Invenory Management at Zauari Cement Limited

A
PROJECT REPORT
ON
INVENORY MANAGEMENT
AT
ZUARI CEMENT LIMITED
Submitted in partial fulfilment of the award of the degree of
MASTER OF BUSINESS ADMINSTRATION

By
PALAKURLA SHIVA
KRISHNA 2266-19-672-093
Under the guidance of
Mr. K. BHASKAR
Asst. Professor
GLOBAL INSTITUTE OF MANAGEMENT

(Approved by AICTE & Affiliated to Osmania University)
UPPARIGUDA (V), IBRAHIMPATNAM (M), R.R DIST, TELANGANA-501506.
2021-2221
CERTIFICATE
This is to certify that the project report entitled " INVENORY MANAGEMENT AT
ZUARI CEMENTS” is a bonafide work done by Mr. PALAKURLA SHIVA
KRISHNA bearing Hall Ticket No. 2266-19-672-093 in the Department of Management
Studies, GOBAL INSTITUTE OF MANAGEMENT, UPPARIGUDA (V),
IBRAHIMPATNAM (M), R.R. DIST, under my supervision. He has completed project
work as per the rules prescribed for partial fulfillment of the award of MBA degree
INTERNAL GUIDE HEAD OF THE DEPARTMENT
EXTERNAL EXAMINER
DECLARATION
I hereby declare that this project report entitled " INVENORY MANAGEMENT AT
ZUARI CEMENTS " Submitted by me to the DEPARMENT OF MANAGEMENT
STUDIES, GOBAL INSTITUTE OF MANAGEMENT, UPPARIGUDA (V),
IBRAHIMPATNAM (M), R.R. DIST, is a bonafide work undertaken by me and it is not
submitted to any other university or institution for the award of any degree
diploma/certificate or published any time before.
Date : PALAKURLA SHIVA KRISHNA
Place : 2266-19-672-093
ACKNOWLEDGEMENT
I would like to express my heartfelt thanks to my supervisor Mr. K. BHASKAR for his
guidance throughout my project work.
I am very thankful to the entire team of ZUARI CEMENTS for their co-operation , and
specially my thanks to Mr. NAVEEN KUMAR (Asst. Manager) without whose cooperation
this project would not have been possible.
I express my gratitude to Mr. K. BHASKER, HOD of Global Institute of Management for
her/his valuable suggestions, encouragement and open minded discussions have been a
source of inspiration during this project work.
I take this opportunity to thank all those who have been of helped to me in the completion of
this project. Finally I thank to my friends for their continuous support and help in the
completion of my project.
PALAKURLA SHIVA
KRISHNA 2266-19-672-
093
ABSTRACT
Financial management involves various activities such as capital budgeting, inventory
management, investment decision making, etc. Among these inventory management is an
important function for the manufacturing industry. Inventory includes raw materials, stock in
progress and the finished goods.
Inventory is maintained by every manufacturing organization to use it as and when required in

manufacturing process, to reduce losses, to reduce costs, etc. Various inventory management
methods or techniques exist for this purpose. Different companies follow different methods of
inventory maintenance.
This study focuses on the inventory management at the company Zuari Cement Limited. This
company is into lead manufacturing. It manufactures pure lead, lead alloys, etc. The main raw
material it uses is re-melted lead. In this study, the procurement procedure of raw material at the
company has been studied. The inventory value for the next year is calculated using the
regression analysis method. Inventory components for the past five years are analyzed. EOQ for
re-meltedis calculated for these years to get an understanding about the standard quantity of the
materials purchased.
From the observations of the study, the required suggestions are made to the company to
improvise its working on the inventory. Inventory management practices observed in the
company are traditional ones. So it is advisable for the company to follow modern methods for
inventory maintenance which can fetch high productivity and low costs.
INDEX
S.No CHAPTER Page No
1 CHAPTER - I 01 – 08
INTRODUCTION
NEED OF THE STUDY
SCOPE OF THE STUDY
OBJECTIVES OF THE STUDY
RESEARCH METHODOLOGY
LIMITATIONS OF THE STUDY
2 CHAPTER - II 09 – 28
REVIEW OF LITERATURE
3 CHAPTER - III 29 – 44
INDUSTRY PROFILE
COMPANY PROFILE
4 CHAPTER - IV 45 – 63
DATA ANALYSIS &INTERPRATATION
5 CHAPTER - V 64 – 67
FINDINGS
CONCLUSION
SUGGESTIONS
BIBLIOGRAPHY 68
CHAPTER-I
INTRODUCTION
1
FINANCIAL MANAGEMENT:
Financial management is one of the vital functional areas in business. It deals with planning,
organizing, directing and controlling financial activities of a business. Financial manager is the
person concerned with the financial activities of the firm. Various activities involved in financial
management are capital budgeting, investment decisions, inventory management, cash and funds
management.
Inventory management is one of the important functions of financial management. Inventory

management is considered as a current asset but it is different from other current assets because
financial managers are involved in it. There are different views regarding the inventory based on
the different functional areas of the firm.
The term inventory derives from the French word inventaire and the Latin word inventariom
which simply means a list of things which are found.
INVENTORY: Inventory is an accounting term which refers to goods that are in various
stages of production and goods that are ready for sale.
Inventory includes:
 Raw materials – materials that are used to produce goods.

 Work-in-progress – goods that are in process of being finished.
 Finished goods – that are readily available for sale.
INVENTORY MANAGEMENT AND CONTROL:
Inventory management involves “the development and administration of policies, systems and
procedures, which will minimize total costs relative to inventory decisions and related functions
such as customer service requirements, production scheduling, purchasing and traffic”.
Inventory management is a collection of tools, techniques, and strategies for storing, tracking,
delivering, and ordering inventory or stock.
2
There are two models of inventory system:-
 The fixed order quantity system
 The fixed order periodic system
TOOLS AND TECHNIQUES OF INVENTORY MANAGEMENT:

 Just in time
 Drop shipping
 Cross-docking
 Inventory software
 Bulk shipments
 Economic order quantity
 HML analysis
 XYZ analysis
 VED analysis
 Material requirement planning(MRP)
3
NEED FOR THE STUDY:
 To minimize the costs associated with inventory.

 To supply the required material as and when required.
 To minimize the risk of over stock and under stock of materials.
 To minimize losses through deterioration, pilferage, wastes and damages.
 To maintain the systematic accounting and understanding of inventory.
4
SCOPE OF THE STUDY:
Every manufacturer, company or a store has to manage their inventory but the scope of this study
is limited to Zuari Cement Limited. This company manufactures lead and lead products for
which it maintains several materials in the inventory.
5
OBJECTIVES OF STUDY:
 To study the inventory management practices at Zuari Cement Limited.
 To study inventory procurement procedure at Zuari Cement Limited.
 To know the efficiency of inventory management in Zuari Cement Limited.
 To estimate the amount of inventory for the next year in the company.
 T o find EOQ for the main raw material used in the company.
6
RESEARCH METHODOLOGY:
DATA SOURCES:
The data used for this study is both primary data and secondary data.
Primary data: Direct observations at the inventory department of Zuari Cement Limited and
interactions with inventory maintenance staff and personnel of Zuari Cement Limited.
Secondary data: Data collected from the books, websites, records and documents maintained
for inventory.
Financial statements of the company for the past five years and records maintained for inventory
such as raw materials procurement, raw materials consumed at manufacturing process,etc.
METHODOLOGY:
 Direct observations are made at the company to understand the procurement procedure
and sales procedure.
 Regression analysis is used for calculating the estimated value of amount of inventory for
the next year.
 EOQ for the raw material is calculated using its formula.
7
LIMITATIONS OF THE STUDY:
 This study of inventory management is limited to only one company i.e. Zuari Cement
Limited.
 The material procurement procedure and only the various tools and techniques currently
followed at Zuari Cement Limited have been studied.
 This study is confined to data from past five years i.e. 2018-22
8
CHAPTER-II
9
(Brent D Williams, 2008) In the study by Travis Tokar( The Ohio state university, Fisher
college of business, marketing and logistics, Columbus, Ohio, USA) named, “a review of
inventory management research in major logistics journals”, stated his findings as follows.
The major concepts which were identified to emerge from the logistics research on inventory
management are:
1. Usage of traditional inventory control models for Integration of traditional logistics

