where it is
pneumatically homogenized to get a uniform product.
2. Clinker production
Clinker is produced in a rotary kiln, which is a cylindrical steel shell of 65m
length and diameter 4.2m, lined with refractory bricks. The kiln is inclined at
3% and set rotating at a speed of 2 2.2 rpm. It is provided with a 4-stage
multi cyclone pre-heater system through which the homogenized raw meal is
fed to the kiln inlet by means of belt bucket elevators. The Kiln is fired with

pulverized coal and maintained at a temperature of about 14500C. In the preheater and kiln, the raw meal undergoes a series of physical as well as
chemical changes giving rise to the cement minerals. The resultant product in
nodular form obtained from the kiln is called clinker. Clinker is immediately
quenched in the clinker cooler to stabilize its properties and stored in the
clinker stockpile.
3. Cement production.
Cement is produced by grinding clinker with 3-5% gypsum in a closed circuit
ball mill to required fineness. Gypsum is added to control the setting properties
of cement. Grinding clinker and gypsum produces ordinary Portland cement
(OPC). Fly ash / Slag at required proportion is ground along with clinker and
gypsum to produce Portland pozzolana cement (PPC) / Portland slag cement
(PSC). The ground cement is stored in concrete silos and packed in 50 Kg bags
using electronic packing machines.

1.9 CHAPTER SCHEMA

INTRODUCTION
INTRODUCTION TO THE STUDY
OBJECTIVES OF THE STUDY

CHAPTER 1

NEED FOR THE STUDY

SCOPE OF THE STUDY
LIMITATIONS
INDUSTRY PROFILE
COMPANY PROFILE
PRODUCT PROFILE
CHAPTER SCHEMA

LITERATURE REVIEW
STUDIES RELATED TO INVENTORY MANGEMENT

CHAPTER 2

INVENTORY MANGEMENT
THE RESEARCH MODEL

RESEARCH METHODOLOGY
RESEARCH DESIGN

CHAPTER

PROBLEM STATEMENT
PERIOD STUDY
SAMPLING DESIGN
SOURCES OF DATA
STATISTICAL TOOLS USED

CHAPTER 4

DATA ANAYSIS AND INTERPRETATION

FINDINGS, SUGGESIONS AND

CHAPTER 5

CONCLUSIONS

2. LITERATURE REVIEW
2.1 STUDIES RELATED TO INVENTORY MANGEMENT
Inventory, in most of the industries, accounts for the largest Proportion of gross
working capital. A number of studies, Therefore, have been conducted to find
the determinants of Investment in inventories. The following discussion
provides a Brief review of studies, dealing with factors influencing
Investments in inventory in India.
Economic studies to analyze the factors that influence Inventory accumulation
in India, are based on time series and Pooling of cross section of time series
data pertaining to
Manufacturers inventories. Krishnamurtys study (1964) was Aggregative and
dealt with inventories in the private sector of the Indian economy as a whole
for the period 1948-61. This study used Sales to represent demand for the
product and suggest the Importance of accelerator. Short-term rate of interest
had also been Found to be significant.
Sastrys study (1996) was a cross-section analysis of total Inventories of
companies across several heterogenous industries For the period 1955-60 using
balance sheet data of public limited Companies in the private sector. The study
brought out the Importance of accelerator represented by change in sales. It
also Showed negative influence of fixed investment on inventory Investment.
Krishnamurty and Sastrys study in 1970 was perhaps the most comprehensive
study on manufacturers inventories. They used CMI data and the consolidated
balance sheet data of public limited companies published by RBI, to analyze
each of the major components i.e. raw material, goods-in-process and finished
goods for 21 industries over the period 1946-62.
It was a time series study but some inter-industry cross section analysis had
also been done. Accelerator represented by change in sales, bank finance and
short-term interest rate were found to be important determinants. Utilization of
productive capacity and price anticipations had been found toe of some
relevance. Another study conducted by them in 1975 analyzed inventory

