INTRODUCTION

NATURE & SCOPE OF INVENTORY MANAGEMENT

The meaning of inventory is stock of goods, or a list of goods. Various authors

understand the word inventory differently. In accounting language it may mean stock of
finished goods only.

Every enterprise needs inventory for smooth running of its activities. It serves as
a link between production and distribution processes. There is generally a time lag
between the recognition of a need and its fulfillment the greater the time- lag, the higher
the requirements for inventory, the enforcing fluctuations demand and supply of goods
also necessitate the need for inventory. It also provides a cushion for future price
fluctuations.

The investment in inventories constitutes the most of 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 a variability of materials in sufficient quantity as and when required and also to
minimize investment in inventories.

To grasp complete knowledge of Inventory must have to focus on nature of

inventory and its issues. The issues are respectively:

 Raw materials
 Work in progress
 Consumables
 Finished goods
 Spares

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 Raw material from a major input the organization. They are required to carry our
production activities uninrruptedly the quantity of raw materials required will be
determined by the rate of consumption and the time required for relishing the supplies.
The work in progress is that stage of stocks, which are in between raw materials and
finished goods. These are the materials, which are needed to smoothen process of
production. These materials do not directly enter production but they act as catalysts, etc.
consumables may be classified according to their consumption criticality. These are the
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 consumers. Spares also form a part of inventory. The
consumption pattern of raw materials, consumable, finished goods are different from of
that of spares.

The main objectives of inventory management are operational and financial. The
operational objectives mean that the materials and spares should be available in
sufficient quantity so that work is not disrupted for want of inventory. The present topic
of Inventory management is related to the financial management. Finance is the
managerial activity which is concerned the planning and controlling of firms resources.
The Financial management has the three major decisions. They are:

 Financing Decisions
 Investment Decisions
 Dividend Decisions

The present topic of my project report is related to one of the decision of

investment decision. In that working capital is the main issue which has to meet the day
to day business needs .In this way it has managed current assets and current liabilities
effectively. When management does this it has been also managing inventory
management.

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 NEED FOR THE STUDY

Inventories constitute the most significant part of manufacturing concern the

objective of inventory management should be to determine and maintain optimum level
of inventory will be lie between two danger points of excessive and inadequate
inventory.

The Major Dangers Of Over Investments Are: -

1. Unnecessary tie up of funds and loss of profit.
2. Excessive carrying cost.
3. Risk of liquidity.

The Major Danger Of Under Investments Are: -

1. Production holds up.
2. Failure to meet the delivery commitment.

Thus the need of inventory management is to avoid over and under

investments.

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 OBJECTIVES OF THE STUDY

1. To make a detail study on the existing paper industry in general and inventory
management in particular to APPM, Rajahmundry.
2. To study the pattern of organization management and inventory factors of APPM,
Rajahmundry.
3. To analyze the inventory classification and its management and control.
4. To study the relevant costs, cost saving measures and find out drawbacks.
5. To study the general concept of inventory management.
6. To find out the inventory management and procedures of APPM, Rajahmundry.
7. To examine the methods and techniques of inventory control in APPM,
Rajahmundry.

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 SCOPE OF THE STUDY

1. Inventory management is one of the key areas in finance. It plays main and
important role in the organization.
2. The study concentrates on the methods and techniques are followed by the APPM
Ltd., is for its management.
3. The present study also concentrates on the importance of inventory management.

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 METHODOLOGY

The methodology in this content involves the process of collection of data from
primary and secondary sources and interpreting the same by using the analytical tools
and techniques utilizing the consequent finding to put forward liable and insightful
suggestions to the company.

Primary Data:

A large part of primary data was collected in the course of my interaction with
the personnel concerned departments and also developed in consultation with costing
manager, material manager and officers. The data collected was regarding various
aspects of inventory management like lead-time, ordering cost, carrying cost and
working of online computerized stores system.

Secondary Data:

The secondary source of data is the ISO manual of material department, purchase
department of APPM. Company’s annual reports, audit reports, balance sheet and other
company records journals, periodicals on paper and paper products.

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 LIMITATIONS OF THE STUDY

1. Some information is highly confidential so it is very difficult to get the data from
the organization.
2. The result realized are applicable to this firm only the major constraints on this
endeavor. Where the policy of time and information, the scope of the work is
confined to the inventory management rather than material management as a
whole.
3. The management of time for project completion is also a factor that limits
extensive study of the nature of projection process and its implications on
inventory aspects.
4. The study has been con for only to days

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 INDUSTRY PROFILE

PAPER AND ITS ESTABLISHMENT

Paper is a commodity, which is important in everyday life. Paper has grown
immensely in importance in such a way that it has became an indicator for a country’s
civilization, since it is mostly depend upon its paper consumption first to understand the
establishment and growth of the paper industry. We had to know in brief about the
introduction and the establishment of paper in the world and its enhance into the Indian
soil. It is equally important and very essential to know about the development and
progress of paper industry in our country as well as in our state.

The word “paper” is derived from the water plant called “papyrus”. That grows
around the “Nile River”, Egypt. The citizens of Egypt used the bark of “papyrus plant”
after cutting and dry it. It was said that “T. Jariluru Chin” had prepared paper with the
bark of the mulberry tree in 105 A. D.

In 751 A. D. the Arabs imported the knowledge of paper making with the help
of Chinese, later the art of paper making was spread to Europeans and Central countries
of the world.

Paper was highly popularized by the baudhas especially by the “BOKZA mark”
through out the world. The first paper mill in the world was started in 1336 A. D. In
Germany, viewing the tremendous aspect of paper industry paper mills were started in
1586 in Switzerland and London. Later it was spread to all other countries of the world
in no great amount of time.

The technology used in paper making has made many modifications and was
entirely different from the technology used in the beginning. In the year 1927 chlorine
gas was used for bleaching of the pulp. In 1979, “Robert Micholas” the French scientist
has designed first paper machine in the world. The paper machine used in the late 1960’s
was designed by “Lober didut and Brimal donklin”. The machines used now a day are

8
quite different and very well advanced both in capacity to produce and the enormous
speed with which they operated.

Another major development came in its way in 1862 when the soda pulping
process was first used in England. The consumption of Rosin & Alwnn was started in
1900 A. D. The industry in these days, has gain much development with production
technology.

History Of Indian Paper Industry

Unlike Iron & steel, textile and sugar industry the paper making industry didn’t
exist in ancient India for writing purpose ancient Indian’s used Bhoja patras (bark of tree)
and tal patras (bark of palm) were used some of the old man scripts and many grand has
preserve up to the present times were written on these materials which are not prevalent
now a days.

The modern art of paper making came to India quite late the
Foundations of latest papers industry gained momentum from late 1870’s prior to the
latest technology, people used different techniques.

Ancient Egyptians (the couriers of paper making to India) used papyrus sheets
made from stem tissue of the plant papyrus. The oldest written sheets, which are present,
now a day, can be dated back to as many as five thousand years. The Aryans used
derived and processed palm leaves and thin bark sheets of the Bhoja patras for writing.

First successful paper mill in India “the tata ghar” paper mills was established in
the year 1891 in Bangalore, East India from this year onwards, the paper industry in India
has gained much movements and speed through out the country and increased in number.

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Size And Capacity Of Paper Industry
The economic size of a paper industry is determined by the availability of raw
materials and density of market’s availability of power and transport facilities etc. The
beginning of 1st V plan there were only 19 paper and paper board mills with a total annual
capacity of about 1.39 lakh tons and production was 1.34 lakh tons. At present there are
106 mills with total annual capacity of 1394 lakh tons and production is about 11.12 lakh
tones although there has been a several spreading of mills in large dimensions. There are
some units well organized and well equipped with a production capacity of more than
50,000 tons and units too small with a capacity of 1,000 tons.

In India the growth of paper industry after independence is satisfactory under

the guidance of 5 year plans.

Its growth is reflected by the fact that from a major 17 mills with annual
capacity of 1.37 lakh tones. In 1957, the industry has been enlarged to 319 mills with
annual capacity of 32.31 lakh tones at the end of 7th 5 year plan.

The paper and paper boards production in India during 1951 was 17 units and the
total installed capacity of 1.40 lakh tons, file the production excluding news print is about
1.30 lakh tons.

And in 1994 the paper and paper board production was 380 units and with the
total installed capacity of 37.09 lakh tons, file the production excluding news print is
about 22 lakh tons. The lack of a large of large investment in their industry by “the
Indian paper corporation” in the public sector to give importance to the growth of the
industry to meet the requirement to the near future with effect from much 1987 paper
industry preview of “MODVAT” scheme during the last few years Govt. has made efforts
to reduce the importance of news point and forced the new paper and magazines to use
some of the cultural varieties of paper manufactured by Indian mills.

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Types Of Paper Product

Paper industry supplies various types of paper board, special paper to a no. of uses
which include Government education, companies packing, news paper & magazines etc.

The Indian paper industry produces a number of varieties of papers & paper
boards. These include glassine paper, art paper, carbon papers, insulation papers, draft
papers, maplitho papers, quoted papers, quoted board, duplex boards, triplex boards,
straw boards, paper boards, lottery paper, Xerox paper, decorative paper etc.

CONSUMPTION OF PAPER IN INDIA

The per capital consumption of paper is India is at low condition. Since it is at
very low level of about 3 kg at present. This is of the lowest in Asia continent is 18 kg
very is as it is only 0166 in the case of our India that Indian capital paper consumption in
likely into increase by 12 kg by 2010 A. D.

PER CAPITA PAPER CONSUMPTION

S.NO COUNTRY Per Capita paper consumption

1 USA 289
2 Canada 251
3 Sweden 213
4 Germany 205
5 Switzerland 168
6 Japan 153
7 England 135
8 Israel 79
9 Singapore 60
10 U.S.S.R 32
11 Brazil 26
12 Egypt 10

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 13 China 5
14 Indonesia 3.5
15 India 3

Present Status
In 1974 Government of India introduced the paper control order to regulate the
prices and qualities of paper boards with the withdrawal of paper control order. The
industry has received some receipt and its hope to achieve higher profitability by
producing these blends of paper and paper board which are supported by terrible demand.
A significant term around has been achieved by a large no. of units during the past
two or three years. However, the paper industry put a lot of something conflicting signals
during 1992.