decisions such as warehousing and transportation, with the Inventory management
decisions.
2. Researchers have focused on usage of collaborative models in inventory management and

examining the results.
(Grzegorz, 2008); Value based inventory management.
Modified value-based inventory management model has been presented in this article. Since the
basic financial purpose of the firm is to maximize its value, an inventory management system
should contribute to realization of this aim. Most of the current asset management models found
in the financial management was designed with an assumption of profit maximization. Hence,
this article suggests for the value based model.
(Awi Federgruen, 1999); Combined pricing and inventory control under uncertainty.
In this, it’s been discussed pricing and inventory replenishment strategies when there is an
uncertainty in demand.Both finite and infinite horizon models were addressed, with the objective
of maximizing total expected discount profit, or its timeaverage value, assuming that the prices
can be adjusted arbitrarily. A report on extensive numerical study characterizing various
qualitative properties of optimal strategies and its corresponding optimal values of profit were
given.
10
(Waters, 2008); Inventory control and management.
In this book, it’s been described about the recent thoughts about stocks and the methods used for
inventory control. It has also given some insights on the stocks within an organization, Models
for known and uncertain demand, just in time technique and material requirement planning.
(Koumanakos, 2008); Effect of inventory management on firm’s performance.
In this study, the food, textile and chemical industries of Greece were selected and financial date
for 3years has been analyzed. The results obtained from cross- section linear regressions depicted
that the higher level of inventory maintenance by the firm has resulted in the lower value of rate
of returns.
(Jordan, 1988); Inventory management in the JIT age.
In this article, an emphasis is made on the Just-in-time (JIT) approach. Though it is a simple
method, its execution becomes difficult. While implementing this approach, the clear
understanding of different aspects should be considered such as inventory classification,
identification of materials with the inventory code, inventory records, material requirement
planning, etc.
(Lawrence D.Fredendall, 2000); Basics of supply chain management.
In this book, there were insights given on the evolution of supply chain management. The
essentials of the supply chain, models and the techniques for better understanding and
implementation of those is explained.
(Ziukov, 2015); A Literature review on models of inventory management.
This article has analyzed the possible parameters of existing models of inventory management
and control. An attempt is made to provide update review on the characteristics of inventory and
types of inventory controls models that should be developed.
11
P.Radhakrishnan, In his study named, “study of slow moving and non-moving inventory in
BHEL, Trichy”, has ascertained the total number of slow moving and non moving items. He has
also ascertained their book value and suggested the feasibility of disposing them.
John schreidfeder in his paper on inventory in 1992 stated that, it is easy to turn cash into
inventory, the challenge is to turn inventory back into cash. In the early 1990’s, the distributors
recognized the need of controlling the inventory, which was their largest asset. With this, they
have developed several inventory management modules and systems. Though they have
implemented these systems, the distributors didn’t find any improvement in the controlling of
inventory.
12
THEORETICAL FRAMEWORK
INVENTORY
The term inventory includes materials in the raw form, in process, in finished stage, spares and
other goods which are in the stock to meet the unexpected demands in the future.
TYPES OF INVENTORIES:
Other than raw materials, work-in-progress and finished goods, inventory can also be classified
based on the types of businesses such as merchandise, manufacturing and service.
Classification of inventory in merchandise and manufacturing industry:
 Raw materials: These are materials which are purchased by the manufacturer and the
manufacturing process is applied to these materials to produce the finished goods or
products.
 Work-in-progress: These are the partly produced raw materials which are in
intermediate level of production process. These are also called as semi-finished goods.
 Finished goods: These are the final products or goods after completing the
manufacturing process of raw materials. These are ready to sale products.
 Packing material: It refers to the inventory used to pack goods. For the transportation
convenience and to make goods usable, packing is done.
 MRO goods or inventories: MRO refers to Maintenance, Repair and Operating
supplies. It includes maintenance and repair goods like bolts, lubricating oil, etc. and
operating supplies like stationery used in production process.
Other types of inventory:
 Goods in transit: When the finished goods or raw materials are transported from one place
to another, due to long distances, the inventory may have to stay on the way for some days,
weeks or even months. These goods are called goods in transit.
13
 Buffer inventory: It refers to the inventory which is maintained for the purpose of meeting
the future uncertainties. It is also called as safety stock.
 Anticipatory stock: The inventory which is maintained after considering the forecasts of
future trends in market such as an increase in price of raw materials , an increase in
demand, etc.
 Decoupling inventory: To always keep running the plant and machinery in a factory, the
stock of input for all machines should be sufficient. Such inventory of inputs is called
decoupling inventory.
 Cycle inventory: Cycle inventory is maintained to avoid carrying cost of inventory. To
balance the carrying cost and the holding cost, cycle inventory is used for optimizing the
inventory ordering cost.
OBJECTIVES OF INVENTORY:
 To supply the required material as and when required: There should be continuous
availability of materials in the factory so that the production and sales process run
smoothly.
 To maintain the systematic accounting and understanding of inventory: Adequate
accounting procedures will help the management to evaluate the current inventory
management policy and for planning and decision making regarding inventories.
 To minimize the risk of over stock and under stock of material: Over and under stocking
of material creates problem in smooth operation of a business.
 To minimize losses through deterioration, pilferage, wastes and damages: Inventory
management aims to reduce or avoid the losses and misappropriate use of materials.
 To minimize the costs associated with inventory: The total cost associated with the
inventory may be minimized by analyzing the lot size to be required.
 To make stability in price: To ensure right quality goods at a reasonable price.
14
FACTORS EFFECTING INVENTORY MANAGEMENT AND CONTROL:
 Type of a product: The materials of high value used in manufacture of product should
be given much control. The materials which are in short supply or is rationed by the
government, used in product, influence the purchase of this material and the stock
maintained.
 Type of manufacture: If there is a continuous manufacture, the rate of production is the
factor that affects inventory control. Because of uninterrupted operation of machines and
assembly lines in the plant, inventory control is of major importance.
In intermittent manufacture, there is greater flexibility in the control of material.

 Volume: The volume of product that is represented by the rate of production may also have
effect on the complexity of the inventory problem.
 Amount of inventory: It is essential to maintain the right amount of inventory. Over stock
and stock out are the major issues of inventory management.
 Inventory price: Inventory price also have an effect on inventory control. To maximize cost
efficiency the company uses EOQ (Economic order quantity).
 Suppliers: The suppliers have an influence on inventory. Reliable suppliers are necessary so
as to prevent any shortages of product or delay in the manufacturing process.
 Lead time: Lead time refers to the time between the placing order for an item and it is
received. Lead time varies with the different product and therefore it is the factor that
requires changes in the inventory management.
 Other factors are:

 The objectives of the company which are related to the inventories and the level of
service provided to the customers.
 The nature and size of inventories and their relationship with other functions in the
company, such as manufacturing, finance and marketing.
 The qualifications of the staff personnel who will design and coordinate the
implementation of inventory system.
15
 The present method which is used for controlling inventories and for making
inventory decisions.
 The capabilities of personnel of company who are responsible for managing the
inventory system on continuous basis.
 The availability of data which is used in controlling inventories.
 REASONS OR MOTIVES FOR HOLDING INVENTORY:

 The main reason for holding or maintaining inventory is to supply adequate quantity
of materials to the manufacturing department and ensure the availability of finished
goods to the customers as per the demand.
 Transaction motive: The manufacturing concerns need inventories of raw
materials and work in progress so as to maintain regular production activities. The
quantity of inventory held in the organization must be able to meet the demand of
the customers. In order to have regular transactions, inventory is maintained by the
organizations.
 Precautionary motive: There maybe uncertain conditions which affect the
regular manufacturing operations of a business. Such as delay in inventory supply
due to shortage of material with supplier of raw material or issues with the suppliers,
etc. So, it is also important an important objective to hold inventory.
 Speculative motive: Generally, the prices of inventory rise, so the companies
may keep additional amount of inventories to get benefit by selling the surplus
inventory at higher price than the purchase price. But it creates risk, when the prices
of inventories fall.
STOCK LEVELS:Various stock levels are been maintained by the stores department to
ensure the adequate availability of the materials in the stores.
Minimum stock level: It refers to the quantity below which the stock of the items should not be
maintained. That means the minimum quantity of the items to be maintained in the stores. It can
be calculated by using the formula:
16
Minimum stock level= Re-order level – (normal usage * normal re-order period).
Maximum stock level: It refers to the quantity above which stock of items should not be
maintained. That means the maximum quantity of items maintained in the stores. It can be
calculated by using the formula:
Maximum stock level= Re-ordering level + Re-order quantity – (minimum usage * minimum re-
order period).
Re-ordering level: It refers to the level of stock at which the more stock can be ordered. It can
be calculated by using the formula:
Re-ordering level= Maximum consumption * Maximum re-order period.
Or
Re-ordering level=Minimum level + consumption during the time required to get the new stock
of items.
Average stock level: It refers to the average stock of items maintained by the concern. It can be
calculated by using the formula:
Average stock level = Minimum stock level + ½ (re-ordering quantity)
Danger level of stock: It refers to the level of stock at which there is emergence of ordering
fresh stock. It is generally fixed below the minimum level of stock. It can be calculated using the
formula:
Danger level of stock= Average rate of consumption * Emergency delivery time.
Economic ordering quantity (EOQ):It represents the size of ordered items that a
company should maintain so as to minimize the total cost of inventory and obtain maximum
economy of purchasing. It can also be referred to as standard or optimum ordering quantity.
It can be calculated by the formula: EOQ= 2𝐶𝑂/𝐼
17
Where,
C= Annual consumption/ annual demand for materials
O= cost of ordering
I= carrying cost
Total cost of materials = Total Purchase cost + Total ordering cost + Total carrying cost
Purchase cost: It refers to the total amount spent on purchases.
Purchase cost= purchase price per unit * number of units.
Total ordering cost = ordering cost per order * number of orders.
Number of orders in a year = C/EOQ.
Total carrying cost: Average cost * I
EOQ model is useful for calculating the appropriate reorder quantity and re-order point.
Ratio analysis:
Various ratios can be used to evaluate the efficiency of the inventory management of an
organization. Turnover ratios are appropriate for this purpose. These are as follows:
18
Activity ratios or Turnover ratios:Turnover ratios are also referred to as efficiency
ratios. These ratios are used to measure the effectiveness with which the firm manages its
resources or assets. These can be used to calculate the pace at which various assets, in which
funds are blocked up, get converted into sales.
The different turnover ratios are as follows:
Inventory turnover ratio: This ratio represents the number of times the items in the stock
turned over into sales in a particular year. This ratio is also referred to as stock turnover ratio.
Hence it is used to indicate the stock requires to be maintained in the stores to achieve the
desired level of sales. This can be calculated by using the formula:
Inventory turnover ratio = Cost of goods sold

Average stock
Where,
Cost of goods sold = sales – gross profit (or) net sales * gross profit %
Opening stock +Closing stock

Average stock = 2
Stock conversion period: It represents the number of days taken for the stock to be converted
into sales. It is calculated as follows:
Number of effective days in one year

Stock conversion period = Stock turnover ratio
Ideal stock turnover ratio is 8.
Debtors turnover ratio: This ratio represents the relationship between the debtors and sales. It
can be calculated by using formula:
Net credit sales

Debtors turnover ratio =
Average debtors
Debt collection period: It represents the number of days in which cash can be received from
debtors. It can be calculated as follows:
19
Number of days in an year
Debt collection period =
Debtors turnover ratio
Ideal debtor turnover ratio is 10 – 12 and debt collection period is 30 – 36 days.
Creditors turnover ratio: This ratio represents the relationship between creditors and
purchases. It can be calculated by using the formula:
Creditors turnover ratio = Net credit purchases

Average creditors
Debt payment period: It represents the number days taken by the firm to repay its debt amount
to the creditors. It can be calculated as follows
Number of days in a year

Debt payment period = Creditors turnover ratio
Ideal creditors turnover ratio is 12 or more and debt payment period is 30days or less.
Working capital turnover ratio: This ratio represents the efficiency in utilization of funds. It
can be calculated as follows:
Working capital turnover ratio = Cost of goo ds sold

Working capital
Where, working capital = current assets – current liabilities.
Fixed assets turnover ratio: This ratio represents the utilization of firm’s fixed assets. It can be
calculated as follows:
Net sales
Fixed assets turnover ratio =
Fixed assets
Net fixed assets = Gross fixed assets – depreciation
Ideal fixed assets turnover ratio is 5.
20
Total assets turnover ratio: This ratio represents the utilization of investments in the business.
It can be calculated as follows:
Net sales
Total assets turnover ratio =
Total assets
Total assets = Net fixed assets + investments + current assets
It doesn’t include fictitious assets.
TOOLS AND TECHNIQUES OF INVENTORY MANAGEMENT
JUST IN TIME (JIT):
It is a technique in which the order for raw materials is placed as per the production requirements
of the current period. It is a reverse technique of just- in- case technique. That means, less
inventory is maintained by the firm and it matches the current requirements. It is one of the most
popular methods of inventory management. Forecasting demand and material requirement
planning are necessary for Implementing JIT.
The advantages of JIT are as follows:
 Wastage of materials can be reduced.

 Costs of holding excess inventory can be minimized.
Disadvantages of JIT are:
 It is a risky technique.
 Uncertainties on the part of supplier may also become the disadvantage to the firm.
ABC ANALYSIS:
ABC refers to Always Better Control. This technique is based on the Pareto principle (80-20
rule). This takes into consideration, the units of annual consumption, value of inventory and its
cost, to divide the inventory into 3 categories namely, A, B and C. The classification of items
under ABC analysis is as follows:
21
A category items: These comprise of less number of items with a higher value. That means it
constitutes for 70% of total value and 10% of total number of items. These generally include
expensive items which occupy less warehouse space and need utmost control.
B category items: These comprise of moderate number of items with moderate value. That
means it constitutes of 20% of total value and 20% of total number of items. These include mid-
range items which need more holding cost than A-category items.
C category items: These comprise of more number of items with less value. That means it
constitutes of 10% of total value and 70% of total number of items. These items generally
include items which need simple observation and minimum attention towards their control.
Advantages of ABC analysis are as follows:
 Prioritization of items is done though this process.

 Wastage can be reduced.
 Allocation of costs for various categories of items can be done.
Disadvantages of ABC analysis are as follows:
 It doesn’t take into consideration the importance of items in the process of production.
 Only money value is considered for classification.
 Proper codification of items of inventory should be done.
HML ANALYSIS:
HML analysis is a technique in which the various items of inventory are classified based on the
price of item. That means cost per unit of item is taken into consideration for classification.
The different categories of items under this analysis are as follows:
H category items: These items include materials of high price.
M category items: These items include materials of medium price.
L category items: These items include materials of low price.
Advantages of HML Analysis are as follows:
22
 It helps for deciding the frequency of physical verification of stock.
 It is useful for controlling the purchase of materials.
XYZ ANALYSIS:
In this, the items are classified based on the inventory value of items. The various categories of
items are as follows:
X category items: These are the items of high inventory value. Generally these are bulky items
with more shelf life and needs much attention of control.
Y category items: These are the items of moderate inventory value. These have moderate shelf
life and needs moderate control over the items.
Z category items: These are the items of low inventory value. Generally, these are not bulky and
do not have shelf life and doesn’t need much control.
VED ANALYSIS:
VED refers to the vital, essential and desirable items. This analysis is mainly meant for
categorizing the spares. In VED analysis, the items are classified based on their functionality,
essentiality and availability of the spares, its importance and impact on manufacturing process.
The various items in this classification are as follows:
V category items: These are vital items in the firm’s manufacturing process and operations and
whose non-availability may result in loss of production.
E category items: These are essential items in the firm’s manufacturing process but are not vital.
The non-availability of these items may reduce the equipment’s performance resulting in
temporary loss but not ceases the production activity.
D category items: These are the desirable items in the firm’s manufacturing process but are not
essential. The non-availability of these items doesn’t affect the performance of equipment.
Generally, these are non-functional items.
23
The classification under this analysis follows a common saying “Vital few- Trivial many”. That
means the number of items falling under the vital category are more than the essential and
desirable items.
FSN ANALYSIS:
In this inventory management technique, the items are classified based on the rate of
consumption or usage. The various categories of items under this analysis are as follows:
F category items: These are the fast moving items which get consumed within a short period of
time and need better control system.
S category items: These are the slow moving items which get consumed slower than the F
category items.
N category items: These are the non-moving items which are not significantly consumed.
SDE ANALYSIS:
In this analysis, the items are classified based on the availability of items in the market. This
analysis is used to decide an appropriate inventory policy in the firm. The various categories of
items in this analysis are as follows:
S category of items: These refer to scarce items. These are the items which are in short supply
in the market such as firm’s raw materials, imported items, spares, etc.
D category of items: These refer to difficult items. These are items which can’t be available in
the local markets or have limited suppliers of materials.
E category items: These refer to easily available items. These are items which are easy to
acquire at local markets.
BATCH TRACKING:It is a technique in which batch numbers are used to trace the stocks at
the distribution chain. This technique helps in tracking all the raw materials, work-in-progress
and finished goods. It helps in tracking the movement of goods, their expiry date, etc.
24
Advantages of batch tracking are as follows:
 Accounting errors can be reduced.
DROP SHIPPING:In this technique, the stock is not held by the company instead the shipment
details and customer orders are directly sent to manufacturers or wholesalers to send the goods
directly to the final customers. With the implantation of this method, the holding costs of
inventory are reduced.
Advantages of drop shipping are as follows:
 Inventory holding costs can be reduced.

