Professional Documents
Culture Documents
Inventory Management
Inventory Management
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Specific Objectives
a) Profit maximization
b) Wealth maximisation
General Objectives
a) Balance asset structure
b) Liquidity
c) Proper balancing of funds
d) Efficiency
e) Financial discipline
INTRODUCTION
In financial parlance, inventory is defined as the sum of the value of raw materials, fuel
and lubricants, spare parts and semi-processed materials and finished goods stock at any given
BANGALORE INSTITUTE OF MANAGEMENT STUDIES
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DEFINITION OF INVENTORY:
The term Inventory has been defined by several authors. The most popular of them are
The term Inventory includes Raw-materials, in process, finished packaging, spares and other
stocked in order to meet an unexpected demand or distribution in the further.
IMPORTANCE OF INVENTORY:
Inventories constitute the largest component of current assets in many organizations. Poor
Management of inventories therefore may result in business failures. A stock-out creates an
unproductive situation for the organization. In case of a manufacturing organization, (in stock out
ability to supply an item from inventory) could, in extreme cases, bring production process to a
half. Conversely, if a firm carries excessive inventories, the added carrying cost may represent
the difference between profit and loss. Efficient inventory control therefore, can significantly
contribute to the overall profit-position of the organization.
Purchase, production and sale are not one continuous activity. There are separate
activities. So, basically there is the need to carry inventory so that the functions of
purchase, production and sale can precede it their own optimum pace or speed.
Large purchases of raw materials or finished good may be to take advantage of the
discounts offered on bulk purchases. Bulk purchases; naturally result in holding of
inventories.
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Large orders may be placed for goods to cut down the ordering costs the cost of checking,
handling and payments involved in small orders, large orders, naturally results in taking
advantage of price factor.
Production of components in large batches will be helpful to reduce the set-up cost. This
(i.e.; the production of components in large batches) would naturally, result in holding of
large stocks of components.
Vital spares and tools are required to be kept in stock so as to avoid long spells of
production due to non-availability of important spare parts or tools.
Sufficient stocks of finished goods are required to be held to meet the demands of the
customers, which may be uneven.
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IM.NPROLFAHE-DUTVZGYCS
INDO SPANISH TASTY FOODS PRIVATE LIMITED
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Risk of liquidity.
The excessive level of inventories consumes the funds of the firm, which cannot be used for any
other purpose. The carrying costs such as the cost of storage, handling, insurance, recording and
inspection also increase in proportion to the volume of inventory. An excessive inventory carried
from a long period brings down the liquidity of the firm.
Problem of Inadequate Inventories:
1) Inadequate raw materials and work-in-progress will result in stoppage of production.
2) If the finished goods inventories are sufficient to meet the demands of the customers
regularly, the customers may shift to other competitors, which will amount to a
permanent loss to the firm. An effective inventory management should avoid both these
extreme situations namely over investment and under investment in inventories.
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inventory management and control. Where continuous manufacture is employed at the rate of
production is the key factor. Here inventory control is of major important ad in reality controls
the production of the product. The economic advantage in this type of manufacture is the
uninterrupted operation of the machines and assembly lines in the plant. Intermittent
manufacture, on the other hand permits greater flexibility in the control of material.
Volume: The Volume of product to be made as represented by the rate production of may have
little effect on the complexity of the inventory problems. On the other hand, the manufacture of a
large number of sarees involves the planning and control of thousands of inventory. Both the
inventory problem and the difficulty of controlling production increase in difficulty with the
number of component parts of the product and not with the quantity of products to be made.
The other factors are:-
The qualifications of staff personnel who will design and co-ordinate the implementation of the
system.
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The capabilities of personnel who will be responsible for managing the system on a continuing
basis.
The nature and size of inventories and their relationship to the other functions in the company,
such as manufacturing, finance, marketing etc.
The potential savings that might be anticipated from improved control of inventories.
The current, or potential, availability of data that can be used in controlling inventories.
The present method for controlling inventories and for making inventory decisions.
Under FIFO, the cost of goods sold is based upon the cost of material bought earliest in the
period, while the cost of inventory is based upon the cost of material bought later in the year.
