Inventory Management

THE STUDY ON INVENTORY MANAGEMENT
1.1INTRODUCTION
Inventory management is primarily about specifying the size and placement of stoked
goods inventory management as required at different location with in the facility ,or
with in multiple supply net work to protect the regular and placed score of production.
Against the random distribution of the running out of material goods
1.2 INVENTORY MANEGEMENT:
Inventories constitute the most significant part of current assets of a large majority of
companies in India. On an average inventories are approximately 6% of current assets in
public limited companies in India because of the large size of inventories maintained by
firms, a considerable amount of funds is required to be committed to them. It is, therefore
absolutely imperatively to manage inventories efficiently and effectively in order to avoid
unnecessary investment.
A firm neglecting the management of inventories to a will be jeopardizing its long run
profitability and may fail ultimately. It is possible for a company to reduce its levels of
inventories to a considerable degree, e.g., 10% - 20%, without any adverse effect on
production and sales by using simple inventory planning and control techniques. The
reduction in excessive inventories cruces favorable impact on a companys profitability.
Inventories, which may be classified as supplies, raw materials, work-in-progress, and
finished goods, are a essential part of virtually all business operations. In other words, the
term inventory refers to the stockpile of the product a firm is offering for sale and the
components that make up the product. It is composed of assets that will be sold in future in
the natural course of business. Inventory, as a current asset, differs from other current assets
because only financial managers are not involved. Rather, all the functional areas, i.e.,
finance, marketing, production, and purchasing, are involved. The views concerning the
appropriate level of inventory would differ among the different functional areas.
Inventory in general meaning stock of goods, or a list of goods. The word Inventory is
understood differently by various authors. In accounting language it may mean finished
BGS INSTITUTE OF TECHNOLOGY, BGNAGAR
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goods only. In a manufacturing concern, it may include raw materials, work in process and
stores, etc
To understand the exact meaning of the word inventory we may study it from the usage side
or from the side point of entry in the operations. Inventory includes the following things
Raw materials
Work In Progress
Finished goods
Consumable stores and spares
1.2.1 RAW MATERIALS

They are the inputs of the final products. They are purchased by the firm from others
and are used in the production for converting into finished components. The quantity of raw
materials required will be determined by the rate of consumption and the time required for
replenishing the supplies. The factors like the availability of raw materials and government
regulations, etc. too affect the stock of raw materials.
1.2.2 WORK IN PROGRESS

This refers to the goods lying in the manufacturing process. They are normally partially
finished or semi-finished goods that are at various stages of production in a multi-stage
production process. The raw materials enter the process of manufacture but they are yet to
attain a final shape of finished goods. The quantum of work-in-process depends upon the
time taken in the manufacturing process. The greater the time taken in manufacturing, the
more will be the amount of work-in-process.
1.2.3 FINISHED GOODS
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These are the final or completed products which are ready for sale. The stocks of finished
goods provide a buffer between production and market. The purpose of maintaining inventory
is to ensure proper supply of goods to customer. In some concerns the production is
undertaken on order basis, in these concerns there will not be a need for finished goods.
The need of finished goods inventory will be more when production is undertaken in general
without waiting for specific order. Work in production, while stock of finished goods is
required for smooth marketing operation. Thus inventory serve as a link between production
and consumption.
1.2.4 CONSUMABLE STORES AND SPARES
These are the goods held for consumption by machines in a manufacturing concern. They
include spare parts, lubricants, cleaning materials, oil, cotton waste etc. They dont enter into
the final product but they are required for maintaining and running the machines for
production purpose. The levels of the above four kinds of inventories differ depending upon
the nature of the business.
For example-A manufacturing firm will have all the four kinds of inventories. But a retailer
or wholesaler will have a high level of inventories of finished goods but they will have no
inventories of raw-materials, spares, maintenance supplies and stores and goods in progress.
Further depending upon the nature of the business, inventories may be durable or nondurable, valuable or inexpensive, perishable or non-perishable etc.
Inventory control has been attracting the attention of managers in India for a long time. But
with the credit squeeze measures announced by the Government of India and the
consideration of the recommendations of the committee for inventories top management is
deeply a concern with developing suitable norms for inventory control. In this context,
research has shown the engineering oriented public sector undertaking carry more inventory
than the other categories
1.3 NEED FOR THE STUDY
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It keeps down investment in inventories, inventory carrying costs and obsolescence

losses to the minimum.
It facilitates economical purchasing through the measurement of requirement on the

basis of recorded experience.
It eliminates duplication in ordering or in replenishing stocks by centralizing the

sources from which purchase requisitions emanate.
It permits a better utilization of avoidable stocks by facilitating inter-department
transfers within a company.
It provides a check against the loss of materials through carelessness or pilferage.
1.4 OBJECTIVES OF THE STUDY

To
study
the
various
techniques
of
inventory
adopted
by
the
SRI
CHAMUNDESWARI sugar ltd.

To evaluate the performance and efficiency of SRI CHAMUNDESHWARI Sugar ltd
with respect to inventory management techniques
To offer suggestion for improving in the efficiency in inventory management.
1.5 SCOPE OF THE STUDY
The study was taken up to know the financial activities in sri chamundeshwri sugar
Company Limited relating to their business activities and the study is done to ascertain the
financial position and performance of the organization.
1.6 RESEARCH METHODOLOGY
The Methodology used in the present study Working Capital Management at Sri
Chamundeswari sugars limited in K M Doddi.
Geographical area covered:
The present study has been carried out in Sri Chamundeswari sugars limited in K M
Doddi, Mandya. In present Mandya district four sugar factories are their study will conducted
in Sri Chamundeswari sugars limited in K M Doddi. This study is mainly based on secondary
data, the necessary data have been obtained from the annual report of SCSL.
Sampling design:
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The present study selected convenient sampling.

Sample size:
The research present study was selected the five year annual report on 2008-09 to 2012-13.
1.6.1 TYPE OF RESEARCH

The method adopted was a case study method and was analytical in nature based on primary
and secondary data which were collected from various sources. Primary data has been
collected through interaction with senior officials in the finance department. Secondary data
has been collected through annual published financial statements and other websites.
1.6.2 PLAN OF ANALYSIS
All the collected data has been analyzed using the simple statistical tools. The facts and
figures collected from the study are compared and analyzed thoroughly in line with each of
the objectives. Percentages are calculated for better appreciation and are interpreted in the
form of text along with statistical and mathematical tools namely accounting ratios, formulas,
tables and graph.
1.6.3 SOURCES OF DATA

The methodology followed for collecting information is based on
Primary data
Secondary data
1.PRIMARY DATA
The method which was adopted to collect the primary data is Personal Interview and
discussions with the respective department head
In order to collect the information, direct personal interview and discussion was made with
different personnel of purchase departments, stores department and other departments. So
information is collected through exploratory research design.
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2 .SECONDARY DATA
For gathering secondary data various other sources were used. They are:
Different accounting books and research reports of the company.