 Order fulfillment costs can be reduced.
 It is a less risky technique.
CONSIGNMENT INVENTORY:The consignment is a business agreement where one party

agrees to send their goods to the other party i.e. seller or manufacturer called as consignor
transfers goods to the retailer called as consignee. In this, the ownership of goods remains with
the consignor and only physical goods are transferred to the consignee. That means the title of
goods will be with consignor and possession will be with consignee. Consignee pays the
consignor only when the goods are been sold out.
TWO-BIN SYSTEM:It is also called as double-bin system. It is a traditional inventory control

system which is used in constant demand conditions. In this, the identical inventory items are
divided into two bins. Firstly, the items of first bin are used for issue and when all items of first
bin are issued, the order will be placed for the items to fill the first bin. Till then, the items of
second bin are issued.
LEAN MANUFACTURING: This is a system which aims at minimizing the wastage and
maximizing the quality (value) of product. This was started by Toyota manufacturing system
(TPS). Lean manufacturing aims at reducing three types of wastes and following principles to
increase the value of product. The three wastages are:
25
Muda: It refers to the wastage activities which does not constitute for creating value product
Mura: It refers to the activities which effect the work flows in a firm resulting in wastage.
Muri: It refers to activities which cause stress to employees and the machines of a firm.
The principles of lean manufacturing are value, value stream, process flow, JIT, perfection,
kaizen, etc.
PERPETUAL INVENTORY MANAGEMENT SYSTEM:It is a system in which store

balance is recorded after every receipt and issue of materials. Its objective is to facilitate regular
checking of stock. For this purpose, bin cards and stores ledger are used to record balances of
stock. On a regular basis, stock is verified and actual stock is compared with the stock records.
Advantages of Perpetual inventory system are:
 It is a systematic method of stock taking.

 It helps in avoiding over-stocking or under-stocking of materials.
 Various discrepancies in the stores can be identified.
 It helps to determine obsolete, slow moving and surplus stocks existence in stores.
PRICING OF MATERIALS:
Various methods of pricing of materials are as follows:
FIFO: FIFO refers to first in-last out.In this method, the materials are charged to various orders
at an actual cost. It assumes that the various lots are used in the same order in which they are
received into stock. The issues are priced in the order of purchases. That means the materials
which are received first are issued first.
LIFO: LIFO refers to last in-first out.In this method the materials purchased is issued in reverse
order. That means last receipt first issue. The cost of last received materials is used in pricing of
first issued materials.
26
AVERAGE COST METHOD: This method lies on the principle that identity of different lots
of materials is lost when they received in stores and it is appropriate that materials are issued at
average cost of materials in store. Average cost methods are of two types:
 Simple average method: In this method, prices of different lots of materials are added
and the total is divided by the number of prices.
 Weighted average method: In this method, weighted average price is calculated by
dividing total cost of materials purchased by the total quantity of materials purchased.
BASE STOCK METHOD: In this method the firm maintains minimum quantity of stock.
Minimum stock is also called as base-stock. The base stock is always maintained in the store and
is used only in case of emergency. This method is used along with LIFO or FIFO methods.
SPECIFIC PRICE METHOD: This method is used when the materials are purchased for a
specific job. The original price of the purchased materials is taken into consideration under this
method.
MARKET PRICE OR REPLINISHMENT PRICE METHOD: Under thismethod, the

materials are priced at the market rate prevailing on the date of issue of materials.
STANDARD PRICE METHOD: Under this method, issues are priced at a standard price.
After considering various factors, the standard price is fixed for every material.
INFLATED PRICE METHOD: Inflated price refers to price higher than actual price. The
underlying principle in this method is there will be natural wastages in the storage of materials
and this wastage cost is to be recovered from the remaining materials by using inflated price.
MODELS OF INVENTORY MANAGEMENT:
There are two models of inventory management system. They are as follows:
FIXED ORDER QUANTITY SYSTEM: In this system, the manufacturing company places
order for the fixed quantity. Whenever the need for the raw materials arises, the company
purchases fixed units. This quantity is often an economic order quantity.
27
Advantages of fixed order quantity system:
 Pre-determined quantity of material for placing an order can help to maintain inventory
investment effectively.
 Materials can be procured as and when needed at a fixed quantity.
 Each material can be ordered at an economic or standard quantity.
Disadvantages of fixed order quantity system:
 There may be irregularity in the re-order point due to which the materials needed
formanufacturing cannot be purchased at a time.
 Different quantity maybe required at a different period. The fixed quantity ordered may
result in over or under stock held by the company.
FIXED ORDER PERIOD SYSTEM: In this system, an order is placed by the manufacturing
firm after a review on the inventory maintained at a specific period of time. That means a
company reviews availability of each item in the company at frequent intervals of time and
places order for items according to the requirement. In this the order size is not fixed. The
companies may fix its review period accordingly the orders can be placed.
Advantages of fixed order period system are:
 Ordering costs can be reduced. Thus inventory costs can be low.