The Government has taken the following step of encourage and enhance
production of paper and paper boards in the country they are

1. Paper units based on the use of minimum 75% of pulp derived from baggages,
agricultural, residues and other non contravention raw materials have been exempted
for industrial licensing subjected to 10 caution angles.
2. Manufacture of writing and printing paper and unquoted craft paper containing not
less than 75% by weight of pulp made for rice, wheat, straws, jute, and baggage mix
of more pulps of the above mentioned materials exempted for excise duty.
3. Import of water paper has been freely allowed without the need import license at low
rate of customs duty (20%). In recent years the Government in other certain
concessions with a review to help the industries to improve its capacity utilization
and financial liability. These include liberalized import of raw materials board
sanding of different vacant of paper and paperboards and de-licensing the
manufacturing of certain varieties of paper.

Future Prospects
The challenges to be met by the paper industry include production of stronger
paper and paperboards. Cost reduction through modernization encouragement of the use

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of non conventional materials for the production of paper and paperboards and striking
and equilibrium between demand and supply. Both the Central and State Government
along with the private sector should strive the basic input for papers and paper boards and
implement research and development.

The above measures should be used in order to improve the technology used and
also measures must be taken to increase the productivity of the paper industry in this
country through safe methods.

PAPER INDUSTRY STATE-WISE DISTRIBUTION OF UNITS &

CAPACITY
(In lakhs tonnes)

INSTALLED
S.No. STATE NO. OF MILLS PRODUCTION
CAPACITY
1. Andhra Pradesh 18 4.106 2.173
2. Assam 4 2.208 1.084
3. Bihar 8 0.915 0.025
4. Gujarat 45 2.743 1.670
5. Haryana 17 1.496 1.110
6. Karnataka 15 1.933 1.770
7. Jammu & Kashmir 1 0.033 0.009
8. Himachal Pradesh 13 0.094 0.215
9. Kerala 3 0.393 -
10. Madhya Pradesh 15 1.813 0.991
11. Maharastra 52 4.697 3.555
12. Nagaland 1 0.030 0.218
13. Orissa 7 2.136 1.207
14. Punjab 17 1.378 0.820
15. Rajasthan 9 0.433 0.064
16. Tamilnadu 21 2.051 1.616
17. Uttar Pradesh 58 3.120 2.092
18. West Bengal 21 2.386 0.858

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19. Chandigarh 1 0.030 0.016
20. Pondicherry 1 0.096 0.032

PROFILE OF THE ANDHRA PRADESH PAPER MILLS LTD.

One of the oldest paper mills in India, low profile mill, high tech. Plans in the
Andhra Pradesh paper Mill Ltd., Rajahmundry, is the biggest integrated pulp and paper
manufacturing plant in India produce a wide range of paper grades which includes
writing, printing, packaging and poster paper.

Rajahmundry is the ideal location besides the river Godavari in Southern India. It
is a pilgrimage center home for many temples and the cultural capital of Andhra Pradesh
as its home for the last 7 decades dense bamboo forest are in close proximity town
Rajahmundry has ample labour force.

The company was incorporated on June 29 th, 1964, is still the golden letter day in
the history of the mill is one of the 1 st joint stock public limited company in our country.
Then owned and managed by the Government handed over to Bangur group and Somani
group.

The mill has been certified as ISO 9002 company w.f. December 9 th 1998.
Quality management system by M/s DET NORSKE VARITAS (DNV) Netherlands.

It celebrated its silver jubilee year in 1989 APPM looks forward in to the future
with one guiding philosophy “Leadership through Quality”. During the year under the
view the company receives many awards for the year 1999, for best management may
contribution towards productivity, toward harmonious industrial relation and labour
welfare. The mill staidly expended to become one of the largest integrated mills in India.

GENSIS:
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 In 1921, a retired forest officer proposed to set up the paper mill in Rajahmundry.
Before this there was no paper mill in Andhra Pradesh state and Southern region also the
construction work was go on in 3 years i.e. up 1924 the mill was started its production by
the name of CARNATIC PAPER MILLS LIMITED. Later on it was renamed as Andhra
Pradesh Paper Mill and Company Limited as it was situated in Andhra region till 1930
the mills with the capacity of 7 tones a day. But unfortunately the mill was closed get
forward to take charge over the mills. Of course the reason maybe that of the demand for
the paper at that time was very low be at the as most of the Indians are illiteracy. At least
M/s Dayaian Co. took change over the mill is 1937. But the mills could not be own by
M/s Dayaram Co. for long time. In 1942 again the mills were closed, because of the
inability of the M/s Dayaram Co. to run the mills.

In 1942 M/s APTO & Sons, took over the charge of mills to run. Due to
requirement of high working capital and financial problems M/s APTO and Sons could
not continue to handle to charge again it was closed in 1946.

Under 1946-53 ultimately 1953 the “Andhra Government takes over the mill and
started running the mill till 1958. ooked in & decided to expand the mill by utilizing 2.3
crores French loan.

Growth:
In 1964 July, the Government called for private and experienced industrialist to
run the mill with this invitation of the Government the present management Bangur and
Somani group took the old paper machine inherited took over the mill and started running
it. It has the 3 equal participation between the Government the public and the west coast
paper mill Ltd. Under the through study of the expansion scheme for 1800 tones per
annum had extra in built capacity. Therefore it was decided to recast the project to raise
the capacity to 31,500 tones for years.

The first phase of expansion program in 1966 October was successfully

completed by installing second paper machine (MG) AGRAJA pulp mill, recovery unit
and coal fire boilers with in 7 months of the companies incorporation despite unfortunate

15
fire accident engulfing the imported machinery increasing the project cost due to
devaluation of rupee etc.
The third paper machine MF (ANUJA) Bleach plant for sulphate pulping unit
which had put the mill march 1967 into the normal production with the completion of
first phase of expansion.

The second paper phase in 1969 was completed for the production of 45 thousand
tones per year with innovation of Asha machine and expansion of Anuja machine and by
the modification of management achieved 60 thousand per annum production with the
help of second expansion.

In 1979 quality and quantity of output was increased and achieved 100% capacity
utilization by installing the number of new machine and minor equipment introducing
new technology in the mills to achieve around 75 thousand per annum. A new recovery
boiler was commissioned to 1981 to handle the liquor and to improve for recovery
efficiency.

In 1982, the machinery was rehabilitated because of the out dated machinery and
modern high-tech high capacity sheet cutter was commission to earn to the bigger
quantities at the sheet order from the customers further expanded to install capacity of 85
thousand per annum by 1986.

The mill received industrial licensed for increasing its capacity to 14644 metric
tones at present the mill installed capacity is 98,500 metric tones.

Today there are 5 paper machines with latest technology facilities on some
machine to make various varieties of paper with high quality both in the form of sheets
and reels.

Raw Materials:
The company with its well planned approach and concerned efforts could
successfully maintain the sustained supply of fibrous raw materials required for the paper
production, at most competitive cost throughout the year.
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 During the year the company could not get the allotment of bamboo lease copper
from Government of Andhra Pradesh, which forced the company to procure bamboo
from other weigh boring stated and private sources.

Cost of raw materials is tending to group because of this also due to undesirable
interference in the market driven status at the raw materials policies as well as
experienced in the Ogle area recently from where the company procures approximately
35% of its requirement.

During the year under review company’s farm forestry activities as a means of
ensuring abundant future supply of pulpwood with farmers and Eco-friendly approach
continued vigorously. Around 13.3 millions casuarina, seedling and subabul stumps were
distributed to the farmers in Visakhapatnam, East Godavari, West Godavari, Guntur,
Krishna and Prakasam districts as against 116 million seedlings distributed in the last
year.

Low cost quality planting material and plantation techniques developed out of
Research and development efforts of the company has shown every encouraging results
and wide acceptability.

Amongst the farmers which not only helps in increasing wood availability and
uplift of social status of farmers community but also in reporting and maintaining echo
balance in the catchments.

Company has joined hand with government agencies for development of planning
material plantations in the backward tribal area under which around 3.8 millions of
seeding casuarinas, subabul, eucalyptus, mango and other spices one under production
exclusively for the back ward area in association with district rural development authority
(DRDA). Once upon a time 85% bamboo 15% hard wood used for production but now
there is shortage of raw material changed 15% bamboo and 85% hard wood (casuarinas).

17
Technology:
Efforts in boiled made towards technology absorption adaptation and innovation.
1. Installation of continuous stock preparation for paper machine.
2. Installation of automatic A4 size cutting and packing system at cut to size unit.
3. Replacement of bag fitters of coal fired boilers 3 & 4 with ESP.
4. Adoption of state of the art medium consistence pumps chemical mixtures and
reactors.
5. To introduce state of the art of washing in screening technology in pulp mill.

Imported Technology:
On line computerized process system on paper machine no.2 and caliper control
system on paper machine no.3.

 Generation of chlorine dioxide along with electrolysis system.

 Up radiation of four designer with installation new low turbulent head box and high
efficiency bi-nip ness.
 The mill is one of the first installed equipment for oxidization of black liquor to
reduce sulfur looses.

APPM feature the following innovation falling evaporates with high steam
economy chimney washer of 320 tones per day capacity, chlorine dioxide SO2 usage in
the bleach plant and veto plant drum type chippers Alkaline sizing is done on one of the
paper machine and the mill is planning to install neutral sizing equipment on one another
machine. Mean while the mill is preparing to introduce ECF bleaching as well as all.