investment in the context of flexible accelerator with financial variables. Both

RBI and Stock Exchange Official Directory, Mumbai data for seven important
industries had been taken for the period of 1956-69. Their study of pooled
cross section was in current prices whereas time series analysis based on RBI
data was a constant price. OLS results showed the important influence of
accelerator, internal and external funds flow and fixed investment on inventory
investment.
Materials management has been considered as a separate field of management
discipline only in the recent past and is accorded the status of a separate
functional area. While the concept got wide popularity and recognition in all
the advanced countries. In India, it is yet at an infant stage. On account of its
latest origin, unfortunately research in the area of materials management both
at the micro and macro levels was conspicuously absent. There does not exist
adequate indigenous literature on this subject. However, in recent years on
account of the growing importance of material management, few research
studies were conducted at various universities in our country
which highlighted some of the problems faced by selected central and state
public sector undertakings in the country. Apart from the above research work,
a few studies were conducted at Administrative Staff College of India,
Hyderabad and some studies were conducted by individual authors which
focused to some extent on the existing policies, procedures and problems of
industrial organizations in the field of materials management.
Besides the above studies, there are a number of reports submitted by
governmental committees from time to time. In addition to this, some studies
were conducted on Inventory Management in India.
Bansal G.D., in his study on Material Management, A Case Study of Bharat
Heavy Electrical Limited, Bhopal unit, (BHEL), has evaluated the existing
systems of inventory management. He emphasized the need for automatic
replenishment system in the undertaking. He also studied the application of
ABC analysis and EOQ technique of inventory control. He also pointed out the
accumulation of surplus stores and non-moving items in the organization. He
recommended that the surplus and obsolete stores, which are no longer

required, should be disposed off as early as possible at the best available price.
Further, he has suggested the preparation of monthly classwise statements on
inventories for effective control over them. And he suggested the introduction
of reconciliation of stores ledgers with account ledgers to avoid
misappropriation of stores. The study also revealed that raw material,
components and stores, and spares for production and operation are above their
actual consumption level. The inventories in general are found to be above
their routine requirements. The holdings of stores and spares generally are of
the order of two to three years requirements and these are considered as
excess.
Rama Krishna Rao B., in his thesis Materials Management in Heavy
Engineering Industry a case study of Bharat Heavy Plate & Vessels Limited
(BHPV), Visakhapatnam in 1979, he has evaluated the performance of
materials management in BHPV and identified some problems pertaining to
materials management in BHPV in particular and heavy engineering industry
in general. The method of investigation involves documentary evidence and
survey of expert opinion. He has evaluated the existing purchase systems and
lead-time involved in procurement of materials and suggested that the long
lead-time should be reduced. His study pinpointed the excess inventory in
terms of number of months cost of production in all the engineering units. He
also highlighted some of the problems in the area of materials management
such as delay on the part of customers in supplying their own materials,
existence and disposal of surplus and non-moving items, excessive lead time
and excessive dependence on imports. He also found that the administrative
and procurement lead times of the company are on the higher side due to the
peculiar nature of the industry. He suggested the liberalized purchase
procedures, increasing financial powers to the personnel, opening up of liaison
offices in various countries to reduce the lead-time. In comparison with the
BPE norms, the inventory levels of various stores items in BHPV and the
overall inventory accumulation in Heavy Engineering Group was relatively
higher and he suggested for drastic reduction in the inventory levels.