 This system is suitable for materials which are used seasonally so that the order can be
placed for that period only.
Disadvantages of fixed order period system:
 The periodic review of all items may increase the work of the purchase department.
 This system is not suitable for materials which are continuously used in the
manufacturing process.
28
CHAPTER-III
INDUSTRY PROFILE
&
COMPANY PROFILE
29
INDUSTRY PROFILE
INTRODUCTION
India is the second largest producer of cement in the world. India has a lot of potential for
development in the infrastructure and construction sector and the cement sector is expected to
largely benefit from it. Some of the recent initiatives, such as development of 98 smart cities, is
expected to provide a major boost to the sector.
Aided by suitable Government foreign policies, several foreign players such as Lafarge-Holcim,
Heidelberg Cement, and Vicat have invested in the country in the recent past. A significant
factor which aids the growth of this sector is the ready availability of raw materials for making
cement, such as limestone and coal.
Market Size
Cement production reached 329 million tonnes (MT) in FY20 and is projected to reach 381 MT
by FY22. However, the consumption stood at 327 MT in FY20 and will reach 379 MT by FY22.
The cement production capacity is estimated to touch 550 MT by 2020. As India has a high
quantity and quality of limestone deposits through-out the country, the cement industry promises
huge potential for growth.
According to CLSA (institutional brokerage and investment group), the Indian cement sector is
witnessing improved demand. Key players reported by the company are ACC, Dalmia and
Ultratech Cement. In the second quarter of FY21, Indian cement companies reported a sharp
rebound in earnings and demand for the industry increased, driven by rural recovery. With the
rural markets normalising, the demand outlook remained strong. For FY21, CLSA expects a
14% YoY increase in EBITDA in the cement market for its coverage stocks.
Investments
According to the data released by Department for Promotion of Industry and Internal Trade
(DPIIT), cement and gypsum products attracted Foreign Direct Investment (FDI) worth US$
5.28 billion between April 2000 and March 2020.
30
Some of the major investments in Indian cement industry are as follows:
In December 2020, the company planned to invest Rs. 5,477 crore (US$ 776.99 million) to raise
its capacity by 12.8 mtpa. The expansion includes existing approval for the cement plant at Pali
in Rajasthan, in addition to capacity expansion of 6.7 mtpa that is currently underway in Uttar
Pradesh, Odisha, Bihar and West Bengal.
In November 2020, Ramco Cements Ltd. acquired an additional stake worth Rs 2.48 crore (US$
335.34 thousand) in Lynks Logistics.
In November 2020, Dalmia Cement has signed a contract with Paytm for digitising its payment
processes. Paytm will help customers purchase Dalmia Cement products from >30,000 dealers
and distributors across 22 Indian states and union territories using Paytm Wallet, Unified
Payments Interface (UPI) and other cashless modes of payment.
In October 2020, Dalmia Bharat Group announced plans to invest ~Rs 2,000 crore (US$ 270.44
million) for setting up a cement plant in Kalaburgi, Karnataka.
JK cement planned to invest Rs. 1,700 crore (US$ 246.7 million) to increase its production
capacity to 15 million tonnes by end of 2020.
In November 2020, Shiva Cement Ltd, a subsidiary of JSW Cement Ltd, has announced plans to
invest over Rs. 1,500 crore (US$ 203.21 million) in a new 1.36 million tonne per annum clinker
unit project in Odisha.
Government Initiatives
In order to help private sector companies, thrive in the industry, the Government has been
approving their investment schemes. Some of the initiatives taken by the Government off late are
as below:
The Union Budget has allocated Rs. 139 billion (US$ 1.93 billion) for Urban Rejuvenation
Mission: AMRUT and Smart Cities Mission. Government’s infrastructure push combined with
housing for all, Smart Cities Mission and Swachh Bharat Abhiyan is going to boost cement
demand in the country. The move is expected to boost the demand of cement from the housing
31
segment. As per Union Budget 2021-22, Government planned to upgrade 1,25,000 km of road
length over the next five years.
Also, the Government of India extended an additional outlay of Rs. 18,000 crore (US$ 2.43
billion) for the PM Awaas Yojana - Urban over the already allocated Rs. 8,000 crore (US$ 1.08
billion); this is expected to be used for the development of ~30 lakh houses (ground support for
12 lakh houses and completion of 18 lakh houses) and will likely create an additional 78 lakh
jobs and boost production and sale in the steel and cement sectors.
An outlay of Rs. 27,500 crore (US$ 3.93 billion) has been allotted under Pradhan Mantri Awas
Yojana in the Union Budget 2020-21.
Road Ahead
The eastern states of India are likely to be the newer and untapped markets for cement companies
and could contribute to their bottom line in future. In the next 10 years, India could become the
main exporter of clinker and gray cement to the Middle East, Africa, and other developing
nations of the world. Cement plants near the ports, for instance the plants in Gujarat and
Visakhapatnam, will have an added advantage for export and will logistically be well armed to
face stiff competition from cement plants in the interior of the country. India’s cement
production capacity is expected to reach 550 MT by 2025.
Due to the increasing demand in various sectors such as housing, commercial construction and
industrial construction, cement industry is expected to reach 550-600 million tonnes per annum
(MTPA) by the year 2025.
MARKET OVERVIEW
 India is the world’s second largest cement market, both in production and consumption.
 It is supported by high level of activity going on in real estate and high Government
spending on smart cities and urban infrastructure.
 Capacity addition of 20 million tonnes per annum (MTPA) is expected during FY19-
FY21.
32
 According to CLSA (institutional brokerage and investment group), the Indian cement
sector is witnessing improved demand.
 Key players reported by the company are ACC, Dalmia and Ultratech Cement. In the
second quarter of FY21, Indian cement companies reported a sharp rebound in earnings
and demand for the industry increased, driven by rural recovery.
 With the rural markets normalising, the demand outlook remained strong.
 For FY21, CLSA expects a 14% YoY increase in EBITDA in the cement market for its
coverage stocks.
 India's cement production is expected increased at a CAGR of 5.65% between FY16-22,

driven by demands in roads, urban infrastructure and commercial real estate. The
consumption of cement in India is expected grow to at a CAGR of 5.68% from FY16 to
FY22.
 Cement production reached 329 MT in FY20.
33
 Sale of cement in India stood at Rs. 63,771 crore (US$ 9.05 billion) in FY20.
EXPORT AND IMPORT OF CEMENT
 India’s export of cement, clinker and asbestos increased at a CAGR of 1.68% between
FY16-FY20. In FY20, it reached US$ 1.98 billion.
34
COMPANY PROFILE
Italcementi Group History
Founded in 1864, Italcementi was quoted for the first time on the stock markets, at the Milan
Stock Exchange, in 1925, under the name of “Società Bergamasca per la Fabbricazione del
Cemento e della Calce Idraulica” and has been operating since 1927 under the name of
Italcementi Spa.
Zuari Cement is part of the Italcementi Group, the fifth largest cement producer in the world and
the biggest in the Mediterranean region. With net sales over 6 billion Euros in 2009 and a
capacity of 70 million tonnes. Italcementi Group combines the expertise, know-how and culture
of a number of companies from more than 22 countries in 4 continents. This includes an
industrial network of 63 cement plants, 15 grinding centres, 5 terminals, 134 aggregates quarries
and 613 concrete batching units. In India, with its inherent strengths, Italcementi Group's Zuari
Cement is committed to give the building industry a cement that is truly international.
A commitment to customer satisfaction has seen Zuari Cement grow from a modest 0.5 million
tonne capacity in 1995 to 3.5 million tonne today. Zuari Cement is in the process of increasing
this capacity to 6 million tonne by 2009 through setting up of a new 5500 tonne per day clinker
line at Yerraguntla and a grinding center at Chennai. A captive power plant with a capacity
of 43 MW has already been set up at the Company's cement manufacturing facility at Sitapuram.
With a 6% market share in the south Indian cement market and sales of about Euro 188 million
in 2009, Zuari Cement has chalked out ambitious plans for the future. This includes
strengthening its presence in the Maharashtra, Orissa and West Bengal markets. While
technology is just one of its strengths, there are many other factors that contribute equally to
Zuari's success. These include a high-level organisation and decentralised quality assurance
teams to guarantee the full compliance with the customers' expectations.
35
Our History
Strong foundations for a company of strength.
Zuari entered the Cement business in 1994 to operate the Texmaco Cement Plant. In 1995,
Texmaco’s Plant at Yerraguntla was taken over by Zuari and a Cement Division was formed.
The fledging unit came into its own in the year 2001 when Zuari Industries entered into a Joint
Venture with the Italcementi Group, the 5th largest producer of Cement in the world , Zuari
Cement Limited was born. Zuari Cement took over Sri Vishnu Cement Limited in 2002. Today,
the Company is amongst the topmost cement produces in South India.
Zuari and Italcementi. The strength of two
Zuari Cement is one of the leading cement producers in South India.A fully owned subsidiary of
the Euro 6 billion Italcementi Group, Commitment to customer satisfaction has seen Zuari
Cement grow from a modest 0.5 million tonne capacity in 1995 to 3.5 million tones today.And
earned a place among the most reliable cement producers in the country.
Thanks to a careful plan of investments and take-overs of other cement producers, the company
expanded, quickly reaching a strong position on the market and becoming the leading cement
manufacturer in Italy.
After several acquisitions abroad, in 1992 Italcementi achieved important international status
with its take-over of Ciments Français, one of the main global cement producer.
In 1997 Italcementi consolidated its verticalisation strategy with the acquisition of Calcestruzzi,
thus becoming Italian leader in the ready-mixed concrete sector.
In March 1997, all the international companies of the Group gathered under one single corporate
identity.
Since 1998 Italcementi Group has been pursuing its internationalisation strategy by acquiring
new cement works in Bulgaria, Kazakhstan, Thailand, Morocco, India, Egypt and the United
States.
36
Our Management:
While professional management and quality workforce ensure superior results, the role played by
the core management should not be discounted. With their vision and experience, they make sure
that Zuari Cement moves in the right direction. Towards becoming one among the leading
cement producers in India.
Nabil Francis
Managing Director
Carlo Foroni
Director Technical
Sunnira Ly
Chief Financial Officer
S.SURESH
Vice President HR & IR
Appotiment of Director
Zuari Industries Ltd has informed BSE that the Board of Directors at its meeting held on January
21, 2011 have appointed Mr. Suresh Krishnan, as Additional Director of the Company.
With an annual production capacity of approximately 70 million tons of cement, Italcementi

