A STUDY ON INVENTORY MANAGEMENT SYSTEM

IN THE SREERAMA SCAFFOLD SYSTEMS,

PALAKKAD

PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE

CURRICULUM FOR THE FOURTH SEMESTER OF

MASTER OF BUSINESS ADMINISTRATION

UNIVERSITY OF CALICUT

Submitted by
SUKANYA R
REG.NO: PKAOMBA031

Under the guidance of

Dr. B. Vijayachandran Pillai

(Coordinator, SMS, Palakkad)

SCHOOL OF MANAGEMENT STUDIES

UNIVERSITY OF CALICUT
PALAKKAD
(2014-2016)
 SCHOOL OF MANAGEMENT STUDIES
UNIVERSITY OF CALICUT, PALAKKAD

C E R T I F I C AT E

This is to certify that this project titled A STUDY ON

INVENTORY MANAGEMENT SYSTEM IN THE SREERAMA SCAFFOLD

SYSTEMS, PALAKKAD submitted in partial fulfillment of the

curriculum for fourth semester of Degree of Master of Business

Administration of University of Calicut was carried out by Ms.

SUKANYA R

Place: Palakkad Dr. B. Vijayachandran Pillai

Date: Coordinator, SMS, Palakkad
University of Calicut
 SCHOOL OF MANAGEMENT STUDIES
UNIVERSITY OF CALICUT, PALAKKAD

C E R T I F I C AT E

This is to certify that this project titled A STUDY ON

INVENTORY MANAGEMENT SYSTEM IN THE SREERAMA SCAFFOLD

SYSTEMS, PALAKKAD submitted in partial fulfillment of the

curriculum for fourth semester of Degree of Master of Business

Administration of University of Calicut was carried out by Ms.

SUKANYA R under my guidance.

This has not been submitted to any other

university/institution for the award of any

degree/diploma/certificate.

Place: Palakkad Dr. B. Vijayachandran Pillai

Date: Coordinator, SMS,
Palakkad
University of Calicut

SCHOOL OF MANAGEMENT STUDIES

UNIVERSITY OF CALICUT, PALAKKAD

DECLARATION

I SUKANYA R, hereby declare that the project work

entitled A STUDY ON INVENTORY MANAGEMENT SYSTEM IN THE

SREERAMA SCAFFOLD SYSTEMS, PALAKKAD is a bona fide work

carried out by me for the partial fulfillment of the requirement for

the award of the degree of MASTER OF BUSINESS ADMINISRATION

from UNIVERSITY OF CALICUT. Any part of this project has not

been reproduced or copied from any report of the university.

Place: Palakkad SUKANYA R
Date: REG NO:
PKA0MBA031

ACKNOWLEDGEMENT

I would like to express my sincere gratitude and reverence to

God Almighty, for guiding me throughout this project, making my endeavor an
undiluted success.

With great pleasure, I am presenting this project entitled A

STUDY ON INVENTORY MANAGEMENT SYSTEM IN THE SREERAMA
SCAFFOLD SYSTEMS; PALAKKAD Project of this dimension would not have
been possible without the sincere help and earnest support provided to me from all
sources that was approached.

I acknowledge my sincere and profound gratitude to Dr. B.

VIJAYACHANDRAN PILLAI the Co-ordinator, School of Management Studies,
Palakkad for providing me the necessary formal sanction required for carrying out
this project.

I would also like to express my profound gratitude to the

Managing Director K.K.BABU and to all the staff of Sreerama Scaffold

Systems for the whole hearted co-operation given to me in the completion of this
project.
 I wish to express my deep sense of gratitude to my guide Dr. B.

Vijayachandran Pillai, co-ordinator of School of Management Studies

Palakkad, University of Calicut, for his kind support, advice and encouragement
from the beginning of the project work till the completion of the project report and
he has been very co-operative and without his valuable advices and suggestions this
report would not have been successful.

Finally I would like to thank my parents, friends and all others

for their support and guidance to complete the project successfully.

SUKANYA R

PROFORMA FOR APPROVAL OF PROJECT REPORT

 NAME SUKANYA R

SCHOOL OF MANAGEMENT STUDIES,

NAME OF THE UNIVERSITY OF CALICUT, PALAKKAD.
INSTITUTE

REG. NO PKAOMBA031

A STUDY ON INVENTORY MANAGEMENT

TITLE OF THE PROJECT
SYSTEM IN SREERAMA SCAFFOLD
SYSTEMS PALAKKAD

AREA OF THE STUDY FINANCE

DURATION OF THE 42 DAYS

STUDY

NAME OF THE SREERAMA SCAFFOLD SYSTEMS

ORGANISATION PALAKKAD

INTERNAL EXAMINER
EXTERNAL EXAMINER CO-
ORDINATOR

INTERNAL EXAMINER

LIST OF CONTENTS
CHAPTER No. PARTICULARS PAGE No.