Phaniswara Raju B produced a research work entitled Materials Management

in Andhra Pradesh State Road Transport Corporation (APSRTC) in the year
1986. In his study, he examined the materials management practices and
purchasing systems in APSRTC on the basis of various parameters like
material consumption per vehicle, material consumption per kilometer,
inventory per vehicle, inventory in terms of number of months consumption
etc. He highlighted some major problems in the procurement of materials. The
study was primarily based on secondary data collected from published annual
reports of APSRTC, the records of MIS, the reports on performance of
Nationalized Road Transport Undertaking of CIRT, Pune etc., coupled with
personal interview with various officials of the corporation. The study revealed
the increasing levels of materials consumption in APSRTC as compared to
other undertakings. He observed the absence of the use of important analytical
techniques like value analysis and network techniques in the purchasing
system of APSRTC.
The inventory control system in APSRTC was critically examined in respect of
stock out pattern, reordering and review policies, lend time patterns, stock out
levels etc. He mainly suggested the reclassification of stores items based on the
criticality, the refixation of reorder level and reorder quantities. The study also
showed the wastage caused by maintenance of unnecessary stock records
relating to items, which were no longer used.
Hari R. Swami in his research work Materials Management in Public
Undertakings has evaluated the performance of materials management in the
central public undertakings in Rajasthan such as, Instrumentation Limited,
Kota unit: HMT, Ajmer unit: Hindustan Zink Limited, Debari unit; Hindustan
Copper Limited, Khetri unit and Sambhar Salts Limited. The study covered
various aspects of materials management in these enterprises from 1977-78 to
1981-82. The methods of investigation include questionnaire interview, on the
spot study and deskwork techniques etc. It has been observed that the cost of
materials accounts for more than 50 per cent of the total cost of production in
the selected units of the study. Unfortunately, the importance of proper
materials management was not fully realized by public undertakings in

Rajasthan and very little attention has been paid so far, to the task of
controlling investment in inventories through the application of various
scientific techniques of materials management. The research opined that,
materials management should not cover the inspection function, as it requires
an autonomous and independent status in the organization. The study revealed
that the lead-time in the selected public enterprises was considerably long and
suggested to reduce administrative lead-time by expediting purchase files. The
study also revealed that the inventory of selected public enterprises had been
accumulated due to the following reasons; faulty purchases, heavy rejections,
high lead time, uncongenial organization, lack of scientific and modern
techniques of materials management, defective inventory control and
inflationary tendencies in the economy. He suggested that the inventory
holdings could be reduced by adopting integrated system of materials
management, appointing qualified and trained inventory managers, reducing
lead time, setting and regulating consumption and stocking norms of raw
materials and other goods, applying modern techniques of materials
management and identifying slow and non-moving items. The study tested
fully its hypothesis the public enterprises had suffered losses or earned low
level of profits relates to the inefficient management of materials. If the public
enterprises followed standard techniques of materials management, they would
not only generate resources for their own expansion but would also have
contributed towards economic growth. The very important reason for public
enterprises having suffered losses or earned low level of profits relates to the
inefficient management of materials. Had public undertaking in Rajasthan
managed materials in an efficient and effective manner, they would not only
have generated resources for their own expansion but would also have
contributed towards economic growth.
In the year 1980, K. Sambasiva Rao conducted a research study entitled
Materials Management in Public Sector Shipbuilidng Industry. He made a
review of studies conducted earlier on materials management in the Indian
industries and he threw light on planning and budgeting of materials
management in Hindustan Shipyard Limited. He did an in-depth study in the

areas of procurement of materials, codification and standardization, vendor

analysis, and inventory control in the light of inventory norms fixed by the
Bureau of Public Enterprises of the company under study. He conducted the
study under certain limitations like absence of proper records, confidential
nature of the information, un-disclosure of certain information, reluctance of
officials in providing the necessary data pertaining to inventory control.
In his study, he highlighted the problems faced by the Indian shipbuilding
industry in general and specific problems of Hindustan Shipyard Limited. The
problems include international parity price on the involvement of the
directorate of shipping in fixing the price of the ships constructed. Inadequate
use of installed capacity, paucity of funds, paucity of orders, paucity of trained
manpower, high cost of material inputs, delays in procurement of material and
equipment, due to the undevelopment and underdevelopment of ancillary units,
the shipbuilding industry is facing severe hardships in obtaining the necessary
inputs by paying scarce foreign exchange reserves. Even if at all there are
some indigenous ancillary industries to shipbuilding industry, the prices of the
products of ancillaries tend to be high because of the incidence of duties, taxes
and high overhead schedules are postponed after receipt of major material
and components due to lack of coordination among the various departments by
drawing offices, production planning and control department, purchase
department, stores organization and production department.
Finally, his study highlighted the significance of materials management
function in shipbuilding industry and suggested that the procurement policies,
procedures and systems need to be improved to achieve higher operational
efficiency in this critical area.
In the year 1996, (Ms) Prameela Devi did a research work entitled Materials
Management in Public Sector Heavy Engineering Industry. A Case Study of
Bharat Heavy Plates and Vessels Limited, Vishakapatnam. She laid emphasis
on the problems faced by materials management department in BHPV Limited.
She did a comparative study of inventory management practices of BHPV with
the public sector heavy engineering units. She found some weaknesses in the
materials management function of BHPV and suggested some measures to turn