Group is the world’s fifth largest cement producer.
The Parent Company, Italcementi S.p.A., is one of Italy’s 10 largest industrial companies and is
included in S&P/MIB Index of the Italian Stock Exchange.
Italcementi Group’s companies combine the expertise, knowhow and cultures of 22 countries in
4 Continents boasting an industrial network of 63 cement plants, 13 grinding centres, 5
terminals, 125 aggregates quarries and 614 concrete batching units.
37
In 2009 the Group had sales amounting to almost 6 billion Euro.
Italcementi, founded in 1864, achieved important international status with the take-over of
Ciments Français in 1992.
Following a period of re-organization and integration that culminates in the adoption of a single
corporate identity for all Group subsidiaries, the newly-born Italcementi Group began to
diversify geographically through a series of acquisitions in emerging countries such as Bulgaria,
Morocco, Kazakhstan, Thailand and India, as well as operating in North America. As part of the
plan to further enhance its presence in the Mediterranean area, in 2005 the Group boosted its
investments in Egypt becoming the market leader.
In 2007 Italcementi acquired full control of the activities in India and signed an agreement to
strengthen its position in Kazakhstan while, in 2008, it further strengthened its presence in Asia
and the Middle East through the operations in China, Kuwait, Saudi Arabia. In 2009 the Group
signed a joint venture in Libya to build a 4 million tons/year cement plant.
As a member of the World Business Council for Sustainable Development (WBCSD)

Italcementi Group has signed the Cement Sustainability Initiative’s Agenda for Action, the first
formal commitment that binds a number of world cement industry leaders to an action plan that
aims at satisfying present-day needs at the same time as safeguarding the requirements of future
generations.
To further confirm its commitment on these issues, the Group has taken over the co-
Chairmanship of the Cement Sustainability Initiative for the period 2007-2008.
Our Products
Cement for every kind of task
Zuari Cement manufactures and distributes its own main product lines of cement .We aim to
optimize production across all of our markets, providing a complete solution for customer's
38
needs at the lowest possible cost, an approach we call strategic integration of activities.
Cement is made from a mixture of 80 percent limestone and 20 percent additives. These are
crushed and ground to provide the "raw meal”, a pale, flour-like powder. Heated to around 1450°
C (2642° F) in rotating kilns, the “meal” undergoes complex chemical changes and is
transformed into clinker. Fine-grinding the clinker together with a small quantity of gypsum
produces cement. Adding other constituents at this stage produces cements for specialized uses.
Blended Cements
Zuari Blended Cement the eco-friendly, user-friendly cement
Zuari Blended Cement has been developed in response to today’s need for environment-friendly
products that are cost-effective, durable and have minimal by-products.
Durability is a very important property in concrete. And durability here means concrete that
ensures the long life span of structures like homes and residences that are lifetime investments.
Since distress of concrete and early failure of structures is a common phenomenon, research over
a period of time helped develop various remedial measures that improved durability and cost
economics. One of them being blended Portland Cement, with complementary pozzolanic and
cementitious materials like fly ash, blast furnace slag, etc. And Zuari Blended Cement is a fine
example of it.
Our Products
Portland Cement
Zuari OPC is a high quality cement prepared from the finest raw material. Owing to optimum
water demand, it contributes to a very low co-efficient of permeability of the concrete prepared.
This improves the density of the concrete matrix and increases the durability of the concrete.
Zuari OPC is a high performance cement far exceeding the codal requirement of BIS.
It is this very durability that translates into long - lasting residential and commercial
constructions of a wide variety.
39
Zuari’s edge
With these unique advantages, Zuari Cement comes to you in two grades - 43 Grade OPC and 53
Grade OPC.
Zuari OPC is a high quality cement prepared from the finest raw material. Owing to optimum
water demand, it contributes to a very low co-efficient of permeability of the concrete prepared.
This improves the density of the concrete matrix and increases the durability of the concrete.
Zuari OPC is a high performance cement far exceeding the codal requirement of BIS.
It is this very durability that translates into long - lasting residential and commercial
constructions of a wide variety.
Zuari 43 & 53 Grade Ordinary Portland Cement (OPC) - Strong cements for longlasting
constructions.
• Higher compressive strength

• Better soundness
• Lesser consumption of cement for M-20 grade concrete and above
• Faster deshuttering of form work
• Reduced construction time
• Primo Concrete Cement - Concrete Redefined
Primo - The success storyIn 2008 Zuari Cement launched its high-strength cement under the
brand name 'Primo Concrete Cement' in Bangalore City. 'Primo' improves the density of the
concrete matrix and increases the durability of the concrete, making it an immediate hit among
construction and infrastructure projects undertaken in and around Bangalore. Recently Primo
was also launched in Kochi and Chennai. An extensive marketing and distribution network
across south India concretes Zuari Cement's success story.
New products, on the line of the extremely successful 'Primo' launch, will play a significant role
in key markets.
Primo Concrete Cement - Concrete Redefined
40
Primo concrete cement is a high quality cement prepared from the finest raw material. Owing to
optimum water demand, it contributes to a very low co-efficient of permeability of the concrete
prepared. This improves the density of the concrete matrix and increases the durability of the
concrete. Primo is a high performance cement far exceeding the codal requirement of IS 12269-
1987. It is this very durability that translates into long-lasting residential and commercial
constructions of a wide variety, such as dams,canals, highways, roads and flyovers.
• Higher compressive strength

• Better soundness
• Lesser consumption of cement for M-20 Concrete grade
• and above
• Faster deshuttering of form work
• Reduced construction time
41
CHAPTER-IV
DATA ANALYSIS
&
INTERPRETATION
45
RAW MATERIALS CONSUMED:
YEAR AMOUNT
2017-18 22585144
2018-19 2924059
2019-20 5492994
2020-21 7005189
2021-22 8542185
The above table represents the consumption of raw materials such as re-melted lead red oxide,
fire wood, caustic soda, charcoal, etc. which are used in the manufacturing process.
GRAPHICAL REPRESENTATION:
25000000
20000000
15000000
10000000
5000000
0
2017-18 2018-19 2019-20 2020-21 2021-22
INTERPRETATION:
In the year 2017-18, the raw materials consumed are amounted to 22585144. In the next year,
2018-19, the raw material consumption has been reduced drastically to 2924059. In the year
2019-20, this has increased a little to 5492994. For the year 2020-21, it was 7005189. In 2019-
20, there was slight increase in consumption of raw materials amounting to 8542185.
46
STOCK-IN-PROGRESS: These are the partly produced raw materials which are in intermediate
level of production process. These are also called as semi-finished goods.
STOCK IN PROGRESS:
YEAR AMOUNT
2017-18 12352329
2018-19 8633773
2019-20 4201396
2020-21 12547524
2021-22 18761392
The above table represents the goods which are in the process of production (stock- in- progress)
at the company for the past five years.
20000000
18000000
16000000
14000000
12000000
10000000
8000000
6000000
4000000
2000000
0
2017-18 2018-19 2019-20 2020-21 2021-22
INTERPRETATION:
In the year 2017-18, the stock-in-progress has amounted to 12352329. In the year 2018-19, this
has decreased to 8633773. For the next year, 2019-20, it has more decreased than last year to
4201396. In 2020-21, stock-in-progress was12547524. In 2020-21, it has increased more and
amounted to 18761392.
47
FINISHED GOODS: These are the final products or goods after completing the manufacturing
process of raw materials. These are ready to sale products.
FINISHED GOODS:
YEAR AMOUNT
2017-18 8794935
2018-19 14447786
2019-20 8402792
2020-21 28931552
2021-22 32551150
The above table represents the finished goods after the manufacturing process and were ready
for sale.
35000000
30000000
25000000
20000000
15000000
10000000
5000000
0
2017-18 2018-19 2019-20 2020-21 2021-22
INTERPRETATION:
In the year 2017-18, the finished goods amounted to 8794935. In the next year, 2018-19, it has
increased to 14447786. In 2019-20, this has decreased much and amounted to 8402792. In the
year 2020-21, the finished goods amount had increased than the previous years to 28931552. In
2021-22, it was amounted to 32551150.
48
TOTAL INVENTORY: It represents the entire inventory held at the company. It includes raw
materials, stock-in-progress and the value of finished goods.
TOTAL INVENTORY:
YEAR AMOUNT
2017-18 43732408
2018-19 26005618
2019-20 18097182
2020-21 48484265
2021-22 59854727
This table shows the amount of total inventory for the past five years.
60000000
50000000
40000000
30000000
20000000
10000000
0
2017-18 2018-19 2019-20 2020-21 2021-22
INTERPRETATION:
In the year 2017-18, total inventory in the company was, 43732408. In the next year 2018-19,
inventory has been reduced to 26005618. For the next year, 2019-20, the inventory has amounted
to 18097182. In 2020-21, it has increased to 48484265. In 2021-22, it was increased more to
59854727.
49
ANALYSING THE TREND OF INVENTORY (REGRESSION ANALYSIS):
The trend of amount of inventory maintained in the company can be calculated by using
regression analysis. Regression analysis uses two variables X and Y, in which one is independent
variable and the other one is dependent variable. With the use of one variable the other variable
can be estimated.
CALCULATION OF INVENTORY TREND:
YEAR (X) INVENTORY AMOUNT (Y)