This results in inventory being valued close to current replacement cost. During periods of
inflation, the use of FIFO will result in the lowest estimate of cost of goods sold among the three
approaches, and the highest net income.
Under LIFO, the cost of goods sold is based upon the cost of material bought towards the end of
the period, resulting in costs that closely approximate current costs. The inventory, however, is
BANGALORE INSTITUTE OF MANAGEMENT STUDIES
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Weighted Average :
Under the weighted average approach, both inventory and the cost of goods sold are based upon
the average cost of all units currently in stock at the time of reporting. When inventory turns over
rapidly this approach will more closely resemble FIFO than LIFO.
Average :
Under the average approach, both inventory and the cost of goods sold are based upon the
average cost of all units received in stock.
BENEFITS OF INVENTORY MANAGEMAENT & CONTROL:
Proper management and control of inventories will result in the following benefits to an
organization:
Inventory control ensures an adequate supply of materials, stores, etc., minimises stock-outs and
shortages, and avoids costly interruptions in operations.
It keeps down investment in inventories, inventory carrying costs and obsolescence losses to the
minimum.
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It facilitates cost accounting activities by producing a means for allocating material cost to
products, departments or other operating accounts.
It enables management to make cost and consumption comparisons between operations and
consumptions comparisons between operations and periods.
It serves as a mean for identifying and disposal of inactive and obsolete items of stores.
Perpetual inventory values provide consistent and reliable basis for preparing financial
statements.
PROCESS OF INVENTORY MANAGEMENT AND CONTROL:
As mentioned earlier, Inventory Management and Control refers to the planning for optimum
quantities of materials at all stages in the production cycle and evolving technique, which would
ensure the availability of planned inventories.
Four steps are involved in the process, they are:-
Determination of optimum inventory levels and procedures of their review and adjustments.
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4) ORGANIZATIONAL ARRANGEMENT:
The last aspect of inventory management and control is to determine an organization
structure to handle inventory. Organizationally speaking, inventory control function is
assigned to materials management or production planning and control.
Attaching inventory control to material management activity is feasible in organizations
were integrated material management is in practice. There is a strong justification for such an
arrangement as inventory control is part of material activity and all material functions must be
integrated into one group.
Assigning inventory control function to production planning and control however has
advantages. Production planning and control department will be in a better position to plan its
production schedule with the knowledge of inventory under its control.
Besides, the production planning and control department will be able to issue timely
requisitions for replenishment of stocks used in the production operation. And logically speaking
it is the production department which is the user of inventories, and the same department must be
held responsible for controlling them.
Actually the nature of a firms production operation, its product, and the type of market in
which it operates determine the preference for assigning inventory function to production. An
engineering oriented company producing specialised technical products on a job-shop basis
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ABC Classification
HML Classification
VED Classification
SDE Classification
FSN Classification
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Level Setting
Just-In-Time Technique
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LEVEL SETTING:
Setting up of inventory levels, such as Maximum level, Minimum level, Re-order level, Danger
level and Average stock level. The above level are calculated when a storekeeper should place an
indent for fresh stock and also to avoid over stocking of any material, at the same time to ensure
follow up sufficient materials to production process. The main purpose of fixing the levels is to
control the investment on inventories.
MINIMUM LEVEL:
This is the limit below which the stock should not be allowed to fall. It is fixed on the basis of
average consumption and average lead time required to measure the item. The main purpose of
fixing this level is to ensure adequate check for continuous production and sales.
MINIMUM LEVEL = RE-ORDER LEVEL (NORMAL CONSUMPTION INTO
NORMAL RE-ORDER PERIOD)
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MAXIMUM LEVEL:
This is the limit or level beyond which the stock of an item should not exceed. This level is fixed
for avoiding over stocking of materials and its associated risks.
MAXIMUM LEVEL = RE-ORDER LEVEL + RE-ORDER QUANTITY (EOQ)
(MINIMUM CONSUMPTION x MINIMUM RE-ORDER PERIOD)
RE-ORDER LEVEL:
It is the point fixed between maximum and minimum level at which the storekeeper has to
initiate action to obtain fresh supplies of materials.