Suggestion Scheme
The suggestion scheme serves as an ideal form for bringing about an
improvement in the existing situation or creating a new situation which helps reduce costs
or increase efficiency productivity or simplicity. In pursuit of the core values of
innovation, employees are encouraged to initiate innovative suggestion, which would
improve the existing way to working.

Research And Development:

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 Research & development center industry continued to provide valuable support to
improve the quality of existing products. As a result of this we were able to re lunch
papers during the current year. The re lunch of paper with superior paper claims will
facilitate the company to sustain the growth in business in the years come. In addition,
work in progressing on the development of number of new improved products, as well as
up dating of production process as per international standards.

Information Technology:
The industry has implemented two leading edge world class ERP packages to
enable the business to respond faster and better performance. During the year, the
company was incurred a lot of expenditure on account of implementation of the new
processors and systems.

During the year (1999) industry has been actively working on the year 2000
(Y2K) hardware/software problem and has already made a significant progress in this
area. The mill has already completed a serious of prudent and reasonable steps to
minimize the risk of exposure of Y2K problem.

Out Look Of The Industry:

The paper industry continue to reach under the demand recession cheaper
imports and supply demand imbalances to consented the cost effectiveness, product
improvement and introduction of new products to meet the growing needs of the
customers.

DEVELOPMENT OF PAPER INDUSTRY IN INDIA

According to historical records the first paper mill was set up in the year 1812 A.
D. It was only after 1870’s manufacturing of paper gained momentum with
establishment of “Royal base paper mill” at “Hubli” which was latest merged unit
Tatanagar paper units from then onwards the production of paper has been constantly
increasing to meet the even increasing demand of paper in the country. At present about
what paper mills are in function units over all installed capacity of 24.50 lakh tones out of
high amount of production capacity 40% of the production are from small scale mills and
19
only 2 mills are joint undertakings only 52 mills have an annual installed capacity of
10,000 tones according to recent survey it was quite clear and evident that India is in back
seat when compared to countries like America, Japan.

The main reason for backwardness of the paper industry in India has high
illiteracy rate. Literacy factor is play a crucial role in determine the demand for paper in
any country. Besides this main factor another factor that play equally important role is
lack of paper. Technology and lack of production methods that is highly productive. By
implementing the recommendations and policies. Which were recommended by Dr. Man
Mohan Singh in the year 1991-1996 has been much important in paper industry due to
importation of latest and innovation technology.

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PROFILE OF THE APPM LIMITED

In 1921 a retired forest officer. Mr. Carnatic proposed to set up the mill in
RJY. The company was established in the year. 1924 under the name of Carnatic
paper mills with a capacity of one ton per day. Due to financial problem this mill was
closed for 7 years. In 1937 Mr. Dayarames Sons look over the organization. Again it
was closed in 1942 due to financial problems.

In 1953 the Govt of AP took over the company. In 1958 the planning
commission decided to expand the mills by inverting a loan of 2.3 crores of rupees
through the French Govt at this the capacity increased from 10 tones to 35 tones per
day.

In 1964 Baugur & Somani group took over the mill but Govt called for private
experience industrialists to run the mill. It was incorporate in 1964 as first joint sector
enterprises in India. It was 3-way participation between the Govt, public & west coast
paper mills, with their experience management quickly revised the expansion of the
mills with 7 crores to a capacity of 60 tones per day. But management could not do
that because of devaluation of rupee, I high administration expenses etc. This venture
management took a decision to exchange the per day capacity. In 1966 management
successfully completed first phase of expansion programmed by installing second
paper machine, pulp recovery unit and coal fire boilers etc. Per day production
capacity further increased by installing 3 rd paper machine in 1967 along with block
plant for sulphate phosphorous.

In 1969-second phase expansion programme was completed for the production

of 45000 taxes p.a. with an innovation of ASH machine and expansion of Abuja

21
machine the management achieved 60,000 tones p.a. production capacity with the
help of 2nd phase expansion.

In the year 1979 production capacity further increased to 75000 to P.A. By

installing a number of new machines & equipment and introducing new technology in
the mills.

In 1995-96 APPM has under taken 196 crores mill development plan to be
implemented in 2 phases involved technological up graduation & product
diversification up to 1.08 lakh tones p.a. Now present capacity of APPM is 1.12 lakh
tones p.a.

PILOTS OF ANDHRA PRADESH PAPER MILLS LIMITED

BOARD OF DIRECTORS

1. L.N. BANGUR- CHAIRMAN

2. Dr. N. TATRAO
3. ALKA BANGUR
4. N. SRINIVASAN
5. R.K. JOSHI
6. SURENDRA SINGH ( IDBI Nominee)
7. R.C. MALL – EXECUTIVE DIRECTOR
8. Ms. SHEETAL BANGUR (Director Commercial)

EXECUTIVES
CORPORATE OFFICE
SUDHIR BHANSALI - PRESIDENT (FINANCE)
P. B. NAIDU - SR VICE PRESIDENT (COMMERCIAL)
L. M. HOOGAN - SR VICE PRESIDENT (PROJECTS)
K.GEORGE THOMAS - SR VICE PRESIDENT (MARKETING)
SHREEYASH BANGUR - VICE PRESIDENT (CORPORATE

PLANNING AND BUSSINESS DEVELOPMENT)

22
WORKS
P. K. SURI - PRESIDENT (OPERATIONS)

U.V. SATHYANARAYANA - VICE PRESIDENT (WORKS)

J.K JAIN - GENERAL MANAGER
(RAW MATERIAL)
S.S. MOOKERJEE - GENERAL MANAGER (WORKS)
UNIT: C.P

C.PRABAKAR - VICE PRESIDENT CORPORATE

AFFAIRS

Auditors:
Brahmayya & Co.,
Chartered accountants
Visakhapatnam.

Principal bankers:
State Bank of India.

Registered office & mills:

Rajahmundry-533105.
East Godavari District
Andhra Pradesh.

Corporate Office:
501-509, Swapnalok complex,
5th floor, 92/93.Sarojini Devi Road,
Secunderabad-500 003.

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Company’s Mission:
Our Mission is to be a powerful force in the world economy in paper
technology through productivity and excellence; a shared vision for which shared
responsibility lies with all stakeholders.

Values:
Employee empowerment for commitment to total quality team efforts and
increased productivity. Ethical management practices for esteem, credibility life and
public image

Guiding Principles:
Integrity of management, union, staff, workers and all people associated with
us.

Eco friendly process, innovative value, engineering technology for better

quality and cost effectiveness.

Constantly increased profitability for the prosperity and growth of the

individual and industry, corporate, citizenship for meeting social objectives.

Quality Policy:
To achieve customer satisfaction through quality up gradation of products,
process and human resources on a continuous process.

Awards Taken By Company:

 Certificate of merit for capacity for 1989-1990 from Indian Paper Maker’s
Association (IPMA), in report of Large Paper Mills.
 Second prize for Capacity Utilization from IPMA for the year 1990-1991
 ‘YAJAMANYA RATNA’ (For best entrepreneurship) for the year 1994-1995 by
the State Government.
 Special Export Award (CAPEXEL) for2004-2005.

24
  “INDEPENDENCE DAY AWARD” by State and District Administration for
Social Forestry.
 State level “VANA MITHR AWARD” for excellent contribution in field of
afforest ratio.
Company also bagged CAPEXEL SPECIAL AWARD IN 2000 December in
recognition of its outstanding Exports Performance in Paper and Paper Boards for
year 1999-2000.

Marketing Activities:
The marketing division of APPM is headed by general manager (marketing)
and with report to the executive director and the responsible for.
1. Defining the marketing objectives.
2. Setting the marketing goals and for development of marketing strategies.
3. Defining policies and procedures of distribution.
4. Coordination of all marketing activities.
5. Measuring profitability of operations.
6. Assisting management corporate level.

Investments:
Investments are stated at cost provision for diminution in the market value of
long tern investments is not made.

Inventories:
 Finished goods are valued net realizable value.
 Stock of raw materials, stores, spare parts, material in transits etc., one
valued at coast after providing for cost of obsolesce cost includes
exercises of procurement, exile and custom duty and in net of credit
under motivate scheme.
 Bamboo extracted in the leased area under an agreement with the state
of government of A.P and head in stock at the end of the year, is
valued at the direct cost of such extraction.

25
  Purchase of prices in respect of the said bamboo unaccounted for when
the stocks are received at the factory in accordance with the form of
lease agreement.
 Scrape is valued at the es6timaTED MATERIAL COST.
 Stock in process is valued at estimated material cost.

Inventory Management:
There is a separate department for inventory management in APPM.
In APPM nearly 30thousand items are required for the companies production in is
include regularly required like bamboo, hardwood chemicals dies oil and coal etc.,
and occasionally used engineering items like nuts, bolts and spare parts etc.,

For 90% of the above items APPM gets credit but for items like coal and oil
APPM makes advance payment the reason for this is that coal and oil being scares
have great demand in India.

APPM maintains six months inventory in case of raw materials and two
months inventory in vase of coal and one-money inventory for chemicals and dies
there are no restrictions by government.
One advantage feature is mill is located nearest to the forest area is incurring
less transportation cost as compare to other industries cash is the most import current
asset for the operation of business. It is the basic input need to keep the business
running on a continues basis, it is also the ultimate object expected to be realized by
selling the product manufacture by the firm.

The major function of the financial manager is to maintain a sound cast

position.

Research & Development:

 In 1970 started establishment as a part of central laboratory, 1973 DISR
Department for industry recognition.
 Specific areas in which carried out by the company:

26
 New product development and product quality improvement.
 Identification of suitable additives chemicals and their plant trails.
 Chlorine dioxide bleaching and other alkaline sizing studies, bleaching & neutral.
Benefits derived as a result of the above R%D.
 Development of products like ss color cards, for files, special ticket printing
paperboard of export paper.
 Introduce new shade in product like Mg deluxe, color paper for wedding cards, SS
drawing cards neutralized sized copier, ink jet printing paper.

