Inventory Management Ysr

MBA Programme
Inventory Management
INTRODUCTION
The Inventory Concept
The dictionary meaning of the word inventory is Stock of goods. The term
Inventory refers to the commodities s!!"ied to an ndertaking for the !r!ose of
consm!tion in the !rocess of manfactre or of rendering service or for transformation
into !rodcts.
To the finance e#ective$ Inventory can %e taken as the va"e of raw materia"s$
consma%"es$ s!ares$ work in !rogress and finished goods in which the com!anys
working ca!ita" fnds have %een invested.
Classification of Inventories
The Inventories in an Indstria" concern is genera""y c"assified as fo""owing&
Raw material Inventory - This is sed in manfactring. 'hen the demand
arises$ they are drawn from stores and !rocessed or se va"e is added dring the
!rocess and fina""y finished !rodct comes ot.
Semi finished goods - 'hen the materia" %eing !rocessed$ it may have to wait
%etween two !rocesses$ sch materia" are known as semi finished goods or semi
finished materia" or 'ork in !rocess inventory.
Components - The !arts sed in assem%"y of !rodct$ are known as com!onents.
'hen these com!onents are !rchased from otside$ it is known as %oght ot
com!onents or %oght ot materia".
Spare parts Inventory - 'hen manfactring or servicing faci"ity %reakdown$ it
is to %e re!aired. In sch case$ the defective or worn(ot !arts of the machine are to
%e re!"aced %y new one. These new !arts of the machine are known as s!ares or
s!are !arts.
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Obsolete Inventory - 'hen any faci"ity %ecomes nservicea%"e$ and it is to %e
re!"aced %y a new one$ after re!"acing$ the o"d machine2faci"ity is to dis!osed.
Sch machines$ which have %ecome se"ess$ are termed as o%so"ete inventory.
aste! Scrap and re"ects - This ty!e of inventory occrs in manfactring firms
or in service organi3ations. 'hi"e !rocessing materia"$ chi!s are !rodced and it is
of no se for the organi3ation and it is to %e dis!osed. Simi"ar"y$ defective
com!onents$ which cannot %e re!rocessed ,re4ects- and materia"s which cannot %e
sed in any way in the organi3ation ,waste-$ a"" these are to %e dis!osed. They may
not %e having any se va"e for the organi3ation$ %t they may %e re!rocessed %y
some other organi3ations to !rodce a sef" !rodct.
#otives for holding Inventories
1conomists have esta%"ished three motives for ho"ding inventories.
Transaction motive$
%reca&tionary motive$
Spec&lative motive$
Transaction motive ' 5irms may re6ire ho"ding certain amont of finished !rodcts
!er!eta""y in stock for dis!"ay or demonstration !r!ose. They may a"so ho"d inventories
to meet a sdden demand$ ths redcing the de"ivery tags.
%reca&tionary motive ' 5irms may ho"d inventories for fear of stock ots and "osing its
goodwi"". Some of the !recationary motives give rise to safety stock to dea" with
ncertainty in s!!"y and demand.
Spec&lative motive ' A firm may a"so ho"d %oth raw materia"s and finished !rodcts
when it e#!ects a !rice in ftre$ there%y rea"i3ing a stock !rofit. Inventories he"d for
s!ec"ative motive are termed as !rofit(making inventory.
7f the three motives$ preca&tionary motive re6ires mch attention. Besides
accm"ation of inventory de to the three motives mentioned a%ove$ inventories a"so get
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accm"ated %ecase of inefficient management of working ca!ita". This ty!e of
inventory is ca""ed$ flabby inventory$
In addition$ there may %e a contract&al reason for ho"ding some inventories.
Contract&al Re(&irements 9 7ccasiona""y it may %e necessary to carry a certain "eve" of
inventory to meet a contracta" agreement. Some manfactrers re6ire dea"ers to
maintain a s!ecified "eve" of inventory in order to %e the so"e re!resentative in a !artic"ar
territory.
Inventory #anagement
Inventories re!resent a s%stantia" amont of firms crrent assets. Pro!er
management of Inventory is necessary so that this investment does not %ecome too "arge$
as it wo"d res"t in %"ocking ca!ita" which co"d %e sed in !rodctive as!ect in
somewhere e"se.
Inventory Management covers efficient management of inventories in a"" its
as!ects inc"ding Inventory !"anning and !rogramming$ Prchasing$ Inventory :ontro"$
receiving$ ware ;osing and Store kee!ing$ Inventories hand"ing and <is!osa" of scra!.
In this conte#t of Inventory Management the firm is faced with the !ro%"em of
meeting two conf"icting needs.
To maintain a "arge si3e of inventory for efficient and smooth !rodction and sa"es
o!erations.
To maintain a minimm investment in inventories to ma#imi3e !rofita%i"ity.
The aim of Inventory management$ ths$ is to avoid e#cessive and inade6ate
"eve"s of inventories and to maintain sfficient inventory for the smooth !rodction and
sa"es o!erations.
An effective inventory management sho"d
1nsre continos s!!"y of materia"s to faci"itate ninterr!ted !rodction.
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Maintain sfficient stocks of raw materia"s in !eriods of short s!!"y and
antici!ate !rice changes.
Maintain sfficient finished goods inventory for smooth sa"es o!erations$ and
efficient cstomer services.
Minimi3e the earnings cost and time.
:ontro" investment in inventories and kee! it at an o!timm "eve".
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O)*+CTI,+S O- IN,+NTOR. #/N/0+#+NT
The o%4ectives of the inventory management are discssed nder two heads&
7!erating o%4ectives.
5inancia" o%4ectives.
O%+R/TIN0 O)*+CTI,+S
The 7!erating o%4ectives of Inventory management is frther divided as fo""ows
/vailability of materials
The first and the foremost of inventory management is make a"" ty!es of
materia"s avai"a%"e at a"" times they needed %y the !rodction de!artments. So that the
!rodction may not %e he"d ! for want of materia"s. It is therefore advisa%"e to
maintain the minimm 6antity of a"" ty!es of materia"s to move on !rodction
sched"e.
#inimi1ing the wastage
Inventory management has to minimi3e the wastage at a"" "eve"s that is dring its
storage in the god owns or at work in the factory. 0orma" wastage$ in other words
ncontro""a%"e wastage$ sho"d on"y %e !ermitted. Any a%norma" %t contro""a%"e wastage
sho"d strict"y %e contro""ed. 'astage of materia"s %y "eakage$ theft and s!oi"age de to
rst$ dst or dirt sho"d %e avoided.
%romotion of man&fact&ring efficiency
The manfactring efficiency of the enter!rise increases if right ty!es of raw
materia" are made avai"a%"e to !rodction de!artment at the right time. It redces wastage
+ cost of !rodction + im!roves the mora" of workers.
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)etter service to c&stomers
In order to meet to the demand of the cstomers$ it is the res!onsi%i"ity of
inventory management to !rodce sfficient stock of finished goods to e#ecte the orders
received from cstomers.
Optim&m level of inventories
Pro!er contro" of inventories he"!s management to !rocre materia"s in right time
in order to rn the !"ant efficient"y. Maintaining the o!timm "eve" of inventories kee!ing
in view the o!erationa" re6irements avoids the ot of stock danger.
-IN/NCI/2 O)*+CTI,+S
The 7!erating o%4ectives of Inventory management is frther divided as fo""ows (
+conomy in p&rchasing
Pro!er inventory management system %rings certain advantages and economies in
!rchasing the raw materia"s. Management makes every attem!t to !rchase raw
materia"s in %"k 6antity and to take advantage of favora%"e market conditions.
Optim&m investment and efficient &se of capital
The !rimary o%4ective of inventory management$ from financia" !oint of view$ is
to have an o!timm "eve" of investment in inventories. Inventory management has to
set! minimm and ma#imm "eve"s of inventories to avoid deficiency or sr!"s stocks.
Reasonable prices
Inventory management has to ensre the s!!"y of raw materia"s at a reasona%"e
"ow !rice$ %t withot sacrificing the 6a"ity. It he"!s to redction of cost of !rodction
and im!rovement in the 6a"ity of finished goods in order to ma#imi3e the !rofits of the
organi3ation.
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#inimi1ing the costs
Minimi3ing inventory costs sch as hand"ing$ ordering and carrying costs etc is
one of the main o%4ective of inventory management. It he"!s in redction of inventory
costs in a way that it redces the costs !er nit of inventory and there %y redction of tota"
cost of !rodction.
Inventory Systems
5or an effective inventory management$ an efficient inventory system sho"d %e
maintained. Ths the im!ortance of inventory systems cannot %e neg"ected in the
Inventory Management. The two im!ortant ty!es of inventory systems avai"a%"e are
%eriodic Inventory System$
%erpet&al Inventory System$
*&st-In-Time Inventory System$
%eriodic Inventory System
In this system the 6antity and va"e of inventory is fond ot on"y at the end of
the acconting !eriod after having a !hysica" verification of the nits in hand.
The cost of materia"s sed or goods so"d is o%tained %y adding the tota" of
inventory !rchased dring the !eriod to the va"e of the inventory in hand in the
%eginning of the !eriod and s%tracting the va"e of inventory at the end of the !eriod.
In this system the inventory "eve" is not monitored at a"" dring the time interva"
%etween the orders$ so it has the advantage of "itt"e or no re6ired record kee!ing. The
disadvantage is "ess contro".
%erpet&al Inventory system
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It is a system of tracking and knowing the va"e of inventory and 6antity of
merchandise on hand at any time %y tracking sa"es$ retrns and recei!ts with information
systems.
A !ositive featre of a !er!eta" system is that inventory "eve" is continos"y
monitored$ so management a"ways knows the inventory stats. This is advantageos for
critica" !arts or raw materia"s and s!!"ies. ;owever$ it can %e cost"y.
The !er!eta" inventory system consists of&
Bin :ards.
Stores "edger.
:ontinos Stock taking.
)in cards 9 Bin cards are !rinted cards sed for acconting the stock of materia"$ in
stores. 5or every item of materia"s$ se!arate %in cards are ke!t.
The detai"s regarding the materia" sch as the name of the materia"$ the
!art nm%er$ the date of recei!t and isse$ the reference nm%er$ the name of the s!!"ier$
the 6antity received and issed$ the va"e of the materia"$ the rate$ the %a"ance 6antity$
etc. are recorded in the %in cards.
Stores ledger 9 .ike %in cards$ a stores "edger is maintained to record a"" the recei!ts and
isses in res!ect of materia"s with the difference that a"ong with the 6antities$ the va"es
are entered in the recei!t$ isse and %a"ance co"mns.
Contin&o&s stoc3 ta3ing 9 The !er!eta" inventory system is not com!"ete withot a
systematic !rocedre for !hysica" verification of the stores. The %in cards and the stores
"edger record the %a"ances$ %t their correctness can %e verified %y means of !hysica"
verification on"y.
