Inventory Galla

INTRODUCTION
Financial management is the managerial activity which is concern with the planning and controlling of the Finns Financial resources. Though it was a branch of economics till 1890 as a separate activity or discipline. It is of recent origin still it as no unique body of nowledge of its own. !nd draws heavily on economics for its theoretical concepts even today. The sub"ect of financial management is of immense to both academician and practicing managers. It is of great interest to academicians the sub"ect is still developing and there are still certain areas when controversies e#ist for which unanimous solutions have been reached as yet. In financial management the wor ing capital management plays a ma"or role. The wor ing capital management will be effectively managed by inventory management. In my present chapter the inventory management will be discussed in these topics$ importance of inventory management$ nature of inventories$ need to hold inventories$ cost of holding inventories$ other characteristics of inventory situations$ types of inventory$ economic order quantity$ techniques of inventory management. Importance of Inventory Management Inventory management is concerned with eeping enough products on hand to avoid running out while at the same time maintaining a small enough inventory balance to allow for a reasonable return on investment. %roper inventory management is important to the financial health of the corporation& being out of stoc forces customers to turn to competitors or results in a loss of sales. '#cessive level of inventory
however$ results in large carrying costs$ including the cost of capital tied up in inventory warehouse fees$ insurance etc.
! ma"or problem with managing inventory is that the demand for a corporation(s product is to a degree uncertain. The supply of the raw materials used in its production process is also somewhat uncertain. In addition the corporations own
VCR INSTITUTE OF MANAGEMENT STUDIES
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production contains some degree of uncertainty due to possible equipment brea downs and labor difficulties. )ecause of these possibilities$ inventory acts as a shoc absorber between product demand and product supply. If product demand is greater than e#pected$ inventory can be depleted without losing sales until production can be stepped up enough to select the une#pected demand. *owever inventory is difficult to manage because it crosses so many lines of responsibility. The purchasing manager is responsible for supplies of raw material and would li e to avoid shortages and to purchases in bul in order o ta e advantages of quantity discounts. The production manager is responsible for uninterrupted production and wants to have enough raw materials and wor in process$ inventory on hand to avoid disruption in the production process. The mar eting manager is responsible for selling the product and wants to minimi+e the chances of running out of inventory. The financial manager is concerned about achieving an appropriate overall rate of return. Tunds invested in an inventory are idle and do not earn a return.
INDUSTRY PROFILE
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Overview of Foo Proce!!ing In "!try The food processing industry plays a vital role in the diversification and commerciali+ation of agriculture by ensuring value addition to agricultural produce$ generating employment$ enhancing the income of farmers and creating mar ets for e#port of agro foods. In short$ the food processing industry provides lin ages and synergies between the industrial and agricultural sector. ,hange in lifestyle and food consumption patterns and increase in the disposable income are some of the ey growth drivers for the industry. Fr"it! an #egeta$%e Proce!!ing The total installed capacity of fruits and vegetables processing industry has increased from 1.1 mn tones in -anuary 199. to /.0 mn tones in -anuary /001. The processing of fruits and vegetables is estimated to be around /./2 of the total production in the country. 3eat 4 %oultry %rocessing In meat and poultry processing sector$ poultry meat is one of the fastest growing animal proteins in India. Through 19915/000$ the estimated production was 1.0 mn tones$ which has grown at a ,!67 of 1.2. %er capita consumption has grown from 810 grams in /000 to about 1.88 g in /000 and is e#pected to grow to / g in /009. Mi%& ' Mi%& Pro "ct! India is the largest mil producing country in the world. !ccording to the !nnual 7eport F901 of 3inistry of Food %rocessing Industries of India$ Indian production stands at 91 mn tones$ having grown at a ,!67 of :2. !ppro#imately 10 mn rural Indian households$ primarily$ small and marginal farmers and landless laborers$ are engaged in the business of mil production. Marine Pro "ct!
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The country has a long coast line of over 8000 of e#ports$ 8..02 is contributed by fro+en shrimps.
ms$ 00800 sq
ms of
continental shelf area and /./ mn ms of e#clusive 'conomic ;one. <f the total value
!mong all$ the => is the largest importer of Indian marine products$ contributing to 1.2 in quantity and .02 in value of total e#ports$ as per the 3inistry of Food %rocessing Industries. (rain Proce!!ing 3illing of rice$ wheat and pulses form a part of the grain processing industry. India is self reliant in grain production. It is the second largest rice producer in the world$ with a /02 share in the global production. 'very year$ India produces about /00 mn tones of different food grains. !ll ma"or grains$ such as paddy$ wheat$ mai+e$ barley$ millets li e "owar ?great millet@$ ba"ra ?pearl millet@ and ragi ?finger millet@ are produced in the country. )%co*o%ic +everage! India is the third largest mar et for alcoholic beverages in the world. The demand for beers and spirits is estimated to be around .1. mn cases$ according to the !nnual 7eport F901 of 3inistry of Food %rocessing Industries of India. The alcoholic beverages industry provides considerable employment opportunities in the agro A processing industry. Con!"mer Foo In "!try ,onsumer food industries include pac aged B convenience food aerated soft drin and pac aged drin ing water. %ac aged food consists of ready5to5eat and ready5 to5coo products$ pastas$ breads$ ca es$ pastries$ biscuits$ rice fla es$ bun rolls$ noodles etc. !s per the 3inistry of Food %rocessing Industries$ bread and biscuits constitute the largest segment of consumer food with the production of about : mn tones p.a. <f the total production of bread$ :02 is produced in the organi+ed sector and the remaining in the unorgani+ed sector. In production of biscuits$ the organi+ed sector produces about 802 of the total production.
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Po%icy Initiative! The 6overnment has underta en several policy measures and initiatives. >ome initiatives can be named as followsC 3ost of the processed food items have been e#empted from the purview of licensing under the Industries ?Development 4 7egulation@ !ct$ 1901. In order to ease the availability of finance$ the industry is included in the list of priority sector. '#cise duty levied on the ready5to5eat products$ instant food mi#es$ aerated drin s and fruits and vegetables processing units is reduced. Foreign equity up to 1002 for most of the processed items e#cept for alcoholic beverages and those reserved for the small5scale units. ! large number of foreign collaborations have been approved. '#cise Duty of 182 on dairy machinery has been fully waived off and e#cise duty on meat$ poultry and fish products has been reduced from 182 to 82. F"t"re O"t%oo& India has the potential of being the biggest producer within the food and agricultural sector. In this respect$ the country is endowed with a large production base for a variety of food crops due to its varied agro5climatic conditions. The 6overnment of India under the 3inistry of Food %rocessing Industries has adopted a Eision /010 which envisagesC Trebling the si+e of the processed food sector Increasing level of processing of perishables from 82 to /02 Ealue addition to increase from /02 to .02 >hare in global food trade to increase from 1.02 to .2
The areas identified to develop the food processing industries in India are 5 establishing mega food par s$ moderni+ation of abattoirs$ cold chainBvalue addition
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and preservation infrastructure$ upgrading safety and quality of street food and establishment B up gradation of quality control laboratories. %olicy reforms in the food processing sector are already in their advanced phase$ and have prompted several corporate li e 7eliance$ IT,$ )hatia and 6odre" to invest in this sector. The growth in food processing industries would not only help in the growth of agricultural sector$ but also in the growth of these segments that may have remained marginali+ed for a long time. C%"!ter In!ig*t! ,luster Insights are aimed at highlighting the performance and e#pectations of the small and medium enterprises operating in the food processing sector in the Fol ata cluster. The sample considered for this analysis are the food processing firms profiled in this publication& the variables considered for analysis include operational structure$ business practices$ and future plans. Fey characteristics of the Fol ata food processing cluster !verage revenue growth of the food processing companies in the last two years was around /:2. /:2 of the companies possessed quality certifications such as I>< 9000C /000 and others. 002 of the companies were involved in e#ports. :12 of the profiled companies generated more than 002 of their total revenue from the international mar et !sia ?e#cluding 3iddle 'ast@ is the most preferred e#port destination. <n an average$ the companies operated at a capacity utili+ation of around 812. 092 of the companies were established prior to 1990. !round .82 and .2 of the companies respectively. were established between19905/000 and post /000
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Owner!*ip Pattern The ownership pattern of food processing companies was inclined more towards public limited companies. !round 802 of the public limited companies fall in the 7s 10 A 100 mn turnover brac et. %rivate limited companies in the Fol ata cluster recorded an average revenue growth of /02 in the last two years. S"$ Segment 3ost of the companies in the %ac aged B convenience foods segment fall in the turnover brac et of 7s 10 A 100 mn$ followed by mil 4 mil products segment. 802 of the companies in pac aged B convenience foods segment were involved in e#ports. ,ompanies dealing in mil 4 mil products operated at an average of 812 of their installed capacity. T"rnover +rac&et /02 of the companies in the turnover brac et of 7s 10 A 100 mn earned more than 002 of their revenue from the overseas mar et. The companies in the turnover brac et of 7s 100 5 /00 mn operated at an average of 882 of capacity utili+ation. (rowt* ' F"t"re P%an! The food processing companies in Fol ata cluster e#pect an average revenue growth of ..2 in the ne#t two years. Gotably$ 112 of the profiled companies are e#pecting more than 002 revenue growth in the ne#t two years. 3ost of the companies have envisaged future plans. The plans range from capacity e#pansion and moderni+ation$ to enter into new mar ets and diversification. For instance$ :02 of the companies are planning to tap new mar ets while .02 are willing to e#pand the plant capacity.
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C%"!ter $enefit! an *in rance! 3ar eting initiatives$ quality up gradation and funding from the financial institutions were the dominant benefits derived by the companies operating in the cluster. C*anging face of t*e In ian foo proce!!ing in "!try Hhile India(s food processing industry features an array of products li e fruit and vegetables$ meat and poultry$ mil and mil products& other consumer product groups li e confectionary$ chocolates and cocoa products$ soya5based products$ mineral water and high protein food also falls under its purview. !s per the figures given by the Gational ,ommittee on Food %rocessing 4 7egulatory !ffairs$ the food processing sector received investments worth =>D 1:: million between /001 and /008$ as against =>D 0.1 million in the previous year. During !pril /008 5 -anuary /009$ the sector received =>D 180 million worth of investments. T*e Foo Proce!!ing In "!try, In 7etrospect Hith an aim to streamline the meat and poultry processing industry in India$ the government has launched the Gational 3eat and %oultry %rocessing )oard ?G3%%)@ in Gew Delhi on February /009. The new board will have 19 members and will address issues related to the production of clean and hygienic meat and meat products. The board will also go a long way in helping the rural economy through employment generation. Further$ G3%%) will wor towards raising domestic standards in meat and poultry processing to international levels$ developing uniform and effective meat quality testing systems and addressing environmental pollution issues arising out of the conditions$ which is now prevalent in the meat industry. The cabinet had given the approval for the board(s set up$ with an outlay of 7s 1:.8: crore ?7s 1:8.: million@ Setting "p Mega Foo Par&! >imilarly a sum of 7s .$100 crore has been assured in order to set up 10 mega food par s in the first phase of the 11th five5year %lan. This includes 7s /$000 crore5 investment from individual units$ 7s 100 crore from special purpose vehicles ?>%Es@ and the ,entre contributing 7s 000 crore. ! total of .0 mega food par s are e#pected
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to be set up during the 11th %lan. 'ach food par is e#pected to have .0 units$ which are collectively e#pected to attract 7s /00 crore. The >%E$ which will require an investment of 7s 1/0 crore$ will include the government(s contribution of 7s 00 crore. *ence$ each par will attract an investment of 7s .10 crore. !part from private entities$ government agencies are also allowed to be part of the >%E. The par s will be set up in ,hittoor ?!%@$ ,hi magalur ?Farnata a@$ Dharmapuri ?Tamil Gadu@$ %une ?3aharashtra@$ -alandhar ?%un"ab@$ -angipur ?Hest )engal@$ 7ai )areilly ?=ttar %radesh@$ *aridwar ?=ttara hand@$ Galbari ?!ssam@ and 7anchi ?-har hand@. %rivate partners$ who have ta en part in the >%E$ include %atan"ali !yurved of 7amdev fame in =ttara hand$ >hrei Infrastructure in Hest )engal$ =nity Infra in %un"ab and ,hordia Food %roducts in 3aharashtra. For the >%E to be approved$ it should have a minimum of five members$ out of which one should be from the food processing industry. Some !taggering fact! India has 18: million hectares of cultivable land and the country produces 90 million tones of mil ?highest in the world@$ 100 million tones of fruit and vegetables ?second largest@$ :80 million livestoc ?largest in the world@$ /0: million tones food grain ?third largest@$ 8.. tones fish ?third largest@$ :89 million poultry and :0$/00 million eggs. In spite of having a vast production base$ the processing level is low 5 two per cent in fruits and vegetables$ /8 per cent for marine products$ si# per cent for poultry and /0 per cent for buffalo meat. Hith only 1.0 per cent share of India(s e#port of processed food in global trade& there lies immense potential for investment and development in this sector. In ian (rape Proce!!ing +oar In early /009$ the government launched the Indian 6rape %rocessing )oard ?I6%)@ in %une$ 3aharashtra. This board will provide a platform for the advocacy of the Indian wine sector. The board(s ma"or ob"ectives are to formulate a vision and action plan for the Indian wine sector(s growth including research and development for quality up gradation in new technologiesBprocesses& to collaborate and advise
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wine5grape growers$ the wine processing industry$ central and state governments on commercial$ regulatory and technical issues related to the Indian wine sector$ including best practices in viticulture& to increase farmers( income and employment generation$ with a particular focus on rural areas& to encourage cluster farming$ contract farming and farm diversification& to bring the benefits of value addition to the farming community and farmers fetching remunerative prices for their produce& coordinating with premier 7esearch and Development ?74D@ institutes in order to identify and develop appropriate root5stoc and wine varieties of grapes suited for different geo5climatic regions of India. Re!earc* an Deve%opment In !ugust /009$ >ahai said that the government was planning to formulate a separate policy for India(s food processing industry and develop 74D activities in the sector. The minister addressed this topic at a wor shop on (Gew %erspectives in 7esearch and Development in the Food %rocessing >ector$( "ointly organi+ed by the ministry and the Federation of Indian ,hambers of ,ommerce and Industry ?FI,,I@. The proposed new policy would lay special emphasis on %%% for giving a commercial orientation to 74D activities in this sector. The ministry intends to chart out a roadmap for scaling up 74D activities in the sector. It will also focus on technical capacity building for research with the ultimate aim of increasing the processing of perishables from the /001 5 08 level of 10 per cent to /0 per cent by /010 and raise value addition ?of agricultural produce@ from /0 per cent to .0 per cent.
)cceptance an F"t"re Food service industry professionals opine that the product e#pectations have increased from institutional clients$ suppliers and retailers$ especially with regards to the new technology that augments itself within the food processing sector. Food service players find it relatively easier to gain ground$ now$ within the mar et$ than s to the spurt of trade shows and e#hibitions$ which showcase the latest offerings within the F4) sector. II believe there is a paradigm shift in the way end consumers and the
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industry perceives the food processing industry. For e#ample$ we have observed that people are willing to accept processed fro+en foods now. ! few institutional players have also changedBmodified their style of operations$ food preparation and service to match the prerequisites of processed food. <ne cannot rely on the seasonal availability of certain e#otic fruits and vegetables$ hence$ fro+en foods serve as the most ideal option for such requirements$I e#plained$ *rishi esh )hat"iwale$ Eice %resident 5 >ales and 3ar eting$ Tastee ,hoice.
COMP)NY PROFILE
3r. 7amachandra G. 6alla Technocrat who was an G7J having engineering bac ground promoted !mara ra"a batteries ?!7)J@ as a private limited company yin 1980.)efore embar ing on this venture he wor ed as senior engineer with 3Bs >argent 4 Jundy$ =>! ?power consultants@ for about /0 years. %rior to this$ he wor ed as an 'lectrical engineer for =>! >teel ,orporation for about . years. In
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1989 !7)J has entered into technical collaboration with 6G) batteries to promote advanced E7J! ?value regulated lead acid@ batteries. %rior to setting its own facilities$ !7)J imported the product in semi5 noc ed ?>FD@ down condition in >eptember 1990& it was converted into a public limited company and come out with its I%< ?Initial public offer@ in -anuary 1991 aggregating rs.09.00 3illion. It was formed to manufacture maintenance5free sealed lead acid batteries in which commercial production commenced from 3ay 199/. despite its initial technical support from 6G) )atteries$ during the financial year 1998 !7)J ceded a /..12 sta e to -ohnson controls Inc. =>!$ at a premium of 7s.10 per share to cement a financial and technical tie5up to foray into automotive batteries.
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)M)R) R)-) +)TTERIES LIMITED !mara 7a"a )atteries Jimited was established in the year 1980 and then converted into limited in the year 1990. !3!7!7!-! has a strategic tie5up with -<*G><G ,ontrols Inc. of the =>! !3!7!7!- has demonstrated its commitment to offer optimum system solutions of the highest quality and has become the largest supplier of standby power systems to core Indian utilities such as the Indian 7ailways$ department of Telecommunications$ 'lectricity )oards and ma"or power generation com panics. )M)R) R)-) PO.ER SYSTEM P#T/ LTD/0 !mara ra"a power systems %vt. Has incorporated in 198: and was co5 promoted by !.%.'J',T7<GI, D'E'J<%3'GT ,<7%<7!TI<G ?!%'D,@. )y virtues of !%'D,(> equity participation$ !7%>!J has become a deemed public limited company as per section :.?!@ of the !ct.1908. !7%>J is engaged in the manufacture of uninterrupted power systems ?=%>@$ )attery charges ?),@$ and in venters. M)N()L PRECISION PRODUCTS P#T/LTD/
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It was started in the year 1998591 at pettamitta village$ ,hittoor dist. It produces battery components li e copper connectors$ copper inserts$ hardware required to !7)J 4 !7%>J. The unit is having required machinery and equipment li e press brea $ mechanical press$ could forge machine$ thread forming machine$ lathe$ drilling$ trapping$ machine etc.$ to dispatch to !7)J 4!7%>J. )M)R)R)-) ELECTRONICS P#T/LTD/ %opulated printed circuit boards ?%,)@ assembly on "ob wor basis for 3B>. !mara ra"a power systems %vt. Jtd.$ Tirupati. %opulated printed circuit boards assembly for sale to <riginal 'quipment 3anufacturers ?<'3@. Total strength of !7'%J comes around ()LL) FOODS ' SPICES LTD1 6!JJ! F<<D> is part of the =>D/01 3illion !mara 7a"a 6roup$ ma ers of internationally acclaimed !maron )atteries. >ituated at ,hittoor in !ndhra %radesh$ the mango belt in India$ 6!JJ! F<<D> ?6F%J@$ is a 1000 '#port <riented =nit ?'<=@ processing Tropical Fruit %urees$ ,oncentrates and Fresh Fruits. !JJ! F<<D> was started eeping in mind the local farming community wealth. The farming community is an integral part and forms the bac bone of the organi+ation. In it(s effort to be a forerunner in the chosen areas of business in terms of best practices in quality and technology. 6F%J plans to benefit farmers$ the industry and the nation in a phased manner 6!JJ! F<<D> )elieves in 'mpowering farmers by providing technical assistance from research institutes in the food industry to support the farmers in achieving better quality and higher yields by developing the gardening and harvesting techniques. Further to educating farmers with latest horticultural techniques. 6alla Foods is encouraging farmers to mobili+e the fruits directly to the thereby minimi+ing the fruit handling damages and high value reali+ations. The First phase has been completed. )y setting up of state5 of5the5 art5fruit processing plant to produce natural tropical fruit puree and concentrates.
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#ISION, Through the amara ra"a way$ we will be a significant player in Food and )everage sector and will be the largest processor of fruit pulp and concentrate in India. He are committed to creating and sharing wealth with the forming community by connecting them to global consumers and ma ing them our partners in progress. INFR)STRUCTURES, F)CILITIES, 6alla Foods processing facility is located in ,hittoor$ spread over an area of 100 acres. This place has been earmar ed to host a Integrated Food ,omple# of International standards. The facility currently has a tropical fruit %uree B ,oncentrate processing plant and the pac house for preparing the Fresh Fruits 4 Eegetables CUTTIN(2ED(E2TEC3NOLO(Y, 6alla Foods plant is equipped with state5of5the5art fruit puree processing aseptic filling line of >I65 3an+ini$ Italy to produce natural fruit pulps 4 concentrates. The plant has one of the India(s single largest fruit processing line 510 T%* ripen fruit processing with !septic %ac aging (a%%a Foo !4 tec*no%ogy initiative! !pan t*e fo%%owing i!cip%ine!,
%J, operated equipments for better control over monitoring and operations with supervisory units.
Two stage washing of fruits to ensure *!,,% quality requirement. Two5stage sterili+ation to retain the natural flavor and aroma. *igh speed advanced 3ono bloc aseptic filling machine supplied by >I6 3an+ini.
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Integrated 'nterprise 7esources %lanning system is in place to automate business processes and provide data for analysis and reporting$ allowing a closer control on quality and operations
Efficient P%ant Layo"t,

