A

PROJECT REPORT
ON
INVENTORY
MANAGEMENT
AT
COCO-COLA
Submitted by
KEERTHI AVINASH
H.T.No.1303-22-672-138
PROJECT SUBMITTED IN PARTIAL FULFILLMENT FOR THE

AWARD OF THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

Department of Business Management

AURORA’S POST GRADUATE COLLEGE (MBA)

PEERZADIGUDA, UPPAL, HYDERABAD

(Affiliated to Osmania University)

2022-2024
 DECLARATION

I hereby declare that this Project Report title, A PROJECT ON INVENTORY MANAGEMENT

submitted by me to the Department of Business Management, O.U. Hyderabad, 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.

KEERTHI AVINASH
Signature of the Student
HT. No:130322672138
 CERTIFICATION

This is to Certify that the Project Report title A STUDY ON INVENTORY MANAGEMENT

submitted in partial fulfillment for the award of MBA program of Department of Business Management,

OU, Hyderabad, was carried out by KEERTHI AVINASH under my guidance. This has not been

submitted to any other University or Institution for the award of any degree/diploma/certificate.

P.SAI JHANAVI Signature of the Guide

 AURORA’S POST GRADUATE COLLEGE(MBA)
Peerzadiguda, Uppal, Hyderabad-500 092.

CERTIFICATE

This is to Certify that KEERTHI AVINASH bearing Hall Ticket No.1303-22-672-138 is a

bonafide student of Aurora’s PG College (MBA),Uppal in Masters of Business Administration.

This project titled INVENTORY MANAGEMENT which is being submitted in partial

fulfillment of the requirement for the award of MBA program of Department of Business
Management of Osmania University, Hyderabad was carried out under my guidance. This has
not been submitted to any other University or Institution for the award of any
Degree/Diploma/Certificate

Signature of Student Signature of Guide

Signature of HoD Signature of Principal

 Abstract

With the ongoing revolution in electronic and communication where Innovations are taking at the blink of eye;
it is impossible to keep the pace with the emerging trends.

Excellence is an attitude that that whole of human race is born with. It is the environment that makes sure that
whether the result of this attitude is visible or otherwise. A Well planned, properly executed and evaluated
Industrial training helps a lot in inculcating a professional attitude. It provides a linkage between the student
and industry to develop an awareness of industrial approach to problem solving, based on a broad
understanding of process and mode of Inventory of organization.

During this period, the student gets the real experience for working in the actual Industry environment. Most of
the theoretical knowledge that has been gained during the course of their studies is put to test here. Apart from
this the student gets an opportunity to learn the latest technology , which is immensely helps in them in
building their career .

I had the opportunity to have a real experience on many ventures, which increased my sphere of knowledge to
great extent. I got a chance to learn many new technologies and was also interfaced to many instruments. And
all this credit goes to organization.
 ACKNOWLEDGEMENT

I take this opportunity to extend my profound thanks and deep sense of gratitude to the authorities of
HINDUSTAN COCO-COLA BEVERAGE PVT LTD, forgiving me the opportunity to undertake
this project work in their esteemed organization.

My sincere thanks to Principal, Head of the Department and the Management for their kind
encouragement and constant support for completion of this project work, from my bottom of my
heart

I express deep sense of gratitude to my Internal Guide for constant support at all the levels for the
completion of the project work.

I am also thankful to all those who have incidentally helped me, through their valued guidance
cooperation and unstinted support during the course of my project.

I would also thank to my parents and my friends for supporting me in every stage my education and
life.

KEERTHI AVINASH
 TABLE OF CONTENT

INDEX

S.NO CHAPTERS PAGE NO

1 CHAPTER-I 1-11
INTRODUCTION 1-5
NEED FOR THE STUDY 6
SCOPE OF THE STUDY 7
OBJECTIVES OF THE STUDY 8
RESEARCH METHODOLOGY 9-10
LIMITATIONS OF THE STUDY 11
2 CHAPTER-II 12-17
REVIEW OF LITERATURE