up the materials management function and for the overall performance of

BHPV Limited. She highlighted the difficulties of materials management in
jobbing industry like BHPV with that of the industrial units, which are of
continuous process industry. The researcher observed that frequent changes
taking place in materials management adversely affects the smooth functioning
of materials management.
She also observed that the number of items in the inventory is on the increase
and she suggested that enforcing strict control on the delegation of powers
should curb it. For determination of the appropriate quantity to be procured
and minimum capital without any delay in the production is of importance, in
satisfying the conflicting interests. For it, she gave some solutions like SIM
(selective inventory management) which consists of Pareto analysis (ABC
analysis), criticality analysis (VED analysis), movement analysis (FSN
analysis) and availability analysis (SED, GOLF, SOS etc.).
She further highlighted the deficiencies of the management and they are as
follows. Adoption of inventory control methods like classification,
codification, and standardization, variety reduction, value analysis, ABC
analysis is not systematically implemented. Economic order quantity was not
adopted. Vender rating techniques and value analysis were not followed.
Materials management manuals were not even prepared in BHPV. Buying cost
or inventory carrying cost of materials was not worked out systematically.
Computerization was not extensively done. So far, a good number of research
studies were conducted by different researchers in different institutions in
universities and they tried to cover all the aspects of materials management in
both public sector and private sector industrial units located throughout the
country. But there was not even a single work done in the area of materials
management in shipbuilding units managed by defence production department.
As such, researcher found this gap and took up the study of Materials
Management in Indian Shipyards: A Case Study of Goa shipyard Limited.
Apart from the above research studies, as a result of growing awareness of the
subject, some studies were conducted in the area of materials and inventory

management which focuses attention on the existing policies, procedures and

problems. Some of them are:
Rationalizing Materials Management, (Datta A.K., 1990),
Essentials of Materials Management, (Gokarn P.R., 1986),
Inventory Management, Text and Cases, (Gopalakrishnan P. and Sandilya
M.S., 1978),
Spare Parts Management, Text and Cases, (Gopalakrishnan P. and
Sundaresan M., 1977),
Materials Management, Procedures Text and Cases, (Datta A.K., 1984),
Management of Materials, (Chowdary B.K. Roy, 1979),
Materials Management, (Sharma P.C.,1986), Integrated
Materials Management, (Patel, Chuna Walla and Patel, 1984),
Integrated Management: Concepts and Cases, (Verma M.M., 1984),
These books are textual in nature, which explain mainly the functions,
procedures and problems in the area of materials management, which mainly
intended to cater the needs of students, researchers and professionals dealing
with the subject. However, in some textbooks, some typical and useful case
studies were discussed at length for the benefit of the readers.
In addition to the above mentioned text books, which deal with all the aspects
of materials management, thee are some other text books exclusively on
inventory management such as
Inventory Management in India (Chandda R.S., 1984),
Inventories in Indian Manufacturing (Krishna Murthy K. and Sastry D.U.,
1970),
Inventory Management (Institute for Financial Management and Research,
1980), Purchasing and Inventory Control (Menon K.s 1985),
Inventory Holding by Manufacturers in India and United States (Mazumdar
H.K., and Soloman M.J. 1960),
Inventory Holdings by Manufacturers in India and United States (Rajeshwar
Rao K. 1985),
Working Capital Planning and Control in Public Enterprises in India,
Problems of Working Capital (Mishra R.K., 1975),

Management of Working Capital (Agarwal N.K., 1983).