3inimal drop in power and steam transfer. >traight5line process flow design to maintain the hygiene and control in respective areas.
>pecial food grade self5leveling epo#y flooring to maintain optimum hygienic conditions.
,urved corners and food grade epo#y painted walls to avoid dust accumulation and to facilitate easy washing.
!dvanced high raise insulated roofing with double layer 6I >heeting with air e#tractors to maintain temperature inside the plant.
=tility lines are routed outside the plant to eep the interiors free from dust accumulation.
#a%"a$%e2In "!tria%2E5perti!e, 6alla Foods is bac ed with strong support and service from its team of highly qualified technical personnel and domain e#perts with perceptive nowledge and s ill. %owered by priceless hands5on e#perience these professionals are upgrading themselves continuously to identify and introduce improved and innovative product offerings that would delight customers worldwide and comply with the leading global quality standards PUREE PL)NT
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The fruit processing aseptic line is from >I653an+ini of Italy. The line has a capacity to process 10 metric tons per hour ripened fruits. The processing line is fully integrated and controlled by %J, P)C63OUSE 6alla Foods has a set up a Fresh fruit and Eegetable processing facility from 6reefa$ >pain. Fresh fruits including mangoes$ bananas are processed along with tropical vegetables li e < ra$ 'gg plant$ Jemon$ )itter gourd etc. The facility also holds ripening chambers$ pre cooling chambers and cold storage to handle fresh fruits and vegetables. #)POUR 3E)T TRE)TEMENT To enable Fresh 3ango e#ports to countries li e -apan and Forea$ 6alla Foods has commissioned the E*T facility. This ensures irradiation of the fruit flies in the fresh fruit. ! 6alla food is the first private organi+ation to set up this facility in the country. CERTIFIC)TIONS INTERN)TION)L 7U)LITY ST)ND)RDS 6F%J(> quality and business ob"ectives are designed to challenge the organi+ation through continual improvement and a +eal for results. !t 6F%J quality determines not only the end product but processes and operations at all levels. The company(s laboratory is equipped with the latest testing facilities to perform all necessary tests. Frequent 4 stringent quality chec s are carried out for %hysical$ ,hemical$ <rganoleptic 4 3icrobial parameters and immediate corrective measures are carried out on detection of variance in parameters$ assuring a high quality end product. !s a mandatory procedure$ all finished products are analy+ed with e#treme care before clearance by 6F%J(> quality assurance staff. O"r certification! inc%" e,
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1. *!,,% ?Food >afety ,ertification@ by T=E$ 6ermany /. I>< 9001C/000 ?Kuality 3anagement >ystem@ by T=E$ 6ermany .. F<>*'7 by >tar5F$ =>! :. >ure 6lobal Fair ?>6F@ 0. *alal ,ertification RESPONSI+ILITIESC Hater is an essential 4 precious natural resources. It is a nature(s gift without water there is no life on the earth. It is as important to the fruit processing industry as to the living being. )ut$ water is becoming scare year by year due to increase its consumptions in industries and agricultures sectors and indiscriminate =seBwastage by human being$ therefore$ it needs a integrated scientific approach for its management to use it so that undesirable wastages avoided which helps to save water for write utili+ation. .)TER M)N)(EMENT, Feeping the importance of water in mind$ we ta e care at every stage of use of water to best effect in our factory. <ur main source of water is bore wells the water is portable. Hater from all bore wells is collected in sump. From there is pumped over a tan to supply to various locations of use. To manage appropriately and conserve the water$ we are ta ing following steps at various locations of its useC
FRUIT .)S3IN(,
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The water is re5circulated after filtration up to its becomes dirty. This water is chlorinated to control the contamination by continuous dosing of chlorine in the washing tub. STE)M (ENER)TION, Hater for boiler feeding is treated in water softener to reduce the hardness. The steam condensate of evaporator is recycled to boiler to save water 4 energy as condensate will have high temperature.
>team condensate from other heating equipment 4 Eapors condensate from pulp concentration is collected in a tan to use in crate 4 floor cleaning.
Floor 4 'quipment are cleaned by compressed water "et to converse the water Treated effluent is used for civil construction and gardening. Floor meters are installed at location of ma"or use to have control over water utili+ation.
=E sterili+er is installed on main line of water$ which feed to processing saniti+e the water.
The water to be used for blending in product is treated in plant. Drin ing water is passed through +ero5b filter.
.)STE M)N)(EMENT/ <ur factory1 is equipped with aerobic effluent treatment plant of /00 FJ capacity 'ffluent from all locations of water use is collected through inter connected drains in 'T plant. It is aerated here 4 transferred to settlement tan for sedimentation of solid particles. The treated effluent is sent to o#idation pond. From pond$ water is used for gardening 4 civil construction.
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The sludge is transferred to drying bed. The dried sludge is used as manure in our garden. The main feature of our company is that no effluent treated or untreated is released in public drains 4 therefore$ does not pose any danger to surrounding environment 4 public. So%i .a!te management, The solid waste consists of followings.