3 CHAPTER-III 18-25
RESEARCH METHODOLOGY

4 CHAPTER-IV 26-43
DATA ANALYSIS AND FINDINGS

5 CHAPTER-V 44-47
CONCLUSIONS 45
SUGGESTIONS 46
RECOMMENDATIONS 47
6 CHAPTER- VI 48-49
BIBLIOGRAPHY 49
 LIST OF TABLES

NO TABLE NAME PAGE NO

4.1 Gender of the Respondents

4.2 Age Group of the Respondents

4.3 Occupation of the Respondents

4.4 Income Per Month of the Respondents

4.5 Qualification of the Respondents

4.6 Importance of the BigData Management

4.7 Utilization of BigData

4.8 BidData help an Organization to Survive in this

Competitive World

4.9 BigData may Reduce the WorkLoad

4.10 Type of Education is needed for Utilization of BigData

4.11 Restriction to use BigData in Decision taking

4.12 Personal understanding about the BigData

4.13 Skills needed for Utilizing BigData

4.14 Statistical Skills Training needed for the BigData

4.15 Refer the Using of BigData to other for more Effective

Results
 LIST OF FIGURES

NO TABLE NAME PAGE NO

4.1 Gender Of The Respondents

4.2 Age Group Of The Respondents

4.3 Occupation Of The Respondents

4.4 Income Per Month Of The Respondents

4.5 Qualification Of The Respondents

4.6 Importance Of The BigData Management

4.7 Utilization Of BigData

4.8 BidData Help An Organization To Survive In This

Competitive World

4.9 BigData May Reduce The WorkLoad

4.10 Type Of Education Is Needed For Utilization Of BigData

4.11 Restriction To Use BigData In Decision Taking

4.12 Personal Understanding About The BigData

4.13 Skills Needed For Utilizing BigData

4.14 Statistical Skills Training Needed For The BigData

4.15 Refer The Using Of BigData To Other For More Effective

Results
 CHAPTER I
INTRODUCTION

1
INTRODUCTION
Inventory management is primarily about specifying the size and placement of stocked goods.
Inventory management is recurred at different locations within a facility or within multiple locations of a
supply or network to protect the regular and planned course of production against the random disturbance of
running out of materials or goods. The scope of Inventory management also concerns the fine lines between
replenishment lead time, carrying costs of inventory, asset management, Inventory forecasting, physical
inventory, available physical space for Inventory, quality management, returns and defective goods and
demand and forecasting.

Types of Inventory

Normally the inventory has divided into two types. These,

1. Merchandising inventory,
2. Manufacturing inventory.
The manufacturing inventory has been subdivided into three types. These,
1. Raw materials,
2. Work in process,
3. Finished goods.

 Raw materials: Everything the crafter buys to make the product is classified as raw materials. That includes
leather, dyes, snaps and grommets. The raw material inventory only includes items that have not yet been put
into the production process.
 Work in process: This includes all the leather raw materials that are in various stages of development. For the
leather crafting business, it would include leather pieces cut and in the process of being sewn together and the
leather belts and purse etc. that are partially constructed.

In addition to the raw materials, the work in process inventory includes the cost of the labor directly
doing the work and manufacturing overhead. Manufacturing overhead is a catchall phrase for any other
expenses the leather crafting business has that indirectly relate to making the products. A good example
is depreciation of leather making fixed assets.

2
  Finished goods: When the leather items are completely ready to sell at craft shows or other venues, they are
finished goods. The finished goods inventory also consists of the cost of raw materials, labor and manufacturing
overhead, now for the entire product.

INVENTORY MANAGEMENT

Every enterprise needs inventory for smooth running of activities. It serves, as a link between production and
distribution. For every process there is, generally, a time lag between the recognition of a need and its
fulfillment. The greater the time lag, the higher the requirement for inventory. The unforeseen fluctuations in
demand and supply of goods also necessitate the need for inventory. It provides a cushion for future price
fluctuations.

The investment in inventories constitutes the most significant part of current assets/working capital in most of
the undertakings. Thus, it is very essential to have proper control and management of inventories. The purpose
of inventory management is to ensure availability of materials in sufficient quantity as and when required and
also to minimize investment in inventories.

The investment in inventory is very high in most of the undertakings engaged in manufacturing, wholesale and
retail trade. In India, a study of 29 major industries has revealed that the average cost of materials is 65paise
and the cost of labour is 10 paise and overheads is 15paise of a rupee, 10%is profit. It is necessary for every
management to give proper attention to inventory management. A proper planning of purchasing, handling,
storing and accounting should form a part of inventory management.

An efficient system of inventory will determine,

• What to buy
• How to buy
• Where to buy
• Where to store

There are conflicting interests of different departmental heads over the issue of inventory. The finance
manager will try to invest less in inventory because to him it is an idle investment, where as production

3
manager will emphasis to acquire more inventory as he does not want any interruption in production due to
shortage of inventory. The purpose of inventory management is to keep the stocks in such a neither way that
there is over-stocking nor under-stocking. The over-stocking will mean a reduction of liquidity and starving of
other production processes whereas under-stocking, on other hand, will result in stoppage of work. The
investments in inventory should be kept in reasonable limits.

MEANING AND NATURE OF INVENTORY

There are different meanings of inventory in different languages. In accounting language, it may mean stocks
of finished goods only. In a manufacturing concern, it may include raw materials; work in process and stores,
etc., to understand the exact meaning of the work “inventory”

Inventory may include the following things:

1. RAW MATERIALS:
Raw materials form a major input into the organization. They are required to carry out production activities
uninterruptedly. The quantity of raw materials required will be determined by the rate of consumption and the
time required for replacing the supplies. The factors like the availability of raw materials and government
regulations, etc., too affect the stock of raw materials.

2. WORK-IN-PROGRESS:
The work-in-progress is that stage of stocks, which are in between raw materials and finished goods. The raw
materials enter the process of manufacturing but they are yet to attain a final shape of finished goods. The
quantum of work-in-progress depends upon the time taken in the manufacturing process. The greater the time
taken in manufacturing, the more will be the amount of work-in-progress.

3. CONSUMABLES:
These are the materials, which are needed to smoothen the process of production. These materials do not enter
directly into production but they act as catalysts. Consumables may be classified according to their
consumption and criticality. Generally, consumables stores do not create any supply problem and form a small

4
part of production cost. There can be instances where these materials may account for much value than the raw
materials. The fuel oil may form a substantial part of the cost.

4. FINISHED GOODS:
These are goods, which are ready for the consumers. The stock of finished goods provides a buffer between
production and market. The purpose of maintaining inventory is to ensure proper supply of goods to the
customers. In some concerns the production is under taken on order basis. In these concerns there will not be a
need for finished goods inventory. The need for finished goods inventory will be more when production is
undertaken in general without waiting for specific orders.