In all these books, an attempt had been made by the respective authors to
explain the concepts, importance, tools and techniques and problems of
inventory management with some case studies. For instance, Krishna Murthy
and Sastry have studied inventory behaviour of 21 industries comprising 91
per cent of output and 96 per cent of inventories of the group of the industries
covered by the census of manufacturers. The study deals only with inventory
holdings of the manufacturers and the analysis is mainly in terms of the prices
prevailed during the study period.
Similarly, the IFMRs survey Inventory Management summarizes briefly the
findings of four important surveys, it conducted in the area of inventory
management practices in Indian industry. A study on control practices in Indian
industry conducted by the faculty members of the Jamnalal Bajaj Institute of
Management Studies, University of Bombay concluded that most of the
companies were still guided by rules of thumb and intuition in deciding on
how much capital to invest in inventory. Out of the 224 companies approached,
36 responded and among them only 13 reported using inventory control
techniques. Only six out of the 13 companies took into account inventory costs
in controlling inventories.
The faculty members of the Administrative Staff College of India made a
survey on spare parts management practices in India in 1977. 200
organizations were covered under this study. The survey findings indicate that
a major bottleneck is the painful slow process of import substitution. This is
mainly because inability of ancillaries to provide quality goods, scarcity of
certain raw materials etc.
The faculty members of the Administrative Staff College of India made
another study on inventory management practices with a focus on the Tandon
Committee recommendations concerning inventory norms. The study indicated
that industries were found to carry by an large more stocks of raw materials
including spare parts and imported items than the suggested norms by Tandon
Committee. It also revealed that industries except in engineering and textile

sectors were managing the workin- progress inventory within the specified
norms.
To highlight the range of problems affecting inventory management and to get
an appreciation of the techniques and practices adopted in the Indian context
and to tackle these problems, the IFMR has conducted an empirical study on
inventory management practices in public sector undertakings and public
limited companies in the private sector in 1979. While it was intended to cover
200 organizations, response was actually
received from 48 organizations only. The study revealed that a majority of the
respondents gave high priority in inventory management, to the financial
objectives of maximizing the return on the investment. It also revealed that
there is considerable scope for reducing the spares inventory in the engineering
and process industries. There is a general lack of appreciation of the benefits
of, and the need for integrated materials management. Most of the respondents
viewed that materials management functions as a
service centre, and a few conferred on it the status of a profit centre. In most
instances, thee is a very strong case for the materials management function to
be elevated too much higher status with close and continuing association with
top management.
In addition to this, there are a number of reports submitted to the government
from time to time. For instance, the committee on public undertakings in its
40th report on Materials Management, Parliamentary Committee on Public
Sector Undertakings, pointed out source of the deficiencies in the realm of
materials management of the public sector undertakings in India. The BPE
Guidelines for Materials Management in Public Sector Enterprise, Bureau of
Public Enterprises, Ministry of Finance, Government of India, New Delhi,
1979 has issued guidelines on material management to the public sector
undertakings to introduce modern methods and for improving their materials
management function.
The

administrative

reforms

commission,

Report

on

Public

Sector

Undertakings, New Delhi, 1967 made some recommendations for reducing

inventory levels. The RBI Study Group, on the follow-up of Bank credit,

Bombay, 1975 was appointed to frame guidelines and to lay down norms for
bank credit to be made applicable to all classes of industrial borrowers
(popularly known as Tandon Committee report). It classified inventories and
prescribed inventory norms for 15 industries. The Fifth report of the
Committee on Inventory control, Bureau of public enterprises (BPE), Ministry
of Finance, Government of India, New Delhi, 1972 appointed by BPE in 1972
examined
inventories of the following three public sector undertakings viz., Hindustan
Shipyard Limited, Hindustan Cables Limited, and National Mineral
Development Corporation Limited. The committee fixed inventory levels for
HSL and made some concrete recommendations to reduce inventory levels in
all the three undertakings.
Apart from the research studies conducted at various universities and
institutions and textbooks published on the subject, there are a few famous
journals on materials management published in India. Though the journals,
experts, professional and practitioners in the field of materials management
have shared their thoughts in the form of writings. Hereunder, an attempt has
been made to review some of the important articles published in various
journals in India.
Pren. Vrats, Materials Productivity in Indian Industries, published in Indian
Management, All Indian Management Association, new Delhi, December,
1978, highlighted the importance of increasing materials productivity in Indian
industries. Ravindra Kumar described materials management as a truly
creative, productive and profit centre. Renuka Raja Gopalans, Increased
Productivity published in the Materials Manager, Indian Institute of Materials
Management (IIMM), stressed the importance of productivity through efficient
materials management in manufacturing enterprises. Suresh Krishnas Role of
Materials Management Professionals in Industrial Growth, stressed the need
for professionalism in materials management to achieve the organizational
goals. Krishna Swamy Ss Trust The Key to Better Materials Management
published in The Materials Manager, Indian Institute of Materials Management
(IIMM), emphasized the need for maintaining good vendor relations.