>eeds of fruits >tem ends 4 s inBpeel of fruits 4 vegetables %omace5consists of fibers 4 embedded pulp. >poiled fruits 4 vegetables The seeds 4 peels of good fruits are passed second time through a pulpier to
remove the remaining pulpy portion. The pulp e#tracted so and %omace are mi#ed 4 given an en+ymatic treatment 4 centrifuge to remove the e#traneous materials so that pulp can be for ma ing concentrate. This helps in improving the recovery out of fruits. Then$ seeds 4 peels are dried is sun to be used as cattle feeds and fuel in small5 <scale industries. >poiled fruits 4 damaged portion of peels are used for maturing by vermin culture 4 composting in pits. The manure is used for gardening and helps to maintain good environment in and around our wor ing area. To maintain good environment$ we planning lot of trees in our premises$ which are nourished by in5 house made manure and treated effluent
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FRUIT .)S3IN(, The water is re5circulated after filtration up to its becomes dirty. This water is chlorinated to control the contamination by continuous dosing of chlorine in the washing tub. STE)M (ENER)TION, Hater for boiler feeding is treated in water softener to reduce the hardness. The steam condensate of evaporator is recycled to boiler to save water 4 energy as condensate will have high temperature.
>team condensate from other heating equipment 4 Eapors condensate from pulp concentration is collected in a tan to use in crate 4 floor cleaning.
Floor 4 'quipment are cleaned by compressed water "et to converse the water Treated effluent is used for civil construction and gardening. Floor meters are installed at location of ma"or use to have control over water utili+ation.
=E sterili+er is installed on main line of water$ which feed to processing saniti+e the water.
The water to be used for blending in product is treated in plant. Drin ing water is passed through +ero5b filter.
PRODUCTS
%uree Bpulp
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,oncentrates )everages Fresh fruits Fresh vegetables.
PUREE8PULP, 6all Foods offers finest tropical fruit purees including 3ango purees$ 6uava purees$ %apaya puree$ Tomato puree etc. Fruits are carefully graded$ sorted and are directly sourced from the farmers to a large percentage$ we ensure direct interaction with the farmers and share nowledge on pre 4post harvesting practices$ resulting in better quality$ better yield and highest satisfaction. M)N(O PUREE

!lphonso 3ango Totapuri 3ango Hhite 6uava %in 6uava Tornota 9ellow papaya 7ed papaya !cidified banana puree.
(U)#) PUREE

TOMOT) PURE
P)P)Y) PUREE

+)N)N) PUREE
CONCENTR)TES,
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6alla Foods offers finest tropical fruit concentrates including 3ango concentrates$ 6uava concentrates$ %apaya concentrates$ Fruits are carefully graded$ sorted and are directly sourced from the farmers to a large percentage. He ensure direct interaction with the farmers and share nowledge on pre 4post harvesting practices$ resulting in better quality$ better yield and highest satisfaction. M)N(O CONCENTR)TES

Totapuri 3ango GLe lain 3ango
(U)#) CONCERNTR)TES

Hhite 6uava %in 6uava
P )P)Y ) C O NCENTR)TES

9ellow papaya 7ed papaya
+RE)#E(ES
Fr"it rin&! ,lassical 3ango and !pple5Jitchi 6alla Foods has entered the popular fruit drin s segment with the launch of 6alla Fruit Drin s in two Flavors5,lassical 3ango and an e#otic biend of !pple5Jitchi.
Fr"it nectar!

6alla thic 3ango 6alla thic mango coc tail 6alla Thic 3ango 3agic
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(a%%a T*ic& Mango, 6alla Thic 3angos5 the thic est "uiciest mangoes$ bottled "ust for youM made from the fastest and "uiciest mangoes& 6alla thic mango is a delicious. 5 6alla Thic 3ango ,oc tail %ure$ true and unmatched.... 6alla thic mango coc tail is a sumptuous blend of e#otic fruits with the quintessential ing of fruits. (a%%a t*ic& mango magic, '#perience through magic rush in your mouth with the inimitable blend of 6alla thic mango with apple or orange. FRES3 FRIUTS, Tropica% fre!* fr"it! proce!!ing at integrate pac& *o"!e faci%ity, 6alla Foods has a set up a Fresh fruit and Eegetable processing pac house in addition to the state of the art fruit %uree 4 concentrated processing. Fresh fruits including 3angoes$ bananas are processed along with tropical vegetable li e < ra$ 'gg plant$ Jemon$ )itter gourd etc.$ The facility also holds ripening chambers$ pre cooling chambers and cold storage to handle fresh fruits 4 fresh vegetables.
FRES3 #E(ET)+LES, Tropica% fre!* vegeta$%e! proce!!ing at integrate pac& *o"!e faci%ity, 6alla Foods has a set up a Fresh fruit and Eegetable processing pac house in addition to the state of the art fruit %uree 4 concentrated processing. Farms around the facility grow tropical vegetables li e < ra$ 'gg plant$ cluster beans$ ridge gourd$ )itter gourd and leafy vegetables. 6alla fruits entered into contact forming with the farmers to ensure quality produce. ! 6alla fruit also enriches the farming community by sharing with farmerNs pre and post harvesting technique.
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NEED FOR T3E STUDY

The choice of area of the study for the pro"ect wor given after initial study companyNs operations and system of wor ing. Through the company has several departments$ the prime area of my interest was in finance. !fter scrutini+ing various financial aspects$ I found to inventories which consist an integral of wor ing capital. !mara 7a"a )atteries Jtd.$ which need better management. 'very firm must maintain adequate inventory for its smooth running of the business. For the purpose maintain of adequate inventory is must.
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SCOPE OF T3E STUDY

The pro"ect can be carried out to overall industry or other industries also. Inventory management can be measured with different techniques proper purchase procedure$ proper storage perpetual inventory system and establishment of a system budgets reviews slow and non moving items.
O+-ECTI#ES OF T3E STUDY

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To determine the inventory levels in !mara 7a"a batteries JTD 3easuring the requirement raw material for the better control of production process in !mara 7a"a batteries JTD To evaluate inventory management techniques and detail '<K for optimi+ation cost of inventory in 7a"a batteries JTD To evaluate !), analysis as well as '<K for the inventory of 7a"a batteries JTD in order to efficient inventory management.
LIMIT)TION OF T3E STUDY
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)ecause of time constraint the deep analysis may not able to under ta e The inventory management techniques have been apply !), and '<K analysis only The complete information regarding the financial statements of the firm may not be available !ll the values used in the pro"ect are all have been collected from the secondary sources
RE#IE. OF LITER)TURE
Definition of inventory
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I-ohn -.*amptionI defined inventory as Ithe goods for eventual resale by the firmI. Inventory$ measured by rupee value constitute the ma"or element in the wor ing capital of many business underta ings. Inventory is the value of raw materials$ consumables$ and spares$ wor 5in process& finished goods are called as loc up capital. The ma"or determinants of investment inventory areC a@ Jevel of sales. b@ Jength and technical nature of the production process. Inventory involves two types of costs. The first is Idirect costI which is too
connected to buying and holding of goods and the second is Iindirect costI of financial cost. The direct cost includes ordering costs. These costs include cost of placing order& shipping$ handling and quality discounts etc. and another one carrying cost are the costs which are incurred for storing the goods. These costs include the space insurance$ spoilage and damages or thefts. The indirect costs include interest paid on the capital tied up in the inventory and the inadequacy of materials involves the cost.
I6ood inventory management is good financial managementI

)y >.,.F=,*!J.
Nat"re of Inventorie! Inventories are stoc of the product a company is manufacturing for sale and components that ma e up the product. The various forms in which inventories that e#ist in manufacturing company are 7aw materials Hor 5in5process Finished goods These are those basic inputs that are converted into finished product through the manufacturing process. 7aw materials inventories are those units which have been purchased and stored for future production.
Raw materia%!
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.or&2in2proce!! These inventories are semi5manufacture products. They represent products that need more wor before they became finished for sale Fini!*e goo ! These inventories are those completely manufactured products which are ready for sale. >toc s of raw materials and wor 5in5process facilitate production while stoc of finished goods is required for smooth mar eting operations. Thus$ inventories serve as lin between the production and consumption of goods. Nee to *o% inventorie! 3aintaining of inventories involves trying up the companies and incurrence of storage and handling cost. There are three general motives for holding inventories. Tran!action motive It emphasi+es the need to maintaining inventories to facilitate smooth production and sales operation. Preca"tionary motive It necessitates the holding of inventories to guard against ris of unpredictable changes in demand and supply force and other factors. Spec"%ative inventorie! It influences the decision to increase or reduce inventory level to ta e advantage of price fluctuations. The firm should always avoid a situation of over investment or under investment in inventories. The ma"or dangers of over investment in inventories are
i. ii. iii.
=nnecessary tie up of the funds and loss of profits. '#cessive carrying cost. The ris of liquidity.
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The consequences of under investment in inventories are

i. ii. iii.
%roduction hold5ups Failure to meet delivery commitments. Inadequate raw materials. Hor 5in5process will result in frequent in production interrupts.
!n efficient inventory management should
'nsure a continuous supply of raw materials to facilitate uninterrupted production. 3aintain sufficient supply of raw materials in periods of short supply and anticipate price changes. 3aintain sufficient finished goods inventory for smooth sales operation and efficient customer service. 3inimi+e the carrying cost on time. ,ontrol investment in inventories and eep it at an optimum level
Inventory management tec*ni9"e! The effective inventory management requires an effective control system for inventories. Inefficient inventory control system result in unbalanced inventory and infle#ibility and increases the level of investment and ma es the firm unprofitable$ the various techniques used for inventory management and control.
1. !), analysis. /. 'conomic order quantity. .. ,omputeri+ed inventory control system. :. Inventory turnover ratio. 0. E ' D !nalysis. 8. Determination of stoc level. 1. Determination of proper storage. 8. ,lassification and codification of inventories.
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E!!entia% Re9"irement! of Inventory Contro%, 'ssential to an adequate control of inventory are the following requirements.
O
There should be proper co5ordination between various concerned$ vi+.$ purchasing$ departments receiving$ inspections$ storage$ issues and cost departments.
%urchasing should be centrali+ed under the control of a competent manager. There should be proper planning of materials with codes$ materials satisfactorily storage control procedures.
O$:ect! of Inventory Management The main ob"ectives of inventory management are operational and financial. The operational ob"ectives mean that the materials and spares should be available in sufficient quantity so that wor is not disrupted for want of inventory$ the financial ob"ective means that investments in inventories should not remain idle and. 3inimum wor ing capital should be loc ed in it.
1. To maintain a large si+e of inventory for efficient and smooth production and
sale operations.
/. To maintain a minimum investment in inventories to ma#imi+e profitability. .. To determine and maintain optimum level of inventory investment. :. To avoid both over5stoc ing and under5stoc ing of inventory. 0. To place an order at the right time with the right sources to acquire the right
quantity at the right price

8. To ensure a continuous supply of raw materials to facilitate uninterrupted
production.
1. To maintain sufficient stoc of raw materials in periods of short supply and
anticipate price changes.