Annual report which consists of Balance sheet, profit and loss account.
Published books, Magazines, Newspapers, Journals, Websites.
1.7 LITERATURE REVIEW

1. This article focuses on the usage of simple variance method, Economic order quantity, and
Chi square method. The EOQ model used to judge the optimum level of the inventory. They
have used the techniques interview, observation, companies annual report. Not only the
Company uses EOQ model at all the levels but also company should focus on Material
management unit should also focus on the same.
-S.L. Adeyemi and A.O. Salami S:2006
2. This article emphasizes on the Indian commercial vehicles industry like, BTL, EML and
SML using and maintained by more percentage of raw material where as TML and EML
using less percentage of raw material and more percentage of sales. The techniques used in
managing the inventory at Indian commercial vehicles. It indicates the TML and EML is a
more strength compare to BTL, EML and SML.
-P.Janaki Ramudu et al:2008
3.This article emphasizes on Inventory management software system configured to

warehouse, retail or product line will help to create revenue for the company. The Inventory
Management will control operating costs and provide better understanding. Building a better
solution from start to finish will yield results for Increased Inventory Management. More
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efficient operations provide bottom-line results. Inventory Management activities impact the
following:
Sales Forecasting or Demand Management
Sales and Operations Planning
Production Planning
Material Requirements Planning
Inventory Rotation
It also emphases on the processing an inventory for a long time is not feasible as it involves a
too much expenditure.
-Dr. Aarti Deveshwar and Mr. Dhawal Modi:2009
4.This Article focuses on better Inventory Management practices followed at small and
medium enterprises; it also focuses more frequent stock verification as well as raw material
ordering. Inventory management practices have a positive influence whereas inventory cost
per sales has a negative influence on Inventory Turnover Ratio. All these enable us to infer
that it is appropriate to encourage SMEs to adopt better IM practices because that would
enable the company to achieve lower inventory cost per sales and higher ITRs.in this article
they use Thumb Rules, EOQ (Economic Order Quantity),ABC(Always Better Control),
Computerized IM, Just-in Time (JIT) / Vendor Managed Inventory (VMI). Better monitoring
of the inventory is very essential.
- Rajeev Narayana Pillai :
2010
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5.In this Article there has been a discussing how inventory management affects economic
performance & also analyzing the importance of inventory as an input in the production
process. Consequently, the role of IM in improving the economic performance the estimated
production functions confirmed this with beta coefficients of inventory cost ranking first
amongst all the inputs. All the economic performance indicators adopted, seem to have a
positive and significant association with performance in the SMEs IM-efficient are also
likely to perform better on the inventory.
- Rajeev N:2011
1.8 LIMITATIONS OF THE STUDY

As this is a study undertaken to fulfill the academic requirements, it is bound to have certain
limitations. The most prominent among them are:
The scope of the study is limited to the data available to me

Study was confined only to the selected components in the stores department
Level of accuracy of research might have negligible errors.
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CHAPTER-II
INDUSTRY PROFILE
2.1 Progress of sugar industry:
The history of sugar industry in India begins in 1903 when a sugar factory was set up
in Bihar and Uttarpradesh each. Sugar production commenced in 1920s but it got an industry
status in late 1920,s or early 1930,s when in India had 29 sugar industries producing just
100000 tons of sugar. The industry facing the competition from imported sugar, sought tariff
protection. Sugar production picked up under the Sugar industry protection act was passed in
1932. In 1932 there were 32 factories operating in the country. In that year tariff protection
was granted to the industry and, as a result of the number of factories shot up 137 by 1937
and India become self sufficient in sugar. Because of the extensive cultivation of sugarcane as
a commercial crop in north India, the sugar industry was localized for quite some time in
Uttar Pradesh and Bihar. Also cane pricing act was enforced to provide a good cane price to
formers. This was followed by land reforms putting ceiling on land holdings to protect small
farmers, formation of cane grower co-operatives and setting up of sugar mills jointly with
farmers called as cooperative mills on ownership and sharing basis. Government of Uttar
Pradesh enacted sugarcane rules in 1934 followed by Bihar and Orissa sugar cane rules in
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1934. In 1951, central government took over control of sugar industry under the Industries
development and regulation act.
The sugar industries occupy a major portion in the organized industries of India.
Indian sugar industry, the second largest agro based processing industry after the cotton
textiles industry in Country. Sugar industry covers around 7.5% of the total rural population
and provides employment to 5 lakhs rural people. About 4.5 cores farmers are engaged in
sugar cane product in India. Considerable quantity of sugar is produced since old days. India
produces Whiter sugar, khandasari and jiggery.
There are about 453 Sugar industries working throughout the country. Among them 134
are
in private sector, 252 in co-operative sector and remaining 67 are in public sector. India is the
second largest producer of sugarcane next to Brazil. Presently, about 4 million hectares of
land is under sugarcane with an average yield of 70 tons per hectare. The industry offers the
employment opportunities to a number of semi skilled and skilled workers in the rural areas
of the country there by contributing towards their development, since sugarcane is used as the
input for the manufacturing of sugar growing states in India namely Andrapradesh,
Tamilnadu, Gujarat, Karnataka, Maharashtra and UttarPradesh. The list of top players in the
sugar industry in India is given below
Bannari Amman sugars limited

Dwarikesh sugars
Rajshree sugars
Rana sugars
Shree Renuka sugars
Upper Ganges sugar and industries
Bajaj Hindustan limited
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. Sugar industries in India are facing lot of problems. Those are,

Inadequate supply of sugarcane.
High cost of production.
Short crushing season.
Inefficient management.
Unfavorable government policy.
Some companies using Old and outdated technology.
Less sugar price in the sugar market.
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Sugar industries in Karnataka

Sugar industry is the major agro based industry in Karnataka. Sugarcane cultivated for
many decades as a major commercial crop in Karnataka. The first sugar factory in Karnataka
started 1933-34 as public sector undertaking in Mandya district. The sugar industry in
Karnataka can be divided into two groups that are the unrecognized sector, which comprises
of the producers of the traditional sweeteners such as guru and khandasari and the organized
sector which consists of the sugar mills. The manufacturing of khandasari and gur is
considered to be rural industry are produced in huge quantities.
There are about 58 sugar mills working throughout the Karnataka. Among them 36 in
private sector, 20 in co-operative sector, and 2 in public sector.
List of sugar industries in Karnataka:
Sl.
No
1.
2.
3.
4.
5.
6.
7.
8.
9.
Name of factory
Co-operative sector
Dhodhaganga Krishna SSKN, Chikkodi.
Ghataprabha SSK limited, Arbhavi,
Belgaum.
Halsidhanatha SSK limited, Shakarandnagar,
Nippani, Belgaum.
Hiranyakeshi SSK limited, Saneswara,
Belgaum.
Krishna SSK limited, Sankonatti, Belgaum.
Malaprabha SSK limited, M.K.Hubli,
Belgaum.
Laila sugars limited, (Bhagyalaxmi SSK
limited) Kuppatgiri, Khanapur, Belgaum.
Renuka sugars limited, (Raibag SSK
Niyamit), Raibag, Belgaum.
GMR sugars limited, (Sri.dhanalaxmi SSK
limited), Ramdurg, Belgaum.
Sugar
(TCD)
Cogeneration
(MW)
Distillery
(KLPD)
5500
20
30
2200
1800
5000
26.0
54
4000
3500
30
2500
2500
2500
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10.
Shri.Someswara SSK limited,

Siddesamudra,mallammana, Belgaum
2500
11.
12.
Raithar SSK limited, Rannanagar, Timmapur.

Nandi SSK limited, Krishnanagar, Bijapur.
VIjayanagar sugars pvt.,limited,
2500
5000
12.3
18.14
13.
(Sri.Mrudagiri SSK limited),
5000
Gangapur, Gadag.
GM Sugars and Energy Pvt., limited,
14.
(Lesee of Karnataka SSK limited),
1250
15.
16.
Sangur, Haveri.
SSK Niyamit Aland, Bhusnur, Gulbarga.
Mahatma Gandi SSK limited, Bhalki, Bidar.
Naranja SSK limited, G.N.Nagar, immampur,
1250
2500
7.0
Bidar.
The Bidar SSK limited, Hallikhed, Bidar.
Pandavapura SSK limited, Pandavapur,
2500
8.0
2500
8.0
3500
1250
8000
15.0
40
10000
63.6
75
5000
23.0
4500
24.0
30
15000
38.0
120
10000
34.0
120
7200
36.4
35
2500
3000
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
Mandya
Ambika sugars (lease sriram SSK limited),
Chunchankatte, Mysore.
Private sector
Satish sugars, Hunshiyal, Belgaum.
The Ugar sugar works limited, Ugarkhurd,
Belgaum.
Venkateswara
power
project,
Bedkihal,
Belgaum.
Athani farmers sugar factory,
Vishnuannanagar, Belgaum.
ShriRenuka
sugars
limited,
Burlatti.
Belgaum.
Shri.Renuka sugars limited, R.S.Munnoli,
Belgaum.
Vishwanath sugars limited, Belladbagawadi,
Belgaum.
Renuka sugars
limited,
(Gokak
limited), Kolavigokak, Belgaum

Shivashakti sugars limited,
sugars
Sowadatti,
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30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
Raibag, Belgaum.
Shiva sugar and agro products limited,
Udupudi, Ramadurga.
Gem sugars limited, Kundaragi, Bagalkot.
Godavari bio refineries limited, Sameerwadi,
Bagalkot.
Jamakhandi
sugars
mills,
jamakhandi, Bagalkot.
Prabhulingeswar sugars
Hirepadsalgi,
and
chemicals
limited, Siddapur, Jamakhandi.

