INVENTORY MANAGEMENT IN VIJAYALAKSHMI JUTEMILLS- AN ANALYSIS

In this chapter an attempt is made to study inventory management in the study vijayalakshmi jutemills. inventory and its movement have lot of influence and impact over the working efficiency and overall profitability of the organization .so that ,the movements and its strength or study in this concept. Now a days inventory management is gaining important in every organization .a firms inventory management reveals its strength against their smooth flow of production. in any firm inventory management plays a vital role; by this a firm can achieve its goals.the organization should maintain optimum and sufficient level of inventory management.the important of inventory management can be viewed from the following facts. There is a continuous supply of materials ,spares and finished goods so that production should not suffer at any time and the customers demand should also be met. To remove both over stocking & under stocking Maintain investments in inventories at the optimum level of as required by operational sales activities. Eliminate duplication in ordering or replenishing stocks. Minimize losses and get profit maximization.

TABLE4.1 VJM: trends in total inventory

(in lakhs) year 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 Total inventory 49.16 57.51 55.04 43.15 45.93 % growth over preceeding year 5.94 8.93 2.88 4.26

INTERPRETATION: The trends in overall inventory are shown in the above table 4.0.

ECONOMIC ORDER QUANTITY

the vijaya lakshmi jutemills LTD. Can maintain different inventory techniques and procedures for the smooth running of production.at this part only the vijayalakshmi jutemills LTD can maintain economic order quantity also the EOQ is profit maximization for any organization.where both the carrying cost and ordering cost are the equal,it is quantity for maintain for better results.the major products in vijayalakshmi jutemills LTD are jute,stores & spares, oils & lubricants, packing material,diesel oil, stock of stores.the EOQ of these materials can be maintained by the organization.yhe ordering cost is the cost incurred by the organization after the place of an order,it includes the cost of stationary ,salaries of these engaged in receving and inspecting, salaries of those engaged in preparing the purchasa orders etc. the carrying cost includes the cost of store keeping ,intrest on capital locked up in stores,the incidence of insurance cost, evaporation etc.

EOQ ANALYSIS:

The formula for EOQ is 2AO/C A= annual demand for raw material B=ordering cost per order C=carrying cost per annum

YEAR RAW

STORES OILS SPARES 68.96 77.17 86.15 85.27 88.22

JUTE OIL 78.11 84 81.34 10.86 11.69

PACKING

DIESAL STOCK OF STORES 12.64 12.64 15.40 47.98 36.25

MATERIALS & 200708 200809 200910 201011 201112 96.25 85.96 98.20 95.26 97.56

&LUBRICANTS BATCHING MATERIAL OIL 15.40 26.99 37.58 28.39 29.80 65.75 52.14 52.14 12.19 32.75 10.18 63.69 14.53 22.16 25.26

EOQ OF RAW MATERIALS :

Component/year

2007-08

2008-09

2009-10

2010-11

2011-12

Raw materials

96.25

85.96

98.20

95.26

97.56

Interpretation:

The trends in raw materials of Vijaya Lakshmi jute mills are presented in table 4.2.the cost of raw materials has decreased 10.29 lakhs in the year 2008-09 when compared to 2007-08.and the cost increased to 12.24 lakhs in the year 2009-10 when compared to previous year.surpriginly the cost has decreased to 2.94 lakhs in the year 2010-11 when compared to 2009-10.the cost of raw materials has raised to 2.3 lakhs in the year 2011-2012. EOQ OF STORES & SPARES :

Component/yea r stores & spares

2007-08 68.96

2008-09 77.17

2009-10 86.15

2010-11 85.27

2011-12 88.22

Interpretation:

the trends in stores & spares costs of vijaya lakshmi jutemills are shown in the table 4.3.the cost of stores & spares increased to 8.21 lakhs in the year 2008-09 when compared to 2007-08.again the of stores & spares increased to 8.98 lakhs compared to previous year.surprisingly the cost was decreased 0.88 lakhs in the year 2010-11.the cost was increased to 2.95 lakhs in the year 2011-12.