5. SPARES:
Spares also form a part of inventory. The consumption pattern of raw materials, consumables, finished goods
are different from that of spares. The stocking policies of spares are different from industry to industry. Some
industries like transport will require more spares than the other concerns. The costly spare parts like engines,
maintenance spares etc., are not discarded after use. Rather they are kept in ready positions for further use. All
decisions about spares are based on the financial cost of inventory on such spares and the cost that may arise
due to their non-availability efficiency, aggressively expand its reach to customers, continue to invest in brand
building activities and ensure customer and shareholder delight.

5
NEED FOR THE STUDY

• Inventory management helps companies identify which and how much stock to order at what time.
• It tracks inventory from purchase to the sale of goods.
• The practice identifies and responds to trends to ensure there's always enough stock to fulfill
customer orders and proper warning of a shortage

6
SCOPE OF THE STUDY
Many companies use inventory system in their production or retail operations. Inventory management
provides the foundation to meet customer demands and composes one of the largest assets owned by
the company. Companies incorporate inventory system as a way of managing inventory level. Each
inventory system falls within a specific scope and experiences certain limitations. Management needs
to understand the scope of each in order to choose the best inventory system for the company. The
scope of an inventory system considers which needs the inventory system addresses. These include:

 Valuing the inventory, measuring the change in inventory and planning for future inventory levels.
 The value of the Inventory at the end of each period provides a basis for financial reporting on the
balance sheet.
 Measuring the change in inventory allows the company to determine the cost of inventory sold during the
period.
 The inventory level and changes allow the company to plan for future inventory needs.

7
OBJECTIVES OF THE STUDY

 To study the inventory management followed in Hindustan coca cola beverages ltd .
 To identify the existing inventory management and its effectiveness.
 To calculate analysis for their performance in inventory management.
 To analyze effectiveness of inventory management.
 To study the inventory Control measures in inventory management
 Analysis of inventory management by using ratio analysis.

8
RESEARCH METHODOLOGY

RESEARCH DESIGN
The Descriptive type of research has been applied in the study. In this research
the researcher has no control over the variables. He only reports what has happened or what
is happening. The research can only discover causes but cannot control the variables.

DATA COLLECTION
This study purely based on secondary sources of information. The necessary data
calculated from annual report, books, journals and websites.

PERIOD OF STUDY
This study covers a period of five years from 2018 – 2023. The accounting year
commenced from April and ending with March of the next year.

AREA OF STUDY
This study was conducted in Hindustan coca cola beverages ltd pvt.ltd Ranaga Reddy.

TOOLS FOR ANALYSIS

The following tools have been applied in the present study.
They are listed below
 Ration analysis (inventory) and
 EOQ analysis

RATIO ANALYSIS (INVENTORY)

The percentage of a mutual fund or other investment vehicle's holdings that have been
"turned over" or replaced with other holdings in a given year. The type of mutual fund, its
investment objective and/or the portfolio manager's investing style will play an important role
in determining its turnover ratio

9
ECONOMIC ORDER QUANTITY (EOQ)
Economic order quantity is that level of inventory that minimizes the total of
inventory holding cost and ordering cost. The framework used to determine this order
quantity is also known as Wilson EOQ Model. The model was developed by F. W. Harris in
1913.The most economical quantity of a product that should be purchased at one time. The
EOQ is based on all associated costs for ordering and maintaining the product. EOQ refers to
the size of the order which gives maximum economy in punches of materials.

2Ao
EOQ =
C1

Where

A = Annual usage in unit

O = Ordering cost
C1 = Carrying cost

10
LIMITATIONS OF THE STUDY

• The inventory details of company are collected for 5 years only

• The information taken from the company was limited
• In this study only limited ratios are used

11
 CHAPTER II
REVIEW OF LITERATURE

12
 REVIEW OF LITERATURE

Amrit Raj has reported that beverage industry is a focusing on technology revamp by having
tie ups with US based EBR racing and with Austria based engine maker AVL these moves are
with an ultimate aim to extend arm in R&D as the company has decided not to run the existing
brands on Honda engines.

Abhijeet Singh and Brijesh Kumar has mentioned that Hero Motors Ltd, is running a
program With an objective to create an innovative environment for interaction between Hero
Honda and its customers. Members of this program are given a magnetic card in which all
information is stored and this card is swiped when using any service at a showroom or
workshop and it works like a loyalty benefit card.

Joseph George is of the opinion about the hero tie up with Engines Engineering to improve
design that while hero needs good research and development support, it should ensure it finds
right partners, unlike Bajaj and TVS who pursued in house research and development, hero
seeking outside help is fraught with risks as it could be tough for hero to synergize diverse
inputs from variety of partners.

Sunitha, K. V. (2023) in her the sis. inventory management is vital for keeping costs down,
when meeting regulations. It is difficult to balance demand and supply and inventory
management to make sure that the balance is untouched. The trained inventory management
and good quality software will help make inventory management a victory. The ROI of
Inventory management has seen better revenue and profits, positive employee ambiance and
increase in customer satisfaction.

Gaur and Bhattacharya (2021) Attempted to study the linkage between the performance of
the components of inventory such as raw material, work in progress and finished goods and
financial performance of Indian manufacturing firms. The study revealed that finished goods
inventory as inversely associated with business performance while raw material inventory and
work in progress did not have much effect on same. They concluded that managers not paying
heed to inventory performance may become weak in combating competitors.