This point will usually be slightly higher than the minimum stock to cover such emergencies is
abnormal usage or un-expected delay in supply. Re-ordering level depend on lead time, rate of
consumption and economic order quantity.
RE-ORDER LEVEL = MAXIMUM CONSUMPTION x MAXIMUM
RE-ORDER PRIEOD
DANGER LEVEL:
It is the level below the minimum level. When the stock reaches this danger level urgent action
for purchases is necessary. As normal lead time is not available it is necessary to resort to
unorthodox purchase procedure resulting in higher purchase cost.
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2 AO
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RESEARCH DESIGN
INTRODUCTION:
Inventory management is the process of efficiently overseeing the constant flow of units into and
out of an existing inventory. This process usually involves controlling the transfer in of units in
order to prevent the inventory from becoming too high, or dwindling to levels that could put the
operation of the company into jeopardy. Competent inventory management also seeks to control
the costs associated with the inventory, both from the perspective of the total value of the goods
included and the tax burden generated by the cumulative value of the inventory.
The purpose of inventory management is to ensure availability of materials in sufficient quantity
as and when required and also to minimize investment in inventories.
The current study is on inventory management at ISTF regarding the inventory control and the
techniques used by them to control the inventory in the organization.
REVIEW OF LITERATURE:
From the past analysis it has been reviewed that the inventory management with the use of
techniques such as FIFO, LIFO, WEIGHTED AVERAGE METHOD would give efficient
control for the use of available stock optimally.
BANGALORE INSTITUTE OF MANAGEMENT STUDIES
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The company has to improve the various techniques such as ABC Analysis, JIT analysis. With
the usage of these techniques the company can reduce its cost relating to the inventory and also
control the inventory management of the organization.
The current study will be relating to inventory control technique can manage the problem in the
company and improve the control system.
the
inventory.
HYPOTHESIS:
Ho: The inventory control technique can manage the problem in the company and improve the
control system.
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RESEARCH METHODOLOGY:
Descriptive research
Descriptive research, also known as statistical research, describes data and characteristics about
the population or phenomenon being studied. However, it does not answer questions about e.g.:
how/when/why the characteristics occurred, which is done under analytic research.
Although the data description is factual, accurate and systematic, the research cannot describe
what caused a situation. Thus, Descriptive research cannot be used to create a causal relationship,
where one variable affects another. In other words, descriptive research can be said to have a low
requirement for internal validity.
AREA OF STUDY:
This study mainly concentrated on inventory management being adopted by the company. The
study is very useful to the department dealing with inventory. The study will help to find out the
best tool to maintain and to improve procedure of inventory control and also helps to minimize
monitory investment of inventory.
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SOURCES OF DATA
PRIMARY DATA
Primary data are those data that are collected for the first time and for the purpose directly from
the field of enquiry and is original in nature.
SECONDARY DATA
The secondary data will be collected from various sources such as
Companies annual report, Journals, Magazines, Interview question and Data from the internet.
TECHNIQUES OF ANALYSIS:
The data collected will be tabulated, analyzed with the financial statement, secondary data. As
well as appropriate graphs and tables and statistical tools will be used and then findings are
recorded and conclusion is drawn.
LIMITATIONS OF THE STUDY:
The study conducted at ISTF was for few weeks only, due to time constraints hence, the
finding may not be applicable through the calendar year.
Further, in order to maintain the confidentially of certain aspects a few alteration have
been made without hampering of the data
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INDUSTRY PROFILE
The food processing industry in India is one of the largest in terms of production,
consumption, export and growth prospects. Buoyed by a favorable policy environment and the
demand-push impact of a young consuming class with growing disposable incomes, India offers
significant investment opportunities in the food and agri business sector and is likely to
become a world player this business.
India is making an important mark in the global food arena-both as a large producer and
exporter of agricultural products and as a very large and growing market for processed foods.
BANGALORE INSTITUTE OF MANAGEMENT STUDIES
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India is an agric-rich country and the worlds second largest producer of fruits and
vegetables. According to industry estimates, the processed food market accounts for 32 percent
of the total food market which his valued at EUR 67.9 billion. The total exports of the food
processing Industry have jumped from EUR 4.7 bn in 2002-03 to bn in 2006-07. The Ministry of
Food Processing Industries (MOFPI) aims to increase Indias share in the global processed food
trade to 3 percept in the next 8 years from 1.6 percent at percent. India is well placed to take
advantage of growing food trade due to its strong agricultural base and become at-sourcing hub
for food products.