EOQ OF OILS & LUBRICANTS :

Component/yea r Oils & lubricants

2007-08 15.40

2008-09 26.99

2009-10 37.58

2010-11 28.39

2011-12 29.80

Interpretation: The trends in oil & lubricant costs are shown in the table 4.4.the cost was increased to 11.59 lakhs in the year 2008-09 when compared to previous year 2007-08.again the cost increased to 10.59 lakhs in the year 2009-10.surprisingly oil & lubricant cost decreased to 9.19 lakhs in the year 2010-2011.again the cost raised to 1.41 lakhs in the year 2011-2012. EOQ OF JUTE BATCHING OIL :

Component/yea

2007-08

2008-09 84

2009-10 81.34

2010-11 10.86

2011-12 11.69

r Jute batching oil 78.11

INTERPRETATION:

The trends in jute batching oil costs are shown in the table 4.5.the cost has raised to 5.89 lakhs in the year 2008-09 when compared to 2007-08 .again the cost was raised to 2.66 lakhs in the year 2009-10 compared to the previous year 2008-09.surprisingly a deep decreased in the cost 70.48 lakhs in the year 201011 again it was increased to 0.83 lakhs in the year 2011-2012.

EOQ OF PACKING MATERIAL : Component/yea r packing material 2007-08 65.75 2008-09 52.14 2009-10 52.14 2010-11 12.19 2011-12 32.75

INTERPRETATION:

The trends in packing material costs are shown in the table 4.6. surprisingly the cost decreased to 13.61 lakhs in the year 2008-09 when compared to previous year 2007-08.packing material cost are same in the year 2008-09 & 2009-10.again the cost reduced to 39.95 lakhs in the year 2010-11 compared with the previous year 2009-10. Again the cost of packing material has raised to 20.56 lakhs in the year 201112.

EOQ OF DIESAL OIL

Component/yea r Diesel oil

2007-08 10.18

2008-09 63.69

2009-10 14.53

2010-11 22.16

2011-12 25.26

INTERPRETATION:

The trends in diesal oil costs are shown in the table 4.7.surprisingly the cost of diesal oil has raised to 53.51 lakhs in the year 2008-09 compared with the previous year 2007-08.the cost decreased to

49.16 lakhs in the year 2009-10 compared with the previous year.the cost has been raised to 7.63 lakhs in the year 2010-11 compared with 2009-10.again the cost raised to 3.1 lakhs in the year 2011-12 compared with the previous year 2010-2011. EOQ OF STOCK OF STORES

Component/year Stock of stores

2007-08 12.64

2008-09 12.64

2009-10 15.40

2010-11 47.98

2011-12 36.25

INTERPRETATION:

The trends in stock of store cost are shown in the table 4.8.the stock of store cost are same in the year 2007-08 & 2008-09.and the cost increased to 2.76 lakhs in the year 2009-10 compared with the previous year 2008-10.again the cost raised to 32.58 lakhs in the year 2010-11 compared with the previous year. surprisingly the cost decreased to 11.73 lakhs in the year 2011-12 compared with 2010-11.

ANNUAL COST & CARRYING COST OF OVERLL INVENTORY (2007-08)

s annual demand for raw materials=13040828 carrying cost for raw materials =24959

130408 28 265999 11 474926 95 538042 62 637033 53

24955 9 33952 4 41112 8 44295 9 45395 9

annual demand for stores & spares =4876424.70 carrying cost for stores & spares = 1152350

annual demand for stock of oils & lubricants=1089034.15 carrying cost for stock of oils & lubricants =115293

10893 4

11293

19090 0 26576 0 20076 4 21075 4

13090 17290 26321 32323

annual demand for stock of jute batching oil=552326.06 carrying cost for jute batching oil= 76869

annual demand for stock of packing material=4649344.32 carrying cost for packing material=207512

annual demand for diesel oil = 720020.56 carrying cost for diesel oil =21215
72002 0 45037 5 10275 4 15676 4 17868 4 21215 12089 10035 14002 16036

annual demand for stock of stores = 8942300.50 carrying cost for stock of stores =217798
89430 0 89423 6 10894 5 33927 8 25634 3