*&st-In-Time Inventory System
0ow(a(days organi3ations are %ecoming more and more interested in getting
!otentia" gains from making sma""er and more fre6ent !rchase orders. In other words$
they are %ecoming interested in 4st(in(time !rchasing system.
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In Cst(In(Time system the materia"s arrive e#act"y when they are needed in the
!rodction !rocess. Inventory remaining in warehose co""ects dst and cost instead of
revene. Cst(In(Time system avoids this cost.
Costs for 4olding Inventory
The three im!ortant costs considered in ho"ding inventories are
Inventory Carrying Cost 5or6 Stoc3 4olding Cost$
%roc&rement Cost or Set&p Cost$
Shortage Cost or Stoc3-o&t Cost$
Inventory Carrying Costs or Stoc3 4olding Costs
They arise on accont of maintaining the stocks and the interest !aid on the ca!ita"
tied ! with the stocks. They vary direct"y with the si3e of the inventory as we"" as the
time the item is he"d in stock. Darios com!onents of the stockho"ding cost are&
Cost of Storage Space 9 This consists of rent for the s!ace occ!ied %y the
inventory. Besides s!ace e#!enses$ this wi"" a"so inc"de heating$ "ighting and other
atmos!heric contro" e#!enses.
Depreciation and deterioration 9 They are es!ecia""y im!ortant for fashion items
or items ndergoing chemica" changes dring storage. 5ragi"e items sch as
crockery which are "ia%"e to damage$ %reakage$ etc.
%ilferage Cost 9 It de!ends !on the natre of the item. Da"a%"e items may %e
more tem!ting$ whi"e there is hard"y any !ossi%i"ity of heavy casting or forging
%eing sto"en.
Obsolescence Cost 9 It de!ends !on the natre of the item in stock. 1"ectronic
and com!ter com!onents are "ike"y to %e fast otdated. :hanges in design a"so "ed
to o%so"escence.
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4andling cost 9 These inc"de a"" costs associated with movement of stock$ sch
as cost of "a%or$ overhead cranes$ gantries and other machinery sed for this
!r!ose.
%roc&rement Cost or Set&p Cost
They inc"de the fi#ed and varia%"e costs associated with !"acing of an order. In
case of !rchase mode"s it is known as ordering cost$ In case of manfactring mode"$ it
is known set&p cost.
To !"ace an order certain !a!er work is to %e done. The cost of this !a!er work is
taken as cost of ordering. In case of manfactring$ %efore starting !rodction$ the
machine is to %e set !. 7n"y on setting of machine$ the materia" is "oaded and the
!rodction is started. The ordering cost is distri%ted over the items !rchased in that
order. Simi"ar"y$ the set! cost is distri%ted e6a""y over the !rodcts manfactred in
that set!. This cost is a"so known as replenishment cost$
Shortage Cost or Stoc3-o&t Cost
These costs are associated with either a de"ay in meeting demands or the ina%i"ity
to meet it at a"". Therefore$ shortage costs are sa""y inter!reted in two ways. In case the
nfi""ed demand can %e fi""ed at a "ater stage ,%ack"og case-$ these costs are !ro!ortiona"
to 6antify that is short as we"" as the de"ay time. They re!resent "oss of goodwi"" and cost
of id"e e6i!ment. In case the nfi""ed demand is "ost ,no %ack"og case-$ these costs
%ecome !ro!ortiona" to on"y the 6antity that is short. These res"ts in cance""ed orders$
"ost sa"es$ !rofit and even the %siness itse"f.
T+C4NI7U+S O- IN,+NTOR. #/N/0+#+NT
The fo""owing are the techni6es of the inventory management
+conomic order (&antity$
/)C analysis$
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,+D classification$
4#2 Classification$
SD+ Classification$
-SN /nalysis$
SOS classification$
8.9 /nalysis$
0olf classification$
#N0 /nalysis$
+conomic order (&antity
A firm sho"d not !"ace either too "arge or too sma"" orders. 7n the %asis of a
trade(off %etween %enefits derived from the avai"a%i"ity of inventory and the cost of
carrying that "eve" of inventory$ the a!!ro!riate or o!timm "eve" of the order to %e !"aced
sho"d %e determined. The o!timm "eve" of inventory is !o!"ar"y referred to as the
economic order 6antity ,17G-. It is a"so known as economic "ot si3e.
The economic order 6antity may %e defined as that "eve" of inventory order that
minimi3es the tota" cost associated with inventory management. i.e it refers to the "eve" of
inventory at which the tota" cost of inventory com!rising ac6isition2ordering2set(! costs
and carrying cost is minima".
+O7 : ;</O=C
A H Tota" anna" re6irement
7 H 7rdering cost !er order
: H :onvey in cost !er nit
/)C analysis
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Isa""y a firm has to maintain severa" ty!es of inventories. It is not desira%"e to
kee! same degree of contro" on a"" the items. The firm sho"d !ay ma#imm attention to
those items whose va"e is highest. The firm sho"d therefore c"assify inventories to
identify which items sho"d receive the most effort in contro""ing. This c"assification is
done %y the AB: ana"ysis.
The AB: ana"ysis techni6e is %ased is %ased on the assm!tion that a firm
sho"d not e#ercise the same degree of contro" on a"" items of inventory. It sho"d rather
kee! a more rigoros contro" on items that are ,i- the most cost"y$ and2or ,ii- the s"owest(
trning$ whi"e items that are "ess e#!ensive sho"d %e given "ess contro" effort.
7n the %asis of the cost invo"ved$ the varios inventory items are categori3ed into
three c"asses&
>/? category$
>)? category$
>C? category$
:ategory / items (( More cost"y and va"a%"e consm!tion items
are c"assified as A items. Bt the A category
items are very "ess in vo"me ,genera""y 8FJ-
when com!ared to the tota" vo"me of
inventory.
:ategory ) items (( The items having average consm!tion Da"e
items are c"assified as B items. Bt the A
category items are very avg in Do"me
,genera""y =FJ- when com!ared to the tota"
vo"me of inventory.
:ategory C items (( The items having "ess consm!tion Da"e items
are c"assified as : items. Bt the : category
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items are very high in vo"me ,genera""y ?FJ-
when com!ared to the tota" vo"me of
inventory.
,+D Classification
D1< 9 Dita"$ 1ssentia" and <esira%"e c"assification is a!!"ica%"e "arge"y to s!are
!arts. Stocking of s!are !arts is %ased on strategies different from those of raw materia"s
%ecase of there consm!tion !attern is different. ;ere the s!are !arts are c"assified in to
three categories.
Dita" ( The s!ares$ the stock ot of which even for a
Short time wi"" sto! the !rodction.
1ssentia" ( The s!ares$ the a%sence of which cannot %e
To"erated for more than a few hors or a day.
<esira%"e ( The desira%"e s!ares are those s!ares which are
0eeded %t this a%sence for even a week or so wi"" not sto!
the !rodction.
4#2 Classifications
The ;igh$ medim and .ow ,;M.- c"assification fo""ows the same !rocedre as
is ado!ted in AB: c"assification. 7n"y difference is that in ;M.$ the c"assification nit
va"e is the criterion and not the anna" consm!tion va"e. The items of inventory
sho"d %e "isted in the descending order of nit va"e and it is ! to the management to fi#
"imits for three categories. 5or e#am!"es$ the management may decide that a"" nits with
nit va"e of *s. 8FFF and a%ove wi"" %e ; items$ *s. /FFF to 8FFF M items and "ess
than *s. /FFF . items.
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The ;M. ana"ysis is sef" for kee!ing contro" over consm!tion at de!artmenta"
"eve"s$ for deciding the fre6ency of !hysica" verification$ and for contro""ing !rchases.
SD+ Classification
The S<1 ana"ysis is %ased !on the avai"a%i"ity of items and is very sef" in the
conte#t of scarcity of s!!"y. In this ana"ysis$ S refers to scarce items$ genera""y
im!orted$ and those which are in short s!!"y. < refers to diffic"t items which are
avai"a%"e indigenos"y %t are diffic"t items to !rocre. Items which have to come from
distant !"aces or for which re"ia%"e s!!"iers are diffic"t to come %y fa"" into <
category. 1 refers to items which are easy to ac6ire and which are avai"a%"e in the "oca"
markets.
The S<1 c"assification$ %ased on !ro%"ems faced in !rocrement$ is vita" to the
"ead time ana"ysis and in deciding on !rchasing strategies.
-SN /nalysis
5S0 stands for fast moving s"ow moving and non(moving. ;ere$ c"assification is
%ased on the !attern of isses from stores and is sef" in contro""ing o%so"escence.
To carry ot an 5S0 ana"ysis$ the date of recei!t or the "ast date of isse$
whichever is "ater$ is taken to determine the nm%er of months$ which have "a!sed since
the "ast transaction. The items are sa""y gro!ed in !eriods of /8 months.
5S0 ana"ysis is he"!f" in identifying active items which need to %e reviewed
reg"ar"y and sr!"s items which have to %e e#amined frther. 0on(moving items may
%e e#amined frther and their dis!osa" can %e considered.
SOS Classification
*aw materia"s$ es!ecia""y agric"tra" in!ts are genera""y c"assified %y the
seasona"$ off(seasona" systems since the !rices dring the season wo"d genera""y %e
"ower.
The seasona" items which are avai"a%"e on"y for a "imited !eriod sho"d %e
!rocred and stocked for meeting the needs of the f"" year. The !rices of the seasona"
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items which are avai"a%"e throghot the year are genera""y "ess dring the harvest season.
The 6antity re6ired of sch items sho"d$ therefore$ %e determined after com!aring the
cost savings on accont of "ower !rices$ if !rchased dring season$ with the higher cost
of carrying inventories if !rchased throghot the year.
A Bying and stocking strategy for seasona" items de!end on a "arge nm%er of
factors and more and more so!histication is taken !"ace in this s!here and o!erationa"
techni6es are sed to o%tain o!timm res"ts.
8.9 /nalysis
'hi"e the AB: ana"ysis is %ased on the assm!tion on va"e$ K)L ana"ysis is
%ased on the va"e of inventory ndertaken dring the c"osing of anna" acconts. K
items are those having high va"e$ ) items are those whose inventory va"es are medim
and L items are those whose inventory va"es are "ow.
The !ercentages are simi"ar to AB: ana"ysis. This ana"ysis he"!s find items with
heavy stock.
0olf Classification
The "etter stands for Movernment$ 7rdinary$ .oca" and 5oreign. There are main"y
im!orted items which are channe"i3ed throgh the State Trading :or!oration ,ST:-
Minera"s and Meta"s Trading :or!oration$ etc. Indian <rgs and Pharmacetica" .td
,I<P.-$ Mica trading cor!oration etc. These are s!ecia" !rocedres of inventory contro"
which may not a!!"ica%"e to ordinary items as they re6ire s!ecia" !rocedres.
#N0 /nalysis
The gro!ing of inventory items in this ana"ysis takes !"ace as&
#- #oving items 9 The items which are consmed from time to time are norma""y
referred to as moving items.