R&D Achievement:
1. NO.OF paper publishers 65
2. Indian Journals 46
3. Foreign journals 19
4. No of paper presented by Somania group
5. National 20 Foreign 4
In R&D technical library there are 500 books for all the Engineering Managerial,
Production and other books. Current Recognition valid ups to 31.3.2000 the
Recognition no NUTU/IVRD/138

R&D Assets:
Imported equipment Rs.201.47 lakh
Indigenous equipment Rs.12.50 lakh

Human Resources Development

Man power may be through of as the total knowledge, skills, creative, abilities,
talents and aptitudes of an individual involved.

It is the valuable assets of an organization a factory, organization and money

of physical equipment, an organization performance quantity and quality and qualities
of its human research.

27
Training Activities:
In the year 1997 training department was established to facilitate
implementation of the statutory provisional on the job, training being provided in
mills of Apprentices Act 1961.
It is only in the year 1988 that the strategic importance was given to the
training function and National Productivity Council, Madras and retained
systematically survey for assessing the training need for all the senior staff level wise.
In 1992-93 individual training had form on the basis of all level staff and
workers. Every year several training programmers was conducted for the employers
and the other training for management training diploma holders and technical training.

Suggestion development program’s, suggestion schemes, employment

development programs quality circles are the HRD intervention were undertaken by
the mill in additional to the training.

Nearly 30 quality circles are formed in the mill till 30 th June 1990 some of the
quality circles are

PRAGATHI QUALITY CIRICLE - FINISHING HOUSE

NEETAJI QUALITY CIRCLE - FINISHING HOUSE
GODAVARI QUALITY CIRCLE - PULPMILL

In the APPM the training program will be given first preference to the employee’s
children.

Welfare Activities:
The mill is not providing the employees with all statutory facilities for
children they are entitled but also extend various facilities voluntarily.

A Model High School with a playground, the APPM Educational and Cultural
Society to impart education for the employees children are running library and
recreation center.

28
 A staff club and cultural center both modern amenities are being provided at
the colony. Various activities under taken by the management and several services
towards the people of Rajahmundry.

1. Provided construction T.B. ward in general hospital.

2. Construction road divider on the national highway road of Y- junction
3. Conducted Eye camps, blood donated medical camp for various areas.
4. Provide water supply, parks public image opposite APPM colony.
5. Donated high tech van for medical services to Ramakrishna mission.

OPERATIONS DEPARTMENT:
The APPM LTD., manufactures of writing & printing paper, poster paper,
Kraft and business papers like Copier, Envelope and multipart stationery. Using
bamboo, Subabul Casuarinas, Mango Eucalyptus, Hardwood, Chemicals Dyes,
oils, coal etc., are main raw materials. The Company produces 300-315 tones per
day

A.P.P.M PAPER PRODUCTION

Year Ended Production (MT)
2002 94,334
2003 88,745
2004 1, 54,322
2005 1, 49,874
2006 1, 51,692
2007 1, 62,764

First installed capacity of APPM is 10tonnes at present installed capacity is

94000. Licensed capacity is 1467447 metric tones. In the financial year the company
achieved highest production 88,979 metric tones. There are 3 chippers in APPM.
Their capacity of 25 hour each. The third one is prepared by own technology with one
core. The first two chipper houses are under collaboration of German technology.

29
 The average size of the chips is 25 mm each chipper can be working 8 hrs.
And one-day 800tonn chips cutting in the process. Cooking process name is Sulphate
cooking or Kraft cooking 10 digesters there in mills liquor normally called white
liquor. Uncooked chips named as Knotters.

Process Of Paper
Raw material used in the manufacturing of pulp and paper process
Raw materials : Bamboo, Hardwood Casuarinas, and Subabul Mango,
Eucalyptus & waste paper
Major fuels : Coal, LHSH and HSD Oil Cooking,
Bleaching, Sizing
Loading Chemicals : Lime, Sodium Sulphate Rosin Sulphyric Acid &
Talcum.
Process description of pulp and paper manufacturing:
In our mills the sulphate process of pulping is adopted. The chief raw
materials bamboo and hardwood are chipped to one-inch size and fed to large
digesters having 80-m3 volumes. Here the chips are cooked/digested with a solution
Hydroxide and sodium sulphate for a period of 3hrs.
The solution forming black liquor dissolves the non-cellulosic materials.
At present the pulp from digesters is fed to vibrating knitters where large
unlooked bundles are removed (called knots) and which washed over large washing
drums in a counter current operation.

The washed pulp is dilutes and screening to remove small-uncooked fiber

bundles and sand etc., the screened pulp is thickened in dickers and stores in high-
density towers. It is proposed to replace the above old and obsolete two existing
parallel systems, with a single new state of art technology and efficient system
comparison of primary knotted and not stock screening and chemiwasher.

The washed liquor is sent to the chemical recovery section. The washed liquor
containing dissolved organics and in organics is concentrated in multiple effect
evaporators with the heat available in flue gas before firing in the recovery boiler. The
steam generated in utilized for power generation and then for the process requirement.

30
The in organics coming in the form of molten smelt is dissolved in the e week white
liquor from the cauterizing section to form green liquor. The green liquor is treated
with line at caustilizing section for making cooking solution.

The lime sludge generation in the process is burnt in the Rotary Lime Kiln to
produce the burnt lime for reuse.

The pulp so obtained in bleached in a number of stages. Bleaching removes

the coloring matter and imparts brightness to the pulp unbleached pulp as such is
utilized in the manufacturing various packing and wrapping paper.

Bleached pulp is utilized for the manufacturers of various writing, Printing and
base papers. During the first stage of the bleaching process the pulp is directly
chlorine & chlorine dioxide a resistance time of about one hour. The pulp is extracted
with as solution of caustic, washed and chlorine dioxide with intermediate washing
between the stages. The washed pulp is again thickened and stored in stock chests.

Chemicals such as Rosin and Alum are added to the pulp to develop the
property of resistance to the penetration of writing and printing inks. Other chemicals
are added to develop strength in the paper.
The pulp at a very low consistence is formed into a sheet on an end less screen
mesh made of prospers bronze/plastic wire. The sheer is calendared to impart smooth
finish in the surface on the both sides. A calendar consists of a number of chilled iron
rolls with good surface on both sides. A calendar consists of number which the sheet
is passed between the nips formed by the rolls.

31
PRODUCTS PRODUCED:

Anuja
1. SS Multi part stationery-47
2. SS Maplitho-80
3. SS White cover-200
4. SS Dairy paper-60
5. SS Account book paper-75
6. Andhra Copier-75
7. Mg.Spectrum paper-75
8. SS copier-754
9. SS Maplitho-70
10. SS Envelop paper-76
11. SS colour card-170 [blue,gree,orange,pink]

Anupama
1. Cream wove-52
2. White wove d-48
3. White wove education-52
4. Delux Maplitho
5. Maplitho-cs-95
6. SS-Copier

Agraja
1. Maplitho Rs-150
2. MS White cover-130
3. MG White cover-110
4. MG Green, Yellow, pink, blue, colour card.
5. Sandal card-90
6. MGD-Sandal card-12
7. DCC Orange Blue
8. Deluxe Kraft-140

32
 9. DCC brown paper
10. MG Kraft-140

Asha & Abha:

1. MG White Tissue-21
2. MG D-White poster-28
3. MG white poster-60
4. MG pink poster-28
5. MG poster-28,red,green, blue
6. MG Deluxe ribbed RR-40
7. Kraft
8. Yellow poster-60
9. MG Pink Poster-40 green,blue,yellow

COMPANY AT GLANCE
Company Andhra Pradesh Paper Mill Ltd
Establishment 1924
Founder Mr. Carnetic
Plant Address Mallyapeta,
Rajahmundry, E.g (dist),
Andhra Pradesh
Corporate Office 501-509, Swapnalok Complex,
5th Floor, 92/93, Secunderabad.
Product Paper
Awards Special Export Award,
ISO 9002
No. of Dealers 300(70 in our country)
N-Delhi15%
E-Kolkata17%
W – Mumbai25%
S- Chennai35%
No. of Workers 2660
Welfare schemes Education facilities to employees
Children, hospital facility, staff club,
Retirement benefits.

33
PRODUCTION TECHNOLOGY AT APPM

The Mill employs Sulphate process of pulping. The basic raw materials,
Bamboo and Hardwood are chipped to one inch size and fed to large digesters having
80 cu.mts. Volume. Here the chips are cooked / digested with a solution of sodium
hydroxide and sodium sulphide for a period of 3 hours. The mixture of digested stuff
is fed to vibrating knotters where large uncooked bundles are removed (called knots)
and then washed over large washing drums in a counter current operation.

The washed pulp is diluted and screened to remove small uncooked fiber bundles.
The screened pulp is thickened to a consistency of 10 to 12% in deckers and stored in
high density stock towers.
The pulp so obtained is bleached in a number of stages. Bleaching removes the
coloring matter and imparts brightness to the pulp. Unbleached pulp as such is utilised in
the manufacture of various packing and wrapping papers.
Bleached pulp is utilised for the manufacture of various writing, printing and base
papers. During the first stage of the bleaching process, the pulp is directly chlorinated
with chlorine and allowed retention time of one hour. This pulp is extracted with solution
of caustic, washed and again bleached in the subsequent stages with solution of either

34
calcium hypochlorite or chlorine dioxide with intermediate washing between the stages.
The washed pulp is stored in stock chests.

Chemicals such as rosin and alum are added to the pulp to develop the property
of resistance to the penetration of writing and printing inks. Other chemicals are added to
develop strength in the paper.

The pulp at very low consistencies is formed into a sheet on an endless screen
mesh made of phosphor bronze / plastic wire. The sheet is calendered to impart smooth
finish in the surface on both sides. A calender consists of a number of chilled iron rolls
with good surface finish, through which the sheet is passed between the nips formed by
the rolls.
This paper is reeled or cut into sheets by the cutters depending on the requirement for the
customers.