Balagi sugars mills limited, Badayandi,
Bilagi, bagalkot.
Nirani sugars limited, Mudhol, Bagalkot.
E.I.D.parry limited, (Sadashiva sugars
limited), Nagaral, Nainegalli, Bagalkot.
Shri. Kedaranath sugars and agro products
limited, Kerakalamatti, Badami, Bagalkot.
Indian cane power limited, Uttur, Mudhol,
Bagalkot.
Dyanayogisri.Shivakumaraswamiji
sugars,SrisiddeswaranagarHirebevanur,
Bijapura.
Indian sugars manufacturing limited,
Havinal, Bijapur.
Shri.Renuka sugars
limited,
Gulbarga.
The Hugar Sugars work
Havalga,
limited, Malli
village, Jewargi.
Bhavanikhandasari sugars limited,
Baroor, Bidar.
Shri.Chamundeswari sugars, Bharathinagar,
Mandya.
I C L sugars limited, (coromandal sugars ),
Makavalli, Mandya.
N S L (SCM) sugars limited, Koppa, Mandya.
Bannariamman sugars limited, Alaganchi,
Mysore.
Chamundeswari sugars, (Hemavathi SSK
2500
6500
22.5
15000
24.0
60
5000
27.0
8500
27.0
17.5
2500
8.0
15000
32.0
60
3500
15.5
3500
18.0
60
5000
28.0
1250
2500
9.0
10000
25.0
180
2500
15.5
1250
4000
26.0
50
3500
12.0
3500
26.0
45
7500
36.0
60
1250
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limited),
50.
51.
52.
53.
Srinivaspur,
Channarayapatna,
Hassan.
Dhavanagere Sugars co, limited, Kukuwada.
Dhavanagere.
Shamnur Sugars limited, Dugavathi village,
Dhavanagere.
The Indian Sugars and Refineries, Chitwagi,
Hospete, Ballary.
Siraguppa Sugars and Chemicals limited,
54.
Desanur, Bellary.
SPR sugars limited,
55.
ramanagaram, Bangalore rural.

Bharathsugarslimited,
(GMR
Kanchagaranahalli,
industries
3500
24.0
1250
2500
1500
28.0
2500
16.5
5000
24.0
45
3000
28.8
limited), Hullatti village, Panchayathhaliyal,

Uttarkhand.
56.
Shri. Maheshwara sugars, (Bannariamman

sugars),
Kunthur
village,
Kollegala,
Chamarajanaga.
57.
Public sector
The Mysore sugar company limited,
5000
30.0
36
58.
Sugar town, Mandya.

The Mysore paper mills limited,
2500
41.0
Papertown, bhadravathi, Shimoga.

Karnataka sugar industry ranks 3rd in terms of its contribution of sugar in the total
sugar production in the country. The sugar industry in Karnataka is able to manufacture sugar
in such huge quantities due to the fact that sugarcane is abundantly in the state. In fact, stands
4th in the country in cultivation of sugarcane.
The major benefit of Karnataka sugar industry is that it has generated many facilities
in three states such as communication, employment and transport. It has also benefited the
state by helping in the development of the rural areas of the state by mobilizing the various
resources of the villages. The major factories of Karnataka sugar industry are;
Bannariamman sugar limited

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Davanagere sugar company limited

Sri.Chamundeswari sugars limited
Godavari sugar mills limited
Mysore sugar company limited
Athani formers sugar factory limited
2.2 COMPANY PROFILE:
Sri Chamundeswari Sugars Limited (SCSL), incorporated in December 1970, is

promoted by Dr. N. Mahalingam of the 'Shakthi Group' Coimbatore, Tamil Nadu.
SCSL started its operation to manufacture sugar with an installed capacity of 1250
TCD in 1974 at K. M. Doddi, Maddur taluk, and Mandya district in Karnataka. It undertook
expansion of its sugar manufacturing capacity from 1250 TCD to 2400 TCD in 1986 and
further to 5000 TCD in 2006.
In the year 2002-03, the company set up a distillery unit to manufacture rectified
spirit, denatured sprit and extra neutral alcohol from molasses with an installed capacity of 50
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Kilo Litters per day (KLPD). Along with the Distillery Plant, biogas and bio-compost units
have been setup to treat and add value to the effluent from the distillery. The bio-compost unit
was put up to produce Bio-fertilizer by biologically assimilating wastewater effluent into
Press-Mud organically without causing any damage to environmental factors. It is one of the
model units in India, which are treating effluents.
In March 2004, the Company put up a Unique Plant for Extracting Methane forcibly
from Wastewater of Distillery Plant. This plant is in conformity to the norms of UNFCCC as
a Project of Clean Development Mechanism. The project eliminates incidental emission of
Methane Gas to the atmosphere while in storage. The project is eligible for carbon credits
under CMD.
Since its inception, the Company has been helping the surrounding villages for their socioeconomic development through direct and indirect employment opportunities. Also by
liberally donating money for various social causes by constructing rooms for the schools,
community halls and temples.
Objectives of the Company:

The object of the society is to encourage proper development of Agriculture Industries
amongst member on co-operative lines by introducing modern methods of Agriculture and by
promotion of principles of co-operation and joint farming methods. So as to secure best
advantage of modern large scale agriculture production to the owner or tenant cultivators of
land and for that purpose:
The main objective of this factory is to encourage the member for the proper
development of agriculture on co-operative lines by introducing modern method.

To encourage self-help, theft and o-co-operation amongst members.
To arrange facilities to farmers.
To give good market rate to the farmer who supply cane to their factory.
Maximum utilization of manpower and production capacity.
Goals:
Explanation of industry towards optimal utilization of available resources.

Achieving target production of 5000 MT cane crushing per day (including all units)
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Production Quality products to satisfy the domestic and international market.
Organization Structure
CHAIRMA
N
MANAGING
DIRECTOR
VICE
PRESIDENT
GENERAL
MANAGER
ASSISTANT GENERAL
MANAGER
ENGINEERIN
G
DEPARTMEN
MANUFACTURIN
G DEPARTMENT
ACCOUNTS
DEPARTMENT
ADMINISTRATIO
N DEPARTMENT
Assistant
General
Manager
Assistant
General
Manager
manager
Deputy
General
Manage
r
Senior
General
Manage
r
Deputy
Manager
Deputy
Manage
r
Deputy
Manage
r
Manager
administrat
or
Assistan
Assistant
TECHNOLOGY, BGNAGAR
t BGS INSTITUTE OF
manager
manage
Assistant
manager
legal
CANE
DEPARTMEN
T
General
Manager
Manager
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Senior
officers
cane
Officer
II
Engineer
s
Chemis
t
Senior
Officer I
labour
WORK FLOW MODEL OF THE SCSLwelfare
Officer 2
cane
Cane from farmers
Weighed cane-hauled to crushing yard
Cane unload on to the carrier

Cane cut into pieces
Crushed in successive mills
Juice treated with lime & sulphur and heated
Dry chaff fed into boilers as fuel
Subsider
(A)
(A)
Scum
Clear juice
Evaporates
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Filter cake used
Clear
As manure
Juice
Concentrated syrup
Sulphured syrup to vacuum pans
Boiler to main site