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N- Non moving items 9 These items which are not and consmed in "ast one year
are covered nder this gro!.
0- 0host items 9 This gro! refers to sch items which neither have %een
received nor issed dring the year. The %a"ance of sch items shown in stock
registers of the organi3ation wi"" %e ni"$ %oth at the %eginning and at the end of the
!revios financia" year.
/dvantages of Inventory #anagement
The advantages gained %y the firm %y managing the inventory effective"y are&
Introdction of a !ro!er inventory management system he"!s in kee!ing the
investment in the inventories as "ow as feasi%"e.
1nsres avai"a%i"ity of materia" %y !roviding ade6ate !rotection against
ncertainties of s!!"ies and consm!tion of materia"s.
A""ows f"" advantage of economics of %"k !rchases and trans!ortation.
.eads to redction in inventory "eve"s.
*e"eases more of ca!ita" for other o!erations.
Ade6ate cstomer service.
Advantage of !rice disconts %y %"k !ricing.
Providing f"e#i%i"ity to a""ows change in !rodction "ines de to changes in
demands on any other reason.
1ven ot the work"oads on the soa!s in the face f"ctations demands.
Ca&ses of poor Inventory #anagement
There are certain instances$ which "eads to !oor inventory management. They are&
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7ver %ying withot regard to the forecast or !ro!er estimate of demand to take
advantage of favora%"e market.
7ver !rodction or !rodction of goods mch %efore the cstomer re6ires them.
7ver stocking may a"so res"t from the desire to !rovide %etter service to the
cstomers. B"k !rodction or !rchase to ct down !rodction costs a"so wi""
res"t in "arge inventories.
:ance""ation of orders and minimm 6antity sti!"ations %y the s!!"iers may
a"so give rise to "arge inventories.
,ario&s stoc3 levels in Inventory #anagement
The "eve"s of inventory in any organi3ation de!end !on severa" factors inc"ding
socia"$ !o"itica"$ economic$ ethic$ fisca"$ governmenta" !o"icies at the g"o%a" and nationa"
"eve"s$ which determine the demand and s!!"y !arameters of an item. At the nit "eve"$
cost$ critica"ity$ avai"a%i"ity$ service "eve"$ stock ot$ "ead time$ !owers of de"egation$
consm!tion !attern$ etc. affect the "eve"s.
The varios stock "eve"s fi#ed for effective management of inventories are (
Minimm "eve".
Ma#imm "eve".
7rdering or reordering "eve".
<anger "eve".
These "eve"s serve as indices for initiating action on time so that the 6antity of
each item of materia"$ i.e. the inventory ho"ding is contro""ed or managed. Stock "eve"s are
not fi#ed on a !ermanent %asis %t are "ia%"e to revision in accordance with the changes in
the factors determining the "eve"s.
#inim&m level 9 It indicates the "owest figre of inventory %a"ance$ which mst %e
maintained in hand at a"" times$ so that there is no sto!!age of !rodction de to non(
avai"a%i"ity of inventory.
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The main considerations for the fi#ation of minimm "eve" of inventory are as
fo""ows&
Information a%ot ma#imm consm!tion and ma#imm de"ivery !eriod in
res!ect of each item to determine its reorder "eve".
Average rate of consm!tion for each inventory item.
Average de"ivery !eriod for each item. This !eriod can %e ca"c"ated %y averaging
the ma#imm and minimm !eriod.
The form"a sed for its ca"c"ation is as fo""ows&
#inim&m level of Inventory : Reorder level ' 5/verage rate of
cons&mption @ /verage time of Inventory delivery6$

#aAim&m 2evel ' It indicates the ma#imm figre of inventory 6antity he"d in stock at
any time.
The im!ortant considerations which sho"d govern the fi#ation of ma#imm "eve"
for varios inventory items are as fo""ows&
The fi#ation of ma#imm "eve" of an inventory item re6ires information a%ot its
reorder "eve". The reorder "eve" itse"f de!ends !on its ma#imm rate of
consm!tion and ma#imm de"ivery !eriod. It in fact is the !rodct of ma#imm
consm!tion of inventory item and its ma#imm de"ivery !eriod.
Nnow"edge a%ot minimm consm!tion and minimm de"ivery !eriod for each
inventory item sho"d a"so %e known.
The determination of ma#imm "eve" a"so re6ires the figre of economic order
6antity.
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MBA Programme
Avai"a%i"ity of fnds$ storage s!ace$ natre of items and their !rice !er nit are
a"so im!ortant for the fi#ation of ma#imm "eve".
In the case of im!orted materia"s de to their irreg"ar s!!"y$ the ma#imm "eve"
sho"d %e high.
#aAim&m level of Inventory : Reorder levelB Reorder (&antity
5#inim&m cons&mption @ #inim&m reorder period6
Reorder level 9 This "eve" "ies %etween minimm and ma#imm "eve"s in sch a way
that %efore the materia" ordered is received into the stores$ there is sfficient 6antity on
hand to cover %oth norma" and a%norma" consm!tion sitations. In other words$ it is the
"eve" at which fresh order sho"d %e !"aced for re!"enishment stock. The reorder "eve"
mst %e sfficient to cover the ma#imm !ossi%"e consm!tion of stock dring "ead time
,reorder !eriod-.
It is set after consideration of the fo""owing factors.
*ate of consm!tion.
Minimm "eve".
.ead time$ i.e. de"ivery time.
Dariation in "ead time.
Reorder level : #aAim&m reorder period @ #aAim&m Usage$
Danger level 9 It is the "eve" at which norma" isses of the raw materia" inventory are
sto!!ed and emergency isses are on"y made.
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Danger level : /vg cons&mption @ 2ead time for emergency p&rchases
Ob"ectives of Inventory ,al&ation
The o%4ectives of inventory va"ation are discssed here %e"ow as fo""ows
Determination of Income - The va"ation of inventory is necessary for
determining the tre income earned %y %siness dring a !eriod.
Determination of -inancial position ( The inventory at the end of !eriod is to %e
shown as a crrent asset in the %a"ance sheet of the %siness. In case of the
inventory is not !ro!er"y va"ed the %a"ance sheet wi"" not disc"ose the correct
financia" !osition of the %siness.
#ethods of Inventory ,al&ation
Since Inventory is the sing"e "argest asset in the %a"ance sheet of most
organi3ations$ the va"ation of inventory %ecomes of tmost im!ortance and crcia" to the
financia" e#ectives.
#ethods of ,al&ation of Inventories
The different methods sed for va"ation of inventories may %e enmerated as
fo""ows 9
#ethods based on /ct&al cost
5irst(in(5irst(ot method.
.ast(in(5irst(ot method.
;ighest(in(5irst(ot method.
S!ecific identification !rice.
Base stock !rice.
Ad4sted se""ing !rice.
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#ethods based on /verage cost
Sim!"e average !rice.
'eighted average !rice.
#ethods based on /ct&al cost
The methods of acta" cost are as fo""ows (
-irst-in--irst-o&t #ethod 9 The 5irst(in(5irst(ot Method of !ricing materia"s is
%ased on the assm!tion that the materia"s which are !rchases first are issed
first. The f"ow of cost of materia"s sho"d a"so %e in the same order.
2ast-in--irst-o&t #ethod 9 This method is 4st reverse of 5I57. It o!erates on
the assm!tion that the "atest received materia"s are issed first for !rodction and
those received first issed "ast. The !rice of the "ast "ot of materia"s received is
sed for a"" the isses nti" a"" nits from this "ot have %een issed after which the
!rice of the !revios "ot received %ecomes the isse !rice.
4ighest-in--irst-o&t method 9 Inder this method$ the highest !riced materia"s
are treated as %eing issed first. The c"osing inventory is ke!t at the "owest !ossi%"e
!rice. It is nderva"ed in times of rising !rices and ths secret reserves are
created.
Specific identification price 9 The s!ecific identification method may %e sed for
inventories of items that are not ordinari"y inter(changea%"e$ or for goods
manfactred for a s!ecific !r!ose. This method is %est sited for 4o% order
indstries which carry ot individa" 4o%s or contracts against s!ecific orders.
)ase stoc3 price 9 The %ase stock form"a !roceeds on the assm!tion that a
minimm 6antity of inventory ,%ase stock- mst %e he"d at a"" times in order to
carry on %siness. Inventories ! to this 6antity are stated at the cost at which the
cost at which the %ase stock was ac6ired.
/d"&sted Selling price 9 Inder this method which is ado!ted %y retai"ers$
inventory is estimated at se""ing !rice and to va"e it at cost$ the estimated gross
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!rofit is dedcted there from. The a"ternative a!!roach is to dedct crrent sa"es
from the tota" goods avai"a%"e for sa"e at retai" !rice. This gives the va"e of
Inventory.
#ethods based on /verage cost
The methods of average cost are as fo""ows
Simple average price 9 Sim!"e average !rice is the average of the !rices withot
any regard to 6antities. Sim!"e average !rice is ca"c"ated %y adding ! different
!rices and then dividing %y the nm%er of different !rices.
eighted average price method 9 'eighted average !rice is ca"c"ated %y
dividing the tota" cost of materia" in stock %y the tota" 6antity of materia" in hand.
Inder this method$ !rices are averaged after weighting ,i.e. m"ti!"ying- %y their
6antities. The average !rice at any time is sim!"y the %a"ance va"e figre divided
%y the %a"ance nits figre.
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O)*+CTI,+S O- T4+ STUD.
To !resent the conce!ta" framework re"ating to inventory management.
To condct a stdy on e#isting !ractices of inventory management in the com!any.
To determine the inventory stats of the com!any and ana"y3e them.
To stdy the Inventory va"ation methods of com!any.
To make !ertinent sggestions for the effective management of inventory of ).S.*.
SPI00I0M + ''1ADI0M MI..S PDT..T<S
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#+T4ODO2O0. O- T4+ STUD.
The fo""owing is the methodo"ogy of the stdy. The co""ection of data is done in
two !rinci!"e sorces. They are as fo""ows&
Primary data.
Secondary data.
%RI#/R. D/T/
The !rimary data needed for the stdy is gathered throgh concerned officers
some of the information has %een verified and s!!"emented with !ersona" o%servation.
S+COND/R. D/T/
The !resent stdy is %ased on the secondary data sorces and the needed data was
co""ected from !%"ished sorces sch as !am!h"ets of anna" re!orts$ retrns and interna"
records$ reference from te#t %ook and 4orna"s of financia" management.
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N++D -OR T4+ STUD.
This stdy on inventory management is needed %y the firms for
To avoid e#cessive and inade6ate "eve"s of inventories in the com!any.
To gain the cstomer satisfaction throgh short time de"ivery.
To maintain sfficient inventory in the com!any for the smooth !rodction and
sa"es o!erations.
5or rnning the %siness o!erations of the com!any in smooth and efficient
manner.
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SI0NI-IC/NC+ O- T4+ STUD.
The stdy is significant to the fo""owing gro!s.