Steam is required for power generation and process requirement. Part of the
requirement is met with steam generated from the Recovery Boilers and the balance
steam is generated in Coal-Fired Boilers.

CORPORATE SOCIAL RESPONSIBILITY OF APPM

APPM CSR Initiatives…

 A sustainable source of livelihood
 Partnering in community betterment
 Providing Health-care
 Motivating employees to bring in awareness on Aids menace
 Children educational promotion
 Supporting cultural, religious and sports & games events
 Rendering service to the needy and during calamities

A Sustainable source of livelihood:

APPM is a stable source of direct employment to about 4,000 persons and indirect
employment to about 10,000 persons in the support services besides sustenance to about

35
24,000 families of marginal and wasteland owners in rural belts and tribal population
through social/farm forestry activities. Farm/social forestry total activities have been
creating nearly 15 lakh man-days employment per annum.
Free vocational training in tailoring and embroidery for weaker section women through
free tailoring centers helping them to enhance their self-esteem and family income.

Partnering in Community Betterment:

AAPPM constantly involving itself through financial support to an extent of Rs
100 lakhs, in the infrastructure development activities like laying roads; parks, traffic
islands and greenery development; digging bore wells and drinking water supply;
construction of culverts and ramp; construction of college and hospital buildings and
crematoria; bus shelters etc. for the betterment of local community.

Providing Health-care:

APPM started Mobile Medical Van Service with a team of one qualified doctor
and two paramedical staff on 8th December 2005 to provide basic health care to about
2.7 lakh rural populations of 27 Mandals in East Godavari, Visakhapatnam and
Srikakulam districts. During December 2005-March 2006, nearly 6500 villagers of about
200 villages utilized the medical service and nearly Rs 1.75 lakhs worth of medicines
were distributed.

36
Motivating employees to bring in awareness on Aids menace:

APPM constantly trying to bring in awareness on Aids menace and eradicate the
misapprehension through school children and employees’ rallies and enactment of a Play
let, titled “Kanuvippu” (“An Eye Opener/ Realisation”) by volunteering employees in
different towns including at State Capital Hyderabad.

Children educational promotion:

APPM has started two English Medium High Schools to provide high standard
education to its employees’ children as well as local children. The schools are run
through APPM Educational and Cultural Society. APPM contributes Rs 8 lakhs per
annum to meet schools’ running expenses.
During FY 2005-06, 565 School bags were distributed to economically backward
students besides providing school uniforms and books to needy children. Rs 60,000
worth Library reference books were provided to a local degree college,

37
 Every year nearly 250 students from different degree, post-graduate and
professional colleges and universities avail the facility of undergoing vocational training
and carrying out field-studies/project works under the guidance of APPM officials.

APPM AT RAJAHMUNDRY

WASTE WATER TREATMENT PLANT

38
INVENTORY CONTROL IN APPM. LTD.,
Companies based on the type of manufacturing special department and separate
stores maintain different groups of inventories and particular staff to particular areas is
maintained.

They are,
1. General Stores
2. MSP Stores
3. Auto Stores
4. Chemical Stores
The material department is based at Rajahmundry, is a part of administration
function to serve the user departments.

The department initials purchase indent for pulp waste paper process chemical as
per Annual budgeted requirements and capital items regularly required spares of
machinery also indented by this department so as to maintain the user specified
minimum stock levels storage and issue of all types of material. Whether or not directly
related to a material department also performs papermaking.

Materialsdepartment,manualprocedures, quality management system

iso 9001; 2000.
Overview: -
The materials department, which is based at Rajahmundry, is a part of
administration fun to serve the user departments. The department initials purchase
indents for pulp, wastepaper, process chemicals as per annual budgeted requirements and
capital items.

Regularly required machinery spare are also indented b this department, So as to

maintain the user specified minimum stock levels. Storage and issue of all types of
materials.

39
 A local purchase section with in the department, handles the purchasing activities
of general item and job contracts with local source of supply for fabrication and machine
of engineering components.

Other activities under preview of this department are disposal of scrap of

miscellaneous items, movement of goods with in the mill. Compliance to government
legislation on exercise, MODVAT etc.,

The storage areas for maintaining stock of various materials are separately
unmarked depending on the type of materials stored manual as well as mechanical means
are employed for material movement. An Online computerized system, which is in the
process of development aids quirks processing of receipts storage and issue.

Activities; -
Indenting of material
Procurement of material
Receipt of material
Inspection of material
Storage approved material
Return or Replacement of rejected materials
Issue of materials
Disposal of materials

Functions: -
1. Proper selection of Raw material.
2. Inspection.
3. Distribution of raw materials to different unit.
4. Utilization of raw material at proper time.
5. Planning the re-order level.
6. Transportation and material handling

40
 Materials Department Organisation Chart

COMMERCIAL HEAD

MATERIALS HEAD

Dy materials head.

41
OBJECTIVES:

SectionTohead Sectioninventory
achieve optimum head by proper planning
Section and controlSection
head initiating action to
(central
subject Indents
in department (for issue) of materials at right time, righthead
procurement quantity and right
receipts and (chemicals) disposal
quality, also proper storage and issue of materials to meet the requirement of user
excise)
departments for un interpreted activities
.
Stores assets/ Stores assets/ Stores assets/ Disposal assets/
clerks/ clerks/ supervisors clerks/
1. The total storage inventory not to exceed Rs.15 crores . clerks/
supervisors supervisors supervisor
a) Chemicals, dyes, raw materials, fuels Rs.5 crores.
b) General or engineering store includes Rs.10 crores.

2. Lead time required for raising procurement indent.

Section head
With drawings local
9 days
purchase
Without drawings 3 days

3. Clearence of stores in world report (sir) From the date of receipt of material not
exceed – 15days Purchase assets
clerks
4. No of stock outs in a month not to exceed: Zero
1. Chemicals, dyes, raw materials, fuel, packing material and process items.
2. General maintained spares etc 300items

5. No of discrepancies with in the stores not to exceed 5% of the total Item.

‘A’ category item 2%
‘B’ category item 3%
‘C’ category item 5%
6. Awarness on E.M.S to the entire person at (stores) materials department by way of
monthly training programme
7. No of training session in a quarter (one each for month for office or junior staff or
workers) ---3sessions

42
 INVENTORY MANAGEMENT-
A THEORITICAL BACK DROP

Inventory is composed of assets that will be sold in future in the course of

Business operations. The assets which firms store as inventory anticipation of needs are

1. Raw Material
2. Work –In- Process
3. Finished Goods

The raw material inventory contains items that are purchased by the firm from
others and are converted into finished goods through the manufacturing process. They
are an important input of the final product. The inventory management like the
management of other current assets should be related to the over all objective of the firm
(objective is maximizing the owner’s wealth).

Basic concepts to control the inventory:

1. Determination of the type of control required.
2. Economic order quality.
3. Reorder point.
4. Safety stock.

Objectives-
Inventory should be turned over as quickly as possible. It should, at the same
time ensure sufficient Inventories to satisfy production and sales demand.
 To avoid the Break down situations.
 The objective of inventory management consists of two counter balancing
parts.
1. To minimize the firms investments in inventory.

43
2. To meet a demand for the product by efficiently organizing the firms productions and
sales operations.
An optimum level of inventory should be determined on the basis of the trade-
off between costs and benefits associated with the levels of inventory.

HOLDING INVENTORY (Minimize the cost): -

The cost associated with inventory, fall into two categories.
1. Ordering/ Acquisition / Setup costs.
2. Carrying cost.

1. ORDERING COST
 Firms have to place orders with suppliers to replenish inventory of raw materials.
 The ordering costs involved in
a) Preparing a purchase order / requisition.
b) Receiving, Inspecting and Recording the goods received to ensure both
quantity and quality.
 The cost of acquiring materials consists of clerical costs and costs of
stationary.

2. CARRYING COST-
Acquisition of a larger quantity would increase the cost associated with the
maintenance of inventory in carrying cost. The cost of holding inventory may be divided
into two categories

A) Arise due to storing the inventory: - The main components of the category of
carrying costs are

a) Storage cost: - That is tax depreciation insurance maintenance of the

building and utilities.

44
b) Insurance of the inventory against fire and theft.

c) Deterioration in inventory because of pilferage, fire, technical

obsolescence, style obsolescence, and price decline.
d) Serving costs: - Such as labor for handling inventory, clerical and
accounting costs.

B) The opportunity cost of funds / Financial cost / Component of the

cost:-

This consists of expenses of in rising funds (interest on capital) to finance the

acquisition of inventory.

If the level of inventory increases, the carrying costs also increase and vice versa.
The sum of the order and carrying costs represents the total cost of the inventory.

Benefits Of Holding Inventory

Inventories perform certain basic functions, which are of crucial
importance in the firms' production and marketing strategies.

The basic function of inventories is to act as a buffer activity of a

firm, so that all do not have to be pursued at exactly the same rate.

The Key Activities Are: -

 Purchasing.
 Production.
 Selling.
If in the short term they are rigidly related the three key activities cannot be
carried out efficiently. Inventories permit short run relaxation so that each activity may
be pursued efficiently.

45
 Inventories enable firms in the short run to produce at a rate greater than
purchase of raw materials and vice versa or to sell at a greater than production and vice
versa.
The effects of maintaining inventory (uncoupling)

1. Benefits In Purchasing
a) A firm can purchase bulk quantities than is warranted by usage in production
or sales level. This will enable it to avail of discounts that are available on bulk purchase.
It will lower the ordering cost, as fewer acquisitions would be made (saving in cost).

c) Firms can purchase goods before anticipated or announced price increases.

This will lead to a decline in the cost of production.

2. Benefits In Production
Production can be carried on at a rate higher or lower than the sales rate. This
would be of special advantage to firms (to fix) with seasonal sales patter.