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With the second largest arable land area in the world and diverse agro-climatic zones
across the country, India had a production advantage with the potential to cultivate a vast range
of agricultural products. Current global consumer trend towards organic food and herbal products
also open up new export opportunities in areas where India is well positioned to compete. For
example, India produces 41 percent of world mangoes,30 percent of cauliflowers,28 percept if
tea, 23,percent of bananas, 24 percent if cashew nuts, 36 percent of green peas and 10 percent of
onions.
This strong footing in agriculture provides a large an varied raw material base for food
processing. These advantages if leveraged optimally, can lead to India becoming a leading food
supplier to the world.
At present, the Indian food-processing industry is primarily report oriented. Indias
geographical situation gives it the unique advantage of connectivity to Europe, the Middle East,
Japan, Singapore, Thailand, Malaysia, and Korea. One such example indicating Indias location
advantage is the value of tread in agriculture and processed food between India and the Gulf
region which has grown from EUR6.05 billion in 2001 to EUR 38.9 billion at the end of 2006.
Food exports to the Gulf Cooperation Council (GCC) region is estimated at EUR 2.1 billion a
year with agricultural and processed food exports from India to the UAE alone accounting for
more than EUR 218.4 million in 2004-2005.
Indian food brands are increasingly filling prime shelf-space in the U.S and Europe.
MTR Foods ready-to-eat food, Cobra Beer, Bikanervala Foods, ITC/s Kitchen of India and
Satnam overseas Basmati rice are the favorites of the Indian Diaspora spread across the world.
In fact, even foreigners have stated relishing Indian Foods and fruits, especially in the U.K. and
BANGALORE INSTITUTE OF MANAGEMENT STUDIES
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Horticulture, for example, is already a focus area of companies like reliance and bharathi,
while the organic foods market is also exciting. Fiscal incentives by the government to spur agriexports are also expected to help.
According to a recent food and beverages survey conducted by FICCI, the segments
which are expected to record high growth i.e. between 10-20 percent include branded flour (atta)
(16percent), bakery items like bread, cakes (11percent), biscuits (16 percent), fruit juices , pulp
and concentrates (18 percent ) and sauces/ketchups(17 percent ). Segments like semi
processed/cooked ready-to-eat, ice- cream, Wine and sugar are expected to achieve 24 percent,
30 percent, 22 percent and 25 percent growth respectively. The market for branded foods across
different segments of the industry is growing by 15 to 20 per
Some of the key Indian initiatives and local foreign Ventures (JV) include Hershey acquiring
51 perfect stake in Godrej Foods and Beverages for EUR 37.9 million: Indian Hotels of Tata
Group acquiring Amalgam Foods and the Sumeru fast food brand: Field Fresh-Bharti Groups
50:50 joint venture with Rothschild: Snowman Frozen Food, a joint venture with the Mitsubishi
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COMPANY PROFILE
BACKGROUND OF THE COMPANY:Name of the company
Year of Establishment
Director
Parent Company
: Private Company
Branches
: No branches
Sales
Competitors
Products
Importers
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Company background
On July 9, 2004 the company was established in Karnataka. The register office of the
company is situated in the state of Karnataka. The company was named as Indo Spanish Tasty
Foods private Limited.
The company is limited by shares and in incorporated under The Indian Companies Act
1956 and also under the FDI (Foreign Direct Investment ) of Government of India. The
company is also registered under the K-VAT (Karnataka Value Added Tax).In 2005 it was also
registered under CST (Central Sales Tax Act of 1957).
Indo Spanish Tasty Foods Private Limited is a 100% export oriented unit approved by the
Ministry of Commerce, Government of India, engaged in processing vegetables. It does not have
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System
The system shows the flow of activities involved in the daily operations of business,
including its core process and its support systems.
Information system
It refers to section head places which emphasis on ensuring that every office worker in
the unit has a computer on his task .The modern techniques are applied on this organization is
fully computerized. In Indo Spanish Tasty Foods all the bills are computerized. The accounting
section, purchase section and HRD section are fully computerized.