77798 79239 20343 23221 20344

ANNUAL COST & CARRYING COST OF OVERLL INVENTORY (2008-09)

annual demand for raw materials=26599911 carrying cost for raw materials =33924.11 annual demand for stores & spares =5457183.70 carrying cost for stores & spares = 193150 annual demand for stock of oils & lubricants=1909040 carrying cost for stock of oils & lubricants =130690 annual demand for stock of jute batching oil=594228

carrying cost for jute batching oil= 72818 annual demand for stock of packing material=3686993 carrying cost for packing material=342854 annual demand for diesel oil = 450375 carrying cost for diesel oil =12089 annual demand for stock of stores = 894236 carrying cost for stock of stores =19239

ANNUAL COST & CARRYING COST OF OVERLL INVENTORY (2009-10)

annual demand for raw materials=47492695 carrying cost for raw materials =41128.56 annual demand for stores & spares =6092276.70 carrying cost for stores & spares = 213656 annual demand for stock of oils & lubricants=265760 carrying cost for stock of oils & lubricants =152980

annual demand for stock of jute batching oil=575174 carrying cost for jute batching oil= 47932 annual demand for stock of packing material=3686874 carrying cost for packing material=304250 annual demand for diesel oil = 102754 carrying cost for diesel oil =14035 annual demand for stock of stores = 108945 carrying cost for stock of stores =20343

ANNUAL COST & CARRYING COST OF OVERLL INVENTORY (2010-11)

annual demand for raw materials=53804262 carrying cost for raw materials =44959.77 annual demand for stores & spares =6029912.70 carrying cost for stores & spares = 226989 annual demand for stock of oils & lubricants=200764 carrying cost for stock of oils & lubricants =46321

annual demand for stock of jute batching oil=768455 carrying cost for jute batching oil= 57798 annual demand for stock of packing material=8623142 carrying cost for packing material=388328 annual demand for diesel oil = 1567614 carrying cost for diesel oil =14002 annual demand for stock of stores = 339275 carrying cost for stock of stores =21321

ANNUAL COST & CARRYING COST OF OVERLL INVENTORY (2011-12)

annual demand for raw materials=63703353 carrying cost for raw materials =45959.77 annual demand for stores & spares =6238461.60 carrying cost for stores & spares = 239694 annual demand for stock of oils & lubricants=210754 carrying cost for stock of oils & lubricants =47323 annual demand for stock of jute batching oil=826895 carrying cost for jute batching oil= 59867

annual demand for stock of packing material=2315995.38 carrying cost for packing material=428998 annual demand for diesel oil = 1786284 carrying cost for diesel oil =16036 annual demand for stock of stores = 256343 carrying cost for stock of stores =37344

9. DEBTORS TURNOVER RATIO:

This ratio indicates the relationship between Net credit sales and trade debtors. It shows the rate at which cash is generated by the turnover of debtors. It is computed as follows DEBTOR TURNOVER RATIO = CREDIT SALES AVERAGE DEBTORS

The term debtors include trade debtors and bills receivable. Doubtful debts are not deducted from debtors. Moreover, debtors that dont arise from regular sales should be excluded.

DEBTORS TURNOVER RATIO OF VIJAYALAKSHMI FOR THE PERIOD OF 2007-2008 TO 2011-2012

YEAR 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 NET CREDIT SALES 322089148.8 294583079.3 302521386.9 391825292.9 224837027.7 AVERAGE DEBTORS 24519399.83 18852163.82 24757580.75 13269796.25 196989 RATIO 13.61 16.69 12.72 30.98 1141.36

INTERPRETATION:
A high debtors turnover ratio indicates that debts are being collected more quickly. Changes in this ratio show the changes in the companys credit policy or changes in its ability to collect from its debtors. This ratio is an excellent supplement to the information provided by current ratio. From the above

analysis it shows the debtor turnover ratio is high during the period of 2011-2012 which shows the collection from the debtors is quick which is safe for the firm. During the period of the study the debtors turnover ratio showed more fluctuations. It increased to 3.08% during the period 2008-2009 when compared with 2007-08. It decreased to 3.97% during 2009-2010 when compared with 2008-2009 again it showed an increase to 18.26% during 2010-11 and to 1110.38% during 2011-12 while comparing with previous year 2010-11.