The sales rate will be higher than the production rate during a peak season and
lower during the off-season. The firm is either to produce at a level to meet the actual
demand i.e., higher production during peak season and lower production during off
season or produce continuously throughout the year and build up inventory which will
sold during the period of seasonal demand.
The level of production is more economical as it allows the firm to reduce the cost of

discontinuities in the production process.

3. Benefits In Sales
The maintenance of inventory also helps firms to enhance its sales efforts.

a). If there are no inventories of finished goods the level of sales will depend upon the
level of current production. A firm will not be able to meet demand instantaneously.

46
b). If the firm has inventory, actual sales will not have to depend on lengthy
manufacturing process. Thus inventory serves to bridge the gap between the current
production and actual sales.

c) The inventory in work-in-process performs two functions.

It is necessary because production processes are not instantaneous. The amount

of such inventory depends upon technology and the efficiency of production.

By shortening the production time, efficiency can be improved and the size of the
inventory reduced.

By holding less inventory cost can be minimized, but there is a risk that the
operations will be distributed, as the emerging demands cannot be met. On the other
hand, by holding a large inventory the chances of disruption of operations are reduced
but the cost will increase.

Techniques
The major problem areas that comprise the heart of inventory control are.

1) Classification Problem (Abc Analysis)

The ABC system is a widely used classification technique to identify various

items of inventory for purpose of inventory control.

This technique is based on the assumption that a firm should not exercise the
same degree of control on all item of inventory on the basis of cost involved the various
inventory items are categorized as

“A” category items.

“B” category items.
“C” category items.

47
 The items included in group “A” involve the largest investment. There fore
inventory control should be the most rigorous and intensive and the most sophisticated
inventory control techniques should be applied to these items.

“C” group items of inventory, which involve relatively small investment although
the number of items is fairly large. These items deserve minimum attention.

Group No. of items Inventory value (%)

A 15 70
B 30 20
C 55 10
Total 100 100
“B” group stands mid way. It deserves less attention than “A”, but
more than “C”. It can be controlled by employing less sophisticated
techniques. Inventory break down between number of items and inventory
value.
“A” group items are least important in terms of number of items. It is by far the
most important in terms of the investments involved. With only 15% of the number of it
accounts for as much as 70% of the total value of inventory.

The firm should direct most of its inventory control efforts to the items included
in this group. The items comprising “B” group account for 20% of investments in
inventory. They deserve less attention than “A”, but more than “C” which involves only
10% of the total value although number wise its share is as high as 55%.

Advantages: -
1. Easy allocation of funds to different items in an organization.
2. Easy classification of items according to priority significance.
3. It ensures closer control on costly items in which large amount of capital
has been invested.
4. It helps in developing a scientific method of controlling inventories
clerical not can be reduced and stock is maintained at optimum level.

48
Formula

Annual usage value = Demand or x Unit Price

Consumed items

LIMITATIONS: -
1. ABC analysis in order to be fully effective should be carried out with
standardization and codification.
2. It indicates nothing about profitability and criticality.
3. ABC analysis should be reviewed periodically so that changes in price and
consumption are taken into account.
4. Economic Order Quantity
The economic order quantity may be defined as that level of inventory
order that minimizes the total cost associated with inventory management. How
much inventory should be bought in one lot less than one order on each
replenishment? Should the quantity to be purchased be large or small? Or should
the requirement of materials during a given period of time in installments or in
several small lots? Such inventory problems are called order quality problems.

Buying the large quantities implies a higher average inventory level, which will
assure

1. Smooth production or sales operations, and

2. Lower ordering or set up costs. But it will involve higher carrying cost. The
optimum level of inventory is popularly referred to as the EOQ (Economic Lot Size).

49
Assumptions
1. The firm knows with certainty the annual usage (consumption) of a particular
item of inventory.
2. The rate at which the firm uses inventory is steady over time.
3. The orders placed to replenish inventory stocks are received at exactly that point
in time when inventories reach zero.
4. Procurement cost is assumed linearly related to number of orders.
The quantity to be ordered depends upon two factors:
1. The acquisition cost.
2. The cost processing material.
Formula:

EOQ = 2ab

CS

EOQ = Economic Order Quantity

a = Annual Consumption
b = Buying Cost per Order
C = Cost Per Unit
S = Storage and Carriage Costs

3) Re-Order Level (Point):-

Re-order level is mainly depending on lead demand. It may be defined as that
level of inventory when fresh order should be placed with the suppliers for producing
additional inventory equal to the EOQ. This level lies between the minimum level and
maximum level.

Lead time means it is the gap between placing an order and time of actual supply.

50
Lead Time: Servicing time + Delivery time +
Receiving time
Re-order level:

Lead -time in days X Average daily usage

Of inventory.

ASSUMPTIONS:-
1. Constant daily usage of inventory.
2. Fixed lead-time.
a) Minimum level:
It is the level below which stock of materials is never to fail.

Normal
Minimum level = Reorder level – Normal consumption X reorder level

b) Maximum level:
It is the stock level above which stock should not be allowed to rise.

Reorder + Reorder _ Minimum X Minimum

Maximum level = level quantity consumption reorder
Period

51
c) Danger level:
Danger level is below the minimum quantity. It is a level at which normal issue of the
material are stocked.

Average rate Emergency

Danger level = of consumption X supply time

d) Average stock level:

Minimum
Average stock level = stock level + ½ Order quantity

4). Safety Stock (Buffer Stock)

The effect of increased usage and slower delivery would be a shortage of
inventory. That is, the firm would face a stock out situation. It would disrupt the
production schedule and alienate the customers.

There fore be well advised to keep a sufficient safety margin by having additional
inventory to guard against stock out situation. Such stocks are called safety stocks.

D. Pricing of material issued

Each and every item in the stores has some values associated with, if materials
are issued to different jobs or work orders from the stores. These jobs or work orders are
changed with the value of materials issued to them. But the stock of materials consists of
different consignments received at different dates a price. It becomes necessary to decide
about the prices when materials are issued to it.

52
Methods:
 First In First Out.
 Last In First Out.
 Base Stock.
 Simple Average.
 Weighted Average Method.

FIFO (First In First Out)

The issues are priced in order of purchase material received first is issued first.
The oldest price is applied first to value the issued material. When the material having
the oldest price is fully exhausted. The next oldest price items are issued and the
corresponding price are used in valuation.
 The method is simple and easy to apply in practice it.
 There is a place for clerical errors in frequent price fluctuations.

Advantages
I. Materials are issued at actual cost hence balancing of stores ledger becomes easy
number. Adjustment for profit or losses is necessary on account of arbitrator
valuation of material.
II. Method is appropriate for those items that are likely to deteriorate of become
absolute with time.
III. It tends to keep the value of inventory hearer the current market price as well as
cost.

Disadvantages
I. Issue price of the same item may be different if used by different departments and
used for different lots.
II. For pricing one requisition more than one price has often to be adopted.
III. When the processes are fluctuated the effect of current market price is not
revealed in the cost of issues.

Bin Cards: -

53
 Bin means a rack container or space when goods are kept for each kind of
material an inventory tag is attached to the Bin card is maintained. A Bin card is a
quantitative record of Receipts, Issues and closing balance of each item of stores. The
Bin cards are used not only for entering receipts and issues but also for controlling the
stack by watching maximum and minimum level stated on the card.

When the ordering level is reached the shopkeeper has to send the requisition for
the further supplies. For each entry, whether relating to receipts and record in the balance
columns. It should agree with the physical in Bin card stores ledger account.
VERIFICATION OF PURCHASED PRODUCT PROCEDURE FOR
RECEIVING THE MATERIAL AT STORE AND ITS
INSPECTION:

Propose:
To define the method of receiving material into receipts section and initiating
inspection activities.

Method :
1. Receipt of material should be of two types.
I. Self consignment ( by Road / Rail, Post / Hand )
II. On Door – Delivery basis (by Road / Rail, Post / Hand )

2. Self consignment Material:

I. After receipt of LR / RR from the concerned vendors the
concerned stores section head shall verify the LR / RR
particulars for the material ordered.
II. Particulars of the LR / RR should be recorded in LR / RR
registers.
III. The stores assistant shall visit the respective transport
offices or railway parcel office with LR / RR copies to
verify the no of packages physical condition of packing and

54
 receipt of the documents like parts delivery challenge and
transportation copy of Invoice (Mod vat copy on Invoice)
and if any damage or non – tallying of packages or
documents should be informed to concerned stores section
heads.
IV. The stores Asst should arrange to get the materials
delivered form the transport office or railway parcel office
to the stores.

3. Door – Delivery Basis Materials:

The Door – Delivery Material should be delivered directly at the receipts section
of stores.

4. Security Gate Registration of incoming Materials all types have received goods,
should undergo SECURITY REGISTRATION in accordance with the applicable
procedure.

5. Receipt of Materials at Stores:

Upon receipt of materials and the delivery document at the stores section head
should verify the delivery documents for the following:
 Security Inward stamp.
 Correctness of material w.r.t purchase order.
 Correctness of quantities w.r.t purchase order.
 Correctness of quantities w.r.t delivery department.
 Physical condition of the material.

I. The quantities indicated by APPM weighment ship should be

considered as final and binding by all parties for the purpose of payment. In case of
APPM weigh bridge is not in operation for whatever the reasons. May be, the
wighment should be taken at outside weighment bridge recorded at such bridges should
be final and binding by the parties.

55
 II. Any damage or quantity variation should be noted on supplier’s delivery challan
LR / RR and necessary intimation should be sent to the vendor for action either for
replacement or to make good of the loss. The information should also be intimated to
the insurance department for claiming insurance.

6. Unloading of incoming Materials:

I. The Bulk materials should be unloading at the designated stores yard, as per layout
map of stores. Incase the storage go down is fully occupied with bulk material
received, an alternative locating should be identified for unloading the bulk material
received in excess of the designated god own storage capacity.
II. Non bulk material should be unloaded at the designated “under inspection Area” of the
stores.
III. The consignments after inspection and declared as approved should be unloaded stored
at appropriate designated places to tractability and FIFO issuer wherever required.