HR System
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Financial system
Financial system requires ROI, working capital, fixed capital, price, quality, capital
investment and return on sales etc. There are three types of audit done in this company such as
internal, external and statuary.
Production System
The production system of the company is fully computerized. Four different types of
produced. They are gherkins, banderilla, baby corn and chilly. They are packed in barrels and
jars.
Marketing system
Sales forecasting sales planning and sales analysis are done with the help of computer
system .The transitions are sales orders, promotion order are done under the systems. The
marketing operational control activities include the timing and training of sales force, the day to
day scheduling of sales and promotion efforts, products and customers are included in the
marketing system.
Staff
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Culture
The company belongs to the concentrated team activates. The company also followed the
policy of the people, for the people and of the people. The employees are working in a freely
atmosphere. They formulate line and staff relationship from upper level to lower level.
Values
The Company gives more importance to the human beings. It provides all the facilities t
the employees in the organization. The company makes response t society through providing
employment opportunities and protecting the farmers by distributing the high quality seeds and
fertilizers.
Product quality and food safety by meeting the statutory and regulatory requirement for
the product
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They are committed to ensure continual improvement of the environment and prevention
of pollution
Values
Indo Spanish is committed to ensure a strong positive safety culture which is fundamental
to the companys activity.
Indo Spanish is committed to provide safe and healthy work place for all he employees,
subcontractors, visitors and service providers.
An accident and injury free work place is the companys goal which is implemented
through our safety management plan.
Resources
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Training
Indo Spanish will provide information instruction, training and supervision so that all
employees can perform their work safely. It is the responsibility of each and every employee to
actively participate in all the training activities.
Risk Management
Indo Spanishs associated personnel are responsible for identifying hazards in the work
place and addressing them by giving priority above all to reduce or eliminate the risk of
injury or harm to themselves or others.
Indo Spanish encourages all individuals take responsibility for their own safety and
accident prevention.
Understand, implement, maintain and continually improve the social management system
as per the requirements of SA 8000.
Comply with all the national and other applicable legal and other requirement that they
subscribe to , besides duly respecting the international instruments and their
interpretations
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Ensure health, safety and welfare of all the employees during and in the course of their
employment
Hygiene policy
To achieve highest level of hygiene and meeting required food quality standard by
adopting strict procedures of hygiene in production and implementation of control of presumed
norms to ensure food safety and customer satisfaction.
1. Gherkins products
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b) Bitter Sweet gherkins for bulk product: It includes 40-50 pieces per kilogram.
2. Banderilla products
These are the products which have all the mixture of vegetable pieces is a jar.
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Bulk Product
Jar Product
4. Chilly product
a) For jar product: Chilly, Citric acid, ascorbic acid aroma sugar, salt and vinegar.
b) For bulk product: acetic acid, salt, chilly, calcium, chloride, potassium, meta
Bisulphate and water.
Considerable international demand for certain fresh fruits us well as processed fruit
products such as: Mango, Grapes, Banana, lichees and exotic fruits like sapotas,
pomegranates, custard apples and other tropical fruits.
Among vegetables the items having god export potential are: Onion, Potato, Okra, Bitter
gourd, Green Chilies and other seasonal vegetables.
Many non-traditional vegetables mainly processed mushrooms and gherkins and other
like, asparagus, celery, bell pepper, sweet corn, Green and lima beans and organically
grown vegetables are also increasingly being exported.
The sauces/ ketchups segment is expected to record 17 percent growth in 12, 2007-08
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FINANCE DEPARTMENT
Finance is the lifeblood & backbone of any organization without this any organization
cannot undertake any activities concerning the organization. This is fascinating subject, who
deals with end result, and these end result are measurable in terms of money. It is dynamic and
changing.