10.FIXED ASSETS TURNOVER RATIO:

This ratio indicates the efficiency with which the firm is utilizing its investments in fixed assets such as plant and machinery, land and building etc. It is computed as under FIXED ASSETS TURNOVER = SALES NET FIXED ASSETS

FIXED ASSETS TURNOVER RATIO OF VIJAYALAKSHMI FOR THE PERIOD OF 2007-2008 TO 2011-2012
YEAR 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 COST OF SALES 303724245 276398239 288751567 377495871.1 218353844 FIXED ASSETS 5366896 4858009 4320832 4063569 3963569 RATIO 56.59 56.89 66.82 92.89 55.09

INTERPRETATION:
A high ratio indicates efficient utilization of fixed assets in generating sales and a low ratio may signify that the firm has an excessive investment in fixed assets. From the above analysis it shows the fixed assets turnover ratio for the period of 2010-2011 is high which mean that the firm utilized the resources effectively. The fixed assets turnover ratio has increased to 0.3% during the year 2008-2009 when compared with 20072008. The firm has increased its fixed assets turnover ratio to 9.93%during the period 2009-2010 when compared with the period 2008-2009.The fixed assets turnover ratio has increased to 26.07% which is very high during the period of study but the turnover ratio has decreased to 37.8 which is not satisfactory. Therefore the company must try to increase its fixed assets turnover ratio by utilizing its resources to a greater extent.

11. WORKING CAPITAL TURNOVER RATIO: WORKING CAPITAL TURNOVER RATIO = COST OF SALES NET WORKING CAPITAL WORKING CAPITAL TURNOVER RATIO OF VIJAYALAKSHMI FOR THE PERIOD OF 2007-2008 TO 2011-2012

YEAR

COST OF SALES
(RS.) 303724245 276398239 288751567 377495871.1 218353844

NETWORKING CAPITAL (RS.)

57949598 64867215.02 67749973.63 64279102.3 1136393.29

RATIO

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

5.24 4.26 4.27 5.87 192.14

INTERPRETATION:
Working Capital turnover ratio indicates the number of times the working capital is turned over during the year. A higher ratio indicates efficient utilization in working capital and a low ratio indicates otherwise. Income from services is greatly increased due to the extra invoice form Operations & Maintenance fee and the working capital are also increased greater due to the increase in current assets. The percentage decrease in cost of sales is more than percentage decrease in working capital hence the ratio increased in 2011-2012 significantly. Working capital decreased to 0.98% during the period 2008-09 when compared with 2007-08 it showed an improvement in the following years during the period of study it has raised to 192.14% by increasing 186.27% when compared with previous year 2010-11

GROSS PROFIT RATIO:

The first profitability ratio in relation to sales is the gross profit ratio. This ratio shows relationship between the gross profit and sales. Gross profit ratio shows the margin of profit on sales. This indicates how much profit is earned on your products without considering selling and administration costs GROSS PROFIT RATIO = GROSS PROFIT X 100 SALES

A high ratio of gross profit to sales is a sign of good management as it implies that the cost of production of the firms is relatively low. A relatively low gross margin is definitely a danger sign warranting a careful detailed analysis of the factors responsible for it.

GROSS PROFIT RATIO OF VIJAYALAKSHMI FOR THE 2008 TO 2011-2012 YEAR

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

PERIOD OF 2007-

GROSS PROFIT
18364904.24 18184840.17 13769819.92 14329421.78 6483183.68

SALES (RS.)
333803089.8 314813134.3 315105628.9 411224349.9 224837027.7

RATIO
5.5 5.78 4.37 3.48 2.88

INTERPRETATION:
It was observed that the gross profit ratio was high in the period 2008-2009 from then it is decreasing. A high ratio of gross profit to sales is a sign of good management as it implies that the cost of production of the firms is relatively low. A relatively low gross margin is definitely a danger sign warranting a careful detailed analysis of the factors responsible for it. The firm has decreased its gross profit from the period 2008-2009 constantly which signifies that the cost of production has increased. Gross profit of the firm decreased to 1.41%during the period 2009-2010 when compared with 2008-2009.