7. Identifying Incoming Materials:

I. Bulk material consignments should be identified pending receiving inspection; through

on under inspection display board with the following information (This board should
be yellow in colour).
MATERIAL :
MATERIAL CODE :
SIR NO :
SIR DATE :
SIR QUANTITY :

II. Different consignment of bulk material which is unloaded and stored separately should
be identified through separate display boards.

56
 QUALITY OBJECTIVES

S.No QUALITY OBJECTIVE MEASURABLE INDICATOR

01 To procure material at the Right Age analysis of conversion of
times procurement indent to purchases order on
monthly basis and review by chief of
commercial.
02 To procure material at the of Analysis of % of SIR s cleared without
specified quality non -conformity alert notes once in a
quarter for improvement.
03 To procure material at right price Variance between minimum quotation and
purchase order price on a case- to- case
basis.
04 From right Source Analysis of % of purchased Material with
respect to adequate supply sources on
adequate supply source on annual basis.

57
 INVENTORY MANAGEMENT ANALYSIS
In APPM total 70,000 items are used on different areas such as Auto
Stores, Chemical Stores, General Stores and MSP Stores.

For the analysis purpose, the data is gathered from all these stores; only 10 items
are concerned to know which item comes under which category (ABC analysis).

The 10 items annual consumption is taken into account from the last 3 tears.

The APPM follows the ABC analysis for the control of inventory. Depending on
the annual consumption or the total value of the item is taken into consideration. It is plot
possible to the same consumption item is maintained all the years. It must be changed
from time to time. Depending on the requirement and availability and consumption it is
changed.

So items are stored for 4 months of duration because of seasonal and off seasonal
effect. Such as in rainy season the availability of limestone is very less, so the stocks
before the season commence.

For analyzing the items annual consumption is taken for calculation.

Inventory Policies Followed By Appm: -

1. Stocks of raw materials, spare parts, material in transit etc., are valued at cost.
After providing for obsolescence cost, it includes expenses of procurement,
excise and customs and is met of creditors CAN VAT scheme.
2. Work-in- process is valued at cost which includes material, direct labor and over
heads.
3. Scrape is valued at established realizable value.

58
 THE APPM LTD., MATERIALS MANAGEMENT SYSTEM
Monthly Stock Ledger between the Period 01/04/2009-31/03/2010
Stores Ledger Account (Under FIFO System)
Purchases Issues Balance (opening/closing)
Date
Price Amount Units Price Units Amt Units Price Amount
Units Units Units
2009
April 1st -- -- -- -- -- -- 93.55 70 6548.50
15th 98 70 6860 -- -- -- 93.55 70 6548.50
98.00 70 6860.00
30th -- -- -- 97.50 93.55X70 +
3.95X70 6825 94.05 70 6583.5

37.00 70 2590.00 -- -- -- 94.05 70 6583.5

37.00 70 2590.00
May 15th -- -- -- 114.50 94.05X70 +
20.45X70 8015 16.55 70 1158.50
30th
115 70 8050.00 -- -- -- 16.55 70 1158.50
115.00 70 8050.00
Jun 15th -- -- -- 104.50 16.55X70 +
87.95X70 7315 27.05 70 1893.50
30th
124 70 8680 -- -- -- 27.05 70 1893.50
124.00 70 8680.00
Jul 15th -- -- -- 114.50 27.05X70 +
87.45X70 8015 36.55 70 2558.50
th
30
131 70 9170 -- -- -- 36.55 70 2558.50
131.03 70 9170.00
Aug 15th -- -- -- 95.00 36.55X70 +
70.45X70 7490 60.55 70 4238.50
30th
138 70 9660 -- -- -- 60.55 70 4238.50
138.00 70 9660.00
Sep 15th -- -- -- 95.00 60.55X70 +
34.45X70 6650 103.55 70 7248.50
30th

Date Purchases Issues Balance (opening/closing)

Price Amount Units Price Units Amt Units Price Amount
Units

59
 Units Units
th
Oct 15 121 70 8470 -- -- -- 103.55 70 7248.50
121.00 70 8470.00

30th -- -- -- 101.00 101.00X70 7070 2.55 70 178.5

121.00 70 8470.00

57.00 70 3990.00 -- -- -- 2.55 70 178.5

121.00 70 8470.00
Nov 15th 57.00 70 3990.00

-- -- -- 98.00 2.55X70 + 6860 25.55 70 1788.50

95.45X70 57.00 70 3990.00
30th

94 70 6580.00 -- -- -- 25.55 70 1788.50

57.00 70 3990.00
Dec 15th 94.00 70 6580.00

-- -- -- 115.00 25.55X70 +
57.00X70 + 8050 61.55 70 4308.50
30th 32.45X70

219 70 15330 -- -- -- 61.55 70 4308.50

219.00 70 15330.00
Jan 15th
-- -- -- 98.00 61.55X70 +
36.45X70 6859.5 182.55 70 12778.50
30th

54 70 3780 -- -- -- 182.55 70 12778.50

54.00 70 3780.00
Feb 15th
-- -- -- 67.50 67.50X70 4725 115.05 70 8053.50
54.00 70 3780.00
30th
137.9 70 9653 -- -- -- 115.05 70 8053.50
54.00 70 3780.00
Mar 15th 137.90 70 9653.00
-- -- -- 114.05 114.05X70 7983.5 1.00 70 70.00
54.00 70 3780.00
30th 137.90 70 9653.00

60
 THE APPM LTD., MATERIALS MANAGEMENT SYSTEM
Monthly Stock Ledger between the Periods 01/04/2010-31/03/2011
Stores Ledger Account (Under FIFO System)
Purchases Issues Balance (opening/closing)
Date Price Amount Units Price Units Amt Units Price Amount
Units Units Units
2010Apr
il 1st -- -- -- -- -- -- 80.00 65 5200.00
15th 78.00 68 5304 -- -- -- 80.00 65 5200.00
78.00 68 5304.00
30th -- -- -- 90.00 80.00X65 +
10.00X68 5880 68.00 68 4624.00

50.00 67 3350.00 -- -- -- 68.00 68 4624.00

50.00 67 3350.00
May 15th -- -- -- 102.00 68.00X68 +
34.00X67 6902 16.00 67 1072.00
30th
100 67.50 6750.00 -- -- -- 16.00 67 1072.00
100.00 67.50 6750.00
Jun 15th -- -- -- 80.00 16.00X67 +
64.00X67.5 5392 36.00 67.50 2430.00
30th
150 68.00 10200.00 -- -- -- 36.00 67.50 2430.00
150.00 68.00 10200.00
Jul 15th -- -- -- 94.00 36.00X67.5 +
58.00X68 6374 92.00 68 6256.00
th
30
110 68 7480 -- -- -- 92.00 68 6256.00
110.00 68 7480.00
Aug 15th -- -- -- 98.00 92.00X68 +
6.00X68 6664 104.00 68 7072.00
th
30
120 69 8280 -- -- -- 104.00 68 7072.00
120.00 69 8280.00
Sep 15th -- -- -- 110.00 104.00X68 +
6.00X69 7486 114.00 69 7866.00
30th

61
 Purchases Issues Balance (opening/closing)
Date Price Amount Units Price Units Amt Units Price Amount
Units Units Units

Oct 15th 115 69 7935 -- -- -- 114.00 69 7866.00

115.00 69 7935.00

30th -- -- -- 90.00 90.00X69 6210 24.00 69 1656.00

115.00 69 7935.00

80.00 70 5600.00 -- -- -- 24.00 69 1656.00

121.00 69 7935.00
Nov 15th 80.00 70 5600.00

-- -- -- 130.00 24.00X69 + 8970 15.00 69 1035.00

106.00X69 80.00 70 5600.00
30th

90 70 6300.00 -- -- -- 15.00 69 1035.00

80.00 70 5600.00
Dec 15th 90.00 70 6300.00

-- -- -- 120.00 15.00X69 +
80.00X70 + 8385 65.00 70 4550.00
30th 25.00X70

150 70 10500 -- -- -- 65.00 70 4550.00

150.00 70 10500.00
Jan 15th
-- -- -- 110.00 65.00X70 +
45.00X70 7700.0 105.00 70 7350.00
30th

20 70 1400 -- -- -- 105.00 70 7350.00

20.00 70 1400.00
Feb 15th
-- -- -- 80.00 80.00X70 5600 25.00 70 1750.00
20.00 70 1400.00
30th
141.0 70 9870 -- -- -- 25.00 70 1750.00
20.00 70 1400.00
Mar 15th 141.00 70 9870.00

-- -- -- 92.50 92.50X70 6475.0 93.50 70 6545.00

30th
Total closing stock is 93.50 units amount is 6545.00

THE APPM LTD., MATERIALS MANAGEMENT SYSTEM: -

Monthly Stock Ledger between the Periods 01/04/2011-31/03/2012

62
 Stores Ledger Account (Under FIFO System)
Purchases Issues Balance (opening/closing)
Date Price Amount Units Price Units Amt Units Price Amount
Units Units Units
2011Apr
il 1st -- -- -- -- -- -- 95.00 60 5700.00
15th 70.00 61 4270 -- -- -- 95.00 60 5700.00
70.00 61 4270.00
30th -- -- -- 100.00 95.00X60 +
5.00X61 6005 65.00 61 3965.00

50.00 61 3050.00 -- -- -- 65.00 61 3965.00

50.00 61 3050.00
May 15th -- -- -- 100.00 65.00X61 +
35.00X61 6100 15.00 61 915.00
30th
100 60.00 6000.00 -- -- -- 15.00 61 915.00
100.00 60.00 6000.00
Jun 15th -- -- -- 75.00 15.00X61 +
60.00X60.00 4515 40.00 60.00 2400.00
th
30
120 61.00 7320.00 -- -- -- 40.00 60.00 2400.00
120.00 61.00 7320.00
Jul 15th -- -- -- 80.00 40.00X60.00+
40.00X61 4840 80.00 61 4880.00
30th
120 63 7560 -- -- -- 80.00 61 4880.00
120.00 63 7560.00
Aug 15th -- -- -- 100.00 80.00X61 +
20.00X63 6140 100.00 63 6300.00
30th
120 62 7440 -- -- -- 100.00 63 6300.00
120.00 62 7440.00
Sep 15th -- -- -- 110.00 100.00X63 +
10.00X62 6920 110.00 62 6820.00
30th