To the organi1ation & By this stdy the organi3ation can get %enefits
%y ado!ting varios methods and techni6es to
varios !ro%"ems that they are facing in
inventory management.
To the 0overnment & The government can ado!t s!ecia" !o"icies and
strategies for the frther deve"o!ment of sch
organi3ations
To the Researcher & This stdy is sef" to the researcher$ in getting
!ractica" know"edge a%ot the inventory
management !ractices.
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2I#IT/TIONS O- T4+ STUD.
As the detai"s of inventory are maintained confidentia""y$ the !ro4ect dea"s with
fewer areas of inventory.
As the time s!ent on !ro4ect is on"y one month$ it is not !ossi%"e to go in to
detai" stdy of item wise.
The !ro4ect covers the area of stores and s!ares nder inventory management
system of the com!any. It does not dea" with other inventories "ike raw
materia"s$ finished goods and work in !rogress.
The co""ected information is main"y throgh secondary data.

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INDUSTR. %RO-I2+
INTRODUCTION
This section !rovides %ackgrond information on the history$ si3e$ geogra!hic
distri%tion$ em!"oyment$ !rodction$ sa"es$ and economic condition of the te#ti"e
indstry. The faci"ities descri%ed within the docment are descri%ed in terms of their
Standard Indstria" :"assification ,SI:- codes.
The te#ti"e indstry is one of the o"dest in the wor"d. The o"dest known te#ti"es$
which date %ack to a%ot ?FFF B.:.$ are scra!s of "inen c"oth fond in 1gy!tian caves.
The indstry was !rimari"y a fami"y and domestic one nti" the ear"y !art of the /?FFs
when the first factory system was esta%"ished. It wasnt nti" the Indstria" *evo"tion in
1ng"and$ in the /Bth centry$ that !ower machines for s!inning and weaving were
invented. In /A@E when *ichard Arkwrights s!inning frame with varia%"e s!eed ro""ers
was !atented$ water !ower re!"aced mana" !ower ,0eefs$ /EB8-.
In the ear"y /Ath centry of co"onia" America$ te#ti"es were !rimari"y
manfactred in 0ew 1ng"and homes. 5"a# and woo" were the ma4or fi%ers sed$
however$ cotton$ grown !rimari"y on sothern !"antations$ %ecame increasing"y im!ortant
,'i"son$ /EAE-. In /AB8 Same" S"ater$ who had worked as an a!!rentice to Arkwrights
!artner$ immigrated to America. In %"ack stone *iver$ *hode Is"and$ he started %i"ding
Arkwright machines and o!ened the fist 1ng"ish(ty!e cotton mi"" in America ,ATMI$
/EEAa-. In the ear"y nineteenth centry$ in .owe""$ Massachsetts$ the first mill in
America to se !ower "ooms %egan o!erations. It was the first time that a"" te#ti"e
manfactring o!erations had %een done nder the same roof ,'i"son$ /EAE and ATMI$
/EEAa-.
The twentieth centry has seen the deve"o!ment of the fist manmade fi%ers ,rayon
was first !rodced in /E/F-. A"thogh natra" fi%ers ,woo"$ cotton$ silk, and "inen- are sti""
sed e#tensive"y today$ they are more e#!ensive and are often mi#ed with manmade
fi%ers sch as !o"yester$ the most wide"y sed Synthetic fi%er. In addition$ segments of the
te#ti"e indstry have %ecome high"y atomated and com!teri3ed ,ATMI$ /EEAa-.
The te#ti"e indstry is characteri3ed %y !rodct s!ecia"i3ation. Most mi""s on"y
engage in one !rocess or raw materia". 5or e#am!"e$ a mi"" may %e engaged in either
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%road"oom weaving of cotton or %road"oom weaving of woo". Simi"ar"y$ many mi""s
s!ecia"i3e in either s!inning or weaving o!erations$ a"thogh "arger integrated mi""s may
com%ine the two o!erations. These "arge mi""s norma""y do not condct their own dyeing
and fishing o!erations. 'eaving$ s!inning$ and knitting mi""s .sa""y send ot their
fa%rics to one of the a!!ro#imate"y ?FF dyeing and fishing !"ants in the Inited States.
Broad"y defined$ the te#ti"e indstry consists of esta%"ishments engaged in
s!inning natra" and manmade fi%ers into yarns and threads. These are then converted ,%y
weaving and knitting- into fa%rics. 5ina""y$ the fa%rics and in some cases the yarns and
threads sed to make them$ are dyed and fished. The manfactring of te#ti"es is
categori3ed %y the 7ffice of Management and Bdget ,7MB- nder Standard Indstria"
:"assification ,SI:- code 88. The Standard Indstria" :"assification system was
esta%"ished %y 7MB to track the f"ow of goods and services in the economy$ %y assigning
a nmeric code to these good and services. SI: 88 is categori3ed .into nine three(digit
SI: codes. <e to the "arge nm%er of !rocesses sed in the te#ti"e indstry and the
"imited sco!e of this note%ook$ the !rodction of nonwoven synthetic materia"s and
car!ets is not discssed in detai". The !rimary focs of this note%ook is on weaving and
knitting o!erations$ with a %rief mention of !rocesses sed to make car!ets. 7MB is in
the !rocess of changing the SI: code system to a system %ased on simi"ar !rodction.
Processes ca""ed the 0orth American Indstria" :"assification System ,0AI:S-. In the
0AI: system$ te#ti"e mi""s ,inc"ding fi%er$ yarn and thread mi""s$ fa%ric mi""s$ and te#ti"e
and fa%ric finishing and coating mi""s- %e c"assified as 0AI: =/=. Te#ti"e !rodct mi""s
,inc"ding frnishings$ car!ets$ rgs$ crtains$ "inens$ %ags$ canvas$ ro!e$ twine$ and tire
cord and tire fa%ric- wi"" %e c"assified as 0AI: =/>. This note%ook covers the te#ti"es
indstry as defined %y SI: 88. .ess focs is given to SI: 88E$ Misce""aneos Te#ti"e
Moods in the Indstria" Process.
<escri!tions Section %ecase the !rocesses sed and !rodcts manfactred vary
s%stantia""y within SI: 88E. Prodcts categori3ed nder SI: 88E inc"de coated fa%rics$
not r%%eri3ed$ tire cord(and fa%rics$ cordage and twine$ and te#ti"e goods not e"sewhere.
:"assified it is im!ortant to note$ however$ that the Misce""aneos Te#ti"e Moods category
is covered in Section //$ Introdction to the Te#ti"e IndstryO Section ID$ :hemica"
*e"ease and Transfer Profi"eO Section DIII$ :om!"iance Activities and InitiativesO and
other sections of this docment. Indstry sectors re"ated to the te#ti"es indstry$ %t not
categori3ed nder SI: 88 ,and ths$ not in the sco!e of this note%ook- inc"de the
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manfactring of c"othing and a!!are" ,SI: 8=- and the manfactring of r%%er coated
te#ti"e goods ,SI: =F@E-.
%rod&ct Characteri1ation
'ithin the nine %road categories in the te#ti"e indstry are 88 for(digit SI: codes
which more narrow"y define the different ty!es of !rodcts made Manfactring
esta%"ishments within the te#ti"e indstry are !rimari"y invo"ved In
5i%er !re!aration and manfactre of yam$ thread$ %raids$ twine$ and cordsO
Manfactre of knit fa%rics$ %road and narrow woven fa%rics$ as we"" as car!ets
and rgs fiomyarn ,Broad woven fa%ricsare genera""y greater than C< inches in
width$ whereas narrow woven fa%rics are "ess than /8 inches in width.-O
<yeing and fishing if %eers$ yarns$ fa%rics$ and knitted goodsO
:oating$ water !roof and treating fa%ricsO
Integrated manfactre of knit a!!are" and other !rodcts foam yarnO and
Manfactre of fe"t$ "ace$ nonwoven$ and other misce""aneos te#ti"e !rodcts.
More detai"ed information on the indstria" !rocesses sed to !rodce the varios
te#ti"e !rodcts.
0eographic Distrib&tion
The geogra!hic distri%tion of the te#ti"e indstry in the I.S. is "arge"y governed
%y its history in this contry. The indstry %egan in 0ew 1ng"and and moved to the Soth
as cotton %ecame the !rimary sorce of fi%ers. The five ma4or states for em!"oyment in
the te#ti"e indstry are 0orth :aro"ina$ Meorgia$ Soth :aro"ina$ A"a%ama$ and Dirginia.
Thogh the ma4ority of mi""s are "ocated in the Soth$ northern states sch as Maine$
Massachsetts$ 0ew .or3! 0ew Cersey$ *hode Is"and$ and Pennsy"vania are sti""
im!ortant to the te#ti"e indstry. Many finishing and dyeing ,SI: 88@- o!erations are
"ocated in 0ew Cersey. 0arrow fa%rics and manmade fi%er mi""s ,SI: 88>- are more
concentrated in *hode Is"and and Pennsy"vania. Nnitting mi""s ,SI:88?- and
misce""aneos te#ti"e mi""s ,SI: 88E- are scattered throgh severa" sothern and northern
states.
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According to the 1992 Census of Manufacturers for SI: 88 ,the most recent
censs data avai"a%"e-$ there were a tota"of?$?B> esta%"ishments in the te#ti"e
manfactring indstry. A "arge !ro!ortion ofthese were knitting mi""s ,SI: 88?- and yam
and thread mi""s ,SI: 88B-. Together these categories acconted for a"most ?F !ercent of
the tota" nm%er of esta%"ishments in the indstry. PThey a"so acconted for the "argest
!ortion of the em!"oyment and va"e of shi!ments in the te#ti"e indstry. The knitting and
yam and thread mi""s categories acconted for >@ !ercent of the @/>$FFF!eo!"e em!"oyed
in the indstry$ and>F !ercent of the QAF.? mi""ion in va"e of shi!ments$ in /EE8.
+conomic Trends
Throghot the /EEFs$ the te#ti"e indstry indicators have shown im!rovements.
The year /EE> was a !eak year for a"" indicators inc"ding e#!orts$ ca!ita" e#!enditres$
em!"oyment$ and mill fi%er consm!tion. In /EE>$ mill fi%er consm!tion set a record
with a @ !ercent increase to /@./%i""ion !onds. In/EE?$ fi%er consm!tion decreased %y
/.A !ercent on"y to increase by / !ercent in /EE@ ,ATMI$/EEA%-. Both /EE> and /EE@
were record years for fi%er consm!tion and were a s%stantia" im!rovement over the
recession years in the ear"y !art of the decade. The indstry has a"so e#!erienced a shift
towards increasing internationa" trade with contries sch as :anada and Me#ico ,ATMI$
/EE@-
Domestic Economy
The te#ti"e indstry s!ends for to si# !ercent of sa"es on ca!ita" e#!ansion and
moderni3ation$ down ffom eight to ten !ercent dring the e#!ansionary !hase of the
/E@Fs and /EAFs. Most recent ca!ita" e#!enditre has !aid for mill moderni3ation and
factory atomation ,1PA$ /EE@-. According to the American Te#ti"e Manfactrers
Institte ,ATMI-$ the "argest trade association for the indstry$ ca!ita" e#!enditres %y
domestic te#ti"e com!anies have increased in recent years reaching Q8.E %i""ion in /EE?