Somayajulu S.V.R. highlighted an integrated view of the role of materials

management in improving the profitability of the undertakings. Al Prased Rs
Increased Productivity through Better Materials Management published in
The Materials Manager, Indian Institute of Materials Management (IIMM),
emphasized the
need for proper planning and good inventory management systems in
achieving

organizational

goals.

Parsed

Mukherjee

S.K.s

Materials

Management in Food Corporation of Indian (FCI) published in Lok Udyog,

New Delhi, felt that the key result areas in material function have a direct and
important bearing on productivity or purchasing, transportation, materials
handling and realizations from disposal of obsolete surplus and waste products
in Food Corporation of India (FCI). He also felt that the materials
management is a profit center of great importance in industries where 50 to 60
per cent of the cost of production is on materials and where the entire working
capital is in the form of inventory. According to Mahadevan, 1982, materials
management is vital to corporate management and goals and no wonder it
constitutes one of the 5 Ms of the corporate; Marketing Management by sales,
Man Management by personnel, Money management by Finance, Machine
Management by workers factory, Materials management by Materials.
Gurani V.G. emphasized the need for cost reduction and cost savings in the
area of materials management by a combined approach and teamwork of all
persons in the organization. Mahalanobis P.Cs, A New Look at Materials
Management, published in The Materials Manager, Indian Institute of
Materials Management (IIMM), stressed the need for materials management in
improving productivity. He stressed the need for total materials control to
achieve better results. Sreenath H.R.s, Materials Management in a Steel
Plant, viewed the importance of the role of materials management in the
productivity of steel plants. He suggested regular interaction between materials
management

groups,

centralized

procurements,

extensive

use

of

computerization etc., to improve the productivity of steel plants. Sari, A.R.

(1977) in his article Materials Management in the Industrial Economy,
published in The Indian Buyer highlights the importance of modern materials

management in the present competitive market. The author has discussed in

details the silent points to curb and control excess inventory. He also stressed
on the purchasing function at large. Materials Management in Process
Industries, an article published in The Materials Manager by Chandramouli.
K. published by Indian Institute of Materials Management (IIMM), in 1983,
differentiated the materials management function between engineering and
processing industries. He highlighted the problems of materials management in
the process industry. Ramaswamy S., in his article Effective Materials
Management-key to Productivity, in The Materials Manager, published by
Indian Institute of Materials Management (IIMM), 1983, highlighted the
importance of materials management function to contribute effectively to the
productivity of the organization. Hans Busch F. viewed materials management
as a total concept involving organizational structure unifying a single
responsibility, the systematic flow and control of materials. He stressed the
need for implementing modern concepts in materials management. Madho
Narain stressed the need to develop professional personality and other
managerial virtues for the people working in the materials management area in
his article Material manager in the managerial hierarchy of the Indian
industry. Kapok M.L.s article, Productivity in Materials Management, in
The Materials Manager journal published by Indian Institute of Materials
Management in 1988, felt that materials management can contribute to the
growth and profitability of an organization to achieve better productivity in
materials management. He suggested to maintain good relationship with the
suppliers and to remove the fear complex of stock outs.
Rama Krishna Rao B., in his article Some Problems of Materials
Management, reviewed the inventory position in central public sector heavy
engineering units and highlighted the problems faced by engineering units in
particular and all central public sector undertakings in general. Roy
Chowdhury Bipul K.s Materials Management Availability Research article
outlined some of the salient points necessary for the development and disposal
of availability research in the area of materials management. Some methods
are also discussed and these can be used for setting certain types of research