13
Silver, Edward (2020) (Article from production and inventory management journal)This
article considers the context of a population of items for which the assumption underlying the
EOQ derivation holds reasonably well. However as is frequently the cash in practices there is an
aggregate constraint that applies to the population as a whole. Two common forms of
constraints are:

The existence of budget to be allocated among the stocks of the items and a purchasing
production facility having the capability to process almost a certain number of replenishment
per year. Because of the constraint the individual replenishment quantities cannot be selected
independently.

D.Hoopman (2019) In this article he said that inventory optimization recognize that different
industry have different inventory profiles and requirements. Research has indicated that
solutions are priced in a large range from tens of thousands of dollars to millions of dollars. In
this niche market sector price is definitely not an indicator of the quality of solution, ROI and
usability are paramount.

Atnafu. D. &Balda, A. (2018) focuses on inventory management & explains the relationship
between inventory management practices competitive advantage & organizational performance.
The finding of the study on basis of data analysis is that there is a positive relationship between
competitive advantages and inventory management performance. And better organizational
performance gives a firm bigger capital to apply various inventory management techniques

Pradeep Singh (2018) In his study made an attempt to examine the inventory and working
capital management of Indian Farmers Fertilizer Cooperative Limited (IFFCO) and National
Fertilizer Limited (NFL). He concluded that the overall position of the working capital of
IFFCO and NFL is satisfactory. But there is a need for improvement in inventory in case of
IFFCO. However inventory was not properly utilized and maintained bay IFFCO during study
period. The management of NFL must try to properly utilize the inventory and try to maintain
the inventory as per the requirements. So that liquidity will not interrupt

Bernatde William (2018)This study tells that the main focus of inventory management is on
transportation and warehousing. The decision taken by management depend s on the traditional
method of inventory control models. The traditional method of inventory management is how
much useful in these days the author tell about it. He is also saying that the traditional method
14
is not a cost reducing, it is so much expensive. But the managing the inventory is most
important work for any manufacturing uniT.

Farzaneh (2018) Presented a mathematical model, to assist the companies in their decision to
switch from EOQ to JIT purchasing policy. He defines JIT as “to produce and deliver finished
goods just in time to be sold, sub-assemblies just in time to be assembled in goods and
purchased material just in time to be transformed into fabricated parts”. He highlights that the
EOQ model focuses on minimizing the inventory costs rather than minimizing the inventory.
Under the ideal condition where all the conditions meet, it is economically better off to choose
the JIT over the EOQ because it results in purchase price, ordering cost

Lal (2017) his study focused on inventory management. He originated a model which involve
price variable in inventory management; earlier price variable in inventory was not considered
in that company. The analysis recommended solid policies, which would look after internal
and external factors, ultimately it would help in bringing in efficient working capital
management

Mohamad. S. J. A. N. bin S. Suraidi. N. N. Rahman. N.A.A. &Suhaimi. R. D.S.R. (2016)

concluded that efficiency of inventory management is a major concern area of business.
Suggestions are given to improve the performance of inventory management. demand
forecasting, scattered inventory & cycle counting

Hong Shen. Qiang. Deng. Rebbaca Lao, Simon Wu (2016) focused on boosting the inventory
management to improve the supply chain of the company. Drop in inventory is considered one
of the most significant aspects of inventory management. In practice, small Inventory level is
not always a better solution, so manufacturers need to maintain the correct amount of inventory
at the correct level

S. Singh (2016) Analyzed the inventory control practices of single fertilizer company named
IFFCO. He statistically examined the inventory system with consumption, sales and other
variables along with growth of these variables and inventory patterns. He concluded that an
increase in components of inventory lead to an increase in the proportion of inventory in current
assets. A special focus was made on stores and spares in order to calculate excess purchases
15
resulting in loss of profit.

Plinere, D. &Borisov, A. (2015). concluded that. inventory management is necessary to every

company, having inventories. Companies have stock, but so much as to keep away from
overstock and out-of-stock situations. Inventory management can better company inventory
control existing condition and reduce costs of the company.

Gaur, Fisher and Raman (2015) In their study examined firm-level inventory behavior among
retailing companies. They took a sample of 311 public-listed retail firms for the years 1987–
2000 to examine the relationship of inventory turnover with gross margin, capital intensity and
sales surprise. They observed that inventory turnover for retailing firms was positively related
to capital intensity and sales surprise while inversely associated with gross margins. They also
suggested models that yield an alternative metric of inventory productivity, adjusted inventory
turnover that can be used in study of performance analysis and managerial decision-making.

Srinivas Rao Kasisomayajula (2014) The study concluded that all the units in the commercial
vehicle industry have significant relationship between Inventory and Sales. Proper management
of inventory is important to maintain and improve the health of an organization. Efficient
management of inventories will improve the profitability of the organization.

Lwiki et al (2013) A survey conducted and established that there is generally positive
correlation between each of inventory management practices. Specific performance indicators
were proved to depend on the level of inventory management practices. They established that
Return on Equity had a strong correlation with lean inventory system and strategic supplier
partnerships. As such, they concluded that the performance of sugar firms could therefore be
stated as being a function of their inventory management practices.

Panigrahi (2013) Undertook an in-depth study of inventory management practices. The study
also investigated the relationship between profitability and inventory conversion days. The
study, using a sample of the top five cement companies of India over a period of 10 years from
2001 to 2021, concluded that a considerable inverse linear relationship existed between
inventory conversion period and profitability.