,ATMI$ /EEA%-. The increase in ca!ita" e#!enditres has "ed to an increase in
!rodctivity. Between /EA? and /EE?$ "ooms !rodctivity$ measred in S6are yards of
fa%ric !er "oom$ increased %y 8@A !ercent and was ! /F.? !ercent in /EE@ ,ATMI$
/EEA%-. In the same !eriod$ !rodctivity of %road woven fa%ric. Mi""s$ measred %y an
inde# of ot!t !er !rodction em!"oyee hor$ increased %y /F? !ercent$ and !rodctivity
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of yarn s!inning mi""s increased %y BB !ercent ,ATMI$ /EE@-. Indstry a"so re!orts
s!ending more than Q8? mi""ion each year on !o""tion and safety contro"s.
1conomies of sca"e in te#ti"e manfactring are significant and "imit entry into
the market. The cost of a new fi%er !"ant$ for e#am!"e$ is a!!ro#imate"y Q/FF mi""ion.
:osts of raw materia"s are e6ity vo"ati"e and ty!ica""y accont for ?F to @F !ercent of the
cost of the fished !rodct. To hedge against s!!"y shocks and to secre s!!"y$ many
!rodcers are vertica""y integrated %ackward into chemica" intermediates ,and in the case
of com!anies sch as Phi""i!s and Amoco$ a"" the way to crde oi"-. 5orward integration
into a!!are" and !rodct manfactre ,e.g. car!eting- a"so is not ncommon. 5US 1PAO
/EE@-.
INDUSTRI/2 %ROC+SS D+SCRI%TION
This section descri%es the ma4or indstria" !rocesses in the te#ti"e indstry$
inc"ding the materia"s and e6i!ment sed and the !rocesses em!"oyed. The section is
designed for those interested in gaining a genera" nderstanding of the indstry$ and for
those interested in the interre"ationshi! %etween the indstria" !rocess and the to!ics
descri%ed in s%se6ent sections of this !rofi"e (( !o""tant ot!ts$ !o""tion !revention
o!!ortnities$ and 5edera" reg"ations. This section does not attem!t to re!"icate
!%"ished engineering information that is avai"a%"e for this indstry. *efer to Section IK
for a "ist of reference docments that are avai"a%"e. 0ote a"so that Section D$ Po""tion
Prevention 7!!ortnities$ !rovides additiona" information on trade(offs associated with
the indstria" !rocesses discssed in this section. This section descri%es common"y sed
!rodction !rocesses$ associated raw materia"s$ the %y!rodcts !rodced or re"eased$ and
the materia"s either recyc"ed or transferred off(site.
This discssion identifies where in each !rocess wastes may %e !rodced. This
section conc"des with a descri!tion of the !otentia" fate ,via air$ water$ and soi"
!athways- of !rocess(s!ecific waste !rodcts.
Natural Fibers
)arn formation can %e !erformed once te#ti"e fi%ers are niform and have
cohesive srfaces. To achieve this$ natra" fi%ers are first c"eaned to remove im!rities
and are then s%4ected to a series of %rshing and drawing ste!s designed to soften and
)S* S!inning + 'eaving Mi""s ,P- .td.$ =8
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MBA Programme
a"ign the fi%ers. The fo""owing descri%es the main ste!s sed for !rocessing woo" and
cotton. A"thogh e6i!ment sed for cotton is designed somewhat different"y from that
sed for woo"$ the machinery o!erates in essentia""y the same fashion.
Opening / Blending. 7!ening of %a"es sometimes occrs in con4nction with the %"ending
of fi%ers. S!!"iers de"iver natra" fi%ers to the s!inning mi"" in com!ressed %a"es. The
fi%ers mst %e sorted %ased on grade$ c"eaned to remove !artic"es of dirt$ twigs$ and
"eaves$ and %"ended with fi%ers from different %a"es to im!rove the consistency of the
fi%er mix. Sorting and c"eaning is !erformed in machines known as o!eners. The o!ener
consists of a rotating cy"inder e6i!!ed with s!iked teeth or a set of toothed %ars. These
teeth !"" the n %a"ed fi%ers a!art$ f"ffing them whi"e "oosening im!rities. Becase the
feed for the o!ener comes from m"ti!"e %a"es$ the o!ener %"ends the fi%ers as it c"eans
and o!ens them.
Carding. Tfts of fi%er are conveyed %y air stream to a carding machine$ which trans!orts
the fi%ers over a %e"t e6i!!ed with wire need"es. / series of rotating %rshes rests on to!
of the %e"t. The different rotation s!eeds of the %e"t and the %rshes %ecase the fi%ers to
tease ot and a"ign into thin$ !ara""e" sheets. Many shorter fi%ers$ which wo"d weaken
the yam$ are se!arated ot and removed. / frther o%4ective of carding is to %etter a"ign
the fi%ers to !re!are them for s!inning. The sheet of carded fi%ers is removed throgh a
fnne" into a "oose ro!e"ike strand ca""ed a s"iver. 7!ening$ %"ending$ and carding are
sometimes !erformed in integrated carders. That acce!ts raw fi%er and ot!t carded
s"iver
Combing. :om%ing is simi"ar to carding e#ce!t that the %rshes and need"es are finer and
more c"ose"y s!aced. Severa" card s"ivers are fed to the com%ing machine and removed as
a femr$ c"eaner$ and more a"igned com% s"iver. In the woo" system$ com%ed s"iver is sed
to make worsted yam$ whereas carded s"iver is sed for woo"en yam. In the cotton
system$ the term com%ed cotton a!!"ies to the yam made from com%ed s"iver. 'orsted
woo" and com%ed cotton yarns are finer ,sma""er- than yam that has not %een com%ed
%ecase of the higher degree of fi%er a"ignment and father remova" of short fi%ers.
Drawing: Severa" s"ivers are com%ined into a continos$ ro!e"ike strand and fed to a
machine known as a drawing frame ,'ingate$ /EAE-. The drawing frame contains severa"
sets of ro""ers that rotate at sccessive"y faster s!eeds. As the s"ivers !ass throgh$ they
)S* S!inning + 'eaving Mi""s ,P- .td.$ ==
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MBA Programme
are frther drawn ot and "engthened$ to the !oint where they may %e five to si# times as
"ong as they were origina""y. <ring drawing$ s"ivers from different ty!es of fi%ers
,e.g.$ cotton and. !o"yester- may %e com%ined to form %"ends. 7nce a s"iver has %een
drawn$ it is termed a roving.
Drafting: <rafting is a !rocess that ses a frame to stretch the yam frther. This !rocess
im!arts a s"ight twist as it removes the yam and winds it onto a rotating s!ind"e. The yarn$
now termed a roving in ring s!inning o!erations$ is made ! ofa "oose assem%"age of
fi%ers drawn into a sing"e strand and is a%ot eight times the "ength and one(eighth the
diameter of the s"iver$ or a!!ro#imate"y as wide as a !enci" ,'ingate$/EAE-. 5o""owing
drafting$ the ravings may %e %"ended with other fi%ers %efore %eing !rocessed into woven$
knitted$ or nonwoven te#ti"es.
!pinning. The fi%ers are now s!n together into either s!n yams or fi"ament yams.
5i"ament yams are made from continos h e strands of manmade fi%er ,e.g. not sta!"e
"ength fi%ers-. S!n yarns are com!osed of over"a!!ing sta!"e "ength fi%ers that are %ond
together %y twist. Methods sed to !rodce s!n yams$ rather than fi"ament yams$ are
discssed in this section. The ravings !rodced in the drafting ste! are monted onto the
s!inning frame$ where they are set for s!inning. The yarn is first fed throgh another set
of drawing or de"ivery ro""ers$ which "ong then and stretch it sti"" frther. It is then fed
onto a high(s!eed s!ind"e %y a yarn gide that trave"s ! and down the s!ind"e. The
difference in s!eed of trave" %etween the gide and the s!ind"e determines the amont of
twist im!arted to the yarn. The yarn is co""ected on a %o%%in. In ring s!inning$ the s"iver is
fed from de"ivery ro""ers throgh a trave"er$ or wire "oo!$ "ocated on a ring. The rotation
of the s!ind"e arond the ring adds twist to the yam. This is i""strated in 5igre D5C6$
Another method$ shown in 5igre D5<6! is o!en(end s!inning$ which acconts for more
than ?F !ercent of s!inning e6i!ment sed ,ATMI$ /EEA%-. In this method$ s"iver !asses
throgh ro""ers into a rotating fnne"(sha!ed rotor.
The s"iver hits the inside of the rotor and re%onds to the "eft side of the rotor$
casing the s"iver to twist. 7!en(end s!inning does not se rotating s!ind"es since the
yarn is twisted dring !assage throgh the rotor$
)S* S!inning + 'eaving Mi""s ,P- .td.$ =>
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MBA Programme
Manmade Fibers
A"thogh not c"assified nder SI: ""# manmade fi%er !rodction is %rief"y
discssed in the fo""owing !aragra!hs to descri%e the !stream !rocessing of te#ti"es.
Manmade fi%ers inc"des
/. :e"""osic fi%ers$ sch as rayon and acetate$ which are created %y reacting
chemica"s with wood !"!O and
8. Synthetic fi%ers$ sch as !o"yester and ny"on$ which are synthesi3ed from organic
chemica"s.
)S* S!inning + 'eaving Mi""s ,P- .td.$ =?
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MBA Programme
CO#%/N. %RO-I2+
'e have achieved a great height of sccess de to the hard work of #r$ .$
Sridhar Reddy$ the chairman and #r$ .$ Srinivas&l& Reddy$ the managing director of
the com!any. 'e have a high"y ski""ed team of em!"oyees$ who carries "oads of
e#!erience in this fie"d. 'e have a strong infrastrctra" %ase$ which is we"" e6i!!ed
with the advanced machineries. 'e a"ways endeavor to !rovide the %est and !re fa%rics
to or cstomers and ths a"ways check the 6a"ity content of the fa%ric.
'e are engaged in the manfactring of a wide range of fine cotton fa%rics. 7r
fine cottons fa%rics have a remarka%"e characteristic of !roviding smoothness and
softness to the %ody. 'e are reckoned as one of the "eading cotton fa%rics manfactrers$
%ased in India. 7r cotton fa%ric is sed %y %ig com!anies for !rodction of varios ty!es
of garments. 'e have a"so %ecome one of the foremost organic cotton yarn s!!"iers in
India. 7r organic cotton is grown withot the se of any harmf" !esticides + chemica"s
and ths this "eads to the increase in its 6a"ity
#r$ .erram Sridhar Reddy started his %siness as cotton commission agent in
/EAA at his native !"ace Id!"a!ad$ Inko"" Manda"am$ Prakasam <istrict$ Andhra
Pradesh$ and !"anned to forward integration of Minner in /EB=. ;e started a firm Sri
Srinivasa Trading :om!any in /EBE$ s!!"ied cotton %a"es to varios s!inning mi""s in
Tami"nad and Andhra Pradesh.