work. Rao and Rama Rao, in their article Information and Material
Management, published by the Economic Times in 1977, have emphasized the
need for constructive information system to the materials management sphere
to achieve good results.
Adisesh Iyer, discussed the methods of valuing inventories in his article
Inventory Control, published by The Chartered Accountant journal. He is of
the opinion that the work-in-progress inventories have to be valued as per the
cost account ledgers instead of attempting physical valuation. Kulkarni, P.V.,
(1977) discussed ABC analysis techniques at a length in his article ABC
analysis: A Technique of Inventory Management. Pillai and Ashok Agarwal
discussed the inventory management in Indian Air Transport Industry and
found its weaknesses and suggested remedial measures for efficient inventory
management. Rao K.Vs, article Techniques of Inventory Management in The
Economic Ttimes considered four costs viz., replenishment cost, inventory
carrying cost, under-stocking cost and overstocking cost in developing an
inventory system. Gopalkrishnan P., in his article published in The Hindu
entitled Importance of Inventory control, stressed the need for inventory
control in view of the Tandon Committee norms and suggested some methods
to control inventories. Gangahara Rao M. and Rama Kishan Rao B. analyzed
the trends in inventory levels besides bringing into focus the causes for
inventory accumulation in all central public sector undertakings during the
period from 1970-71 to 1978-79. Ganesh Kulkarni highlighted the problems of
valuation of work-inprogress in the context of identification of materials and
valuation in his article (1983) Work-in-progress. Ramakishna Rao B. in his
thesis Inventory control in public sector units highlighted the problems of
inventory control in public sector units and he classified the costs for inventory
accumulation as internal and external. According to him, unrealistic
government policies with regard to import licences and erratic delivery
schedules and long lead times are responsible for inventory accumulation in
public sector units. Rao and Gupta viewed that the effective management of
inventory reduces the cost of production and consequently increases the
profitability of the enterprises. All the above research studies conducted at

various universities in India and other published research studies and surveys
in this area and text books brought out and research papers published in
journals, newspapers etc., revealed that the various facets of materials
management have not been fully developed and are not satisfactory. There is
no common opinion on what functions have to be covered under the preview
of materials management. Even the method, techniques, procedures and
systems suggested by various authors to control the inventories varied widely.
However, the materials management has been identified as the most potential
area of prime importance to increase the productivity and efficiency of an
organization. Even then, serious attempts of research have not been made in
this area. The present study has been to some extent able to highlight the
importance of the materials management as one of the important functional
areas in an industry like shipbuilding.

2.2 THE RESEARCH MODEL

Management costs

Firm performance

Cycle time

Turnover

Production flexibility

Poor customer service

Delivery performance
Perfect order performance
E-business performance

INVENTOREY
MANGEMENT

Loss of cost effectiveness

Increased expenditure

3. METHODOLOGY
3.1.

RESEARCH DESIGN

Research design is systematic planning of research, usually including the

formulation of a strategy to resolve a particular question; the collection and
recording of the evidence; the processing and analysis of these data and their
interpretation; and the publication of results. Agood research design must
possess the important features of objectivity, reliability, validity and
generalization.
The research design followed to study the inventory management in the
company is descriptive and analytical research design.

3.2.

PROBLEM STATEMENT

A study of inventory management at leading cement Company is undertaken in

order to know the inventory performance and position of the company and to
know the strength and weakness of the company. Inventories constitute most
significant part of assets of large majority of the companies in India .Inventory
a double edged sword is usually an asset of an organization, if not used
properly it will become liability .It is therefore absolutely very important to
manage inventories efficiently and effectively in order to overcome
unnecessary investment. And To identify the problems/challenges involved in
the Inventory Management process at this company.

3.1 PERIOD OF STUDY

The study is conducted in 45 days
3.3.

SOURCES OF DATA
Primary source of data collection
Secondary source of data collection

Primary source
Primary data were collected through direct observations of various functions in
the Organizations, through questionnaire and from various department heads
,and also from the interviews.
Secondary source
Secondary data were collected from official documents like their annual report,
company profile, organization manuals and from the company websites and
previous study reports.
This study is more based on secondary source of data that are collected
through annual reports of the company.the data collection was aimed at study
of effectiveness of inventory management of the company.