Madishetti and Kibo na (2013) Found that a well designed and executed inventory
management contributes positively to a small or medium-sized enterprises (SMEs) profitability.
16
Regression analysis was adopted to determine the impact of inventory conversion period over
gross operating profit. The results cleared out that significant negative linear relationship
occurred between inventory conversion period and profitability.

Jose, T. Jayakumar. A., &Sijo. M. T. (2013) found the difference between EOQ & number of
pieces purchased. It is observed that the company is not using EOQ for buying the materials.
Therefore, inventory management is not reasonable. From estimate of safety stock. company
can decide how much inventory the company can keep in back stock per annum.

17
 CHAPTER III
RESEARCH METHODOLOGY

18
RESEARCH METHODOLOGY

RESEARCH DESIGN
The Descriptive type of research has been applied in the study. In this research
the researcher has no control over the variables. He only reports what has happened or what
is happening. The research can only discover causes but cannot control the variables.

DATA COLLECTION
This study purely based on secondary sources of information. The necessary data
calculated from annual report, books, journals and websites.

PERIOD OF STUDY
This study covers a period of five years from 2016 – 2019. The accounting year
commenced from April and ending with March of the next year.

AREA OF STUDY
This study was conducted in Hindustan coca cola beverages ltd pvt.ltd Ranaga Reddy.

TOOLS FOR ANALYSIS

The following tools have been applied in the present study.
They are listed below
 Ration analysis (inventory) and
 EOQ analysis

RATIO ANALYSIS (INVENTORY)

Ratio analysis is an important tool for analyzing the company's financial performance.
Ratio analysis is defined as the systematic use of accounting ratio’s in order to weigh
and evaluate the operating performance of a firm. Ratio is simply one number
expressed in terms of another number. It refers to numerical relationship between two
figures. It is obtained by dividing one figure by the other. Accounting ratio is

19
 relationship expressed in mathematical term between two related figures in the
financial statements.

OBJECTIVES OF RATIO ANALYSIS:

Ratio analysis is a powerful tool of financial analysis. The objectives of ratio analysis
are summarized as below:
 Ratio is helpful in judging financial performance of an enterprise over a period
of time.
 It may help the management in the task of planning and forecasting.
 It is possible to test liquidity, solvency and profitability of the enterprise through
the technique of ratio analysis. It helps the management to take decision
regarding investment, purchases etc.
 It helps to achieve coordination among various departments.

 The primary objective of ratio analysis is to regulate and Control sales and costs
calculation of ratio is a clerical task which requires careful selection of the
relevant data from the financial statements. Appropriate ratios to suit the purposes
of analysis should be calculated and interpreted objective

According to nature of functions ratios can be classified as liquidity ratios , leverage ratios,
activity ratios , profitability ratios. For analysis about the inventory management the
appropriate ratio is activity ratios. It includes:
 Inventory turnover ratio
 Ratio of material consumption to turnover
 Inventory to current assets ratio
 Inventory to working capital ratio
 Cash to current asset ratio
 Cash turnover ratio
 Debtors turnover ratio
 Creditors turnover ratio
 Input output ratio
 Working capital turnover ratio

20
ECONOMIC ORDER QUANTITY (EOQ ANALYSIS)

Economic order quantity is that level of inventory that minimizes the total of inventory
holding cost and ordering cost. The framework used to determine this order quantity is also
known as Wilson EOQ Model. The model was developed by F. W. Harris in 1913.The most
economical quantity of a product that should be purchased at one time. The EOQ is based on
all associated costs for ordering and maintaining the product. EOQ refers to the size of the
order which gives maximum economy in punches of materials.

2Ao
EOQ =
C1

Where

A = Annualusageinunit
O = Orderingcost
C1 = Carriyingcost

THEORETICAL ANALYSIS
Inventory consists of stock of raw materials, work-in-progress, spare pa consumables
for production and finished goods for sale. Thus, inventory com includes control over raw
materials, spare parts, consumables, partly finished goods, and finished goods. The following
are the common techniques of inventory control:

1. Determination of various levels of materials.

2. Economic Order Quantity.

3. ABC Analysis.

4. Perpetual Inventory System.

1. Determination of various Levels of Materials:

The store-keeper plays an important role in deciding upon the various levels materials.
In order to ensure that the optimum quantity of materials is purchased stocked neither less nor
more, the store keeper applies scientific techniques of materials management. Fixing of
certain levels for each item of materials in one of techniques.

21
 These levels are not permanent but require revision according to the change in the
factors which determine these levels. The following levels are generally fixed.

(a) Re-order Level.

(b) Maximum Level.
(c) Minimum Level.
(d) Average Level.
(e) Danger Level

(a). Re-order Level:

This level is that level of material at which it is necessary to initiate purchase

requisition for fresh supplies. This is normally the point lying between the maximum and the
minimum levels. Fresh orders must be placed before the actual stocks touch the minimum
level.

This level is fixed in such a manner that the quantity of materials represented by the
difference between the re-order level and the minimum level will be sufficient to meet the
requirement of production till such time as the order materializes and materials are delivered.

(b). Maximum Level:

The maximum level is that level of stock which can be held at any time. In other
words, it is the level beyond which stock should not be maintained. The purpose is to
avoid over-stocking and thereby using working capital in a proper way.

(c) Minimum Level:

This is the level below which the stock of an item should not fall. This is known as
safety or buffer stock. An enterprise must maintain minimum quantity of stock so that
the production is not hampered due to non-availability of materials

(d) Average Level:

Average level can be calculated by applying the following formula:

Maximum level + Minimum Level Average Level = ……………………………..