Finance deals with all the fact of business production, sales, purchasing, and personnel
etc. This has to be managed actually to yield long-term results. Finance necessary is accumulated
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F.M
Asst. F.M
F.M
Asst. F.M
Asst. F.M
Accountan
t
Asst. F.M
Accountan
t
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c)FIXED ASSETS
Fixed Assets are stated at the historical cost which comprises of cost of acquisition,
manufacture and subsequent improvements thereto including freight, installation cost, duties and
taxes. Preoperative expenses, where appropriate, are capitalized till the commercial use of the
assets.
d)INTANGIBLE ASSETS
Intangible Assets are stated at cost of acquisition less accumulated amortization.
BANGALORE INSTITUTE OF MANAGEMENT STUDIES
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h)INVENTORIES
Inventories are valued at lower of cost and estimated net realizable value after providing for
obsolescence, if any. Cost of inventories comprises of cost of purchase, cost of conversion and
other costs including manufacturing overheads incurred in bringing them to their respective
present location and condition. Cost is determined on Weighted Average Basis.
i)REVENUE RECOGNITION
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All monetary long term assets and liabilities denominated in foreign currencies are reinstated at
the rates ruling at the year-end and resultant exchange differences arising on reporting of long
term foreign currency monetary items at the rate different from those at which they were initially
recorded during the period or reported in the previous financial statements in so far as they
related to the acquisition of depreciable capital assets is added to or deducted from the
cost of the asset and is depreciated over the balance life of the assets, in accordance with
Notification No. G.S.R 913(E) dated 29th December, 2011 issued by Ministry of Corporate
Affairs, Government of India.
k)GOVERNMENT GRANTS/SUBSIDIES
Government Grants/Subsidies are recognized as soon as the appropriate authorities sanction such
subsidies under the respective scheme or policy and it is reasonably certain that the ultimate
collection will be made. Government Grants/Subsidies, if relates to a capital expenditure, are
deducted from gross values of related assets in arriving at its book value.
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m)BORROWING COST
Borrowing Cost attributable to the acquisition and construction of qualifying assets are added to
the cost up to the date when such assets are ready for their intended use. A qualifying asset is one
that necessarily takes substantial period of time to get ready for its intended use. All other
borrowing costs are charged to Statement of Profit and Loss.
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q)MATERIAL EVENTS
Material events occurring after the Balance Sheet date are taken into cognizance
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TABLE 4.1
SHOWS THE INVENTORY TURNOVER RATIO OF ISTF 2009-2012
Particula
2009
2010
2011
2012
rs
Sales
175,796,009.
258,694,641.
373,826,449.
423,857,386.
Closing
92
40,959,736.0
34
52,695,097.0
69
50,230,003.0
25
45,241,744.0
inventory
Ratio
4.291
4.965
7.442
9.363
GRAPH 4.1
SHOWS THE INVENTORY TURN OVER RATIO OF ISTF 2009-2012
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9.36
10
9
7.44
8
7
6
4.96
4.29
5
4
3
2
1
0
2009
2010
2011
2012
ANALYSIS
The above table shows the inventory turnover ratio. Year 2008-09 is taken as
base year having 4.291 times. In 2009-10 its 4.965 times. In 2010-11 it is
7.422 times, and in the current year it is9.363 times.
There is increase in turnover time compared from base year to in current
year.
INTERPERATION
The inventory turnover is increasing over the years. There is increase in
turnover time compared from base year to in current year (2011-12).
TABLE 4. 2:
Showing Inventory Conversion Period :
BANGALORE INSTITUTE OF MANAGEMENT STUDIES
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PARTICULARS
2008-09
2009-10
2010-11
2011-12
INVENTORY
TURNOVER
RATIO
4.291
4.965
7.422
9.363
INVENTORY
CONVERSION
PERIOD
85.06
73.51
49.17
38.98
Note:
Inventory conversion period = 365(days in a year)/inventory turnover ratio.
GRAPH4. 2:
Showing Inventory Conversion Period :
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60
85.06
50
73.51
40
49.17
38.98
30
20
10
0
ANALYSIS
The above table shows the inventory conversion period. Year 2008-09 is taken as base
year, 85.06 days, in 2009-10, 73.51 days, in 2010-11, 49.17 days, in & in current year it
is 38.98days.
INTERPETATION
The inventory conversion period shows decreasing from base year to current year on
continuously. 2010-11 & it is good for inventory management, and in the current year
2011-12 it is showing the least decreasing of the table.