3.4.

STATISTICAL TOOLS USED

The various statistical tools used for data analysis is as follows:

Tables
Graphs
Analytical tools used in this study are :
Ratio analysis
Abc analysis

4. DATA ANALYSIS AND INTERPRETATION

ABC ANALYSIS (Always Better Control)

category

% of total number

% of total material

of items

cost(value)

10

70

20

20

70

10

Interpretation
Category A materials represent 70% of the total materials cost ,but it
constitutes only 10% of the items or quantity(high value materials).
Category

B materials represent 20%of the total materials cost ,constitutes

20% of the material items(middle value materials).

Category C though constitutes 70% of the total items ,it represents only 10%
Of the total value(low value materials).
Thus ,this analysis assumes that smaller number of items in inventory may
have large money value,and the larger number of items have smaller money
value.

RATIO ANALYSIS
Stock turnover ratio
Table 1: Stock Turnover Ratio (in Times) (in Lakhs)
year

Net sales

Average
inventory

Stock Turnover
Ratio

2009-10

18941.39

4498.07

2010-11

27770.44

5648.26

2011-12

29818.21

5134.76

2012-13

29406.17

9003.01

2013-14

27308.11

6561.96

stock turnover ratio

16
14
12

Stock Turnover Ratio

10
8
6
4
2
0

2009-10 2010-11 2011-12 2012-13 2013-14

Figure 1: Stock Turnover Ratio

Stock holding ratio (in days)

Table 1: Stock holding ratio(in days)(in lakhs)
Year
Stock turnover
ratio(in times)

2009-10
4

2010-11
5

2011-12
6

2012-13
3

2013-14
4

average
4.4

Stock holding
ratio(in days)

91

73

61

122

91

87.6

stock holding ratio

140
120
100
80
60

Stock holding ratio(in

days)

40
20
0

Figure 1: Stock holding Ratio

5. FINDINGS, SUGGESTIOS AND CONCLUSIONS

5.1 FINDINGS
This study on the effectiveness inventory management at Malabar Cementes
Limited,Walayar, Palakkad help to find out the efficiency of at the
organization.
The findings of the research from the study as follows:
This analysis assumes that smaller number of items in inventory
may have large money value, and the larger number of items
have smaller money value.
Based on stock turnover ratio , it indicates that the firms stock
is turned over or converted into stock only 6 times on an
average during the accounting period.
The goods are lying in stock for 88 days.thus the inventory
policy or management is poor.

5.2 SUGGESTIONS

 Under the ABC analysis, the management must have more control on
C items than that on A & B items, because C class constitutes more of
higher values. There should not be tight control exercised on stock
levels, to avoid deterioration. This is done through maintaining low
safety stock levels, continuous check on schedules & ordered
frequently in inventories, in order to avoid over investment of working
capital.
The inventory turnover ratio indicates whether investment in inventory
is within proper limit. It also measures how quickly inventory is sold. It
requires maintaining a high turnover ratio than lower ratio. A high
turnover ratio implies that good inventory management and timely the
inventories are being replenished, also reflects efficient business
activities.
The management of the plant should incorporate TQM (Total Quality
Management), particularly in all departments of production to ensure
better sales and reduce the inventory of finished products.

5.3 CONCLUSIONS

In this study, a better inventory management will surely be helpful in solving

the problems the company is facing with respect to inventory and will pave
way for reducing the huge investment or blocking of money in inventory.
Inventory is the physical asset of a company that can create problem if there is
shortage, while in production and also if its in excess even after production.
Inventory is constantly changing as quantities are sold and replenished.Since
the Inventory Turnover Ratio shows the increasing trend, there will be more
demand for the products in the future periods. If they could properly
implement and follow the norms and techniques of inventory management,
they can enhance the profit with minimum cost. From the study it is predicted
that future sales have to be achieved and inventory level have to be maintained.
The company has to periodically review the inventory to avoid production loss.
Hence it can be understood that efficient inventory management can take the
company to new heights and inefficient inventory management can ruin the
company.

BOOKS

A.VINOD,CALICUT UNIVERSITY(2010)