8. To maintain sufficient finished goods inventory for smooth sales operation$
and efficient customer services.

9. To minimi+e the carrying cost and time$ and control investment in inventories
and eep it an optimum level.
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Co!t of *o% ing inventorie! The determination of inventory cost is essentially an income measurement problem$ a means whereby there is rational orderly$ systematic interpretation of the effect
on the economic progress of the company of e#penditures involved acquiring goods or in maintaining and operating productive facilities. !bility to quantify and develop rigorous models of most managerial problems is dependent on the determination behavior of relevant costs. The practical application of such models is also dependent on ability to obtain the cost data. 7elevant inventory cost which change with level of inventory are listed below.
Or ering co!t! 'very an order is placed for stoc replenishment$ certain cost are involved. The ordering cost may vary$ dependent upon type item.
This cost of ordering includes

O O
%aper wor cost$ typing and dispatching order. Follow5up costs the follow5up required ensure timely supplies include the travel cost for purchases follow5up$ telephone tele# and postal bills. ,ost involved in receiving the order inception$ chec ing and handling to the stores. !ny set up cost of machines if charged by supplier$ either directly indicated in quotations or assessed thought quotations for various quantities.
T*e !a%arie! an wage! to t*e p"rc*a!e epartment are re%evant for Ordering Cost It is cost of placing all orders and securing the supplies order costs depends upon the no. Of orders placed and a no. Of items ordered at a time. Higher will be
the ordering cost when frequent order are laced and vice versa.
Carrying Co!t It is the cost of eeping items in stoc

O O
Interest on investment <bsolesce losses

Page 33
O O
>tore5 eeping costs Insurance etc.$
The large volume of inventory the higher will be the carrying cost and vice5 versa. Formula for '<K the Inputs Hhile the calculation itself is fairly simple the tas of determining the correct data inputs to accurately represent your inventory and operation is a bit of a pro"ect.
'#aggerated order costs and carrying costs are common mista es made in '<K calculations. =sing all costs associated with your purchasing and receiving departments to calculate order cost or using all costs associated with storage and material handling to calculate carrying cost will give you highly inflated costs resulting in inaccurate results from your '<K calculation. !s you prepare to underta e this pro"ect eep in mind that even though accuracy is crucial$ small variances in the data inputs generally have every little effect on the outputs. The following brea s down the data inputs in more detail and gives insight into the aspects of each.
,onsideration if the purchasing function is carried out at the same level it e#isting
staff.
There are certain costs that remain the same regardless of the si+e of the lot purchased or requisitioned. This would be retailer ordering from the distributor$ from the distributor ordering from a factory warehouse$ for the factory warehouse ordering a new production run from the factory$ and for the factory ordering raw materials from vendors. These indsN costs are called preparation or set up costs.
If we are ordering to replenish supplies at one stoc point from another stoc point$ our interest is in the incremental clerical costs of preparing orders$ following these orders. '#pediting them when necessary$ etc$ a large segment of the total cost of the ordering function is fi#ed$ regardless of the number orders issued. 'ven then it may be
difficult determined satisfactorily the incremental cost$ which results from one more order. Kuantity discounts and handling and transport cost are other factors$ which vary lot si+es.
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%reparation cost are the incremental costs of planning production$ writing production orders$ setting machines and controlling the flow orders through the factory. 3aterial handling cost in the plant have an effect on production lot si+es in much the same way that freight costs may affect purchase lot si+es. )esides the preparation costs of production$ there are some other production costs$ which have a direct bearing on inventory models$ however. These are over time premiums and the incremental cost of changing production levels$ such as hiring$ training$ and separation costs. Carrying co!t! ,arrying costs constitutes all the costs of holding items in inventory for a given period of time. They are e#pressed either in rupees per period or as percentage of the inventory value per period.
,omponents of these costs include the following

O O O O O
>torage and handling cost. <bsolescence and deterioration costs Insurance Ta#es The cost of the funds invested in inventories
>torage and handling costs include the cost of warehouse space. <bsolescence costs represent the decline in inventory value caused by style changes that ma e the e#isting product less salable. Deterioration costs represent the decline in value caused by changes in the physical quality of the inventory such as spoilage and brea age.
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!nother element of carrying cost is the cost of insuring the inventory against losses due to theft$ fire and natural disaster. In addition$ a company must pay any personal property ta#es required by local and state government on the value of its inventories. Ji e ordering costs$ inventory5carrying costs contain both fi#ed and variable components. 3ost carrying costs vary with inventory level$ but a certain portion of them5 such as warehouse rent and depreciation on inventory handling equipment5 are relatively fi#ed over the short run$ inventory model such as '<K model treat the entire carrying cost as variable. Stoc& o"t co!t! >toc s out costs are incurred when ever a business is unable to fill orders because the demand for an item is greater than the amount currently available in inventory. Hhen a stoc out in raw materials occur$ for e#ample$ stoc out costs include the e#penses of placing special orders ?bac ordering@ and delays. ! stoc out in wor in progress inventory results in additional costs of rescheduling and speeding production within the plant$ and it also may result in lost production costs if wor stoppages occur. Final$ a stoc out in finished goods inventory may result in the immediate loss of profits of customers decide to purchase the product from the competitor and in potential long5term losses if customers decide to order from other companies in the future. Ot*er c*aracteri!tic! of inventory !it"ation! )esides the various types of costs involved$ there are other characteristics of the situation that vary among types of inventory and must be captured if the decision model is to be an accurate representation of the physical circumstances. Lea time! <btaining inventory usually requires a lag from the initiation of the process until the inventory starts to arrive. This lead5time may be a few minutes or it may be many months$ and depends in part on whether the firm is producing goods for its
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inventory or is ordering these goods from another firm. To produce goods for its own use$ the firm must schedule$ set up and ad"ust manufacturing equipment. So"rce! an %eve%! of ri!& =ncertainties play a significant role in inventory situations. =ncertainties usually involve lead times and demand times and demand levels$ but situations where other variables are uncertain also occur. Hhere are substantial uncertainties and where the costs of stoc out are important >trategies for addressing ris must be
formulated.
Static ver!"! ynamic pro$%em! Inventory problems are usually divided in to two types based on the characteristics of the goods involved. In static inventory problems$ the goods have a one5period life& there can be o carryover of goods from one period to the ne#t. Inventory situations where decisions involve the number of news papers to print$ the number of greeting cards to purchase or the number of calendars to produce are static inventory problems. In dynamic inventory problems$ the goods have value beyond the initial period& they do not lose their value completely over time. Rep%eni!*ment rate <nce goods start to be received from a vendor or from the firmNs own production processes$ there are differences among goods in the rate at which they are received. >mall orders from vendors are li ely to be received all at once. For e#ample$
assume that a firm has placed in order for 10 cases of paper towels. For such a small order the rate of replenishment is infinite& the firm(s inventories well go up 10 cases in a very short time as the goods are quic ly unloaded.
For large order from vendors$ or for inventory produced within the firm$ the replenishment rate may be slower.
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Type! of inventory Inventories can be classified into five basic types on the basis of their production. These various types of inventories cannot be identified and segregated within the organi+ation. These five types are
;/ Management inventory
They are needed because of the time required to move stoc s from one place to another place.
</ Lot !i=e Inventorie!
These are as a result of buying materials in quantities larger than the immediate requirement$ with a view to minimi+ing cost of transportation$ buying$ receipt and handling and to obtaining quantity discount.
>/ F%"ct"ation Inventorie!
These are carried to ensure ready suppliers to consumer even when these are irregular and unpredictable fluctuations in their demand.
?/ )nticipation inventorie!
These are usually maintained to meet a predictable but changing pattern of future demand.
@/ Cyc%e Inventorie!
These result from managements attempt to minimi+e the total cost of carrying and ordering inventory. They arise from ordering in batches or lots$ rather from needed basis. Inventories can be further classified into production inventories maintenance repair and operation ?37<@ inventories$ in5process inventories and finished goods inventories.
O
%roduction inventory consists of raw materials parts and components which are used in the production process forming parts of the final product. 3aintenance$ repair and operation supplies which are used in the production of goods or services but do not become part of the product. In5process inventories are semi5finished materials$ parts and assemblies found at various stages in the production operation.
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Finished goods inventory consists of completed products ready for sale.
Economic or er 9"antity AEO7B mo e% The optimum level of inventory is popularly nown as economic order quantity ?'<K@. It is also nown as economic lot si+e. Hhile deciding economic order quantity$ the efforts are directed to ascertain the ideal order si+e while deciding the
ideal order si+e factors such as inventory carrying cost and the ordering cost associated with the placement of purchase orders are to be considered$ the total of both to be minimi+ed. The inventory carrying charge includes interest on the capital invested in the stores materials$ rent for storage space$ salaries and wages of the store5 eeping department$ any loss due to %ilferage and deterioration$ stores insurance charges$ stationery$ etc. =sed by the stores$ ta#es on inventories etc.
<rdering costs include rent$ for the space used by the purchasing department$ the salaries and wages of officers and staff in the purchasing department$ the depreciation on the equipment and furniture used by the department$ postage$ telegraph charges and telephone bills$ the stationery and other consumables required by the purchasing department$ any traveling e#penditure incurred etc. )!!"mption! of t*e EO7 mo e% The '<K model is based on the following assumptions
1. The forecast usageBdemand for a given period$ usually one year$ is nown. /. The usageBdemand is even throughout the period. .. Inventory orders can be replenished immediately. :. There are two distinguishable costs associated with inventories i.e.$ costs of
ordering and costs of carrying.