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Years
Inventory
current assets
Percentage
2008-09
4.09
6.91
59.18
2009-10
5.2
9.55
54.44
2010-11
5.02
10.5
47.8
2011-12
4.52
9.5
47.57
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54.44
47.8
50
47.57
40
Inventory
30
current assets
percentage
20
10
0
2008-09
2009-10
2010-11
2011-12
INTERPERATION
It shows amount of inventory in 2008-09 there was an increase in
inventories which is locked up, there is a decrease in inventories and the
amount of inventory is locked up in current asset again.
TABLE-4.4
BANGALORE INSTITUTE OF MANAGEMENT STUDIES
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RAW MATERIALS
YEAR
RS. IN CRORES
2008-09
7.62
2009-10
12.87
2010-11
2011-12
14.96
17.93
ANALYSIS:
The stock of raw materials in the 2008 is 7.62, and in the next year i.e. 2009 the
companys raw material increased and gradually. Also in the year year 2012 it again increase up
to 17.93
GRAPH-4.4
Graph representing stock raw material for four years
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WIP TURNOVER
18
16
14
12
10
8
6
4
2
0
7.62
12.87
14.96
17.93
2008-09
2009-10
2010-11
2011-12
YEARS
INTERPRETATION
. The stock has been increased from 2009 to 2012 which shows the company maintaining good
stock to avoid the shortage of raw material and to avoid wastages.
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RS. IN
CROR
E
Years
2008-09
0.37
2009-10
0.46
2010-11
0.42
2011-12
0.77
ANALYSIS
The above table shows the stores and spares turnover ratio. Year 2008-09 is
taken as the base year. Itis 0.37crore ,in 2009-10 0.46 crore in 2010-11, its
0.42 crore and 0.77 crore in the current year. It is fluctuating over years.
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0.77
0.8
0.7
0.6
0.46
0.5
0.37
0.4
0.42
0.3
0.2
0.1
0
0
Years
2008-09
2009-10
2010-11
2011-12
INTERPRETATION
Stores and spares turnover ratio is fluctuating over the years. This shows that
there is inefficiency in managing the stores and spares inventory. But in
year 2010-11 it has decreased compared to previous year.
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Year
Total
Consumption
Average
Consumption
Times
2008-09
7.62
2.6
2.93
2009-10
12.87
3.5
3.67
2010-11
14.96
3.8
3.93
2011-12
17.93
4.2
4.26
ANALYSIS
The above table shows the raw material turnover ratio. Year 2008-09 is taken as the
base year having 2.93 as turn over times and there is gradual increase in
succeeding year 2009-10, 3.67 times. In 2009-10 its 3.93 times, and increased by
4.26 times in the current year .
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4.5
3.67
4
3.5
3.93
2.93
3
year
2.5
times
2
1.5
1
0.5
0
1
INTERPRETATION
Raw material turnover ratio is increasing over one year to another year.
This shows that there is efficiency in managing the raw materials.
Page 62
TABLE 7
SHOWS THE WORKING CAPITAL TURNOVER RATIO OF ISTF 20092012
Particula
2009
2010
2011
2012
rs
Sales
175,796,009.
258,694,641.
373,826,449.
423,857,386.
Net
92
31,710,746.2
34
69
57,115,333.73 55,413,901.8
25
61,035,858.7
working
capital
Ratio
3
5.543
4.529
5
6.746
6.944
ANALYSIS:
Page 63
The table shows the working capital turnover ratio it is 2008 is taken as a base year it was 5.543
and in 2009 it was 4.529 and in the current year it was 6.944.
GRAPH 6
SHOWS THE WORKING CAPITAL TURNOVER RATIO OF ISTF 20092012
6.75
6.94
7
5.54
4.53
5
4
3
2
1
0
2009
2010
2011
2012
Interpretation:
Page 64
Page 65
NET PROFIT RATIO:This ratio is very useful to the proprietors and prospective investors because it reveals the
overall profitability of the concern. This is the ratio of net profit after taxes to net Sales. Sales are
calculated as follows.