It was in the year /EEE$ he esta%"ished a S!inning Mi"" at Mana!avaram vi""age
with a ca!acity of >?FF s!ind"es. ;is hard work$ innovative thoghts and strategic
a!!roach has made ).S.*. S!inning + 'eaving Mi""s Pvt. .td.$ trn in to one of the
"eading s!!"iers of /FFJ cotton yarns to many domestic and e#!orted oriented weaving
mi""s in and arond the contry.
#ission
To manfactre a high 6a"ity yarn there%y withstanding high "eve" of
com!etitiveness.
<eve"o!ing a "ong term re"ationshi! with or cstomers and s!!"iers.
)S* S!inning + 'eaving Mi""s ,P- .td.$ =@
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MBA Programme
To se "atest techno"ogica" strategies dring !rodction there%y forming an
innovative a!!roach.
To !rovide a safe$ f"fi""ing and rewarding work environment for or em!"oyees.
Servicing and s!!orting the commnities in which we o!erate
,ision
The com!any has a vision to e#ce" in a"" fie"ds of te#ti"e indstry and agric"tre
!rodce %asis.
'e wi"" %e intense"y cstomer focsed and wi"" offer !rodcts and services which
!rovide the %est va"e for or cstomers.
Spinning Division
).S.*. S!inning + 'eaving Mi""s Pvt. .td.$ has insta""ed state of art machines and
has a ca!acity to !rodce wide range of cotton yarns. 7r machinery "ines ! sing the
most e6i!ment sorced from the %est vendors.
:rrent"y the com!any !rodces B.? tons of /FFJ cotton yarn !er day$ with a
ca!acity of 8??/> s!ind"es and /F?F rotors.
eaving Division
7&ality
)S* S!inning + 'eaving Mi""s ,P- .td.$ =A
0I1T

).S.*. S!inning + 'eaving Mi""s Pvt. .td.$ has insta""ed B nm%ers PI:A07.
7mni !"s Air 4et 'eaving Machines to !rodce Mrey fa%ric.
MBA Programme
%olicyE
Ga"ity is integra" to everything at ).S.* 'e ado!t ho"istic 6a"ity assrance
system and an integrated system which covers the entire !rodction !rocess. A"" "ots are
tested %efore giving to the mi#ing.
'e %e"ieve 6a"ity is a contina" !rocess. 'ith a focs c"ear"y an de"ivering
6a"ity !rodcts and services$ we integrate to constant"y innovate and e#ce". As a res"t
or c"ients are assred of to! notch 6a"ity that is consistent across or !rodct range.
,al&eE
By a c"ear com!rehension of the market dynamics and the assimi"ation of the
ctting edge techno"ogy we assre the highest 6a"ity standards are met at a"" times.
Cotton -abrics

'e are ha!!y to ac6aint orse"ves as one of the sa"ient cotton fabric
man&fact&rers in India. 7r cotton fa%rics inc"de organic cotton fa%rics and white
cotton fa%rics. 'e se !re and good 6a"ity yarn for making the fa%ric. 7r fa%ric
!rovides immense comfort to the sers. It gives soothing effect to the %ody and wi"" %e
the right choice in the hot and sweaty smmers. 7r cotton fa%rics are "ight in weight in
com!arison to its thickness. 7r cotton fa%ric is easi"y washa%"e and its significant featre
is its dra%i"ity. 'e ensre or cstomers to !rovide good 6a"ity cotton fa%ric on time
and that too at moderate !rices.
%rod&cts
)S* S!inning + 'eaving Mi""s ,P- .td.$ =B
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MBA Programme
'e offer an e#c"sive co""ection of white cotton fabrics of a"" si3es. 7r white
cotton fa%ric is made ! of !re cotton. 'e a"so dea" with the manfactring and
s!!"ying of organic cotton yarn. 'e !rovide organic cotton yarn in a"" shades. 'e se
environment friend"y !rocedre for !rodcing or organic cotton yarn. Be"ow "isted are
the two divisions that "ook after or manfactring !rocesses.
Spinning DivisionE
7r ma4or conts range from 8>s to BFs %oth carded and com%ed cotton yarns.
Adding to these conts we have the set! of do%"ing of yarns in *ing <o%"ing yarns.
%rod&ction Capacity
*ing S!n )arns ? tons
7!en 1nd S!inning 8 tons
*ing <o%"ing /.? tons
eaving DivisionE
'e are having Air 4et weaving machines$ which we can !rodce a"" ty!es of
constrctions as !er %yer re6irements. Present"y we are !rodcing 8FFF meters of
>Fs:K>FSc(/=8KA8(@= grey fa%ric and avai"a%"e this fa%ric in finished form a"so.
)S* S!inning + 'eaving Mi""s ,P- .td.$ =E
0I1T
MBA Programme
'e !rovide the %est 6a"ity cotton yarn that inc"des organic cotton yarn and
cotton %"ended yarn. :otton yarn is !rodced from genine 6a"ity fi%er$ cotton yarn is its
high tensi"e strength and its s!erior 6a"ity. 7r cotton yarn is sed %y varios indstries
for manfactring the %est 6a"ity garments which is o%tained from the seed hair of the
cotton !"ant. 7r cotton yarn is sed to manfactre genine 6a"ity cotton fa%rics. The
significant featre of or. 'e are wide"y known as one of the !rominent cotton yarn
s!!"iers from India.
'e"come to the f"orishing wor"d of .$S$R$ Spinning F eaving #ills %vt$ 2td$
'e were esta%"ished in /EEE$ with a s!ind"e ca!acity of >?FF s!ind"es. After e#!ansion
made in 8FF= and 8FF@$ it was now 8??/> s!ind"e and /F=F rotors and B nm%ers of air
4et weaving machines to !rodce ? tons of ring s!n$ 8 tons of o!en end$ /.? tons of ring
do%"ing and 8FFF meters of fa%ric !er day. In s!inning de!artment the mi"" has a
com!"ete range of .M'$ Trmac machines from %"ow room to s!inning de!artments and
in weaving de!artment PI:A07. omni!"s air 4et weaving machine.
7r %est 6a"ity !rodcts are the key of or sccess and fame. The 6a"ity of or
!rodcts has he"!ed s in standing amongst the ma4or com!anies in this fie"d. The
com!any has a strong c"ients %ased at different regions of Andhra Pradesh$ M4arat$
Narnataka$ Maharashtra$ 'est Benga"$ 7rissa and Tami" 0ad. 'e are known as one of
the %est cotton yarn manfactrers in India de to the fine 6a"ity of or cotton yarn. 'e
!rovide genine 6a"ity cotton %"ended yarn$ which is sed to make s!erior 6a"ity
garments.
'e are a"so wide"y renowned as one of the %est cotton fa%ric s!!"iers in India.
7r cotton fa%ric is high"y admired %y or c"ients de to its dra%i"ity and s!reme
6a"ity.
'e give the to!most !riority to or cstomers and strive to !rovide them the %est
6a"ity fa%rics. 'e know the va"e of the time and ths de"iver or !rodcts within the
sti!"ated time. )o can avai" or !rodcts easi"y at reasona%"e !rices$ which wo"d not
affect yor !ocket. <e to the s!erior 6a"ity of or !rodcts we dea" with varios
re!ted com!anies "ocated in India and :hina. 7r chief motive is to maintain a "ong
"asting re"ationshi! with or honored c"ients.
)S* S!inning + 'eaving Mi""s ,P- .td.$ >F
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MBA Programme
)S* S!inning + 'eaving Mi""s ,P- .td.$ >/
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MBA Programme
D/T/ /N/2.SIS F INT+R%R+TTION
C&rrent Ratio
A "i6idity ratio that measres a com!anyPs a%i"ity to !ay short(term o%"igations.
The ratio is main"y sed to give an idea of the com!anyPs a%i"ity to !ay %ack its short(term
"ia%i"ities ,de%t and !aya%"es- with its short(term assets ,cash$ inventory$ receiva%"es-. If
the crrent assets of a com!any are more than twice the crrent "ia%i"ities$ then that
com!any is genera""y considered to have good short(term financia" strength. If crrent
"ia%i"ities e#ceed crrent assets$ then the com!any may have !ro%"ems meeting its short(
term o%"igations. The conventiona" crrent ratio is 8&/.
C&rrent ratio : C&rrent assets = C&rrent liabilities$
Table D$C
.ear C&rrent /ssets C&rrent 2iabilities Ratio
8FFB(FE ?8$@@$>8$F/@2( /B$??$@>$FB/2( 8.B=&/
8FFE(/F >@$@F$A@$E=?2( E$F/$EA$8@82( ?./@&/
8F/F(// @E$==$B8$?8/2( /=$BF$AF$/?=2( >.F8&/
8F//(/8 ?A$>@$?@$@>/2( /F$@B$==$>==2( ?.=A&/
8F/8(/= ??$?F$/8$B>@2( /F$8=$?B$B@/2( @.AA&/
)S* S!inning + 'eaving Mi""s ,P- .td.$ >8
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MBA Programme
InterpretationE
The crrent ratio of the )S* S!inning + 'eighing mi""s !vt "td. in 8FFB(FE was
8.B=O it has %een increased to ?./@ in the year 8FFE(/F and frther decreased to
>.F8 in the year 8F/F(//.
The crrent ratio had increased to ?.=A in the year 8F//(/8. At !resent the crrent
ratio of the com!any was @.AA i.e. in the year 8F/8(/=.
It is ma#imm ,@.AA- in the year 8F/8(/=$ the reason for ma#imm crrent ratio
,in 8F/8(/=- is de to decrease in crrent "ia%i"ities and increase in crrent assets
when com!ared to 8FFB(FE.
It is minimm ,8.B=- in the year 8FFB(FE$ the reason for this is de to high crrent
"ia%i"ities and "ow crrent assets.
The overa"" trend of the crrent ratio is in increasing !attern and !ercentage
change in crrent ratio is /.=E %etween the !eriod 8FFB(FE and 8F/8(/=.
)S* S!inning + 'eaving Mi""s ,P- .td.$ >=
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MBA Programme
)S* S!inning + 'eaving Mi""s ,P- .td.$ >>
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MBA Programme
7&ic3 Ratio
Gick ratio is an indicator of a com!anyPs short(term "i6idity. The 6ick
ratio measres a com!anyPs a%i"ity to meet its short(term o%"igations with its most "i6id
assets. The higher the 6ick ratio$ the %etter the !osition of the com!any. It is a"so known
as the Racid(test ratioR or the R6ick assets ratioR. It is o%tained %y s%tracting inventories
from crrent assets and then dividing %y crrent "ia%i"ities. The conventiona" 6ick ratio is
/&/.