0. The cost per order is constant regardless of the si+e of order. 8. The cost of carrying is fi#ed percentage of the average value of inventory
EO7 form"%a '<K refers to the level of inventory at which the total cost of inventory comprising acquisitionBorderingBset5up costs and carrying cost is minimal.
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'<K5economic order quantity =5annual consumption ?units@ during the year %5cost of placing an order >5annual cost of storage of one unit. Tec*ni9"e! of inventory management Inventories constitute the ma"or part of current assets$ as the investment in inventory is very high in most underta ings engaged in manufacturing$ wholesale and trade. The amount of investment is sometimes more in inventory than in other assets. The efficient management of inventory should ultimately result in ma#imi+ation of the owner(s wealth. To achieve this$ the firm should determine the optimum level of inventory. 'fficiently controlled inventories ma e the firm fle#ible while on the other hand inefficient inventory results in unbalance inventory and infle#ibility$ i.e. the firm may sometimes be out of stoc and sometimes may pile up the unnecessary stoc s. This increases the level of investment and ma es the firm unprofitable. ! proper inventory control not only helps in solving the acute problem of liquidity but also increases profits and causes substantial reduction in the wor ing capital of the concern. This technique is based on the assumptions that a firm should not e#ercise the same degree of control on all items of inventory. Therefore under !), analysis the materials are divided into three categories vi+. !$) and ,. the most costly item included in the category !$ while category may consists of less costly items and category , of the least costly items. Inventory surveys in general have shown the following trend regarding the components of inventories of manufacturing organi+ations. Category 9"antity
Finished goods........................................................................................... 30 Need to hold inventories...........................................................................30 Transaction motive.................................................................................... 30 Preca tionar! motive................................................................................30
C of tota% va%"e
of
tota%
Page 40
"#ec lative inventories.............................................................................30 $ssential %e& irements o' (nventor! )ontrol*.......................................32 +,-ects o' (nventor! .anagement.............................................................32 )ost o' holding inventories....................................................................33 +rdering costs....................................................................................... 33 The salaries and /ages to the # rchase de#artment are relevant 'or +rdering )ost............................................................................................ 33 (t is cost o' #lacing all orders and sec ring the s ##lies order costs de#ends #on the no. +' orders #laced and a no. +' items ordered at a time. 0igher /ill ,e the ordering cost /hen 're& ent order are laced and vice versa.................................................................................................. 33 )arr!ing )ost............................................................................................. 33 )arr!ing costs............................................................................................ 35 (ns rance................................................................................................... 35 Ta1es......................................................................................................... 35 2ead times................................................................................................. 36 "tatic vers s d!namic #ro,lems................................................................37 %e#lenishment rate................................................................................... 37 T!#es o' inventor!..................................................................................... 38 1..anagement inventor!..........................................................................38 2.2ot si3e (nventories................................................................................. 38 3.Fl ct ation (nventories...........................................................................38 4.4ntici#ation inventories..........................................................................38 5.)!cle (nventories.................................................................................... 38 4ss m#tions o' the $+5 model.............................................................39 Techni& es o' inventor! management......................................................40 6$7 anal!sis.............................................................................................. 41 89: anal!sis.......................................................................................... 42 "7F and ;+2F classi'ication..................................................................42 "T+)< 2$6$2"........................................................................................... 43 Form la..................................................................................................... 44 3.4verage "toc= 2evel............................................................................... 44 Form la..................................................................................................... 45 4.%e>+rder 2evel........................................................................................ 45 !), analysis helps to concentrate more efforts on category !$ these items are ept under a constant review so that a substantial material cost may be controlled. The control of , items may be rela#ed and the stoc s may be purchased for the year. Hhile little more attention should be given towards ) category items and their purchases should be underta en at quarterly or half5yearly intervals.
E'D analysis E'D analysis is used generally for spare parts. The parts are classified into three categories depending on their requirements Eital ?E@ 'ssential ?'@
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Desirable ?D@ The vital spare parts are mostly for running the concern smoothly and this must be stored adequately. The non5availability of vital spare parts at required time might cause stoppage of production. 'ssential spare parts are also ept in stoc in adequate quantity. There should be adequate arrangements for replenishment of these spare parts at a short notice. This stoc ing of D types of spares may be avoided e#cept to provide for the load time. DYE ana%y!i! The P9; analysis is based on the value of the inventory in stoc . P items included those inventory value is high while the inventory value of ; items is low. 9 items fall between these two e#tremes. Items of category need greater attention compared to items of category 9 and so on$ while inventory ta ing.
FSN ana%y!i! ?Fast$ >low Gon moving items@ This technique is based on the convention pattern. It is made on the basis of how the material has moved during the earlier periods$ and is often combines with the P9; classification$ which is based on the value of items in shortage. The F>G classification helps in the timely preservation of obsolescence.
3ML ana%y!i! ?*igh$ 3edium and Jow cost@ This technique is based on the basis of the unit value of an item. >ome items may be low5value items$ while others may be high5value items. SDF an (OLF c%a!!ification It should not overloo ed that inventory levels are also dependent on the source a scare item with a long lead time will have a higher safety stoc for the same consumption level. The >DF ?>carce$ Difficult$ 'asy to obtain@ classification and the 6<JF ?6overnment$ <rdinary$ Jocal$ Foreign sources@ classification are systems
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where a classification is done on the basis of general availability and the sources of suppliers. STOC6 LE#ELS ,arrying of too much and too little inventory does determine the firm. If the inventory is too little the firm will face frequent stoc 5out involving heavy ordering cost. For that the firms should maintain an optimum level of inventory where inventory costs are the minimum and at the same time there is no stoc out which may result in less of sale or stoppage of production various stoc levels are discussed blew.
O O O O
3inimum level. 3a#imum level. !verage level. 7e5order level.
;/ Minim"m %eve% These represents the quality that must be maintained in hand at all times. The stoc is less than the minimum level then the wor will stop due to shortage of materials. The following factors are ta en into account while fi#ing minimum stoc level.
1. Jead time /. 7ate of consumption .. Gature of materials
Lea time The time ta en in processing the order and then e#ecuting it is nown as lead time.
Rate of con!"mption,
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It is the !verage consumption of materials in the factory. The rate of consumption will be decided on the basis of past e#perience and production plans. Nat"re of Materia%! If a material is required only against special orders or the customer then minimum stoc will not be required for such material.
Form"%a
3in. Jevel Q 7<J5Raverage consumption P averages re5order period@ </ Ma5im"m Leve% It is the quality of material beyond which a firm should not e#ceed it stoc s. If the quantity e#ceeds ma#imum level limit then it will be over stoc ing$ it will cause high material cost$ bloc ing of more wor ing capital$ more space for storing the material$ more wastage of materials etc.$ ma#imum stoc depend on the following factors.
O O O O O
!vailability of capital !vailability of space storing 7ate of consumption of materials during lead time ,ost of maintaining the stores !vailability of materials
?If the materials are available only during some seasons then they will be stored for the rest of period@ Form"%a 3a#. Jevel Q7e5order level S '<K5R3in. consumption P 3in. 7e5<rder periodT
>/ )verage Stoc& Leve%
The average stoc level is calculated such as
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Form"%a !verage >toc Jevel Q 3inimum level S 3a#imum level B/

?/ Re2Or er Leve%
7e5<rder Jevel is being between minimum level and ma#imum level 7e5 <rder level is determined by ta ing into account the suppliers$ discount$ rate of consumption$ storage cost$ price of the material etc.$ Form"%a 7<J Q ?/02@ 3a#imum consumption P 3a#imum 7e5<rder period.
RESE)RC3 MET3ODOLO(Y
Co%%ection of Data,
The data relating to financial statements of 6alla foods limited$ the data has been collected from he published annual reports for the last : years from /0085/009.
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The financial statements and revenue statement have been used to perform the financial performance of the ,ompany.
Primary Data,
,ollected from the e#ecutives and other staff members of the ,ompany
Secon ary Data,
,ollected from the balance sheet and revenue account which were published by the ,ompany and website of the ,ompany.
Samp%e Si=e, Three years data has been collected to calculate economic order quantity and !), analysis /000508$ /008501 and /001508. Five data has been collected to calculate inventory turnover ratio and holding period /00.50:$ /00:500$ /000508$ /008501 and /001508.
D)T) )N)LYSIS )ND INTERPRET)TION

Ta$%e S*owing Opening0 P"rc*a!e0 Con!"mption an CITRIC Mont*! Opening Stoc& P"rc*a!e Con!"mption C%o!ing Stoc&
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C%o!ing Stoc& of P"re
3ay -une -uly !ugust >eptember <ctober
1.8/.:0 10/0.80 0800.:0 :800.:0 1000.80 :000.00
1.8.80 0000.00 0.00 000.00 .000.00 :000.00
10/0.00 110.00 0800.80 /00.00 180.00 /00.00
1098./0 0800.80 0.00 0800.80 1/00.:0 :800.80
Interpretation, The above 6raph shows that the inventory level of %ure ,IT7I, from 3ay to <ctober. The opening stoc in the month of 3ay was 1.8/0.:0 Fgs.$ at the end the closing >toc stood at 1098./0Fgs.$ which shows consumption in the month of may in /008. If we identify overall months in above the consumption become decline and closing stoc become ma#imised$ it shows storage purchase of company.
Ta$%e S*owing Minim"m0 Ma5im"m0 )verage Stoc& an Con!"mption of P"re CITRIC
Stoc&
Opening
C%o!ing
P"rc*a!e
Con!"mption
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3inimum 3a#imum !verage
10/0.80 0800.80 .:.0.00
1090./0 0800.80 .:1:.00
000.00 0000.00 /100.00
110.00 0800.80 .010.:0
InterpretationC The above 6raph shows that minimum opening stoc of 10/0.80 gs$ ma#imum opening stoc of 0800.80 gs. He compare the opening$ closing$ purchase$ consumption the ma#imum average is .:1:.00 this from closing stoc . He compare the minimum is gradually is degreasing trend a graph.
Ta$%e S*owing Opening0 P"rc*a!e0 Con!"mption an )SCOR+IC Mont*! 3ay Opening Stoc& /91.90 P"rc*a!e Con!"mption ..0.80 100.:0
C%o!ing Stoc& of
C%o!ing Stoc& 011..0