CERTIFICATES

DECLARATION

ACKNOWLEDGEMENT

PROFORMA FOR APPROVAL

LIST OF TABLES

LIST OF CHARTS

EXECUTIVE SUMMARY

1 INTRODUCTION 16

2 REVIEW OF LITERATURE 7 36

3 INDUSTRY PROFILE & COMPANY PROFILE 37 - 67

4 DATA ANALYSIS AND INTERPRETATION 68 - 109

5 FINDINGS ,SUGGESTIONS & CONCLUSION 110 - 114

APPENDIX

BIBLIOGRAPHY

LIST OF TABLES
TABLE TITLE PAGE
NO. NO.
4.1 COMPONENTS OF INVENTORY 69
4.2 VARIATIONS OF COMPONENTS OF INVENTORY TO 70
TOTAL INVENTORY FOR LAST 5 YEARS

4.3 MATERIAL COST INDEX 76

4.4 MATERIAL COST TO SALES INDEX 77
4.5 INVENTORY TO WORKING CAPITAL RATIO 78
4.6 INVENTORY TURNOVER RATIO 79
4.7 INVENTORY HOLDING PERIOD 80
4.8 RAW MATERIAL TURNOVER RATIO 81
4.9 RAW MATERIAL HOLDING PERIOD 82
4.10 WORK IN PROGRESS TURNOVER RATIO 83
4.11 WORK IN PROGRESS HOLDING PERIOD 84
4.12 FINISHED GOODS TURNOVER RATIO 85
4.13 FINISHED GOODS HOLDING PERIOD 86
4.14 INVENTORY TO CURRENT ASSETS RATIO 87
4.15 INVENTORY TO TOTAL ASSETS RATIO 88
4.16 ABC ANALYSIS 90-91
4.17 ABC ANALYSIS SUMMARY 91
4.18 HML ANALYSIS 94-95
4.19 HML ANALYSIS SUMMARY 95
4.20 FSN ANALYSIS 98-99
4.21 FSN ANALYSIS SUMMARY 99
4.22 3*3 MATRIX (ABC & HML) 101
4.23 TREND ANALYSIS 104
4.24 TREND FUTURE PROJECTION ANALYSIS OF 106
INVENTORY TURNOVER RATIO
4.25 FUTURE PROJECTION OF INVENTORY TURNOVER 107
RATIO
4.26 TREND FUTURE PROJECTION ANALYSIS OF 108
MATERIAL COST
4.27 FUTURE PROJECTION OF MATERIAL COST 109
LIST OF CHARTS
CHART PAGE
TITLE
NO. NO.
4.1 COMPONENTS OF INVENTORY 69
VARIATIONS OF RAW MATERIAL TO TOTAL
4:2.1 71
INVENTORY
VARIATIONS OF WORK IN PROGRESS TO TOTAL
4:2.2 72
INVENTORY

VARIATIONS OF FINISHED GOODS TO TOTAL

4:2.3 73
INVENTORY
VARIATIONS OF CONSUMABLES TO TOTAL
4:2.4 74
INVENTORY
VARIATIONS OF TRADING GOODS TO TOTAL
4:2.5 75
INVENTORY
4.3 MATERIAL COST INDEX 76
4.4 MATERIAL COST TO SALES INDEX 77
4.5 INVENTORY TO WORKING CAPITAL RATIO 78
4.6 INVENTORY TURNOVER RATIO 79
4.7 INVENTORY HOLDING PERIOD 80
4.8 RAW MATERIAL TURNOVER RATIO 81
4.9 RAW MATERIAL HOLDING PERIOD 82
4.10 WORK IN PROGRESS TURNOVER RATIO 83
4.11 WORK IN PROGRESS HOLDING PERIOD 84
4.12 FINISHED GOODS TURNOVER RATIO 85
4.13 FINISHED GOODS HOLDING PERIOD 86
4.14 INVENTORY TO CURRENT ASSETS RATIO 87
4.15 INVENTORY TO TOTAL ASSETS RATIO 88
4.16 ABC ANALYSIS 92
4.17 HML ANALYSIS 96
4.18 FSN ANALYSIS 100
FUTURE PROJECTION OF INVENTORY TURNOVER
4.19 107
RATIO
4.20 FUTURE PROJECTION OF MATERIAL COST 109
 EXECUTIVE SUMMARY

TITLE OF THE STUDY

A STUDY ON INVENTORY MANAGEMENT SYSTEM IN THE SREERAMA
SCAFFOLD SYSTEMS PALAKKAD
OBJECTIVES OF THE STUDY
To study the inventory management system in SREERAMA SCAFFOLD
SYSTEMS, Palakkad.
To study the inventory management system based on relevant ratios.
To analyze the components of inventory based on its values and
movements.