Or Average level = Minimum level + of Re-order Quantity.

22
(e) Danger Level:

Usually stack should not be lower than the minimum level. But if for any reason,
stock comes down below the minimum level, it is called danger level. When the stock
reaches danger level, it is necessary to take urgent action on the part of the management for
immediate replenishment of stock to prevent stock-out situation. The danger level can be
calculated by applying the following formula:

Danger Level = Average consumption x Maximum Re-order period for emergency

purchases.

2. ABC Analysis:

This technique of inventory control is also known as always Better Control technique.
ABC analysis is an analytical method of control which aims at concentrating effects on those
areas where attention is needed most.

According to this approach to inventory control high value items are more closely
controlled than low value items. Each item of inventory is given A, B or C denomination
depending upon the amount spent for that particular item. “:A” or the highest value items
should be under the tight control and under responsibility of the most experienced personnel,
while “C” or the lowest value may be under simple physical control.

It may also be clear with the help of the following examples:

“A” Category – 5% to 10% of the items represent 70% to 75% of the money value.

“B” Category – 15% to 20% of the items represent 15% to 20% of the money.

“C” Category – The remaining number of the items represent 5% to 10% of the
money value.

3. Perpetual Inventory System:

Another method of inventory control is the maintenance of inventory control on a

continuous basis. After the material are received into the stores, the storekeeper will arrange
for the storing of each item in the allotted rack, bin, shelf or other receptacles and attach a
card to each bin for the purpose of making entries there in relating to the receipt, issues and
balance. The bin card or the locker card, this becomes a perpetual inventory record for each

23
item of stores. Thus the perpetual inventory is a method of recording store balance after every
receipt and issue to facilitate regular checking and to obviate closing down for stock locking.

Under this method of stocktaking, the verification of the whole of the stock and its
valuation are accomplished only once at the close of the financial year and difference in stock
is adjusted only once. Nevertheless, the periodic inventory has its own disadvantage. In the
first place, it becomes necessary to close down the factory on the day of stock taking.
Secondly, discrepancies in stock cannot be corrected by an executive action immediately as
and when they occur. Thirdly, since all the items are checked only once in a particular day, a
surprise verification will not be possible. Lastly, reason for the discrepancies cannot be found
out because of the long interval between two consecutive verifications.

The advantages of a continuous stocktaking where perpetual inventory records are

maintained may thus be summarized as follows:

(i) The elaborate and costly work involved in periodic stock taking can be avoided.
(ii) The stock verification can be done without the necessity of closing down the factory.
(iii) The preparation of interim financial statement becomes possible.
(iv) Discrepancies are easily located and corrected immediately.
(v) It ensures a reliable check on the stores.
(vi) It exercises a moral influence on the stores staff.
(vii) Fast- and slow-moving items can be distinguished and the fixation of proper stock
levels prevents not only over-stocking, but under-stocking also.
(viii) A perpetual inventory record of the nature of the bin cards enables the storekeeper to
keep an eye on the stock levels and replenish the stock of every item whenever the
limit falls to the recorded level.
(ix) It provides reliable information to the management of the number of units and the
value of every item of stores.
(x) It ensures secrecy of the items that are verified.

Pricing of Raw Materials:

When issues are made out of various lots purchased at varying prices, the problem
arises to which of the receipt price should be adopted for valuing the materials requisitions.

24
1. First in first out:

Materials received first will be issued first. The price of the earliest consignment if
taken first and when that consignment is exhausted the price of the next consignment
is adopted and so on. This method is suitable in times of falling prices, because the
material charge to production will be high while the replacement cost of materials will
be low.

2. Last in first out:

Materials received last will be issued first. The price of the last consignment is taken
first and when that consignment is exhausted the price of the second last consignment
is adopted and so on. In timing of rising prices this method will show a charge to
production, which is closely related to current price levels provided that the last
purchase is made recently.

3. Weighted average cost method:

Under this method material issued is priced at the weighted average cost of material in
stock.

WAC= Value of material in stock / quantity in stock.

4. Standard price method:

Under this method a standard price is predetermined. The price of issues

predetermined for a stated period taken into account all the factors affecting price
such as anticipated market trends, transportation charges, and normal quantity of
purchase. Standard prices are determined for each material and material requisitions
are priced at standard irrespective of the actual purchase price. Any difference
between the standard and actual price results in materials price variance.

5. Current Price:

According to this method, material issued is priced at their replacement or realizable

price at the time of issue. So, the cost at which identical material could be purchased
from the market should be ascertained and used for valuing material issues.

25
 CHAPTER IV
DATA ANALYSIS
AND
FINDINGS

26
DATA ANALYSIS AND FINDINGS

INVENTORY TURNOVER RATIO:

Inventory turnover ratio establishes efficiency of the firm in

selling its product. It establishes relationship between sales and

inventory of a particular period. The ratio reveals number of times

finished stock is turned over during a given accounting Period. Higher

the ratio better it is because it shows that finished stock is rapidly

Turnover. A Low stock turnover is not desirable because it reveals

that obsolete stock or the carrying of too much stock. This ratio is

calculated as follow.