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-une -uly !ugust >eptember <ctober
100.:0 090.80 18:.:0 18:.:0 98.10
1100.00 100.10 0.00 0.00 0.00
809.80 101.:0 10.:0 11.00 0.00
090.80 0.00 1:9.00 9/.90 98.10
Interpretation, The above 6raph shows that the inventory level of !>,<7)I, from 3ay to <ctober. In the over all months is observed the opening stoc is decrease$ consumption is increasing the month of may 100.:0 gs to -uly 101.: g. Decreasing the >eptember to <ctober. ,losing stoc is increasing the month of "une. ,on"umption is increasing the month 3ay to "uly.
Ta$%e S*owing Minim"m0 Ma5im"m0 )verage Stoc& an )SCOR+IC
Con!"mption of
Stoc& 3inimum
Opening 98.10
C%o!ing 9/.90
P"rc*a!e 100.10
Con!"mption 10.:0
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3a#imum !verage
090.80 :00.00
090.80 .::./10
1100.00 80/.810
101.00 .8..:0
InterpretationC The above 6raph shows that minimum opening stoc of 98.10 gs$ ma#imum opening stoc of 0900.80 gs$ and average opening stoc of :00.00 gs. He compare the opening$ closing$ purchase$ consumption the ma#imum average is 090.80 gs this is the closing stoc . He compare the ma#imum stoc is degreasing the purchase of company.
Ta$%e S*owing Opening0 P"rc*a!e0 Con!"mption an +IOTROPIC Mont*! 3ay -une -uly !ugust Opening Stoc& /81.19 /81.19 /.88.:: :/..:: P"rc*a!e Con!"mption 0.00 /81.19 0.00 :00.00 0.00 /:.10 .0:./0 .080.00
C%o!ing Stoc& of
C%o!ing Stoc& 0.00 /.8.:: .././: :19.09
Page 50
>eptember <ctober
:/1.1: :1..::
0.00 0.00
9.09 1/.00
:1/.08 .:1..9
Interpretation, The above 6raph shows that the inventory level of )I<T7<%I, from 3ay to <ctober. The opening stoc in the month of 3ay was /81.19 gs.$ at the end the closing >toc company. :1..:: gs.$ is increased. If we identified the overall months in above the con"umption becoe decline and closing stoc become minimi+e the purchase of
Ta$%e S*owing Minim"m0 Ma5im"m0 )verage Stoc& an +IOTROPIC
Con!"mption of
Stoc& 3inimum 3a#imum !verage
Opening /.8.:: :1..:: ./:.9:
C%o!ing /.8.:: :19.09 ./8.01
P"rc*a!e 0.00 :00.00 /00.00
Con!"mption ..80 .0:..0 10:.0/
Page 51
InterpretationC The above 6raph shows that minimum opening stoc of /.8.:: gs$ ma#imum opening stoc of :1..:: gs$ is a increased. He compare the opening$ closing$ purchase$ consumption the ma#imum average is ./8.01 gs. closing stoc increasing the ma#imum :19.09 gs.
Ta$%e S*owing Opening0 P"rc*a!e0 Con!"mption an C%o!ing Stoc& of SODIUM CLORIDE Mont*! 3ay -une -uly !ugust >eptember Opening Stoc& /.0.00 810.00 880.00 .80.00 .80.00 P"rc*a!e 810.00 810.00 0.00 0.00 0.00 Con!"mption 810.00 8/0.00 /80.00 0.00 0.00 C%o!ing Stoc& .00.00 880.00 .80.00 .80.00 .80.00
Page 52
<ctober
.80.00
0.00
100.00
/80.00
Interpretation, The above 6raph shows that the inventory level of >odium ,loride from 3ay to <ctober. The opening stoc in the month of 3ay was /.0.00 ltrs.$ at the end the closing >toc stood at .00.00 ltrs. He comapre the purchase in month of -uly to <ctober is gradually decreased. ,on"umption is increasing the month of -une.
Ta$%e S*owing Minim"m0 Ma5im"m0 )verage Stoc& an SODIUM CLORIDE
Con!"mption of
Stoc& 3inimum 3a#imum !verage
Opening /.0.00 880.00 :00.00
C%o!ing /80.00 880.00 :1/.00
P"rc*a!e 810.00 810.00 110.00
Con!"mption 100.00 8/0.00 :8/.00
Page 53
InterpretationC The above 6raph shows that minimum opening stoc of /.0.00 ltrs$ ma#imum opening stoc of 880.00 ltrs$ and average opening stoc of :00.00 ltrs. overall average is a 110.00 ltrs is increased. 3a#imum$ !verage is gradually increasing the purchase of 810.00 ltrs$ 110.00. He identified the
IN T3E YE)R <FF@ G <FFH PURE CITRIC 1. Inventory 7equirement per year /900 Fgs. /. ,ost of one Fg %urchased :8.00 .. ,arrying cost per Fg ..00 :. <rdering ,ost 80.00 0. Go of <rders placed Q 8 Ta$%e S*owing EO7
Page 54
Co!t of P"rc*a!e No of Or er! Or er Si=e )verage Inventory Carrying co!t Tota% Co!t
1.09.0 1.09.0 1.09.0 1.09.0 1.09.0 1.09.0 1.09.0 1.09.0
/900
1:11.0
980
1.8.10
091
:9/.0
://.1:
.98..1
1:11.0
1.8.10
:9/.0
.89..1
/90.0
/:8./0
/11.01
18:.88
80 1:0:/1. 0
1.0 1.8/18./ 0
190 1.1191. 0
/80 1.1/98.1 1
./0 1.11:1. 0
.90 1.1008.1 0
:00 .1018. /
0/0 1.100:.0:
EO7 I >HJ/>K 6g!/ Or er! Re9"ire I L
Page 55
Interpretation,
,ompany hold /900 gs in beginning and .89..1 gs at the end of the year$ the average inventory during the year were 001.90 gs
)SCOR+IC 1. Inventory 7equirement per year 9/ Fgs. /. ,ost of one Fg %urchased 11.8.00
Page 56
.. ,arrying cost per Fg 8.00 :. <rdering ,ost 1/.00 0. Go of <rders placed Q 8 Ta$%e S*owing EO7 Co!t of P"rc*a!e No of Or er! Or er Si=e )verage Inventory Carrying co!t Or ering Co!t Tota% Co!t
10:01/ 10:01/ 10:01/ 10:01/ 10:01/ 10:01/ 10:01/ 10:01/
1 9/ :8 /18 1/ 10:880
/ :8 /. 1.8 1:: 10:19:
. .0.81 10... 91.98 /18 10:819.98
: /. 11.0 89 /88 10:889
0 18.: 9./ 00./ .80 10:9/1
8 10... 1.81 :8.0/ :./ 10:990.0/
1 1..: 8.1 :0.0 00: 100008./
8 11.0 0.10 .:.0 018 1001//.0
EO7 I ?H 6g!/ Or er! Re9"ire I <
Page 57
Interpretation, ,ompany hold 9/ gs in beginning and 11.0 gs at the end of the year$ the average inventory during the year was 10.8: gs
+IO TROPIC
Page 58
1. Inventory 7equirement per year 1// Fgs. /. ,ost of one Fg %urchased 1/80.00 .. ,arrying cost per Fg 1..00 :. <rdering ,ost 10.00 0. Go of <rders placed Q 8 Ta$%e S*owing EO7 Co!t of P"rc*a!e No of Or er! Or er Si=e )verage Inventory Carrying co!t Or ering Co!t Tota% Co!t
10818 0 1 1// 81 19. 10 1010/ .
108180
108180
108180
108180
108180
108180
108180
/ 81 .0.0 .98.0 1:0 108898. 0
. :0.81 /0... /8:./9 /10 1088.:./ 9
: .0.0 10./0 198./0 /80 1088.8./ 0
0 /:.: 1/./ 108.8 .00 108888. 8
8 /0... 10.18 1./.08 :/0 1011./.0 8
1 11.:/ 8.11 11../. :90 10818../ .
8 10./0 1.8/0 99.1/0 080 108819.1/
EO7 I ?F/HK 6g!/ Or er! Re9"ire I >
Page 59
Interpretation, ,ompany hold 1// gs in beginning and 10./0 gs at the end of the year$ the average inventory during the year was /0.1/ gs
SODIUM CLORIDE 1. Inventory 7equirement per year 1000 Jtrs. /. ,ost of one Jtr %urchased 10.10
Page 60
.. ,arrying cost per Jtr ../0 :. <rdering ,ost /0.00 0. Go of <rders placed Q 8 Ta$%e S*owing EO7 Co!t of P"rc*a!e No of Or er! Or er Si=e )verage Inventory Carrying co!t Or ering Co!t /.8/0 /.8/0 /.8/0 /.8/0 /.8/0 /.8/0 /.8/0 /.8/0
1 1000 100 /:00 /0
/ 100 .10 1/00 00 /:810
. 000 /00 800 10 /:000
: .10 181.0 800 100 /:./0
0 .00 100 :80 1/0 /:/.0
8 /00 1/0 :00 100 /:110
1 /1:./8 101.1: .:/.8: 110 /:1:/
8 181.0 9..10 .00 /00 /:1/0
Tota% Co!t /8000 EO7 I ;LK/@ Ltr!/
Or er! Re9"ire I L
Page 61
Interpretation, ,ompany hold 1000 Jtrs in beginning and 181.0 Jtrs at the end of the year$ the average inventory during the year was /0:.80 Jtrs.
IN T3E YE)R <FFH2<FFK PURE CITRIC 1. Inventory 7equirement per year .000 Fgs. /. ,ost of one Fg %urchased 89.00 .. ,arrying cost per Fg ..00
Page 62
:. <rdering ,ost 18.00 0. Go of <rders placed Q 8 Ta$%e S*owing EO7 Co!t of P"rc*a!e No of Or er! Or er Si=e )verage Inventory Carrying co!t Or ering Co!t Tota% Co!t
/10:00 1 .000 10/0 :010 18 /1010.
/10:00 / 10/0 18/.0 //81.0 108 /1/89..0
/10:00 . 1018.81 008... 10/:.99 /.: /1//08.9 9
/10:00 : 18/.0 .81./0 11:..10 .1/ /11900.1 0
/10:00 0 810 .00 910 .90 /11100
/10:00 8 008 /0: 18/ :88 /11880
/10:00 1 :.0.11 /11.80 80..00 0:8 /118:9.0 0
/10:00 8 .81./0 190.8/ 011.88 8/: /118:0.88
EO7 I >L;/<@ 6g!/ Or er! Re9"ire I L
Page 63
Interpretation, ,ompany hold .000 gs in beginning and .81./0 gs at the end of the year$ the average inventory during the year were 018.01 gs
)SCOR+IC 1. Inventory 7equirement per year 1/0 Fgs. /. ,ost of one Fg %urchased 11/0.00 .. ,arrying cost per Fg 8.00
Page 64
:. <rdering ,ost 1/.00 0. Go of <rders placed Q 8 Ta$%e S*owing EO7 Co!t of P"rc*a!e No of Or er! Or er Si=e )verage Inventory Carrying co!t Or ering Co!t 1:08/ 0 / 8/.0 .1./0 /00 1:: 1:101 9
1:08/0 1 1/0 8/.0 000 1/
1:08/0 1:08/0 1:08/0 . :/ /1 188 /18 : .1./0 10.8/0 1/0 /88 0 /0 1/.0 100 .80
1:08/0 8 /0.8. 10.:/ 8.../ :./ 1:11:0.. /
1:08/0 1 11.8 8.9 11./ 00: 1:1/00. /
1:08/0 8 10.8 1.818 8/.0/8 018 1:1/8..0/8
Tota% Co!t 1:1191
1:1009 1:10.8 1:1080
EO7 I ?< 6g!/ Or er! Re9"ire I >
Page 65
Interpretation, ,ompany hold 1/0 gs in beginning and 10.8 gs at the end of the year$ the average inventory during the year was /1./0 gs
+IO TROPIC 1. Inventory 7equirement per year /:0 Fgs.
Page 66
/. ,ost of one Fg %urchased 1/90./0 .. ,arrying cost per Fg 1..00 :. <rdering ,ost 10.00 0. Go of <rders placed Q 8 Ta$%e S*owing EO7 Co!t of P"rc*a!e No of Or er! Or er Si=e )verage Inventory Carrying co!t Or ering Co!t Tota% Co!t
.11..8./0 .11..8./0 .11..8./0 .11..8./0 .11..8./0 .11..8./0 .11..8./0 .11..8./0
/:0
1//.0
81.81
81./0
:9
:0.8.
.0
.0.8/0
1//.0
81.0
:0.8.0
.0.1/0
/:.0
/0.:0
11.0
10../
109/.0
198./0
0.0.80
.98.1.8
.18.0
/80..9
//1.0
199.18
10 .18998.10
1:0 .18/1/.0
/10 .18011.1
/80 .1801:..8
.00 .1800:.10
:/0 .18001.8:
:90 .1800..10
080 .18090.:1
EO7 I ?J 6g!/ Or er! Re9"ire I @
Page 67
Interpretation, ,ompany hold /:0 gs in beginning and .0.8/0 gs at the end of the year$ the average inventory during the year was :1.8:0 gs
SODIUM CLORIDE 1. Inventory 7equirement per year 1810 Jtrs. /. ,ost of one Jtr %urchased 18./8 .. ,arrying cost per Jtr :./0
Page 68
:. <rdering ,ost .1.00 0. Go of <rders placed Q 8 Ta$%e S*owing EO7 Co!t of P"rc*a!e No of Or er! Or er Si=e )verage Inventory >JK>/K@ Or ering Co!t Tota% Co!t
.0::..8 .0::..8 .0::..8 .0::..8 .0::..8 .0::..8 .0::..8 .0::..8
1 1810 9.0 1988.81 .1 .::0:..0
/ 9.0 :81.0 1./8 1: ./00:.:1
. 8/. .1/ 99..:8 111 .1880.8
: :81.0 /...10 19:.10 1:8 .1080.08
0 .1: 181 88. 180 .1:/...0
8 .1/ 108 088.//0 /// .1./8.8
1 /81.1: 1...1 :98.89 /09 .1/10.8/0
8 /...10 118.81 .00 /98 .1/.8./9
EO7 I <>>/K@ Ltr!/ Or er! Re9"ire I L
Page 69
Interpretation, ,ompany hold 1810 Jtrs in beginning and /...10 Jtrs at the end of the year$ the average inventory during the year was .11.1. Jtrs.
IN T3E YE)R <FFK2<FFL PURE CITRIC
Page 70
1. Inventory 7equirement per year .09. Fgs. /. ,ost of one Fg %urchased 8/ .. ,arrying cost per Fg 1.00 :. <rdering ,ost 110.00 0. Go of <rders placed Q 8 Ta$%e S*owing EO7
Co!t of P"rc*a!e No of Or er! Or er Si=e )verage Inventory Carrying co!t Or ering Co!t Tota% Co!t
/0.8/8
/0.8/8
/0.8/8
/0.8/8
/0.8/8
/0.8/8
/0.8/8
/0.8/8
.09.
10:8
10.1
11../0
818.8
010.0
::1.8
.88.8/0
10:8.0
11../0
010.0
.88.8/0
.09..
/01.10
//0.9
19...1
108/0.0
0:1/.10
8.08.0
/108..10
/180.1
10:8.0
10:8..
1.0..11
110 /8:081.0
//0 /09/08.10
..0 /010:1.0
::0 /0811/..10
000 .08.:1.11
880 /008./.0
110 /009:/..
880 /0:919.11
EO7 I >LH/H<@ 6g!/ Or er! Re9"ire I L
Page 71
Interpretation, ,ompany hold .09. gs in beginning and .88.8/0 gs at the end of the year$ the average inventory during the year were 0/0.:0 gs
)SCOR+IC 1. Inventory 7equirement per year .09. Fgs. /. ,ost of one Fg %urchased 8/ .. ,arrying cost per Fg 1.00
Page 72
:. <rdering ,ost 110.00 0. Go of <rders placed Q 8 Ta$%e S*owing EO7 Co!t of P"rc*a!e No of Or er! Or er Si=e )verage Inventory Carrying co!t Or ering Co!t Tota% Co!t
/.9/110 /.9/110 /.9/110 /.9/110 /.9/110 /.9/110 /.9/110 /.9/110
1 1911 989 89/. 81 /.9911:
/ 989 :9:.0 .:81.0 18/ /.9019..0
. 809 ./9.0 /.08.0 /:. /.91119.0
: :9:./0 /:1.1/0 11/9.81 ./: /.9://..81
0 .90.: 191.1 1.8..9 :00 /.9.908.9
8 ./9.0 18:.10 110../0 :88 /.9.809./0
1 /8/.: 1:1./ 988.: 081 /.9.1/0.:
8 /:1.1/0 1/..08 88:.9/ 8:8 /.9.88/.9/
EO7 I <?K/;<@ 6g!/ Or er! Re9"ire I L
Page 73
Interpretation, ,ompany hold 1911 gs in beginning and /:1.1. gs at the end of the year$ the average inventory during the year were ..0.91 gs
+IO TROPIC 1. Inventory 7equirement per year ::1 Fgs. /. ,ost of one Fg %urchased 1.1:
Page 74
.. ,arrying cost per Fg 1..00 :. <rdering ,ost 81./0 0. Go of <rders placed Q 8 Ta$%e S*owing EO7 Co!t of P"rc*a!e No of Or er! Or er Si=e )verage Inventory Carrying co!t Or ering Co!t Tota% Co!t 8009.: 8009.: 8009.:
8009. : : 110 00 110 ./0 80891 :
8009.:
8009. : 8 1. .8.0 :1:.0 :81.0 80889 8
8009.:
8009.:
1 ::1 //0.0 /888.0 81./0 808881.1 0
/ //0.0 110./0 1:.../0 18/.0 8010/9.1 0
. 1:1 1..0 900.0 /:..10 8011.../ 0
0 88 :: 01/ :08./0 80891/./ 0
1 8. .1.0 :09.0 088.10 80891/./ 0
8 00 /1.0 .01.0 80/ 8089:..0
EO7 I K> 6g!/ Or er! Re9"ire I H
Page 75
Interpretation, ,ompany hold ::1 gs in beginning and 00 gs at the end of the year$ the average inventory during the year were 1:.8: gs.
SODIUM CLORIDE 1. Inventory 7equirement per year /0/0 Jtrs. /. ,ost of one Jtr %urchased 1118.90
Page 76
.. ,arrying cost per Jtr :./0 :. <rdering ,ost .1.00 0. Go of <rders placed Q 8 Ta$%e S*owing EO7 Co!t of P"rc*a!e No of Or er! Or er Si=e )verage Inventory Carrying co!t Or ering Co!t Tota% Co!t
.8118 .8118 .8118 .8118 .8118 .8118 .8118 .8118
1 /0/0 1010 :/9/.0 .1 :/001.0
/ 1010 000 /1:8./0 1: :0.98./0
. 81. ..8.0 1:.0.1. 111 .9119.1 .
: 000 /0. 1010./0 1:8 .9:01./0
0 :0: /0/ 808.0 180 .9//1.0
8 ..1 188 11: /// .911:
1 /89 1:0 818./0 /09 .900../ 0
8 /0. 1/8 0.0 /98 .9009
EO7 I <@> Ltr!/ Or er! Re9"ire I L
Page 77
Interpretation, ,ompany hold /0/0 Jtrs in beginning and /0. Jtrs at the end of the year$ the average inventory during the year was .:..19 Jtrs.
)+C )N)LYSIS Fo%%owing item! are come "n er category M)N T)+LE
Page 78
CRITIC)L ITEMS 3> )!77'J> !>,<7)I, )I<T7<%I, H!P T*'73!J> H<<D'G %J!T'>
UOM 7TY
UNIT COST
C OF
OF
ITEMS
TOT)L COST 188./80 /.0..: :/80:0 0
OF ITEMS COST C
TOT)L TOT)L COST 1..1. 1.91 ..:9 0
7TY 7TY 0.1. 0.09 0.18 0