7&ic3 ratio : C&rrent assets ' Inventory
C&rrent liabilities
5or6
: 7&ic3 assets = C&rrent liabilities$
Table D$<
.ear 7&ic3 /ssets C&rrent 2iabilities Ratio
8FFB(FE 8/$@8$E=$88B2( /B$??$@>$FB/2( /./@&/
8FFE(/F /?$E@$E8$>?=2( E$F/$EA$8@82( /.AA&/
8F/F(// 8F$A>$AE$AB=2( /=$BF$AF$/?=2( /.?F&/
8F//(/8 8/$@@$F@$>8@2( /F$@B$==$>==2( 8.F8&/
8F/8(/= 8/$B?$>E$@E@2( /F$8=$?B$B@/2( 8./=&/
)S* S!inning + 'eaving Mi""s ,P- .td.$ >?
0I1T
MBA Programme
InterpretationE
The 6ick ratio of the com!any in 8FFB(FE was /./@O it has %een s"ight"y increased
to /.AA in the year 8FFE(/F and frther decreased to /.?F in the year 8F/F(//.
The 6ick ratio had increased to 8.F8$ in the year 8F//(/8. At !resent the crrent
ratio of the com!any was 8./= i.e. in the year 8F/F(//.
It is ma#imm ,8./=- in the year 8F/F(//$ the reason for ma#imm 6ick ratio ,in
8F/F(//- is de to decrease in crrent "ia%i"ities when com!ared to 8FF?(F@.
It is minimm ,/./@- in the year 8FFB(FE$ this is main"y de to higher crrent
"ia%i"ities.
The overa"" trend of the 6ick ratio is in increasing !attern and !ercentage change
in 6ick ratio is F.B= %etween the !eriod 8FFB(FE and 8F/8(/=.
)S* S!inning + 'eaving Mi""s ,P- .td.$ >@
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MBA Programme
)S* S!inning + 'eaving Mi""s ,P- .td.$ >A
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MBA Programme
Inventory T&rnover Ratio
Inventory trnover ratio indicates the efficiency of the firm in !rodcing and
se""ing its !rodct. It is ca"c"ated %y dividing cost of goods so"d %y average inventory.
Average inventory consists of o!ening stock !"s c"osing stock divided %y 8. A high
inventory trnover ratio indicated that the !rodct is se""ing we"". A "ow trnover ratio
im!"ies !oor sa"es and$ therefore$ e#cess inventory. The fo""owing form"a is fre6ent"y
sed for ca"c"ation of ratio&
Inventory t&rnover ratio : Sales = /verage inventory
/vg$ Inventory : Opening Stoc3 B Closing Stoc3
<
Table D$G
.ear Sales /vg$ Inventory Ratio
8FFB(FE /$A@$>>$/?$?>>2( 8E$E=$>8$A8?2( ?.BE&/
8FFE(/F /$>8$/A$>/$/FA2( =F$B=$@@$@=?2( >.@/&/
8F/F(// /$?A$8>$FA$>A82( =8$@E$?B$AA82( >.BF&/
8F//(/8 /$A?$>A$@F$E>82( =?$>A$E/$@=E2( >.E>&/
8F/8(/= /$E@$8>$B=$/B=2( >/$B>$>/$?8F2( >.@B&/
)S* S!inning + 'eaving Mi""s ,P- .td.$ >B
0I1T
MBA Programme
InterpretationE
The Inventory trnover ratio of )S* S!inning + 'eighing mi""s !vt "td. in 8FFB(
FE was ?.BEO it has %een s"ight"y decreased to >.@/ in the year 8FFE(/F and then
increased to >.BF in the year 8F/F(//.
The Inventory trnover ratio then raised ! to >.E> in the year 8F//(/8. At !resent
the inventory trnover ratio of the com!any was >.@B i.e. in the year 8F/8(/=.
It is ma#imm ,?.BE- in the year 8FFB(FE and the reason for ma#imm inventory
trnover ratio is de to high sa"es in 8FFB(FE when com!ared to 8FFE(/F.
It is minimm ,>.@/- in the year 8FFE(/F and the reason for this fa"" in trnover.
The overa"" trend of the inventory trnover ratio is in decreasing !attern and
!ercentage change in inventory trnover ratio is F.8B %etween the !eriod 8FFB(FE
and 8FFE(/F.
)S* S!inning + 'eaving Mi""s ,P- .td.$ >E
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MBA Programme
Inventory to C&rrent assets ratio
)S* S!inning + 'eaving Mi""s ,P- .td.$ ?F
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MBA Programme
This ratio indicates the re"ationshi! %etween inventory to crrent assets. ;igher
the ratio shows that inventory is !ro!er"y ti"i3ed in the organi3ation. Inventory to crrent
assets ratio is ca"c"ated as fo""ows&
Inventory to c&rrent assets ratio : Inventory = C&rrent assets$
Table D$D
.ear Inventory C&rrent assets Ratio
8FFB(FE =/$F=$>B$ABB2( ?8$@@$>8$F/@2( F.?B&/
8FFE(/F =F$@=$B>$>B82( >@$@F$A@$E=?2( F.@?&/
8F/F(// =>$A?$==$F@=2( ??$?F$/8$B>@2( F.@8&/
8F//(/8 =@$8F$?F$8/?2( ?A$B@$?@$@>/2( F.@8&/
8F/8(/= >A$>B$=8$B8?2( @E$==$B8$?8/2( F.@B&/
)S* S!inning + 'eaving Mi""s ,P- .td.$ ?/
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MBA Programme
InterpretationE
The Inventory to crrent assets ratio of the com!any in 8FFB(FE was F.?BO it has
%een s"ight"y increased to F.@? in the year 8FFE(/F and then decreased to F.@8 in
the year 8F/F(//.
The Inventory to crrent ratio had raised ! to F.>> in the year 8F//(/8. At !resent
the crrent ratio of the com!any was F.@B i.e. in the year 8F/8(/=.
It is ma#imm ,F.@B- in the year 8F//(/8 the reason for ma#imm inventory to
crrent assets ratio is de to increase in %oth inventory and crrent assets when
com!ared to 8FFB(FE.
The ratio is minimm ,F.?B- in the year 8FFB(FE and the reason for this is de to
high in %oth crrent assets and crrent "ia%i"ities.
The overa"" trend of the inventory to crrent assets ratio is in increasing !attern
and !ercentage change in inventory to crrent assets ratio is F./? %etween the
!eriod 8FFB(FE and 8F/8(/=.
)S* S!inning + 'eaving Mi""s ,P- .td.$ ?8
0I1T
MBA Programme
)S* S!inning + 'eaving Mi""s ,P- .td.$ ?=
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MBA Programme
Inventory to total assets ratio
This ratio shows the re"ationshi! %etween inventory to tota" assets. Inventory is a
!art of the crrent assets of the com!any. It shows the !ortion of assets tied ! in
inventory. Menera""y$ a "ower ratio is considered %etter.
Inventory to total assets ratio : Inventory = Total assets$
Table D$H
.ear Inventory Total /ssets Ratio
8FFB(FE =/$F=$>B$ABB2( BF$@>$?F$B=82( F.=B&/
8FFE(/F =F$@=$B>$>B82( B=$==$==$88=2( F.=@&/
8F/F(// =>$A?$==$F@=2( /F$/B$B/$/?$>=2( F.=>&/
8F//(/8 =@$8F$?F$8/?2( /$88$=@$>8$8/=2( F.8E&/
8F/8(/= >A$>B$=8$B8?2( /$??$F?$8E$>@?2( F.=F&/
)S* S!inning + 'eaving Mi""s ,P- .td.$ ?>
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MBA Programme
InterpretationE
The Inventory to tota" assets ratio of the com!any in 8FFB(FE was F.=B$ it has %een
s"ight"y decreased to F.=@$ in the year 8FFE(/F and then decreased to F.=>$ in the
year 8FFE(/F.
The ratio had then decreased to F.8E$ in the year 8F/F(//. At !resent the crrent
ratio of the com!any was F.=F i.e. in the year 8F//(/8.
It is minimm ,F.8E- in the year 8F//(/8. The reason for minimm inventory to
tota" assets ratio is de to increase in tota" assets when com!ared to 8FFB(FE.
The ratio is ma#imm ,F.=B- in the year 8FFB(FE$ the reason for this is "ow
inventory and tota" assets.
The overa"" trend of the inventory to tota" assets ratio is in decreasing !attern and
!ercentage change in inventory to tota" assets ratio is F.=/ %etween the !eriod
8FFB(FE and 8F//(/8.
)S* S!inning + 'eaving Mi""s ,P- .td.$ ??
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MBA Programme
)S* S!inning + 'eaving Mi""s ,P- .td.$ ?@
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MBA Programme
Inventory to or3ing Capital Ratio
The Inventory to 'orking :a!ita" ratio measres how we"" the com!any is a%"e to
generate cash sing 'orking :a!ita" at its crrent inventory "eve". An increasing
Inventory to 'orking :a!ita" ratio is genera""y a negative sign$ showing the com!any
may %e having o!erationa" !ro%"ems. If a com!any has too mch 'orking :a!ita"
invested in Inventory$ they may have diffic"ty having enogh 'orking :a!ita" to make
!ayments on Short(Term .ia%i"ities and Acconts Paya%"e. This is a great ratio to %e sed
with severa" others to rea""y !ick a!art the inner workings of a com!any.
Inventory to wor3ing capital ratio : Inventory = or3ing capital$
5or6
Inventory = 5c&rrent assets - c&rrent liabilities6$
Table D$I
.ear Inventory or3ing Capital Ratio
8FFB(FE =/$F=$>B$ABB2( =>$/F$AA$E=?2( F.EF&/
8FFE(/F =F$@=$B>$>B82( =A$?B$AE$@A=2( F.B/&/
8F/F(// =>$A?$==$F@=2( >/$@E$>8$@E=2( F.B=&/
8F//(/8 =@$8F$?F$8/?2( >A$/B$8=$8FB2( F.A@&/
8F/8(/= >A$>B$=8$B8?2( ?E$/F$8=$@@F2( F.BF&/

)S* S!inning + 'eaving Mi""s ,P- .td.$ ?A
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MBA Programme
InterpretationE
The Inventory to working ca!ita" ratio of the com!any in 8FFB(FE was F.EF. It has
%een s"ight"y decreased to F.B/ in the year 8FFE(/F and then increased to F.B= in
the year 8F/F(//.
The ratio had then fe""ed down to F.A@ in the year 8F//(/8. At !resent the crrent
ratio of the com!any was F.BF i.e. in the year 8F/8(/=.
The ratio is minimm ,F.A@- in the year 8F//(/8. The reason for this is de to
increase in working ca!ita" when com!ared to 8FFB(FE.
The ratio is ma#imm in the ,F.EF- in the year 8FFB(FE and the reason is "ow
working ca!ita" in a"" the ana"y3ed five years.
The overa"" trend of the inventory to working ca!ita" ratio is in decreasing !attern
and !ercentage change in inventory to working ca!ita" ratio is F./B %etween the
!eriod 8FFB(FE and 8FFE(/F.