Inventory turnover ratio = sales/inventory

TABLE 4.1 SHOWS THE INVENTORY TURNOVER RATIO 2020-2023

Particulars 2020 2021 2022 2023

Sales 175,796,009.92 258,694,641.34 373,826,449.69 423,857,386.25

Closing 40,959,736.00 52,695,097.00 50,230,003.00 45,241,744.00

inventory

Ratio 4.291 4.965 7.442 9.363

27
 GRAPH 4.1 SHOWS THE INVENTORY TURN OVER RATIO 2020-2023

ANALYSIS
The above table shows the inventory turnover ratio. Year 2019-2020 is taken as
base year having 4.291 times. In 2020-2021 it’s 4.965 times. In 2021-2022 it is
7.422 times, and in the current year it is 9.363times.
There is increase in turnover time compared from base year to in current year.

FINDINGS

The inventory turnover is increasing over the years. There is increase in

turnover time compared from base year to in current year (2022-2023).

28
INVENTORY CONVERSION PERIOD:

TABLE 4.2 Showing Inventory Conversion Period:

PARTICULARS 2019-2020 2020-2021 2021-2022 2022-2023

INVENTORY 4.291 4.965 7.422 9.363

TURNOVER
RATIO

INVENTORY 85.06 73.51 49.17 38.98

CONVERSION
PERIOD

Note:
Inventory conversion period = 365(days in a year)/inventory turnover ratio.

29
 GRAPH 4.2 Showing Inventory Conversion Period

ANALYSIS

The above table shows the inventory conversion period. Year 2019-2020 is taken as base
year,

85.06 days, in 2020-2021, 73.51 days, in 2021-2022, 49.17 days, in & in current year
it is 38.98days.

FINDINGS

The inventory conversion period shows decreasing from base year to current year
on continuously. 2021-2022 & it is good for inventory management, and in the
current year 2022-2023 it is showing the least decreasing of the table.

30
1. PERCENTAGE OF INVENTORY IN CURRENT ASSETS
Inventory generally means stock of goods involved in current assets.
Current assets is those assets which change their form and substances and
which are converted into cash during the normal operating cycle of
business.

Table 3: showing the percentage of inventory in current assets for the

period 2019-2020 TO 2022-2023

TABLE 4. 3 SHOWING PERCENTAGE OF INVENTORY IN CURRENT

ASSET

Years Inventory current assets Percentage

2019-2020 4.09 6.91 59.18

2020-2021 5.2 9.55 54.44

2021-2022 5.02 10.5 47.8

2022-2023 4.52 9.5 47.57

Percentage of inventory to current assets=inventory/current assets*100

ANALYSIS

The above table shows the percentage of inventory in current assets. Year
2019-2020 is taken as a base year, 59.81% in base year, 54.44% in 2020-
2021, 47.8 in 2021-2022, and finally current having raised to 47.57 .

31
 GRAPH 4.3 SHOWING PERCENTAGE OF INVENTORY IN CURRENT
ASSET

FINDINGS

It shows amount of inventory in 2019-2020 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.

32
TABLE-4.4 RAW MATERIALS

YEAR RS. IN CRORES

2019-2020 7.62

2020-2021 12.87

2021-2022 14.96

2022-2023 17.93

ANALYSIS
The stock of raw materials in the 2019 is 7.62, and in the next year
i.e. 2020 the company’s raw material increased and gradually. Also in the year
year 2023 it again increase up to 17.93

33
 GRAPH-4.4 Graph representing stock raw material for four years

FINDINGS

. The stock has been increased from 2020 to 2023 which shows the company

maintaining good stock to avoid the shortage of raw material and to avoid
wastages.

34
STORES AND SPARES TURNOVER:

It is the value of stores and spares inventory consumed during the year.

TABLE 4.5 SHOWING STORES AND SPAIRS

Years RS. IN CRORE

2019-2020 0.37

2020-2021 0.46

2021-2022 0.42

2022-2023 0.77

ANALYSIS
The above table shows the stores and spares turnover ratio. Year 2019-
2020 is taken as the base year. It’is 0.37crore ,in 2020-2021 0.46 crore in
2021-2022, its 0.42 crore and 0.77 crore in the current year. It is
fluctuating over years.

35
 GRAPH 4.5 SHOWING THE STORES AND SPARES

FINDINGS
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
2021-2022 it has decreased compared to previous year.

36
 TABLE4.6 SHOWING RAW MATERIAL TURNOVER RATIO

Average
Year Total Consumption Consumption Times
2019-2020 7.62 2.6 2.93
2020-2021 12.87 3.5 3.67
2021-2022 14.96 3.8 3.93

2022-2023 17.93 4.2 4.26

ANALYSIS
The above table shows the raw material turnover ratio. Year 2019-2020 is taken
as the base year having 2.93 as turn over times and there is gradual increase in
succeeding year 2020-2021, 3.67 times. In 2020-2021 its 3.93 times, and
increased by 4.26 times in the current year.

GRAPH 4. 6 SHOWING RAW MATERIAL TURNOVER RATIO

FINDINGS
Raw material turnover ratio is increasing over one year to another year. This
shows that there is efficiency in managing the raw materials.

37
WORKING CAPITAL TURNOVER RATIO

This ratio reveals number of times working capital is turned over in a stated period.

The Ratio of sales to working capital can be judged as follows:

Working capital ratio = sales/working capital

The higher the ratio lowers the investment in working capital and greater are the profit.

However, a very high turnover of working capital is a sign of over trading and may put The

concern to financial difficulties a low working capital is not effectively used.