Gos Fgs Fgs 7olls
1088.00 1080.00 /09.00 .:8.00 0 11/8.00 1/.0.00 80:.10
Gos
.19.00
010.00
0.10
0.:.2 <F IT'3U! N
18::00
1..:
/0.:12 <F IT!3N!N
Fo%%owing item! are come "n er category M+N T)+LE
Page 79
CRITIC)L ITEMS
UOM
7TY
UNIT COST
C OF 7TY
C OF ITEMS 7TY
TOT)L COST
C OF TOT)L COST
ITEMS TOT)L COST C
!>%',TI, )!6> K! >TI,F'7>
Gos Gos
/1008.0 0 1/000.0 0 .9.00 .1.00 0 8/00.00 100.00 1.00 1009.00 .9.00 :/.00 1.00 .1.00 /1.00
80.00 8/.00 /88.10 108./9 8/.90 1/:.8/ 1/0.00 10/.00 1:.00 1/0.80 9/..8 19/.88 100./0 180.08
9.10 ...: : 0.01 8 0.01 1 0 /.88 0.08 9 0.00 1 0.10 0.01 8 0.01 8 0.00 1 0.01 1 0.01 / :8.9:2 <F IT'3N)N
1.80.90 090:000 11./:.8 0 .9./.1. 0 11.88: 18000 10/..0 111899. . :10..:0 :10..:0 /89.0/ 0001.:0 :./1.8/
11..: :8.18 0.09 0.0. 0 8..1 0.1: 0.0000: 0.911 0.0.8 0.0.8 0.000/ 0.0:0 0.0. 88.0:2 <F IT'3N)N
J'!D >'!J Fgs J'!D HI7' %% 7<JJ H<<D %I','> %=7%J' %!IGT %!IGT )7=>* %=7' ,IT7I, %% >T7!%%IG6 ,JI% )!JJ> >=J%*!7 GIT7I, !,ID !%7<G> F<7 J!)<=7 7olls 7olls Gos Jtrs Gos Fgs 7olls Fgs Fgs Jtrs Gos
Fo%%owing item! are come "n er category MCN T)+LE
Page 80
CRITIC)L ITEMS %<J9T*'G' JIG'7 T*'73<,<J' /033 T*'73<,<J' 1033 >'JF !D*'>IE' >TI,F'7> D7=3 *!GDJIG6 >TI,F'7> H!P 7I))<G *!GDJ' >TI,F'7> T!3%'7 >'!J 6=3 %!,F'T> %!IGT T*IGG'7 )7<HGT!%' ><DI=3 ,J<7ID' TI>>=' 7<JJ> >'JF !D*'>IE' >TI,F'7> ,<TT<G T!%' >!JT
UOM
7TY
C UNIT OF COST 7TY 1.8/ 1/./9 1:.00 0.10 /.:1 1.00
C OF ITEMS 7TY
TOT)L COST
C OF TOT)L COST 0.100 0.0/ 1.8:0
ITEMS TOT)L COST C
Fgs Gos Gos
18/0.8/ 0/00.00 18180.00
1/.:9.1. 8.908 //8/:0
Gos
0.10
0 11.1 0 0.01 / /.0. 9.:1 0 0.01 0.00 1 0.00 0.1/ 1./0 0.00 0.98 1
Gos 7olls Gos Gos Fgs Jtrs Gos Jtrs Gos Gos 7oll Fgs
/:000.00 /8.00 :.10 /0/80 0 /0.00 8.00 110.00 /10.00 100000.0 0 10/.00 /080.00
0.80 ./.00 /8./0 ./.8/ 1../0 :/.01 1/.00 18.00 /0.9/ 0.10 /0.00 :../
1::00 8:0 11:8/0 880881./0 0 108:./0 1/.00 1180 08:8.:0 10800 /0:0 8980.80
0.11 0.0008 0.9. 0..9 0 0.0008 0.00000 0.01: 0.0:8 0.08 0.0/ 0.01.
Page 81
7=))'7 6J<E'> 67''G ,!%> DI>%<>!)J7 ,!%> F=7G!,' <IJ ,!=>TI, ><D! )J'!,*IG6 %<HD'7
%air Gos Gos Jtrs Fgs Fgs
890.00 ./.00 180.00 98/0.00 ///0.00 1/.00 .80.00 010.00 880.00 ./0.00 8000.00 0
19.80 .0.8/ 1./: /0.10 .1.81 1/.80 //.00 ..10 :.01 8./9 8.10 :..00
0.:1 0.01 0..8 :.:1 1.0. 0.0. 0.18 0./8 0..9 0.10 ..1/ 0 0/.812 <F IT'3N ,N ;FFC
10108.00 110.8: 981./ /:1.8/.0 8.8/1.:0 901./0 19/0 /109 .::8.80 /80/.80 0:000 0
0.1/ 0.00009 0.0001 /.01 0.88 0.0001 0.08: 0.11 0.0/8 0.0/ 0.:: 0 1..:12 <F IT'3N,N ;FFC
FGIF'?3G!6<@ Gos 3<=T* 3!>F =7'! D!% JI3' *.> DI'>'J ,<TT<G H!>T' TOT)L Gos Fgs Fgs Fgs Jtrs
Fgs
:0.00
/..00
0.0/
9// ;<<@KHH@/> F
0.0001
<;@<@F/@?@
;FFC
;FFC
R)TIOS
;/ IN#ENTORY TURNO#ER R)TIO
Page 82
Inventory turnover ratio indicates the efficiency of the firm in producing and selling its product. It is calculated by dividing the cost of goods sold by average inventory. ,ost of 6oods >old Inventory turnover Q 5555555555555555555555555555555 !verage Inventory The average inventory is the average of opening and closing balances of inventory. In manufacturing company inventory of finished goods is used to calculate inventory turnover ratio. T)+LE IN#ENTORY TURNO#ER R)TIO Year /008 5 /001 /001 5 /008 /008 5 /009 Ratio Ain Time!B /.81 /../ 1.11
Page 83
InterpretationC The above graph shows that in /008 A 01 the turnover ratio was /.18$ in /001A 08 was /../ and in /008 A 09 was 1.11.
</ D)YS OF IN#ENTORY 3OLDIN(
Page 84
The reciprocal of Inventory turnover gives an average Inventory holding in percentage term. Hhen the numbers of days in the year ?say .80@ are divided by inventory turnover$ we obtain days of inventory. .80 DI* Q 5555555555555555555555555555555 Inventory Turnover T)+LE D)YS OF IN#ENTORY 3OLDIN(
Year /008 5 /001 /001 5 /008 /008 5 /009
No of 3o% ing Day! 1.1.9. 100.11 :8...
Page 85
InterpretationC In the year /008 A 01 the holding days of inventory was 1.1.9.8 days$ in /001 A 08 was 100.11 days and in /008 A 09 was :8... days.
>/ IN#ENTORY TO TOT)L )SSETS R)TIO
Page 86
The relationship between Inventory to total assets is called inventory to total assets ratio. It can be calculated byC >ales Total assets turnover Q 5555555555555555555555555555555 Total !ssets T)+LE IN#ENTORY TO TOT)L )SSETS R)TIO
Year /008 5 /001 /001 5 /008 /008 5 /009
Ratio Ain Time!B /8.:1 18.:: 9..
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InterpretationC The inventory to total assets ratio in /008 A /001 was /8.:1$ in /001 5 /008 was 18.:: and in /008 A 089 was 9...
FINDIN(S
Page 88
CONSUMPTION R). M)TERI)L %=7' ,IT7I, !>,<7)I, )I<T7<%I, ><DI=3 ,J<7ID' EO7 in <FFK G <FFL 1. 'oq of pure citric was .88.8/0 gs. /. 'oq of !scorbic was /:1.1/0 gs. .. 'oq of )iotropic was 1. gs. :. 'oq of >odium ,loride was /0. ltrs. )+C )N)LYSIS 0. Item ! and ) "ointly represent :1.:12 of total items and 88.:82 of the investment. 3ore than half of the total items are item ,. It is merely representing 1..0/2 of the investment. R)TIOS 8. The inventory turnover ratio in the year /000 A /008 was /.812$ it was decreased to /../2 in /008 5/001 and increased to 1.112 in /001 A /008. 1. The ratio was decreased from /8.:12 to 9..2 from /000 A /008 to /001 A /008. MINIMUM 110.00 10.:0 ..80 100.00 M)DIMUM 0800.80 101.00 .0:./0 8/0.00 )#ER)(E .010.:0 .8..:0 10:.0/ :8/.00
SU((ESTIONS
There was a fluctuation in monthly consumptions$ so they need to closely observe the consumption in each and every month.
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'<K is very good in my company. ! tightest control should be e#ercised on Item ! in order to ma#imi+e profitability on its investment. In case of item , simple control will be sufficient
The company is effectively utili+ing its inventory$ because the turnover has been increasing year to year. It is generating more sales by utili+ing the total assets$ so it needs to maintain >am for a long time
CONCLUSION
!fter analy+ing the inventories of the company during the last three financial years it is clear that$ inventories of the company is good.
Page 90
The company by strictly following management techniques li e '<K$ !), !nalysis can increase its profits. )y following the inventory technique li e FIF<$ the company can reduce its
costs and supply the finished goods.
+)L)NCE S3EET )S ON >;!t M)RC3 <FFJ %articulars ><=7,'> <F F=GD> >hare holder fund 7upees 7upees
Page 91
>hare capital >hare application money Joan funds >ecured loans =nsecured loans 7eserves and surplus Deferred ta# liability T<T!J !%%JI,!TI<G <F F=GD> Fi#ed assetsC 6ross bloc Jess accumulated depreciation Get bloc ,apital wor in progress Investments ,urrent assets loans and advances Inventories >undry debtors ,ash and ban balances <ther current assets Joans advances 4 deposits JessC current liabilities 4 provisions Get current assets Deferred Ta# !sset 3iscellaneous '#penditure Deferred 7evenue e#penditure %rofit4 loss account .0.$1/:$1/8 8.$0:/$199 8$.90$11. 1/$18:$880 /:$010$1:1 :8/$:.8$81/ 90$018$0.0
1$80$900$000 5 898$908$/.9 18$011$000 1$00$00$000 5 880$8/0$1.9
0.1$::8$1.9 :8$:8/$01. :8:$98:$1/8 /$.80$810
.1/$://$8.1 1$081$010 1/0$008 18$/:0$/10 880$8/0$1.9
Page 92
T<T!J
Page 93
+)L)NCE S3EET )S ON >;!t M)RC3 <FFL %articulars ><=7,'> <F F=GD> >hare holder fund >hare capital >hare application money Joan funds >ecured loans =nsecured loans 7eserves and surplus Deferred ta# liability T<T!J !%%JI,!TI<G <F F=GD> Fi#ed assetsC 6ross bloc Jess accumulated depreciation Get bloc ,apital wor in progress Investments ,urrent assets loans and advances Inventories >undry debtors ,ash and ban balances <ther current assets Joans advances 4 deposits JessC current liabilities 4 provisions Get current assets 1/:$1::$1:1 :1$8::$198 11$991$900 19$019$1.1 :$:10$0.1 88$98/$111 /0:$09.$8.1 80$::9$:8: 80$10/$:00 /.0$::9$109 /0$/90$118 /10$108$99. 80$199$000 100$101$000 180$00/$/.. 11$.10$181 //$881$091 1:$8/8$9.9 .98$1.8$:/: 7upees 7upees
Page 94
3iscellaneous '#penditure Deferred 7evenue e#penditure %rofit4 loss account T<T!J +)L)NCE S3EET )S ON >;!t M)RC3 <FFK %articulars 7upees
1$080$8.:
.98$1.8$:/:
7upees
Page 95
><=7,'> <F F=GD> >hare holder fund >hare capital >hare application money Joan funds >ecured loans =nsecured loans 7eserves and surplus Deferred ta# liability T<T!J !%%JI,!TI<G <F F=GD> Fi#ed assetsC 6ross bloc Jess accumulated depreciation Get bloc 0.$10.$988 ,apital wor in progress Investments ,urrent assets loan and advances Inventories >undry debtors ,ash and ban balances <ther current assets Joans advances 4 deposits :9$:1.$0.9 JessC current liabilities4 provisions Get current assets 3iscellaneous '#penditure 1$::1$11/ .81$18. .$8::$010 1$881$88/ /$009$999 8$80:$989 1.$810$..1 /:$:0/$/9/ 188$11:$0.1 18$088$801 1$000$000 10$118$/:0 /88$009$01/ 80$199$000 0$.01$000
/18$110$08/ 10$089$9:1 /01$8/0$110 10$8:.$8/.
Page 96
Deferred 7evenue e#penditure %rofit4 loss account T<T!J
/88$009$01/
+)L)NCE S3EET )S ON >;!t M)RC3 <FFH %articulars ><=7,'> <F F=GD> >hare holder fund >hare capital >hare application money 08$:8:$000 .$110$000 7upees 7upees
Page 97
Joan funds >ecured loans =nsecured loans 7eserves and surplus Deferred ta# liability T<T!J !%%JI,!TI<G <F F=GD> Fi#ed assetsC 6ross bloc Jess accumulated depreciation Get bloc ,apital wor in progress Investments ,urrent assets loans and advances Inventories >undry debtors ,ash and ban balances <ther current assets Joans advances 4 deposits JessC current liabilities4 provisions Get current assets 3iscellaneous '#penditure Deferred 7evenue e#penditure %rofit4 loss account T<T!J 18$8/9$/88 .$988$89. :$810$/./ 1$..9$.90 10$9.0$811 99$898$188 19$88.$/:0
118$919$8:8 10$098$190 0$8.0$8// /08$800$880
109$188$.81 8$::1$98/ 10/$118$:00 /.$118$108
80$01:$9/1
/$10:$181 /08$800$880
Page 98
PROFIT )ND LOSS )CCOUNT FOR T3E YE)R <FFJ %articulars Income 6ross sales Total sales JessC '#ercise duty and ta#es Get sales <ther income IncreaseB?decrease@ in stoc T<T!J .80$101$888 .80$101$888 888$0/0 .19$819$88. .1$88/$88. .08$10.$800 119$808$1/8 7upees
'P%'G,'> 3aterial consumed %ayments and )enefits to employees 3anufacturing e#penses !dministrative and e#penses >elling e#penses Financial charges Depreciation Total %rofit B loss before ta# JessC provision for ta#ation ,urrent year 'arlier years Fringe benefit ta# Deferred ta#
:18$08.$/:1 .0$1.:$10/ :8$/.:$881 88$90:$..8 81$081$.10 00$908$1.0 /1$111$891 111$08/$.18 ?01$/18$190@ 5 5 5 1$.10$190 ?/1$11:$01:@
?.0$9./$.88@
Page 99
%rofit and loss after ta# Joss brought forward from previous year )alance carried forward to balance sheet
1/$881$091 ?18$/:0$/10@
Page 100
PROFIT )ND LOSS )CCOUNT FOR T3E YE)R <FFL %articulars Income 6ross sales Total sales JessC '#ercise duty and ta#es Get sales <ther income IncreaseB?decrease@ in stoc T<T!J .91$.10$89: .91$.10$89: :10$/91 .98$8:0$091 .$898$.80 ?.0$/11$119@ .10$:81$/8. 7upees
'P%'G,'> 3aterial consumed %ayments and )enefits to employees 3anufacturing e#penses !dministrative and e#penses >elling e#penses Financial charges Depreciation Total %rofit B loss before ta# JessC provision for ta#ation ,urrent year 'arlier years Fringe benefit ta# Deferred ta#
190$01/$:80 18$01:$::: .0$80/$098 1.$:81$.10 01$:8/$./: /0$11:$08: 10$/00$189 .0/$991$89/ 11$:8.$.11 5 /$/00$000 ?1$989$80:@ /88$00: .$8:8$891
1.$088$/1:
Page 101
%rofit and loss after ta# Joss brought forward from previous year )alance carried forward to balance sheet
?.81$18.@ 1/$881$091
PROFIT )ND LOSS )CCOUNT FOR T3E YE)R <FFK %articulars Income 6ross sales Total sales JessC '#ercise duty and ta#es Get sales <ther income IncreaseB?decrease@ in stoc T<T!J 118$11.$.0: 118$11.$.0: 080$/09 110$0/8$0:0 0$:.8$09/ ?/8$9.:$:9/@ 10:$0.1$8:: 7upees
'P%'G,'> 3aterial consumed %ayments and )enefits to employees 3anufacturing e#penses !dministrative and e#penses >elling e#penses Financial charges Depreciation Total %rofit B loss before ta# JessC provision for ta#ation
81$/90$0/0 8$910$808 .8$808$000 0$./1$.01 8$0:1$818 11$008$110 8$8:1$98: 1:1$088$019 8$9:.$1/8 5 :0$000
Page 102
,urrent year 'arlier years Fringe benefit ta# Deferred ta#
5 18/$110 :$9:1$:18
1$11/$998 %rofit and loss after ta# Joss brought forward from previous year )alance carried forward to balance sheet ?/$10:$181@ ?.81$18.@
PROFIT )ND LOSS )CCOUNT FOR T3E YE)R <FFH %articulars Income 6ross sales Total sales JessC '#ercise duty and ta#es Get sales <ther income IncreaseB?decrease@ in stoc T<T!J .0$.08$..8 .0$.08$..8 5 .0$.08$..8 1$/.8$009 11$/19$81/ 10/$81:$088 7upees
'P%'G,'> 3aterial consumed %ayments and )enefits to employees 3anufacturing e#penses !dministrative and e#penses >elling e#penses
:/$/18$001 /$90.$98. /1$0.9$018 :$.0:$/01 0$.00$9.1 10$818$100
Page 103
Financial charges Depreciation Total %rofit B loss before ta# JessC provision for ta#ation ,urrent year 'arlier years Fringe benefit ta# Deferred ta#
8$::1$981 98$9.1$/10 .$9:.$.0. 5 10$000 18$:10 /..$.01 0$8.0$8//
?/$10:$181@ %rofit and loss after ta# Joss brought forward from previous year )alance carried forward to balance sheet 5 ?/$10:$181@
+I+LIO(R)P3Y
1. I.3. %andey C Financial management
/. 3.9. Fhan4 %.F.-ain
Financial management
.. >.%. -ain4 F.J.Garang
,ost 4 management accounting
:. F. 7a"eswara rao 4 6. %rasad
!ccounting 4finance
0. %. Fula arni
Financial management
Page 104
.e$ Reference!
www.google.com
www.gallafoods.com
Page 105