)S* S!inning + 'eaving Mi""s ,P- .td.$ ?B
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MBA Programme
)S* S!inning + 'eaving Mi""s ,P- .td.$ ?E
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MBA Programme
Tools and Spares to Inventory Ratio
This ratio shows the re"ationshi! %etween s!ares to Inventory. The too"s and
s!ares are one of the im!ortant e"ements. Inventory means not on"y raw materia"s$ work(
in(!rogress and finished goods. Too"s and s!ares are a"so to %e taken as Inventory of the
com!any. The high ratio shows that there is more se"ess inventory in the com!any as the
s!ares are sed on"y occasiona""y.
Spares to Inventory ratio : Spares = Inventory
Table D$J
.ear Tools and Spares Inventory Ratio
8FFB(FE 8$@F$//$@@@2( =/$F=$>B$ABB2( F.FB&/
8FFE(/F 8$@/$8E$/>/2( =F$@=$B>$>B82( F.FB&/
8F/F(// =$=/$BE$/E@2( =>$A?$==$F@=2( F.FE&/
8F//(/8 =$A>$EE$?F>2( =@$8F$?F$8/?2( F./F&/
8F/8(/= ?$/E$FB$/FE2( >A$>B$=8$B8?2( F./F&/
)S* S!inning + 'eaving Mi""s ,P- .td.$ @F
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MBA Programme
InterpretationE
The s!ares to inventory ratio of the com!any in 8FFB(FE was F.FB$ it remains
same in the year 8FFE(/F a"so$ and then increased to F.FE in the year 8FFA(FB
The ratio then raised ! to F./F in the year 8F/F(//. At !resent the crrent ratio of
the com!any was F./F i.e. in the year 8F/8(/=.
It is ma#imm ,F./F- in the years 8F//(/8 + 8F/8(/= and minimm ,F.FB- in the
year 8FFB(FE + 8F/F(//. The reason for ma#imm too"s + s!ares to inventory
ratio is de to increase in %oth too"s + s!ares and inventory when com!ared to
8FFB(FE + 8FFE(/F.
The overa"" trend of the too"s + s!ares to inventory ratio is in increasing !attern
and !ercentage change in too"s + s!ares to inventory ratio is F.8? %etween the
!eriod 8FFB(FE and 8F/8(/=.
)S* S!inning + 'eaving Mi""s ,P- .td.$ @/
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MBA Programme
InterpretationE
There are three items in )S* S!inning + 'eighing mi""s !vt "td.which comes
nder category A. These items com!rise A@J of tota" cost and 8/J of tota"
vo"me which inc"des cotton "int$ cotton yarn$ cotton seed oi".
The B category inventory in )S* S!inning + 'eighing mi""s !vt "td. com!rises
of one item which occ!y a%ot /BJ of tota" cost and >AJ of tota" vo"me which
inc"des cotton seed e#traction.
There are three items which comes nder : category in )S* S!inning +
'eighing mi""s !vt "td.These genera""y occ!y @J of tota" cost and =8J of tota"
vo"me which inc"des cotton seed$ cotton seed h""s$ "inters.
)S* S!inning + 'eaving Mi""s ,P- .td.$ @8
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MBA Programme
)S* S!inning + 'eaving Mi""s ,P- .td.$ @=
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MBA Programme
InterpretationE
There are three items in )S* S!inning + 'eighing mi""s Pvt "td. which comes
nder category A. These items com!rise A?J of tota" cost and 8/J of tota"
vo"me. These items inc"de cotton "int$ cotton yarn$ cotton seed oi".
The B category inventory in )S* S!inning + 'eighing mi""s Pvt "td. com!rises
of one item which occ!y a%ot /@J of tota" cost and >@J of tota" vo"me. These
items inc"de cotton seed e#traction.
There are three items which comes nder : category in )S* S!inning +
'eighing mi""s Pvt "td. These genera""y occ!y EJ of tota" cost and ==J of tota"
vo"me which inc"des cotton seed$ cotton seed h""s$ and "inters.
)S* S!inning + 'eaving Mi""s ,P- .td.$ @>
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MBA Programme
)S* S!inning + 'eaving Mi""s ,P- .td.$ @?
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MBA Programme
InterpretationE
There are two items in )S* S!inning + 'eighing mi""s !vt "td. which comes
nder category A. These items com!rise AFJ of tota" cost and /@J of tota"
vo"me. These items inc"de cotton yarn$ cotton seed oi".
of one item which occ!y a%ot 88J of tota" cost and ?/J of tota" vo"me. These
There are two items which comes nder : category in )S* S!inning + 'eighing
mi""s !vt "td.These genera""y occ!y BJ of tota" cost and ==J of tota" vo"me
which inc"des cotton seed h""s$ "inters.
)S* S!inning + 'eaving Mi""s ,P- .td.$ @@
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MBA Programme
)S* S!inning + 'eaving Mi""s ,P- .td.$ @A
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MBA Programme
InterpretationE
There are two items in )S* S!inning + 'eighing mi""s !vt "td.which comes
nder category A. These items com!rise A/J of tota" cost and /AJ of tota"
of one item which occ!y a%ot 8FJ of tota" cost and ?FJ of tota" vo"me. These
mi""s !vt "td. These genera""y occ!y EJ of tota" cost and ==J of tota" vo"me
)S* S!inning + 'eaving Mi""s ,P- .td.$ @B
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MBA Programme
)S* S!inning + 'eaving Mi""s ,P- .td.$ @E
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MBA Programme
InterpretationE
There are two items in )S* S!inning + 'eighing mi""s !vt "td. which comes
nder category A. These items com!rise @AJ of tota" cost and 8/J of tota"
of one item which occ!y a%ot 8>J of tota" cost and @BJ of tota" vo"me. These
mi""s !vt "td. These genera""y occ!y EJ of tota" cost and //J of tota" vo"me
)S* S!inning + 'eaving Mi""s ,P- .td.$ AF
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MBA Programme
)S* S!inning + 'eaving Mi""s ,P- .td.$ A/
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MBA Programme
-INDIN0S
5rom the stdy it has %een o%served that the AB: ana"ysis in the year 8FFB(FE
indicates that the category A items forms a !ro!ortion i.e. 8/J of tota" nits of
inventory$ %t re!resents highest ratio A@J of tota" va"e. 7n the other hand
category : items re!resent =8J of tota" nits and on"y @J of tota" va"e. B
items occ!ies in %etween i.e. >AJ of tota" nits and /BJ of tota" va"e.
5rom the stdy it has %een o%served that the AB: ana"ysis in the year 8FFE(/F
indicates that the category A items forms a !ro!ortion of 8/J of tota" nits of
inventory$ %t re!resents highest ratio A?J of tota" va"e. 7n the other hand a :
item occ!ies ==J of tota" nits and EJ of tota" va"e. :ategory B items
re!resents >@J of tota" nits and on"y /@J of tota" va"e.
5rom the stdy it has %een o%served that the AB: ana"ysis in the year 8F/F(//
indicates that the category A items forms a !ro!ortion of /@J of tota" nits of
inventory$ %t re!resents highest ratio AFJ of tota" va"e. 7n the other hand B
items occ!ies ?/J of tota" nits and 88J of tota" va"e and category : items
re!resents ==J of tota" nits and a nomina" va"e of BJ of tota" va"e.
5rom the stdy it has %een o%served that the AB: ana"ysis in the year 8F//(/8
indicates that the category A items forms a !ro!ortion i.e. /AJ of tota" nits of
inventory$ %t re!resents highest ratio A/J of tota" va"e. 7n the other hand
category : items re!resent ==J of tota" nits and on"y EJ of tota" va"e. B
items occ!ies in %etween i.e. ?FJ of tota" nits and 8FJ of tota" va"e.
5rom the stdy it has %een o%served that the AB: ana"ysis in the year 8F/8(/=
indicates that the category A items forms a !ro!ortion i.e. 8/J of tota" nits of
inventory$ %t re!resents highest ratio @AJ of tota" va"e. 7n the other hand
category : items re!resent //J of tota" nits and on"y EJ of tota" va"e. B
items occ!ies in %etween i.e. @BJ of tota" nits and 8>J of tota" va"e.
)S* S!inning + 'eaving Mi""s ,P- .td.$ A8
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MBA Programme
5or the !eriod of the stdy on an average A category items of tota" inventory
com!rises of /EJ of tota" nits and A/J of tota" va"e.
5or the !eriod of the stdy on average B category items of tota" inventory
com!rises of >EJ of tota" nits and 8FJ of tota" va"e.
)S* S!inning + 'eaving Mi""s ,P- .td.$ A=
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MBA Programme
SU00+STIONS
It is sggested that )S* S!inning +'eighing mi""s !vt "td. needs to have a strict
inventory contro" and %etter inventory management in re"ation to category A
which inc"des cotton "int$ cotton yarn$ cotton seed oi".
It has %een recommended that )S* S!inning +'eighing mi""s !vt "td. needs to
give nomina" im!ortance and moderate contro" in re"ation to category B which
inc"des cotton seed e#traction.
It is sggested that )S* S!inning +'eighing mi""s !vt "td. needs to give "east
im!ortance in re"ation to category : which inc"des cotton seed$ "inters$ cotton
seed h"".
It has %een recommended that the com!any needs to maintain the inventory
trnover ratio at o!timm "eve".
It is sggested that the inventory to crrent assets has to %e maintained o!timm
"eve".
It is sggested that the com!any has to maintain same "eve" of inventory and tota"
assets as to retain the inventory to tota" assets ratio.
It has %een recommended that the inventory to working ca!ita" ratio of )S*
S!inning +'eighing mi""s !vt "td. sho"d %e im!roved.
It is sggested that the too"s + s!ares in the inventory of )S* S!inning
+'eighing mi""s !vt "td. sho"d %e redced.
)S* S!inning + 'eaving Mi""s ,P- .td.$ A>
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MBA Programme
CONC2USION
The economic "ife of any com!any de!ends on some im!ortant financia" as!ects
"ike !rofits$ e#!enses$ trnover etc. A caref" ana"ysis of these areas is very mch
essentia" for the sccess and srviva" of the com!any. 5or this !r!ose Inventory
management with he"! of techni6e "ike AB: ana"ysis is to %e carried ot. A stdy of this
ty!e is very mch sef" to any com!any to kee! in to the different financia" as!ects and
to take some measres to im!rove.
In my view the inventory management of the com!any is s!!"ying a vita"
information a%ot the inventory of the com!any in a"" as!ects as !er the AB: ana"ysis.
The com!any as maintain o!timm "eve" of inventory as for the re6irements and reached
their goa"s.
)S* S!inning + 'eaving Mi""s ,P- .td.$ A?
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MBA Programme
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www.ysrmi""s.com
www.a%otcotton.com
www.goog"e.com
)S* S!inning + 'eaving Mi""s ,P- .td.$ A@
0I1T

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