Centrifugal
Sugar
Molasses
Bagging
Power Alcohol
Portable Alcohol
Dispatching
Dealers
Consumer
The sugarcane, which is carried by Lorries or others, will be directly fed to the
machine where the initial process starts. At all starting point there are blades, which cuts
sugarcane bunches into individual sugarcane, after this, the next step there is sharp cutters,
which cuts the sugar cane into very small pieces.
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It will go to tenders (a series of rollers used for crushing purpose) for crushing. The
juice produced will go for further processing and the Biogases will be left out there itself. The
cane juice will be added with flocculent (used for mud setting), milk sanitation (used for
bacteria killing), Lime (used to increase pH) and antiscalent (to scale forming substance Ca&
Mg during evaporation). It will be sent to juice boilers, there it will be heated up to 7000 c
and they will add sculpture (for bleaching of juice) to this.
Then further sulphide juice will be again heated up to 10000 c and it will be sent
through the clarifiers. Here the clear juice will go for further processing and residual juice.
The clear juice will then be added with antiscalent (to remain the substance Ca& Mg during
evaporation). And the mixed juice will go through evaporation. Then the juice will go
through pans and through Masscult. For this Masscuite they will add sodium hydrosulphate
(to bleach the masscuite) and it will be separated out the molasses will be send to distillery
and the white sugar will be bagged.
DIVISION:
1. Co-GEN Division
Sri Chamundeswari Sugars Limited (SCSL) incorporated Co-Generation
Power Plant in May 2006 and synchronized it with the Grid in April 2008. The power
generation capacity of the plant is 26 MW. The Boiler for the power plant is being
supplied by TBW Ltd and TG by SNM of Japan.
Establish: In May 2006,start April 2008

Install capacity: 26 MW
2. Sugar Division
Currently the sugar division has a crushing capacity of ten lakhs tons per
annum and our average crushing will be 9.5 to 10.5 lakhs tons every year. We are
planning to increase the crushing to 11 to 12 lakhs tons per annum.
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2.3 PROMOTERS
BOARD OF DIRECTIORS
The Board comprises of a Non-Executive Director as Chairman, one Managing
Director, one Executive Director and eight other Non Executive Directors including a
Directors including a Director nominated by IFCI.
The Board has a Non-Executive
Chairman and the number of independent directors is more than one half the total numbers of
directors. The composition of the Board is in conformity with clause 49 of the listing
agreement.
Composition and Category
The current policy is to have an appropriate mix of executive and independent
Directors to maintain the independence of the Board. As on 25th September, 2009 the
constitution of the Board was:
Name of the Director
Category of Directorships
1
Dr.Mahalingam Chairman
Promoter Non-Executive Director
2
Sri. M. Srinivaasan Managing Director Executive Director
3
Sri. K. Prakash Executive Director
Executive Director
4
Dr. M. Manickam
Non-Executive Director
5
Sri. Balasubramaniam
Non-Executive Director
6
Sri. K.N.V. Ramani
Independent Non-Executive Director
7
Sri. V.K Swaminathan
8
Dr. A. Selvakumar
9
Sri. A. Arjunaraj
10
Sri. S Srinivasan
11
Dr M R Desai
12
Sri. H Shivram Nominee of IFCI
13
Vinay C Sekar Nominee of IFCI
Note: Excluding Directorship in Private Limited Companies and Section 25 Companies.
Only Audit Committee and Shareholders/ investors Grievance Committee of public limited
company are considered for the purpose.
2.4 VISION, MISSION &QUALITY POLICY
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2.4.1 VISION:
To improve the conditions of the farming community and help overall growth and
socio-economic development of the rural class living in areas surrounding the factory, thus
aiming at up liftmen of the society.
We also dedicated to deliver overall value to our customers, delivering high quality
products, exceptional financial performance to our share holders and complete satisfaction to
can-growers, employees and stake holders.
2.4.2MISSION:
Quality& Technology Driven Focus
To produce high quality products in the most efficient way, by adopting latest
technological developments
Commitment to Farmers
To deal with the farmers in a fully open and transparent manner and give them
correct and fair valuation for their raw material & facilitate community development to the
best advantage of the rural people.
Employee Centric
To give ample opportunities to the employees for their career growth and knowledge
acquisition
Eco-Friendly approach
To operate the plants in an environment friendly manner by meeting the regulation
and requirements and imparting environmental awareness to all the village people and staff
Value to Shareholders
To maximize returns to the shareholders y continuously adding value to by-products
and diversification
Social Commitment
To empower the villagers with latest techniques in cane farming and helping them
realize their worthiness
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2.4.3 QUALITY POLICY:

Quality policy is to customer satisfaction shall be the top priority, this shall be
achieved by complying with the quality management system and continuously improve its
effectiveness.
The SCS Ltd assures if its products by ensuring strict compliance with the approval
standards and documents systems, use of quality raw materials and components, as also
proper keep of machinery.
2.5 PRODUCTION /SERVICE PROFILE
Production Flow Chart:
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PRODUCTS
1) Sugar:
We produce plantation white sugar of very high quality with less than 100
icumsa. The sugar produced meets the international standard of very low NSR (Non
Soluble Residue) value of less than 20 PPM.
Sugar production
Small S30
Medium Grain M30
NSR value <20 PPM
Colour: 80-90 icumsa
2) Molasses
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Molasses is the by-product separated from grade sugar during the

centrifuging of sugar crystals. The yield of molasses per ton of cane will be in the
range 4 to 4.5%. The entire quantity of molasses produced will be used for captive
consumption in our distillery.
3) Bagasse
Bagasse is the fibrous material from the sugar cane after extracting the juice.
We generate steam and power to meet out our requirement independently by making
use of the biogases. At present, we are able to generate 8 to 10% of surplus biogases
by implementing steam and power saving devices. With the completion of the inhouse co-generation power plant project, the surplus biogases will be used for generating
captive
power.
4) Press Mud
Press mud, the solid waste from sugar cane, is rich in organic compounds like
nitrogen, phosphors and potassium. Press mud is utilized to produce the bio-manure
by composting with spent wash, a liquid waste from distillery.
3. Distillery Division
The distillery division was installed in the year 2003 and has a capacity of 50 KLPD
with most modern multi pressure distillation and multi optional fermentation. The Plant, a
first of its kind in India, was supplied and commissioned by Praj industries ltd, Pune. The
state-of-the-art technology produces super fine quality of Extra Neutral Alcohol directly from
the wash.
The Product
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The super fine quality of Extra Neutral Alcohol is the natural choice for making
premium brands of IMFL blends. The multi pressure distillation eliminates all impurities
effectively with minimum PP time not < 60 minutes.
The Process
The most modern technology is adopted with the options of continuous, semi
continuous, batch, fed batch, yeast recycle in the fermentation process.
Depending upon the requirement the option can be selected. The unique technology
adopted in distillation, which is a multi pressure distillation consisting of 6 columns with reboilers, produces super fine quality of alcohol with less spent wash generated-around 8 liters
of spent wash per liter of alcohol production.
Establish: Installed in 2003 give contract basis to JAN distillery. Contract cancelled
on 2006.
Install capacity: 50 KLPD
Environmental Management System