2017-18 43732408
2018-19 26005618
2019-20 18097182
2020-21 48484265
2021-22 59854727
STEP 1: Calculation of means:
𝐱
Mean 𝐱 =
𝐧
= 2015 +2016 + 2017 + 2018 + 2019
= 2017
𝐘
Mean 𝐲 =
𝐧
= 43732408 + 26005618 + 18097182 + 48484265 + 59854727= 39234840
The table showing the calculations required for regression analysis:
50
x y X=x Y=y- 𝐗𝟐 𝐘𝟐 X*Y
- 39234840
201
6
2017-18 43732408 -2 4497568 4 20228119714624 -8995136
2018-19 26005618 -1 -13229222 1 175012314725284 13229222
2019-20 18097182 0 -21137658 0 446800585724964 0
2020-21 48484265 1 9249425 1 85551862830625 9249425
2021-22 59854727 2 20619887 4 425179739892769 41239774
10080 19617420 𝐗 𝐘=𝟎 𝐗𝟐=1 𝐘𝟐=1152779739892769 𝐗𝐘

0 0 =54723285
=𝟎
STEP 2: To find regression lines:
𝐗𝐘
To find byx = = 54723285= 5472328.5
𝐗𝟐
10
Regression line y on x
y-𝐲 = byx (x - 𝐱 )
y- 39234840 = 5472328.5(x- 2016)
y- 39234840 = 5472328.5x- 11032214256
y=5472328.5x- 11032214256 + 39234840
y= 5472328.5x- 10992979416
51
STEP 3: To estimate inventory for the year 2020
Estimate y for x= 2020
y= 5472328.5x- 10992979416
Substituting x= 2020 in the above equation,
y= 5472328.5(2019) - 10992979416
y=11048631241.5 – 10992979416
y= 5565182.5
That means for the year 2020, estimated amount of inventory is 5565182.5
INTERPRETATION:
From the regression analysis, the amount of inventory for the year 2019-20 can be estimated as
5565182.5. That means the inventory maintained at the company for the next year can be
approximately to this amount. If this amount is compared to that of past five years, we can find
that the inventory for the next year is closer to the amount of inventory maintained in 2019.
52
In this company, the main raw material used for manufacturing process is re-melted lead. So the
EOQ can be calculated for the re-melted lead, to determine the standard quantity.
CALCULATION OF EOQ FOR THE RE-MELTED LEAD:
YEARS
PARTICULARS
2017-18 2018-19 2019-20 2020-21 2021-22
EOQ (units) 1185 556 644 705 872
Number of 17 7 7 7 7
orders per year
Order 1189 563 655 723 907

size(units)
Average 594.5 281.5 327.5 361.5 453.5

inventory
Carrying 8560 4306.95 5076.25 5892.45 7573.45

cost(rupees)
Ordering 8500 4200 4900 5600 7000

cost(rupees)
Total annual 17060 8506.95 9976.25 11492.45 14573.45

cost(rupees)
53
CALCULATIONS:
For the year 2017-18, the details are as follows:
Units of raw materials required: 20210
Ordering cost per order:500
Carrying cost: 10%
Unit price of purchases: 144
EOQ CALCULATION:
𝟐𝐀𝐎
EOQ =
𝐂
A = 20210
O = 500
C = 144 * 10% = 14.4
2∗20210∗500
EOQ = 14.4
= 1185 units
𝐀
Number of orders in a year =
𝐄𝐎𝐐
20210
= 1185
= 17
𝐀
Order size =
𝐧𝐨.𝐨𝐟 𝐨𝐫𝐝𝐞𝐫𝐬
= 20210 = 1189
17
54
Average inventory = 𝐨𝐫𝐝𝐞𝐫 𝐬𝐢𝐳𝐞
𝟐
1189
= 2
= 594.5
Carrying cost = carrying cost per unit * average inventory
= 14.4*594.5
= 8560
Ordering cost = ordering cost per order * number of orders
= 500*17
= 8500
Total annual cost = Carrying cost + ordering cost
= 8650 + 8500
= 17060
Units of raw materials required:
3940 Ordering cost per order: 600
Carrying cost: 10%
55
EOQ CALCULATION:
𝟐𝐀𝐎
EOQ =
𝐂
A = 3940
O = 600
C = 153 * 10% = 15.3
2∗3940∗600
EOQ = 15.3
= 556 units
𝐀
𝐄𝐎𝐐
3940
= 556
=7
𝐀
Order size =
3940
= 7
= 563

𝟐
563
= 2
= 281.5
= 15.3*281.5= 4306.95
56
= 600*7
=4200
= 4306.95 + 4200
= 8506.95
Carrying cost: 10%
EOQ CALCULATION:
𝟐𝐀𝐎
EOQ =
𝐂
A = 4585
O = 700
C = 155 * 10% = 15.5
2∗4585∗700
EOQ = 15.5
= 644 units
57
𝐀
𝐄𝐎𝐐
4585
= 644
=7
𝐀
Order size =
4585
= 7
= 655

𝟐
655
= 2
= 327.5
= 15.5*327.5
= 5076.25
= 700*7
=4900
= 5076.25 + 4900
= 9976.25
58
Carrying cost: 10%
EOQ CALCULATION:
𝟐𝐀𝐎
EOQ =
𝐂
A = 5062
O = 800
C = 163 * 10% = 16.3
2∗5062∗800
EOQ = 16.3
= 705 units
𝐀
𝐄𝐎𝐐
5062
= 705
=7
𝐀
Order size =
5062
= 7
= 723
59
𝟐
723
= 2
=361.5
= 16.3* 361.5
= 5892.45
= 800*7
= 5600
= 5892.45+ 5600
= 11492.45
Units of raw materials required: 6348
Ordering cost per order: 1000
Carrying cost: 10%
60
EOQ CALCULATION:
𝟐𝐀𝐎
EOQ =
𝐂
A = 6348
O = 1000
C = 167 * 10% = 16.7
2∗6348∗1000
EOQ = 16.7
= 872 units
𝐀
𝐄𝐎𝐐
6348
= 872
=7
𝐀
Order size =
6348
= 7
= 907