TABLE 4.7 SHOWS THE WORKING CAPITAL TURNOVER RATIO

2020-2023

Particulars 2020 2021 2022 2023

Sales 175,796,009.92 258,694,641.34 373,826,449.69 423,857,386.25

Net 31,710,746.28 57,115,333.73 55,413,901.83 61,035,858.75

working

capital

Ratio 5.543 4.529 6.746 6.944

ANALYSIS:

The table shows the working capital turnover ratio it is 2019 is taken as a base year
it was 5.543 and in 2020 it was 4.529 and in the current year it was 6.944.

38
 GRAPH 4.7 SHOWS THE WORKING CAPITAL TURNOVER RATIO
2020-2023

Interpretation:

During the period understudy ratios are not very high. This ratio is increased

every year because increase in working capital every year therefore the ratio

was notably increase highest in 2023-6.944.

39
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.

Net profit ratio = Net profit/sales *100

TABLE 4.8 SHOWS THE NET PROFIT RATIO 2020-2023

Particulars 2020 2021 2022 2023

Net profit 2,081,094.84 2,127,573.65 8,350,610.67 6,240,268.73

Sales 175,796,009.92 258,694,641.34 373,826,449.69 423,857,386,95

Ratio 1.183% 8.224% 2.233% 1.472%

ANALYSIS:

The above table shows the net profit turnover ratio 2019 is taken as a base year it

was 1.183 and in 2020 it was 8.224 and in the current year it was 1.472.

40
 GRAPH – 4.8 SHOWS THE NET PROFIT RATIO 2020-2023

FINDINGS

From the above chart there is increase in the net profit ratio in first two year it

was highest in 2020-8.22 & and it decreased to 1.47 in 2023.

41
 TABLE 4.9 Showing Average Collection Period

PARTICULARS 2019-2020 2020-2021 2021-2022 2022-2023

DEBTORS 24.839 17.188 11.547 13.725

TURNOVER
RATIO

AVERAGE 14.69 21.23 31.60 26.59

COLLECTION
PERIOD

NOTE:
Average collection period = days in a year / debtor’s turnover ratio

ANALYSIS

The above table shows the average collection period 2019 is taken as a base year and
it was
14.69 days and in 2020 it was 21.23 and in the current year it was 26.59.

42
 GRAPH 4.9 Showing Average Collection Period:

INTERPRETATION:

The average collection period has been increased from 14.69 days in 2019-2020
to 21.23 days in 2020-2021. The reason was to fall in the debtors turnover ratio
over the years. Though it’s 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 2021-2022.

43
 CHAPTER-V
CONCLUSION, SUGGESTIONS
AND
RECOMMENDATIONS

44
CONCLUSION

The research topic inventory management and control, has a greater implication on
Indian industries. From the analysis of inventory management and control in HCCB, 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 HCCB 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 today’s
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

Company which does not have in management system will get problem when check.
There .are very much important to produce Finished Goods (FG) at a right time because if the
Finished Goods(FG) are not produce at a right time then there will be a shortage of stock at
retailer shop. Then the retailer doesn’t satisfy to your service. Then the profit showing very
less. It’s totally depends upon the management system. If the management teams don’t give
the raw material at a perfect time then the production teams don’t produce the Finished
Goods (FG) at the right time.
There is a linkage between the Finished Goods (FG), demand and inventories of Raw
material Packaging Material (RMPM) and spares and other which required for day to day
smooth operation of a organization. They all are related to each other. If there is no Raw
Material (RM) then there is no Finished Goods (FG). If the machines are not in good
conditions then the production will be stop. Then the Finished Goods (FG) are not produce at
the right time.

45
SUGGESTIONS
1. It uses standard norms for Inventory Management for all the materials as been

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 Physical verification of high value materials in holding store is conducted in

accordance with predetermined programmers.

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.

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

46
RECOMMENDATIONS AND FINDINGS

 The inventory turnover is increasing over the years. There is increase in turnover time
compared from base year to in current year (2022-2023).

 The inventory conversion period shows decreasing from base year to current year on
continuously. 2021-2022 & it is good for inventory management, and in the current year
2022-2023 it is showing the least decreasing of the table.

 It shows amount of inventory in 2019-2020 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

 Raw material turnover ratio is increasing over one year to another year. This shows that
there is efficiency in managing the raw materials.

 The average collection period has been increased from 14.69 days in 2019-2020 to 21.23
days in 2020-2021. The reason was to fall in the debtors turnover ratio over the years.
Though it’s 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
2021-2022.

47
 CHAPER VI

BIBOLOGRAPHY

48
BIBOLOGRAPHY

BOOKS
 Asohok Banerjee - Financial Accounting – A Managerial Emphasis – Excel Books –
2012
 Collis – Business Accounting – Palgrave Macmillan – 2021
 Khan MY Jain P.K – Management Accounting : Text, problems and cases 4th Edition
– Tata McGraw Hill – 2021
 Pandikumar – Management Accounting – Excel Books – 2021
 Ramachandran N Kakani Kumar Ram – Financial Accounting For Management –
Tata McGraw Hill – 2013
 Robert Anthony David Hawkins Kenneth A.Merchant – Accounting Text and Cases –
Tata McGraw Hill – 2021
 S.K Bhattacharyya JohnDeaden – Costing for Management – Vikas Publishing – 2002
 S.N Maheswari S.K Maheswari – Accounting for Management – Vikas Publishing
– 2013

WEBSITES
 en.wikipedia.com
 Info.shine.com
 www.ask.com
 www.coca-colacompany.com
 www.indiacatalog.com
 www.inventoryquzz.com
 www.reportjunction.com
 www.scribed.com

49