NET PROFIT RATIO:

It is known as net margin this measure the relationship between the net profits and sales of a firm. Net profit ratio establishes a relationship between net profit (after tax) and sales and indicates the efficiency of the management in manufacturing, selling administrative and other activities of the firm. It also indicates the firms capacity to face adverse economic conditions such as price competitors, low demand etc. NETPROFIT RATIO = NET PROFIT X 100 NET SALES

The net profit margin is indicative or management's ability to operate the business with sufficient success not only to recover from revenues of the period, the cost of merchandise or services, but also to leave a margin or reasonable compensation to the owners for providing their capital risk.

NET PROFIT RATIO OF VIJAYALAKSHMI FOR THE PERIOD OF 20072008 TO 2011-2012 YEAR
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

NET PROFIT (RS.)

326491.67 471986.03 480588.36 449776.11 469331

SALES (RS.)
333803089.8 314813134.3 315105628.9 411224349.9 224837027.7

RATIO
0.9 0.14 0.15 0.11 0.21

NETPROF ITRA TIO

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 0.21 0.14 0.9 0.15 0.11

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

INTERPRETATION:
This ratio indicates the firm's capacity to face adverse economic conditions such as price competition, low demand etc. Higher the ratio, the better is the profitability. However, it should be kept in mind that the performance of profit must also be seen in relation to investments or capital of the firm and not only in relations to sales. The net profit ratio is very low during the period of study. This indicates that the company is not having good profitability position. How- ever the net profit ratio increased from 2010-2011 to 2011-2012. The net profit ratio has increased to 0.5% during the period 2008-09 when compared with 2007-08 & 0.1% during 2009-10. It decreased to 0.4% during 2010-11 while comparing with previous year net profit i.e., 200910 and increased to 0.21% with a difference in 0.10% while comparing with 2010-11.

ABC ANALYSIS IN VIJAYLKSHMI JUTE MILLS:

This analysis is a form of inventory control where in different degrees controls are exercised over different items of stores on the investment (value) involved. For example in the making of aircraft engines involving high costs will be monitored closely while cost of tires, nuts and bolt etc, will be given lesser alteration. Advantages: Smooth flow:

ABC analysis ensures than minimum investment will be made in interior of stocks of materials or stocks to be carried with out any dange of interruption of production for want of materials or stores requirement. Cost savings: the cost of placing orders ,receving well and maintaining stocks are minimized speciality if the system coupled with the determination of proper economic order quantities, in vijayalakshmi jute mills . under this system all moving items are divided into three

ABC analysis of vijayalakshmi jute mills ltd: (2010 -2011) GROUPS Stores & spares Oils & A 1867 6 B 692 12 12 C 285 5 10 TOTAL TOTAL items 2844 23 37 TOTAL cost 44.506 lakhs 11.693 lakhs 4.065 lakhs 60.264 LAKHS

lubricants Packing 5 material

Interpretation: The ABC analysis of vijayalakshmi jute mills is exhibited in the table. all the items Including ABC analysis are moving items the total items of ABC analysis are 2904 items these items total value is 60.264 lakhs. The total items of first group are 2844 items and these value is 44.506.the 2nd group contains 23 items and with the value of 11.693 lakhs. There are 37 items which belongs to 3rd group with having the 4.065 lakhs

ABC analysis of vijayalakshmi jute mills ltd: (2011 -2012) GROUPS Stores & spares Oils & A 1798 5 B 712 12 14 C 304 6 14 TOTAL TOTAL items 2814 23 33 TOTAL cost 42.60lakhs 10.502lakhs 4.205 lakhs 57.307 LAKHS

lubricants Packing 5 material

Interpretation: The ABC analysis of vijayalakshmi jute mills is exhibited in the table. all the items Including ABC analysis are moving items the total items of ABC analysis are 2870 items these items total value is 57.307 lakhs. The total items of first group are 2814 items and these value is 42.60.the 2nd group contains 23 items and with the value of 10.502 lakhs. There are 33 items which belongs to 3rd group with having the 4.205 lakhs