TABLE 4.7
SHOWS THE NET PROFIT RATIO OF2009-2012
Particular
2009
2010
2011
2012
s
Net profit
2,081,094.84
2,127,573.65
8,350,610.67
6,240,268.73
Sales
175,796,009.9
258,694,641.3
373,826,449.6
4
8.224%
9
2.233%
423,857,386,9
5
2
Ratio
1.183%
1.472%
ANALYSIS:
The above table shows the net profit turnover ratio 2008 is taken as a base year it was
1.183 and in 2009 it was 8.224 and in the current year it was 1.472.
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GRAPH 4.7
SHOWS THE NET PROFIT RATIO OF ISTF 2009-2012
8.22
9
8
7
6
5
4
2.23
3
2
1.47
1.18
1
0
2009
2010
2011
2012
Interpretation:
From the above chart there is increase in the net profit ratio in first two year it was
highest in 2009-8.22 & and it decreased to 1.47 in 2012.
Page 67
TABLE 8:
Showing Average Collection Period:
PARTICULARS
2008-09
2009-10
2010-11
2011-12
DEBTORS
TURNOVER
RATIO
24.839
17.188
11.547
13.725
AVERAGE
COLLECTION
PERIOD
14.69
21.23
31.60
26.59
NOTE:
Average collection period = days in a year / debtors turnover ratio
ANALYSIS:
The above table shows the average collection period 2008 is taken as a base year and it was
14.69 days and in 2009 it was 21.23 and in the current year it was 26.59.
Page 68
GRAPH 8:
Showing Average Collection Period:
31.6
26.59
21.23
14.69
20
AVERAGE COLLECTION PERIOD
15
21.23
14.69
31.6
26.59
10
5
0
2009
2010
2011
2012
YEARS
INTERPRETATION:
The average collection period has been increased from 14.69 days in 2008-09 to 21.23 days in
2009-10. The reason was to fall in the debtors turnover ratio over the years. Though its at a
satisfactory level but a higher collection period implies as inefficient collection performance
which in turn may adversely affect the liquidity or short term paying capacity of the firm out of
its current liabilities, which reduces in the next year 2010-11.
BANGALORE INSTITUTE OF MANAGEMENT STUDIES
Page 69
FINDINGS
1. ISTF uses standard
maintained.
2 Material planning is done based on orders obtained from different customers. The material
requirement plan is processed is to give exact requirements of materials to be produced.
3 Vendors are related based on their performance with respect to delivery, a quality price
standard.
4 The received material are inspected as per standard plan is finished products are tested on
100% basis no material is released is handled properly.
5
6 All material is stored in right condition at respective locations and The Company has items,
which are slowing moving and non-moving, which are disposed off at regular intervals.
7. The scrap obtained in the process is comparatively very low.
8. As the production cycle is very high, and leads to accumulation of WIP, in turn increase
the cost, the company should flow the sub-contracting method where some part of the
work is done by other contracts and only assembling and furnishing of the product is
done. This leads to systematic and distributed work.
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9. The production layout may be changed to cellular manufacturing concept. I.e. Raw
materials fed in one end and finished products are received in another end where every
step is automatic and mechanized.
10. FIFO method is being adopted to issue the materials to production department
Page 71
SUGGESTIONS
1. To follow just in time (JIT) technique
The concept of JIT means that virtually no inventories are held at any stage of production
and that exact number of units is bought to each successive stage of production at the
right time is also called zero inventories.
2. It is found that in every ward there is A, B, C items. It is suggested keep the materials a
class items in some ward and C class items in some wards, so that it is easy to keep
attention on every ward according to their importance.
3. Method of analysis;
It is found that ABC analysis is followed to a large extent; hence it is suggested to follow
the different methods.
Page 72
CONCLUSION
The research topic inventory management and control, has a greater implication on Indian
industries. From the analysis of inventory management and control in ISTF, it is very clear that,
it has achieved greater importance in production control to a large extent, it also enhance the
arising need of the organization, in respect of inventory management and control.
The inventory management and control in ISTF is very complex function. The functions of
stores depot, its inventory control technique to achieve the effective production program,
necessitates the importance of inventory management and difficult task in todays business world
in spite of complex function, ISTF has maintained a very good system of inventory management
and control has achieved great progress in production program year to year.
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