1. Bio-Mechanization
2. Bio-Composting
Bio-Mechanization
The Bio-Mechanization plant was installed in the month of February 05, to handle
600 m3 of spentwash. The system is based on Up Flow Anaerobic Sludge Blanket (UASB)
process by which sludge blanket is produced at different levels of bio-Mechanization plant
eliminating the requirement of media.
The plant is designed to handle 600 m3/day of spentwash, however only 375 to 400 m3/day
of spent wash is treated, because of the modern technology adopted in the distillery. The
COD reduction is 65 to 70% and BOD reduction is 85 to 90%, there by producing 22000 to
24000 m3/day bio-gas, which replaces 80% of the distillery fuel requirement. Hence,
substantial fuel saving is achieved which not only benefits financially, but also eliminates
pollution load to the maximum extent.
Bio- Composting
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The spentwash is utilized for bio composting along with pressmud and coal ash,
which are the by-products of sugar factory. The company has established concrete lined bio
compost yard to an extent of 10 acres as per the protocol evolved by KSPCB / CPCB
guidelines. Two numbers of powerful aero tillers are utilized for the purpose of mixing the
windrows to activate the aerobic composting process. The microbial culture developed in the
laboratory is added during the formation of windrows. The pressmud with the application of
spentwash is composted with the help of aerobic micro organisms. With cycle time of 40 to
50 days, the spentwash mixed pressmud becomes composted and forms organic manure.
Composting is carried out as per KSPCB / CPCB protocols, with pressmud and spentwash at
the ratio of 1:2.5. Our bio-compost yard has a capacity of producing 2000 MT of bio-compost
per month. The quality of the compost is excellent and well accepted by the farmers.
Bio-Compost Specification
Nitrogen- 1.5 to 2%
Magnesium 0.71%
Phosphorous 1.5 to 2%
Sulphur 0.22%
Potassium 2 to 3.5%
Iron 0.50%
2.6 AREA OF OPERATION

SRI CHAMUNDESHWRI SUGAR Company Ltd. has a wide regional operation. As
a private ltd., industry its marketing operation its decision is taken by the private
owners of Karnataka.
It has to conduct operation within 40km around the
Mandya district. But its marketing operation is conducted Regional, National as

well as global wide as per the Government instruction.
2.7 INFRASTRUCTURE FACILITIES

SCSL is part of the Shakthi Group of Companies. The promoter of Shakthi Group is Dr. N.
Mahalingam, a renowned entrepreneur and industrialist of South India. The group has a
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turnover of about Rs. 2500 crores and has interests in manufacturing of sugar, alcohol, power,
soya processing, transport services, courier services, auto servicing and dealerships,
consumer durables, petrol pumps, milk dairy, castings, yarn manufacturing, CNC machining,
finance activities, synthetic gems, coffee and tea plantations. As a part of its social
obligations, the Group also has established educational institutions including engineering
colleges, charitable and educational trusts. The Shakthi Group of Companies has an eminent
presence in Industries like:
A. Sugar
B. Auto Components
C. Financial Services
D. Transportation & Logistics
E. Auto Dealership & Dairy Products
F. Textile
G. Information Technology
H. Tea & Coffee
I. Automobile Engineering
2.8 COMPETITORS INFORMATION

Sri chamundeshwari Sugar Co. Ltd., is a private Company, So, all the strategies are done by
owners itself. For some extent it is facing competition from private Sugar factories like S C
Mallaiah sugar Co. PVT LTD, Bannari Amman Sugar Co PVT LTD. and other Khandasari
Mills and the local Jaggery Mills . While there are competitions, sri chamundshwri Sugars
Co. Ltd., carrying its activities without threats because farmers of this region has believed
about company
.2.9 SWOT ANALYSIS OF THE COMPANY

SWOT is an acronym used to describe the particular Strength, weakness,
opportunities and Threats that are strategic factors for a specific company. SWOT analysis
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not only results in the identification of corporations distinctive competencies, the particular
capabilities and resources that a firm possesses and the superior way in which they are used.
STRENGTHS
A strong goodwill and reputation.
A strong quality control department.
Adoption of new technology and machineries.
Financial Assistance by State Government.
Location in the heart of the city.
It has a wide distribution network.
The company very talented and skilled employees at all the level.
WEAKNESS
Sales promotional are not very effective.
Weak in financial strategy as well as financial department.
Political interference.
Crisis between management and employees.
The efficiency of the commitment of the workers is not checked effectively

because of which the workers can take undue advantage.
OPPORTUNITIES
Rapid growth of agriculture Sector.
Awareness among the farmer for quality Sugar Cane.
Increase export share in the market.
Increase the divers product line. Implement change in technology.
THREATS
Crisis between management and farmer for regarding price fixation.
High competition from private companies.
Decrease in sugar cane growth.
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Frequent change in government regulations for the sugarcane price may also a
threat
2.10 FUTURE GROWTH AND PROSPECTS
The management has a future plan for expansion. Due to increase in the supply of sugar cane
it has decided to increase the cane crushing capacity from 5000 to 7000 metric tons per year
Planning for the further automation.
Planning to expand plant capacity from 5000 TCD to 7000 TCD.
Promoting lift irrigation projects.
Planning for the expansion of Co-generation of power.
Planning to improvise the infrastructure facility and construct quarters and buildings.
ACHIVEMENTS AND AWARDS

Achievements:
The company managing director has been honoured by the BEST BUSINESS
LEADERSHIP CO-GENERATION awarded by the solar energy society of India with win
rock international, which in the award for the best power plant in India.
The company has been best with honours of INDUSTRIAL EXCELLANCY in
technology and management by institute of Indian economic studies.
Awards:
In 1978 central government awarded it as the best factory having recorded of crushing
period of 21 month uninterruptedly.
It has been awarded as the best taxpayer by the government of India.
.2.11 FINANCIAL STATEMENT
Profit & Loss Account for The year Ended 31st march 2012 and 2013
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PARTICULARS
2012
2013
Sales and other income
363409741
1007860861
Other income
24261033
30652292
Increase /(decrease) in stock of finished goods & WIP
(70168825)
139948669
TOTAL INCOME
317501949
1178461822
Manufacturing and other expenses
477423243
1280445904
Administrative expenses
8212467
13372619
financial expenses
299971877
226058947
Depreciation
12434314
13176761
Amortisation of intangible expenses
10348729
--------
TOTAL EXPENSES
808390630
1533054231
PROFIT/(LOSS) for the year
(490888681)
(354592409)
Extraordinary items
9369169
34886000
Prior period adjustment
(269115193)
(4243527)
Less: provision for taxation
(12917)
- --- - - - -
Net profit (loss) for the year
(702106940)
(323949936)
Opening balance B/D
(2691151811)
(3393258754)
PROFIT AFTER TAX
(3393258751)
(3717208687)
Balance sheet for the year Ended 31st march 2012 & 2013
PARTICULARS
2012
2013
I.SOURCE OF FUND
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1.SHARE HOLDERS FUND

a)capital
87343000
87342980
b)Reserve and surplus
47956000
672826308
a)secured loans
1324319995
1252170806
b)Un secured loan
1842202489
1641921262
TOTAL
3301821484
3301821704
a)Gross block
477362208
476452284
b)less depreciation
311403636
324664903
c)Net block
165958573
151787380
2.INVESTMENT
1702000
1702000
a)inventories
222175729
346400516
b)sundry debtors
22480128
32505047
C)cash and bank balance
121580773
104449395
d)loans and advance
88582620
231113987
1706531370
1876325079
(1251712120)
(1161856134)
3369392991
3693342927
2.LOAN FUNDS
2.APPLICATION OF FUND
1.FIXED ASSET
3.CURRENT ASSETS,LOANS&ADVANCES
CURRENT LIABILITIES&PROVITIONS
a) current liabilities & provision
NET CURRENT ASSETS
4.a)Miscellaneous expenditure
P&L A/C _G/R
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Analysis of financial statement:

Balance sheet:
Source of fund in the year 2011-2012 was Rs 3301821484 increased to Rs

3301821704 in the year 2012-2013 respectively.
Net block in the year 2011-2012 was Rs 165958573 decreased to Rs 151787380 in the
year 2012-2013 respectively.
Investment in the year 2011-2012 was Rs 1702000 and in the year 2012-2013 was Rs
1702000
Inventories in the year 2011-2012 was Rs 222175729 increased to Rs 346400516 in

the year 2012-2013 respectively.
Loans and advance in the year 2011-2012 was Rs 88582620 increased to Rs