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Inventory Galla

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INTRODUCTION

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

Efficient P%ant Layo"t,

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

,oncentrates )everages Fresh fruits Fresh vegetables.

VCR INSTITUTE OF MANAGEMENT STUDIES

Totapuri 3ango GLe lain 3ango

Hhite 6uava %in 6uava

9ellow papaya 7ed papaya

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

NEED FOR T3E STUDY

VCR INSTITUTE OF MANAGEMENT STUDIES

SCOPE OF T3E STUDY

O+-ECTI#ES OF T3E STUDY

LIMIT)TION OF T3E STUDY

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

I6ood inventory management is good financial managementI

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

The consequences of under investment in inventories are

!n efficient inventory management should

VCR INSTITUTE OF MANAGEMENT STUDIES

quantity at the right price

anticipate price changes.

and efficient customer services.

and eep it an optimum level.

VCR INSTITUTE OF MANAGEMENT STUDIES

This cost of ordering includes

Carrying Co!t It is the cost of eeping items in stoc

Interest on investment <bsolesce losses

VCR INSTITUTE OF MANAGEMENT STUDIES

>tore5 eeping costs Insurance etc.$

VCR INSTITUTE OF MANAGEMENT STUDIES

,omponents of these costs include the following

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

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Finished goods inventory consists of completed products ready for sale.

ordering and costs of carrying.

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES

VCR INSTITUTE OF MANAGEMENT STUDIES