𝟐
907
= 2
= 453.5
= 16.7*453.5= 7573.45
61
= 1000*7
=7000
= 7573.45 + 7000
= 14573.45
INTERPRETATION:
EOQ: Economic order quantity (EOQ) was 1185 units in 2017-18 In the next year 2018-19,
EOQ has decreased to 556. From 2018, it has been showing an increasing trend, i.e. in 2019-20 it
was 644, in 2020-21, 705, in 2021-22 it was 872.
NUMBER OF ORDERS PER YEAR: In 2017-18 the number of orders was17, being very
high. For the next four years, the number of orders per year was maintained at 7 times per year.
ORDER SIZE: In 2017-18 the size of order was 1189 but in 2018-19, it has decreased to 563. In
the next 3 years, there was increasing trend when compared to 2015. In 2018-19, order size was
655, in 2019-20, it was 723. In 2021-22 it has increased to 907.
AVERAGE INVENTORY:In 2017-18 average inventory maintained was very high as 594.5.
For the next year it has decreased to 281.5. For the next 3 years it has shown an increasing trend.
IN 2019-20, it was 327.5, in 2020-21, it was 361.5 & in 2021-22, it was 453.5.
CARRYING COST: In the year 2017-18 carrying cost incurred was 8560. In 2018-19, this cost
has been decreased to 4306.95. In 2019-20, carrying cost was increased to 5076.25. In 2020-21,
it was amounted to 5892.45. In 2021-22. it has increased to 7573.45. That means for the past 4
years the carrying cost has been showing an increasing trend.
62
ORDERING COST: In the year 2017-18 the ordering cost was 8500, in 2018-19, it was 4200.
In 2019-20, it has increased to 4900 and further increased to 5600 in 2020-21. In 2021-22, it
increased to 7000.
TOTAL ANNUAL COST: In 2017-18 the total annual cost was 17060. In 2018-19, the total
cost has decreased to 8506.95. In 2019-20, it has amounted to 9976.25. In 2020-21, this has
increased to 1142.45. In 2020-21. this has further increased to 14573.45.
63
CHAPTER-V
FINDINGS
CONCLUSION
SUGGESTIONS
64
FINDINGS:
 The usage of raw materials has been decreased tremendously in 2021. From 2019 it
has shown an increasing trend.
 The main raw material used in the manufacturing process at this company is re-melted
lead.
 This company is observed to follow traditional method for procuring raw material and
selling goods.
 Inventory for the next year is estimated at 5565182.5. Amount of inventory maintained at
the company tends to increase in the future.
 The main customers for the products of this company are HBL LTD and Ned Energy
companies.
 The EOQ of re-melted lead is calculated as 2021-22 as 872. Though there was decrease
in the EOQ in the year 2020-21, an increasing trend can be seen from 2021-21.
 The number of orders was 17 in the year 2017-18. From the next year the orders placed
were 7. That means the company places 7 orders per year for the re-melted lead.
 Order size for each order was 907 in the year 2021-22. The order size has been increasing
for every year for each order they are placing for procuring raw material.
 Average inventory is also showing an increasing trend over past 5 years.
 The Carrying cost was 8560 in 2017-18. For the year 2017-18 it was 4306.95. It has been
following an increasing trend and this cost was 7573.5 in the year 2021-22.
 Ordering cost was 8500 in 2017-18 and decreased to 4200. The cost has been increasing
for every year from 2019, and it has amounted to 7000 in 2021-22.
 The total cost is the sum of carrying and ordering cost. For the year 2021-22, it was
14573.45.
 It has been observed that the company has been following the traditional methods for
maintaining inventory.
65
CONCLUSION:
From this study carried on at Zuari Cement Limited, it has been observed that inventory
management practices at the company are traditional ones. The company is a lead manufacturing
company, which supplies lead for using it in batteries. This company follows an oldest method
for procuring raw material and sale of finished goods. The amount of inventory maintained at the
company is analyzed and inventory for next year is estimated and it is observed to increase in
future. The EOQ for the re-melted lead which is the main raw material at the company is
calculated. It is advised to the company to follow modern methods of inventory management so
as to improve efficiency and reduce the costs associated with it.
66
SUGGESTIONS:
 To use modern methods for maintaining inventory such as computerized inventory

details, classifying inventory based on importance, etc. So that the costs involved in
inventory management like carrying cost and ordering cost can be reduced.
 To calculate EOQ for the raw materials to reduce the excessive inventory accumulated in
the company. EOQ can be used for effective utilization of raw materials and reduces
under stock or over stock.
 Material requirements planning can also be followed by the company to estimate in
advance the material required and place order accordingly.
 It is advisable to estimate inventory to be held at the company for the next year, so that
the necessary arrangements can be made for holding inventory.
 It is suggested to maintain better relationship with the suppliers of the raw materials.
 Efficiency can be improved by switching on to the modern techniques of inventory
management which in turn increases the profitability of the company.
67
BIBLIOGRAPHY:
BOOKS:
1. Management accounting and control by R.P Trivedi, Manoj Trivedi, Pankaj publications.
2. Cost accounting by R.P. Trivedi.
3. Financial management by Prasanna Chandra.
4. Financial management by Khan and Jain.
JOURNALS
1. Awi Federgruen, A. H. (1999). Combined pricing and inventory control under

uncertainity. In Operations research (pp. 454-475).
2. Brent D Williams, T. T. (2008). A review of inventory management research in major
logistics journals:Themes and future directions. The international journal of logistics
management , 212-232.
3. Grzegorz, M. (2008). Value-based inventory management. Romanian journal of
economic forecasting , 82-90.
4. Jordan, H. H. (1988). Inventory management in the JIT age. Production and Inventory
management journal , 3.
5. Koumanakos, D. P. (2008). The effect of inventory management on firm performance
. International journal of productivity and performance management , 355-369.
6. Lawrence D.Fredendall, E. H. (2000). Basics of supply chain management. CRC
Press.
Websites:
1. www.google.com
2. www.zensarlead.com
3. www.financialmanagement.com
68

Invenory Management at Zauari Cement Limited

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Submitted in partial fulfilment of the award of the degree of

MASTER OF BUSINESS ADMINSTRATION

GLOBAL INSTITUTE OF MANAGEMENT

ZUARI CEMENTS” is a bonafide work done by Mr. PALAKURLA SHIVA

KRISHNA bearing Hall Ticket No. 2266-19-672-093 in the Department of Management

Studies, GOBAL INSTITUTE OF MANAGEMENT, UPPARIGUDA (V),

IBRAHIMPATNAM (M), R.R. DIST, under my supervision. He has completed project

INTERNAL GUIDE HEAD OF THE DEPARTMENT

ZUARI CEMENTS " Submitted by me to the DEPARMENT OF MANAGEMENT

STUDIES, GOBAL INSTITUTE OF MANAGEMENT, UPPARIGUDA (V),

IBRAHIMPATNAM (M), R.R. DIST, is a bonafide work undertaken by me and it is not

diploma/certificate or published any time before.

Date : PALAKURLA SHIVA KRISHNA

guidance throughout my project work.

this project would not have been possible.

I express my gratitude to Mr. K. BHASKER, HOD of Global Institute of Management for

source of inspiration during this project work.

Inventory is maintained by every manufacturing organization to use it as and when required in

Inventory management is one of the important functions of financial management. Inventory

 Raw materials – materials that are used to produce goods.

INVENTORY MANAGEMENT AND CONTROL:

TOOLS AND TECHNIQUES OF INVENTORY MANAGEMENT:

 To minimize the costs associated with inventory.

1. Usage of traditional inventory control models for Integration of traditional logistics

2. Researchers have focused on usage of collaborative models in inventory management and

(Grzegorz, 2008); Value based inventory management.

(Koumanakos, 2008); Effect of inventory management on firm’s performance.

(Jordan, 1988); Inventory management in the JIT age.

(Lawrence D.Fredendall, 2000); Basics of supply chain management.

(Ziukov, 2015); A Literature review on models of inventory management.

Classification of inventory in merchandise and manufacturing industry:

Other types of inventory:

In intermittent manufacture, there is greater flexibility in the control of material.

 Other factors are:

 REASONS OR MOTIVES FOR HOLDING INVENTORY:

Re-ordering level= Maximum consumption * Maximum re-order period.

Average stock level = Minimum stock level + ½ (re-ordering quantity)

Danger level of stock= Average rate of consumption * Emergency delivery time.

It can be calculated by the formula: EOQ= 2𝐶𝑂/𝐼

C= Annual consumption/ annual demand for materials

Purchase cost: It refers to the total amount spent on purchases.

Purchase cost= purchase price per unit * number of units.

Total ordering cost = ordering cost per order * number of orders.

Number of orders in a year = C/EOQ.

Total carrying cost: Average cost * I

The different turnover ratios are as follows:

Inventory turnover ratio = Cost of goods sold

Opening stock +Closing stock

Number of effective days in one year

Ideal stock turnover ratio is 8.

Net credit sales

Ideal debtor turnover ratio is 10 – 12 and debt collection period is 30 – 36 days.

Creditors turnover ratio = Net credit purchases

Number of days in a year

Working capital turnover ratio = Cost of goo ds sold

Where, working capital = current assets – current liabilities.

Net fixed assets = Gross fixed assets – depreciation

Ideal fixed assets turnover ratio is 5.

Total assets = Net fixed assets + investments + current assets

It doesn’t include fictitious assets.

TOOLS AND TECHNIQUES OF INVENTORY MANAGEMENT

JUST IN TIME (JIT):