Current liabilities & provision in the year 2011-2012 was Rs 1706531370 increased to
Rs 1876325079 in the year 2012-2013 respectively.
PROFIT AND LOSS ACCOUNT:
Sales and other income in the year 2011-2012 was Rs 363409741 increased to Rs
Net profit (loss) for the year 2011-2012 was Rs (702106940) decreased to Rs
(323949936) in the year 2012-2013 respectively.
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CHAPTER-III
THEORETICAL BACKGROUND OF THE STUDY
3.1 INVENTORY
3.1.1 INTRODUCTION
Inventories constitute the most significant part of current assets of a large majority of
companies in India. On an average inventories are approximately 6% of current assets in
public limited companies in India because of the large size of inventories maintained by
firms, a considerable amount of funds is required to be committed to them. It is, therefore
absolutely imperatively to manage inventories efficiently and effectively in order to avoid
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unnecessary investment. A firm neglecting the management of inventories to a will be

jeopardizing its long run profitability and may fail ultimately. It is possible for a company to
reduce its levels of inventories to a considerable degree, e.g., 10% - 20%, without any
adverse effect on production and sales by using simple inventory planning and control
techniques. The reduction in excessive inventories cruces favorable impact on a companys
profitability.
3.1.2 MEANING OF INVENTORY

The term Inventory refers to the stock of raw-materials, spare parts and finished products
held by a business firm. It is the aggregate quantity of material resources and goods that are
idle at a given point of time. The resources may be of any type; requirement of production
and sales. For example men, materials, machinery, money, when the resources involved in
materials or goods in any stage of completion, inventory referred to as stock. Hence inventory
refers to the Stock that a business firm keeps to meet its future.
3.1.3 DEFINITIONOF INVENTORY

Several authors have defined the term Inventory. The most popular of them are, The term
Inventory includes, Raw materials, Work In Progress, finished packaging spares and other
stock in order to meet an unexpected demand or distribution in the future.
3.1.4 IMPORTANCE
Inventory constitutes the largest component of current assets in many organizations. Poor
management of inventories therefore may result in business failures. A stock out creates an
unpleasant situation for the organization in case of a manufacturing organization (in stock out
ability to supply an item from inventory) could, in extreme cases, bring production process to
a half, conversely, if a firm carries excessive inventories the added carrying cost may
represent the difference between profit and loss. Efficient inventory control therefore, can
significantly contribute to the overall profit-position of the organizations.
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3.1.5 TYPES OF INVENTORY:
Anticipation Inventory:Such inventories are carried to meet predictable changes in demand. In case of
seasonal variations in the availability of some raw materials; it is convenient and also
economical to build up stocks where consumption pattern may be reasonably uniform.
Fluctuating Inventory:Demand fluctuates overtime and it is not possible to predict it accurately. Business
firms maintain reserve stocks to meet unexpected demand and thereby to avoid risk of losing
sales. These safety stocks are known as fluctuating inventory. There is a time gap between
production and use of certain products. The goods produced in one season are held in stock
for sale and used throughout the year.
Lot-Sizes Inventory:In order to keep costs of buying receipts, inspection, transport and handling charges
low, large quantity are bought for immediate need. It is a common practice to buy some raw
materials in large quantities in order to avail quantity of discounts.
Movement or Transit Inventory:Raw materials and finished goods move from one place to another. Some amount of
inventory is always in transit. Longer the transportation period, greater is the amount of
transport and inventories. The average amount can be determined mathematically:I=S*T
Where,
S = the average rate of sales (weekly average)
T = transit time required to move from one stage to another in a week
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I = the movement of inventory needed
Production Inventory:Raw materials and other parts and components which enter into the product during the
production process and generally form part of the product are called Production inventories.
In-Process Inventory:-
Semi-finished Work In Progress and partly finished products formed at various stages of
production are In-Process inventories.
M.R.O. Inventory:These inventories are maintenance repairs and operating supplies, which are
consumed during the production process and generally, do not form part of the product itself.
E.g.: - Oils and Lubricants, Machinery and Plants, etc.
Finished Goods Inventory:-Completed finished products ready for sale are finished
goods inventories.
3.1.6 DANGERS OF OVER-INVESTMENTS IN INVENTORY:-
Block of firms funds in Inventory

Excessive carrying costs
Risk of Liquidity
The excessive level of inventories consumes the funds of the firm and cannot be used
for any other purpose. The carrying cost such as the cost of storage, handling,
insurance, recording and inspection also increases in proportion to the volume of
inventory.
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3.1.7 PROBLEM OF INADEQUATE INVENTORIES:1. Inadequate raw materials and work in progress will result in stoppage of production.
2. If the finished goods inventories are insufficient to meet the demands of the
customers, they may shift to other competitors which will amount to a permanent loss
to the firm.
An effective inventory management should avoid both these extreme situations namely, over
investment and under investment in inventories.
3.1.8 NEED TO HOLDING INVENTORIES

The question of managing inventories arises only when the company holds inventories.
Maintaining inventories involves tying up of the companys funds and incurrence of storage
and landing costs. If it is expensive to maintain inventories, why do companies hold
inventories?
There are 3 general motives for holding inventories:
1. Transaction motive: It necessitates holding of inventories to guard against the risk of
unpredictable charges in demand and supply forces and others factors.
2. Speculative motive: It influences the decisions to increase or reduce inventory levels
so as to take advantage of price fluctuations.
3. Precautionary motive: It necessitates holding of inventories to guard against the risk
of unpredictable changes in demand and supply forces and other factors.
3.1.9 COST OF HOLDING INVENTORY

We shall now consider the relevant costs relating to inventory. Costs generally include
income foregone. Efficient management of inventory depends on the minimization of costs. If
costs are minimized profits will increase. The following are the several kinds of costs related
to inventory.
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Ordering cost: Such costs are also known as acquisition or set-up costs. This cost is
associated with the acquisition or ordering of inventory. Firms have to place orders with
suppliers to replenish inventory of raw materials. The expenses involves are referred to as
ordering costs.
Carrying cost: Carrying cost is the cost involved in maintaining or carrying inventory. The
cost of holding inventory may be divided into two;
a) Those that arise due to storing the inventory.
b) The opportunity cost of funds: This consists of expense in raising funds to finance the
acquisition of inventory. If funds were not locked up in inventory, they would have earned a
return. This is opportunity cost of funds.
3.1.10 BENEFITS IN HOLDING INVENTORY

By holding inventories firm gets certain benefits. The benefits are due to effective
separation of different functions like purchasing, storing, producing and selling. Good
planning and control are achieved by clear separation of these functions. The purpose of
holding inventory and the benefits derived from it are explained below:
Production order cost.
Gaining quantitative discount.
Specific customer order
Achieving efficient production.
Lower prices
Avoiding loses of sale
Safety stock.
Seasonal sales requirements.
It enables the firm to derive the advantages of bulk buying such as competitive price,
higher rates of discount, benefit of lower prices against anticipated or announced
price-rise avoidance of unexpected shortages etc.
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It enables the firm to avoid scarcity of goods meant for either production or sale.
Adequate stock of finished goods received either from purchases or from production
services to bridge the gap between purchases or production and actual sale. It also
serves as a competitive marketing tool to meet customer demand as it can supply
goods to its customers immediately.
3.2 INVENTORY MANAGEMENT

It is often said, When you need money look at your inventories before you look to your
bankers. Inventory management is the planning, ordering and scheduling of materials used
in manufacturing process. Purchase, production and sales departments are mainly concerned
with management of inventories. Management of inventories means an optimum investment
in inventories. It should neither be too low to affect the production adversely nor too high to
block the funds unnecessarily. Investment in inventories should be profitable for the business.
As in the case with accounts receivables, inventory levels also depend heavily upon
the sales. However, whereas receivables build up after sales have been made, inventory must
be acquired ahead of sales.
3.2.1 MEANING OF INVENTORY MANAGEMENT:

Inventory management covers a much wider field. The inventory management is concerned
with the entire range of functions with effect to the flow, conservation and utilization, the
quality and the costs of materials. It is that aspect which is concerned with the activities
involved in the acquisition and storage of all materials directly and indirectly employed in the
production of the finished products. These activities include material planning, programming
functions such as customer service requirements, etc. Viewed in that perspective, Inventory
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management is broad in scope and affects a great number of activities in the organization.
Because of these numbers, inter relationship inventory management stresses the need for
integrated information flow and decision making as it relates to inventory policies and overall
systems. Inventory control on the other hand is defined in a narrow sense than inventory
management and pertains primarily to the administration of established policies, systems and
procedures. For example, the actual steps taken to maintain the stock levels or stock records
refer to inventory control.
3.2.2 FACTORS INFLUENCING INVENTORY MANAGEMENT AND

CONTROL
Several factors influence inventory management and control. The principal effects of
these factors are reflected mostly strongly in the levels of inventory and the degree of control
planned in the inventory control system. The factors include, type of product, type of
manufacture, volume of output and others.
TYPE OF PRODUCT:Among the factors influencing inventory management and control, the Type of
product is fundamental. If the material used in the manufacture of the product has a high
value, when purchased, a much closer control is usually in order. If the material used in the
product is in a short supply or is auctioned by the government, this may influence the
purchase of this material and stock maintained.
The manufacture of standard products as compared to custom-made items still influence
inventories as materials needed to manufacture a standard product is easy to obtain and a
close control on the stock is not necessary whereas materials required to produce made-toorder items need strict control to ensure that no item is lost in the process of manufacture.
Such materials and tools are of special and expensive nature and loss of any small part will
hold up the production.
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TYPE OF MANUFACTURE:Besides type of product, Type of manufacture also influences inventory management
and control where, continuous manufacture employed at the rate of production is the key
factor. Here inventory control is of major importance and in reality controls the production of
the product. The economic advantage in this type of manufacture is the uninterrupted
operation of the machines and assembly lines in the plant. Intermittent manufacture on the
other hand permits greater flexibility in the control of the material.
VOLUME:The Volume of product to be made as represented by the rate of production may have
little effect on the complexity of the inventory problems. Literally, millions of bases for light
bulbs are manufactured even involving the control of only two principal items of raw
materials. On the other hand, the manufacture of large locomotives involves the planning and
control of thousands of items in inventory. Both the inventory problem and the difficulty of
controlling production increases with the number of component parts of the product and not
with the quantity of products to be made.
3.2.3 TECHNIQUES OF INVENTRY MANAGEMENT
In the course of managing inventories the main aim of the financial manager must be
wealth maximization. To achieve this, the firm should determine the optimum level of
investment in inventory. To ensure effective dealing of problems of inventory management, it
is necessary to know the techniques of inventory management. For a firm, in order to have
effective and efficient control system, it is necessary to observe the following factors, which
are generally referred to as essentials of inventory control system:
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Classification and codification of inventories.

Standardization and simplification of inventories.
Setting maximum and minimum levels.
Economic order quantity.
Adequate storage quantity.
The following are the important factors to be considered while setting or selecting of
an inventory management system;
The type of control required over inventory items.
How much should be ordered.
When it should be ordered.
The different techniques of inventory management are as follows
Selective Inventory Control System:

In order to determine the type of control required over inventory items, the selective
inventory control system is used. Under this system there are various techniques which are
briefly discussed below:
ABC Analysis:
The first stop in the inventory control process is classification of different types of
inventories to determine the type and degree of control required for each. The ABC system is
a widely used classification technique to identify various items of inventories for purposes of
inventory control. This technique is based on the assumption that a firm should not exercise
the same degree of control on all items of inventory. It should rather keep a more rigorous
control on items that are most costly which items that are less expensive should be given less
control effort.
On the basis of the cost involved, the various inventory items are according to this system,
categorized into 3 classes I) A, ii) B, 3) C. The items included in-group A involves the
largest investment. Therefore inventory control should be the most rigorous and intensive and
the most sophisticated inventory control technique should be applied to these items. C
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group consists of items of inventory that involve relatively small investments although the
number of items is fairly large. These items deserve attention than A but more than C
employing less sophisticated techniques can control it.
After classification the items are rented by the value. A detailed analysis of inventory may
indicate that only 10% of the item may for 15% of the value ad the remaining 80% of items
may account for 10% of the value.
VED Analysis:
VED analysis is a technique of inventory uses many for the control of spares (i.e.,
spare parts) these spares parts, which are negligible on monetary value, but are very
important for the continuous of production. Under VED analysis, spares parts are classified
into three classs viz. (A) vital spare (B) Essential spares and (C) Desirable spars for the
purpose of stock control.
Vital spares are spares, which are vital for continuous production, and their stock out
(i.e., their absence) even for a short time result on stoppage of production for quite some
time, and course considerable loss. Essential spares are those which are essential for
continuous probation and their stock out for more than a few hours or a day will result in
much loss. Desirable spares, all spares, which are needed for production, but the stock out
even for a week, will not result in stoppage of production.
FSN Analysis:
FSN analysis is technique of inventory control under FSN analysis, materials are
classified into their classes viz. (A) Fast moving items (B) Slow- moving items and (C) Nonmoving items through regular checks.
Fast moving items refer to those items of materials, which are consumed very rapidly,
and all replenished very frequently.
Slow moving items refer to those items of materials, which are consumed frequently
and all not replenished very frequently. Non- moving items refers to those items of materials
which are rarely consumed ad are stocked in very small quantities.
Fixing the maximum- minimum limits of inventory:

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In order to have a proper check on the investment in inventory, it is necessary

to fix the minimum and maximum limits of inventory, so that there should neither be
overstocking of materials, nor shortage of raw-materials. In fixing the levels of inventories
the following two factors should be borne in mind:
a) Time lag between indenting and receiving of the raw materials i.e., lead-time.
b) Rate of consumption during lead-time: Under this system, an order of sufficient size is
placed when a minimum point in inventory is reached to bring the inventory to the
maximum point. Past experience may help in the fixing of minimum and maximum
point of inventory.
Minimum level:
It is that level of an item of materials below which the actual stock should not
normally be allowed to fall. The fixation of this level acts as a safety measure and hence it
is also known as safety measure and hence it is also known as safety stock or buffer
stock.
Maximum level:
It is the upper limit of stock, above, which the stock should not be allowed to exceed
under normal circumstances.
Re-ordering level:
It is the stock of level of an item that is fixed between maximum and minimum levels
at which for fresh supply of materials (stock) should be placed. It may be calculated in the
following manner.
ROL = Minimum level + (Time in acquiring materials) x Rate of consumption.
Danger level:
It is fixed at a point below the minimum level and represents the limit at which special
steps must be taken to obtain emergent supplies of materials.
Economic order quantity:
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EOQ is an important factor in controlling, which can be reasonable to order

economically at a time. It is also known as Standard Order Quantity, Economic lot size
or Economic Ordering Quantity. In determining this point, ordering costs and carrying
costs are taken into consideration. Ordering costs is used in case of raw-materials and
includes the entire cost of acquiring raw materials. They include costs incurred in the
following activities, requisitioning, purchase ordering, transporting, receiving, inspecting and
storing, carrying costs are the costs incurred for maintaining a given level of inventory. It
includes storage, insurance, taxes deterioration and obsolescence.
Either of these two costs affects the profits of the firm adversely and management tries to
balance these two costs.
The balancing or reconciliation point is known as Economic Order Quantity. The quantity
may be calculated with the help of the following formula
EOQ =
2AO / C
Here EOQ = Economic Order Quantity, A= Annual Quantity used. O = Cost of placing an
order, C = Carrying cost.
Order Cyclone System:

In this system, a review of each item of inventory is made from time to time
depending upon the criticality of the item to have the predetermined level of inventory.
Critical items may require a short review. At each review date a required quantity of
inventory is ordered to bring it to the pre-determined level.
Budgetary control system:
Under the system, inventory budgets are prepared and then compared with the actual
consumption figures. Through budgets inventory consumption levels are coordinated with the
expected usage. It serves the purchase of control in the cash and debtors position. The
inventory budget is a plan for inventory funds in stock at regular intervals via raw materials,
work in progress and finished goods.
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Statistical Inventory Control System:

Some firms to find out there widely spread distribution system with the help of
computers etc use statistical models. It helps the management in taking the inventory
management decisions. But this system is valid only if sufficient information for cost
comparison is available and the date has been accurately completed.
Two Bin Systems:
Under this system all inventory items are grouped under two categories. In the first
group, a sufficient supply is kept to meet the current requirements over a designated period of
time. In the second group or bin a safety stock is maintained to meet the requirements of
inventory at times when stock in the first bin is exhausted are re-ordering occurs.
Just-in-Time inventory control:
The just-in-time inventory control system, originally developed by TaichiOkno of
Japan, simply implies that the firm should maintain a minimal level of inventory and rely on
suppliers to provide parts and components just-in-time to meet its assembly requirements.
This may be contrasted with the traditional inventory management system which calls for
maintaining a healthy level of safety stock to provide a reasonable protection against
uncertainties of consumption and supply- the traditional system may be referred to as a justin-case system. The just-in-time inventory system, while conceptually very appealing, is
difficult to implement because it involves a significant change in the total Production and
management system. It requires inter alia (i) a strong and dependable relationship with
suppliers who are geographically not very remote from the manufacturing facility, (ii) a
reliable transportation system, and (iii) an easy physical access in the form of enough doors
and conveniently located docks and storage areas to dovetail incoming supplies to the needs
of assembly line.
First in, First out (FIFO)
This method assumes that materials are used in the order in which they are received in
stores. Hence the price of the first lot is charged to all issues till the stock lasts. In other
words, the issues are priced in the chronological order of receipts. As a result, closing stock
will be valued at latest purchase price
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Advantages:
Simple methods to understand and operate.
Material cost represents actual cost, which should be charged to product or process.
Stock value is closer to current price.
Disadvantages:
In fluctuating price and too many purchases and issues, this method will involve more
calculation.
If price changes frequently, comparison of one job with the other will not serve useful
purpose. Similar jobs will have different costs because of price changes.
Adjustment for rejection and returns become complicated. The method is useful in
case of slow moving or less frequently used materials of bulk items and high unit
costs.
Last in, First out (LIFO)

This method assumes that the last receipt of stock is issued first. Hence issued are
valued at current prices, while stock remains at historical cost. The method has advantage
under inflationary condition of the market. Using the sane data of the earlier illustration, the
issue prices and closing stock valuation of the material will be as follows.
Advantages
It is a cost method that prices goods sold in a systematic and realistic manner. It
provides a better matching of current costs with current revenues.
It results in real income in time of rising prices by maintaining net income at a lower
level than other costing methods.
Disadvantage
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Stock- value does not represent current market prices.

Unfair comparison of job cost when price changes too frequently.
Like FIFO, this method also involves too many calculations, if frequency price
changes occur and purchases are made in small lots.
Highest in, First out (HIFO)

Under this method, issues are valid at the highest price i.e., costlier items are issued
first, and inventory is kept at lowest possible price. Thus secret reserve is created by
undervaluing stock. This method is complicated to determine, if there are numerous purchase
within the period. HIFO method is mainly used for monopoly product or in cost-plus
contracts.
Base Stock method

This method assumes that a minimum stock is always carried at original cost. The
issues are prices using one of the conventional method, i.e. FIFO, LIFO or at actual cost.
3.3 ROLE OF FINANCIAL MANAGER IN INVENTORY CONTROL
The financial manager plays an important role in the sphere of inventory control in the
following ways:
Correcting the imbalance of raw materials by ensuring the availability of raw
materials that are in short of supply.
Control of inventory cost- It is a very difficult problem to solve because certain other
problems are tied up with this very problem. The financial manager should control
both ordering and carrying costs. The financial manager should control both types of
costs to formulate a sound inventory policy.
To take care of absolute stock. He should take necessary steps to dispose of the
unserviceable or absolute stock.
Inventory risks: There are three types of risks inventory:
Risk due to obsolescence- a severe risk in inventory control.
Risk due to product deterioration owing to heat, light and humidity.
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Risk due to price decline on account of new product or competitors.
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THE STUDY ON INVENTORY MANAGEMENT

THE STUDY ON INVENTORY MANAGEMENT

1.2.1 RAW MATERIALS

1.2.2 WORK IN PROGRESS

1.2.3 FINISHED GOODS

BGS INSTITUTE OF TECHNOLOGY, BGNAGAR

THE STUDY ON INVENTORY MANAGEMENT

BGS INSTITUTE OF TECHNOLOGY, BGNAGAR

THE STUDY ON INVENTORY MANAGEMENT

It keeps down investment in inventories, inventory carrying costs and obsolescence

It facilitates economical purchasing through the measurement of requirement on the

It eliminates duplication in ordering or in replenishing stocks by centralizing the

1.4 OBJECTIVES OF THE STUDY

CHAMUNDESWARI sugar ltd.

THE STUDY ON INVENTORY MANAGEMENT

The present study selected convenient sampling.

1.6.1 TYPE OF RESEARCH

1.6.3 SOURCES OF DATA

BGS INSTITUTE OF TECHNOLOGY, BGNAGAR

THE STUDY ON INVENTORY MANAGEMENT

Different accounting books and research reports of the company.

1.7 LITERATURE REVIEW

3.This article emphasizes on Inventory management software system configured to

BGS INSTITUTE OF TECHNOLOGY, BGNAGAR

THE STUDY ON INVENTORY MANAGEMENT

Sales Forecasting or Demand Management

Sales and Operations Planning

Material Requirements Planning

- Rajeev Narayana Pillai :

BGS INSTITUTE OF TECHNOLOGY, BGNAGAR

THE STUDY ON INVENTORY MANAGEMENT

1.8 LIMITATIONS OF THE STUDY

The scope of the study is limited to the data available to me

BGS INSTITUTE OF TECHNOLOGY, BGNAGAR

THE STUDY ON INVENTORY MANAGEMENT

THE STUDY ON INVENTORY MANAGEMENT

Bannari Amman sugars limited

BGS INSTITUTE OF TECHNOLOGY, BGNAGAR

THE STUDY ON INVENTORY MANAGEMENT

. Sugar industries in India are facing lot of problems. Those are,

High cost of production.

Short crushing season.

Unfavorable government policy.

Some companies using Old and outdated technology.

Less sugar price in the sugar market.

BGS INSTITUTE OF TECHNOLOGY, BGNAGAR

THE STUDY ON INVENTORY MANAGEMENT

Sugar industries in Karnataka

BGS INSTITUTE OF TECHNOLOGY, BGNAGAR

THE STUDY ON INVENTORY MANAGEMENT

Shri.Someswara SSK limited,

Raithar SSK limited, Rannanagar, Timmapur.

(Sri.Mrudagiri SSK limited),

(Lesee of Karnataka SSK limited),

limited), Kolavigokak, Belgaum

BGS INSTITUTE OF TECHNOLOGY, BGNAGAR

THE STUDY ON INVENTORY MANAGEMENT

limited, Siddapur, Jamakhandi.

BGS INSTITUTE OF TECHNOLOGY, BGNAGAR

THE STUDY ON INVENTORY MANAGEMENT

ramanagaram, Bangalore rural.

limited), Hullatti village, Panchayathhaliyal,

Shri. Maheshwara sugars, (Bannariamman

Sugar town, Mandya.