63
 Purchases Issues Balance (opening/closing)
Date Price Amount Units Price Units Amt Units Price Amount
Units Units Units

Oct 15th 110 63 6930 -- -- -- 110.00 62 6820.00

110.00 63 6930.00

30th -- -- -- 90.00 90.00X62 6820 20.00 62 1240.00

110.00 63 6930.00

70.00 64 4480.00 -- -- -- 20.00 62 1240.00

110.00 63 6930.00
Nov 15th 70.00 64 4480.00

-- -- -- 100.00 20.00X62 + 6280 30.00 63 1890.00

80.00X63 70.00 64 4480.00
30th

80 65 5200.00 -- -- -- 30.00 63 1890.00

70.00 64 4480.00
Dec 15th 80.00 65 5200.00

-- -- -- 120.00 30.00X63 +
70.00X64 + 7670 60.00 65 3900.00
th
30 20.00X65

150 65 9750 -- -- -- 60.00 65 3900.00

150.00 65 9750.00
Jan 15th
-- -- -- 100.00 60.00X65 +
40.00X65 6500.0 110.00 65 7150.00
th
30

40 65 2600 -- -- -- 110.00 65 7150.00

40.00 65 2600.00
Feb 15th
-- -- -- 100.00 100.00X65 6500 10.00 65 650.00
40.00 65 2600.00
30th
90 65 5850 -- -- -- 10.00 65 650.00
40.00 65 2600.00
Mar 15th 90.00 65 5850.00

-- -- -- 60.00 60.00X65 3900.0 80.00 65 5200.00

th
30

64
Perform the ABC analysis from the following samples of 2009/2010.

Items Usage No.of Usage Value Usage Value

Value Items of in
Cumulative Percentage
frequency
Caustic Soda 2701440 1 2701440 69.00
China Clay 375375 2 3076815 78.61
Bearings 357000 3 3433815 87.73
Emery Type Roll 167805 4 3601620 92.02
Starch Modified 156000 5 3757620 96.00
Hot Melt Glue 73610 6 3831230 97.88
Asbestos Gasket 36720 7 3867950 98.82
Sodium Sulphate 26520 8 3894470 99.50
Chains 15892 9 3910362 99.90
Copying Items 3555 10 3913917 100
Source: Primary Data provided by APPM

65
Graph – 6.1(c)

Interpretation

FIFO system is not properly used by the company. Because it requires proper
super vision and control due to lack of it is FIFO system maintaining is critical.

Spares are used under weighted average system. At present most of the items are
issued under this system.

66
Perform the ABC analysis from the following samples of 2010/2011

Items Usage No.of Usage Usage

Value Items Value of Value in
Cumulativ Percentage
e frequency
Caustic Soda 2405970 1 2405970 44.45
Starch Modified 2080000 2 4485970 82.88
Bearings 277950 3 4763920 88.02
China Clay 252525 4 5016445 92.68
Emery Type Roll 211475 5 5227920 96.59
Hot Melt Glue 84830 6 5312750 98.16
Sodium Sulphate 40609 7 5353359 98.91
Asbestos Gasket 39312 8 5392671 99.63
Chains 16484 9 5409155 99.94
Copying Items 3075 10 5412230 100
Source: Primary Data provided by APPM

67
Graph – 6.1(d)

Interpretation

FIFO system is not properly used by the company. Because it requires proper
super vision and control due to lack of it is FIFO system maintaining is critical.

Spares are used under weighted average system. At present most of the items are
issued under this system.

68
Perform the ABC analysis from the following samples of 2011/2012

Items Usage No.of Usage Usage

Value Items Value of Value in
Cumulative Percentage
frequency
Starch Modified 1950000 1 1950000 39.25
Caustic Soda 1632120 2 3582120 72.10
China Clay 475702 3 4057822 81.67
Bearings 451350 4 4509172 90.76
Emery Type Roll 300850 5 4810022 96.81
Hot Melt Glue 65110 6 4875132 98.12
Sodium Sulphate 38772 7 4913904 98.91
Asbestos Gasket 33696 8 4947600 99.50
Chains 18500 9 4966100 99.96
Copying Items 1935 10 4968035 100
Source: Primary Data provided by APPM

69
Graph – 6.1(e)

Interpretation

FIFO system is not properly used by the company. Because it requires proper
super vision and control due to lack of it is FIFO system maintaining is critical.

Spares are used under weighted average system. At present most of the items are
issued under this system.

70
CHART: ABC ANALYSIS

100
U
90

s 80

70
a
60
g
50

e 40

v 30

20
al%
u 10

0 10 20 30 40 50 60 70 80 90 100

Value of cost in %

A. Items merit a tightly controlled inventory system with constant attention by

the purchase manager and stores management.
B. items formalised inventory system with periodic attention by purchase and
stores management.
C. items use a simpler system designed to cause the least trouble for the purchase and
stores department.

71
Calculation of EOQ
Problem:

Average Consumption of all types of Material 36,00,000 per annum

Average Unit Cost 360
Carrying Cost (equal to Cost of Capital) 15%
Ordering Cost 1500

Solution:

EOQ = Squrt (2AB/CS)

= Squrt (2* 10000*1500/ 360*0.15)

= Squrt (300, 00,000/ 360*0.15)

= Squrt (5, 55,555)

= 745 Units

Total Cost of Inventory at EOQ

= Squrt (2*ABCS)

= Squrt (2*10000*1500*360*0.15)

= Squrt (16200, 00,000)

= Rs 40,250/-

Interpretation:

As APPM is using various types of raw materials it not possible to calculate EOQ
for each of the products. Hence average consumption during 5 years period is taken as
approximate basis.

72
 The results provide the fact that each time an order is made the economic size of
such order will be 700 – 800 Units. In between the individual components it may vary up
to 500 – 1000 units.

FINDINGS

The purpose of this chapter is to present major findings identified in course of the
study and to give suggestions. That may be with while for further strengthening the
financial position of APP MILLS.

1. The company is Awarded G 50 9002 certificate by DNV of Netherlands for its mill
of Rajahmundry.
2. During all the periods under observation there is increase in working capital except
in the year 2006. In this year for the first time working capital decreased.
3. The elements of Inventory and Debtors caused massive increments in all the years
of observation. But during the year 2006 all the current assets except Loans and
Advances decreased. Thus suitable action was taken up on the working capital
problem of the organisation.
4. There is a research and development laboratory inside the factory to give the latest
technology improvements that are relevant to APP MILLS.
5. The average investment in working capital requirement is considerably decreased
during the period of study.
6. The profitability position is not healthy enough for an organization like APPM.
After 2002 APPM could not made required revision in selling price of the products
in fear of losing market share.

73
 SUGGESTIONS

1. Finding of items that reached the re-order level andraise the procurement of
Indent is done by the stores clerk. But this can be done by the system itself by
setting the appropriate system software programmed. It will reduce the workload.
2. Investment in fast moving and non-moving items is high and it must be reduced
freely available items are also maintained at stock levels. Excess investment in
the available items must be reduced as the transportation is at advanced stage.
So no need to maintain them at large quantity.
3. Centralization of stores in names itself indicating, but actually there are diversified
stores located at different places, which will lead to lack of communication and
high overheads and maintained charges. So they must come under one roof.
4. Simple codification procedure may exist of correct the occurrence in the existing
system.
5. Suppliers are located at a distance from the company. Suppliers are scattered all
over North India that resulted in higher lead-time. So there is a need to locate the
local suppliers.
6. For efficient inventory management proper item classifications system is necessary
that is establish of ABC and VED analysis.
7. Conversion period of raw materials to finished goods is varying from time to time.
This variation can be reduced by better co-ordination of the activities of all
departments concerned.
8. The sundry expenses like telephone charges and traveling expenses must reduce the
ordering cost.

74
 CONCLUSIONS

This study is carried out with the prime objective of understanding the inventory
management practices of A.P.P.M. Ltd., inventory management refers to an optimum
investment in inventories. It should be neither inadequate nor excessive. This study
mostly concerns the inventory decisions of A.P.P.M. Ltd., that is how much to order, that
is, what is the optimal quality of an item that should be ordered, when should be order be
placed and also how much safety stock should be kept. Thus what quantity of an item in
excess of the expected requirement should be held as buffer stock in anticipation of the
variations in its demand and or the time involved in acquiring fresh supplies is the
essence of inventory management.

Purchasing procedure and storing procedure of raw material, Work-in-process

and finished goods in A.P.P.M. Ltd., the study also relates to such aspects as which type
of materials are used and which type of inventory management techniques are used to
exercise the inventory control.

Inventory management techniques include various aspects as Economic Order

Quantity, Safety stock and Re-order point which is employed to regulate the inadequate
and excessive inventory in A.P.P.M. Ltd.

75
 BIBLIOGRAPHY

AUTHOR BOOK TITLE PUBLISHER

VIKAS PUBLISHING
FINANCIAL
I.M. PANDEY HOUSE PVT LTD., 1990
MANAGEMENT
Edition
FINANCIAL TATA MC GRAW 1998
KHAN & JAIN
MANAGEMENT Edition
FINANCIAL KITAB MAHAL
R.P. RASTUGI
MANAGEMENT 2000 Edition
FINANCIAL S.CHAND
PRASANNA CHANDRA
MANAGEMENT 2002 Edition
INVENTORY Kalayani Publishers
B.S.GOEL
MANAGEMENT 2002 Edition

76