RESEARCH METHODOLOGY
Research Design

Analytical and Descriptive in nature

Method Of Data Collection

Primary data: It is from the discussions with the finance executive in

Sreerama Scaffold Systems

Secondary data: it is collected from annual reports maintained by the

company for the past five years viz., 2010-2011 to 2014-2015, companys website,
books etc.

Tools for Data Analysis

Ratio analysis
ABC analysis
HML analysis
FSN analysis
Correlation
Trend projection analysis

Tools for Data Presentation

Tables
Charts
Period of study
The period of study is 5 financial years from 2010-2011 to 2014-2015.
That is the companys 5 years data has been taken for analysis.

MAJOR FINDINGS
1. There are no proper inventory control techniques in SREERAMA SCAFFOLD
SYSTEMS PALAKKAD.

2. There are no proper classification methods used by the company.

3. The company made the purchases from both inside and outside the state and
the purchases are made through tender system.
4. The company sold their goods to both intrastate and interstate.
5. Inspection of materials purchased is done efficiently.
6. Bin card, stores ledger, and colored labels are used for easy identification of
stores.
7. Material cost of the company is very high due to the high price of raw
material. It increases the cost of production.
8. 64% of the total inventory comprises raw material.
9. Material cost index is changing yearly. It is very high in the year 2013-14
(0.89) and low in the year 2014-15(0.77)
10. The material cost to sales index was found to be in between 0.73 to 0.81. This
is above the ideal ratio of 0.60 - 0.70. In the year 2014-15 it is 0.73.
11. The inventory to working capital ratio was found to be high of 131.69 in 2012-
13, which suggest that the inventories are too large.
12. The inventory turnover ratio shows a satisfactory level and in the year 2014-15
(9.92 times) it is above the ideal ratio of 8 times.
13. Inventory holding period was found to be in between 37 to 48 days. This
indicates the company is not holding unnecessary stock on hand. This helps
the company to escape from the risk of obsolescence.
14. The finished goods turnover ratio shows very high in the year 2014-15.
Highest ratio shows efficiency of the company.
15. The finished goods holding period is lower in the last year because of large
turnover. The highest holding period are in the year 2012 and 2013. This
indicates that the company is not holding unnecessary stock of finished goods.
16. The inventory to current assets ratio shows decreasing trend and it is lowest in
the year 2014-15. This indicates that the companys current assets include
fewer inventories and the major portion are cash, sundry debtors etc.
17. ABC analysis classifies 6 items to A category, 11 items to B category and 18
items to C category.
18. HML analysis classifies 15 items to High value, 7 items to Medium value and
13 items to Low value.
19. 19 items belong to Fast moving category, 12 items to Slow moving category
and 4 items to None moving category.
20. Under 3*3 matrix, it was founded that 4 items have high consumption value
and high unit price. 8 items comes under C and L category which have less
consumption value and low unit price.
MAJOR SUGGESTIONS
1. Presently, no inventory control techniques are employed in the company. It is
better to use ABC compared to HML for classifying inventories.
2. Proper management should be given to A class and H class items, so that
ideal funds can be reduced.
3. The company should reduce the material cost by implementing EOQ.
4. The company should see the obsolete materials and properly accounted for and
disposed off within 30 days.
5. SREERAMA SCAFFOLD SYSTEMs main markets are Tamilnadu and
Kerala. It should need to expand their markets to two other south Indian States
Karnataka and Andrapradesh.
6. Company can make use of updated inventory system softwares like SAP,
which aids in online resource allocation for inventory, updated automatic
inventory information, EOQ alerts, Inventory scheduling.

LIMITATIONS

The study pertains to finished goods and it does not include all the
materials.

The changes in the slab rate will be affecting the inventory classification.

The study is restricted to Sreerama Scaffold Systems so it cannot be

generalized.

Priority of materials can vary from organization to organization.