Final Project Inventory Mgt At Malabar Cements 245r4n

1. INTRODUCTION 1.1 INTRODUCTION TO THE STUDY The research will be conducted on the assessment of inventory management practice in Malabar cements Limited, Walayar, Palakkad. The research provides a knowledge of conducting research and to give solutions for the company affecting inventory management. Inventory is the stock of any item or resource in campus where as inventory management is the process of reducing inventory cost, keeping inventory from under or over stocking and determining order and recorder points in order to achieve organizational goals. Most studies show that in the company constitutes the major category of assets on the balance sheet. The main objective of this study is to assess the inventory management practice of Malabar Cements Limited, Walayar, Palakkad.

1.2. OBJECTIVES OF THE STUDY Primary Objective To analyse the efficiency of Inventory Mangement of Malabar Cements Limited, Walayar, Palakkad. Secondary Objective To identify the optimum level of inventory to minimize cost. To determine the factors affecting the inventory management system of the company.

1.3. NEED FOR THE STUDY The research is believed to have the following importance.  The study will show the over all inventory management system of the company.  The study will suggest solutions for the problem related to inventory management function  It enables employees of inventory management evaluate them selves  It will indicate the strengths and weakness of the firm inventory management practice.

1.4 SCOPE OF THE STUDY The study is limited to assess the inventory management practice at specific area of . The time duration of this research will be from February up to May .This study is to find the facts and opinions of inventory management In accordance with the present trends it aims mainly at finding out the inventory control procedures. This study gives the brief information about the inventory management of the company. · The study was done by using annual reports, inventory manual…etc.

1.5 LIMITATIONS OF THE STUDY The study is estimated encounter the following constraints The managers who concern the study many not volunteer to respond the needed information in depth. Complexity of inventory system is to the difficulty of gathering information.

1.6 INDUSTRY PROFILE India is the world's second largest producer of cement after China, with cement Companies adding nearly eight million tonnes (MT) capacity in April 2009, taking the total Installed capacity to 219 MT. A few of the leading manufactures are the Ultra Tech/Grasim Combine Dalmia Cements. India Cements, Holeim etc. With the boost given by the Government to various infrastructure facilities, road networks and housing facilities, growth In the cement consumption is anticipated in the coming years.Infrastructure is backbone of any economy which is Petroleum, Fertilizer, Iron, Steel,CoalBanking, Insurance, Power and Cement etc. The cement Industry is one of the coreIndustries of the nation. Cement is a fundamental requirement of all constructions activities.Cement is used in housing, bridges, roads, industrial construction etc. As well as cement isBasic material which is used in all types of construction.In ancient time buildings were constructed with sand stone, bricks, lime and gypsumAnd in special case marbles were used. The house of ordinary citizens was usually made ofMud and those same times of special type of wood fire. In some cases lime and PozzolanaWere used for getting beautiful finish for the interior surface. There were very skilled buildersAnd masons famous for their work and art. However, during 18th century slowly and gradually new types of material and cement Developed in Europe. Jama frost patented cement in 1811 and established works at Swanscomde, the first in the London district. Joseph Aspadin a British stone mason, obtain a Patent for a cement Aspadin first patent is dated 21st October 1824, the patented on artificial Made by calcinations of an argillaceous lime stone kwon as Port land cement because it Reasonable a stone quarried on the isle of Portland near England with this investment Aspadin Laid the foundation for today. Cement is a powdered material with water forms a paste that hardens slowly. It is Made by various types of raw materials. The prominent raw

material composed in the mixture Is calcium carbonates as limestone and other alumina silicates as clay or shale. During the STRENGTH AND PROBLEMS OF CEMENT INDUSTRY:STRENGTH:The following are the inherent and acquired strength of the cement industry. Cement is basic and strategic industry to build the infrastructure of Indian economy. 1. Cement is an important for the housing construction that generates maximum employment In the economy. 2. Cement industry contributes the exports and give the profit of foreign exchange to Country. 3. For cement industry special rural infrastructure and housing schemes as well as five year Tax holding on income from investment in modern infrastructure such as roads air Consumption in medium term. 4. Cement industry contributes in tax excise duties by which income of government is Increased. 6. Cement is a self-sufficient industry with negligible imports. 7. Cement has no substitute. 8. Fundamental technological progress in the cement industry has been insignificant since, More than 30 years. Main improvements on existing technology are concentrate in energy saving and distribution of cement bulk transportation. PROBLEMS OF CEMENT INDUSTRY:The following are main problems of the cement industry. 1. Inadequate production:The main factors responsible for shortfall in production are:



Drastic power cuts ranging from 20 to 75% in various cement

  

producing states. Shortage of coal. Inadequate availability of Wagons. Limited availability if furnace oil.

2. Manufacturing cost problems:The major inputs for cement industry are lime-stone, coal, power, and gypsum cement Is a high cost industry as a result. Cement has become frightening expensive costs, both Manufacturing and non-manufacturing have gone up. It is difficult to control cost.

3. Operational Inefficiency:Operational inefficiency affects the cost of production. Operational inefficiency can be Affected by the internal factors as well as external factors of the company. 4. Cost Escalation and rigid price:In the case of all other industries, there was rise in the cost of production of cement. But the special point in the case of cement industry was that some of the major cost rises were Due to the government policies. The shortage of wagons for the movement of cement was Always a serious. 5. Government policies Rules and Regulation:The various policies rules and regulations of the central and state government not Only encourage the industry but have also adversely affected the industry. The various steps Taken by government viz., istrated prices of inputs, like in the excise duty increase in Railway fright, low off take by government reduction in

loading capacity of trucks, compulsory Jute bag packaging high electricity duty, sales tax, power tariff etc. Adversely affects the Industry. 6. Infrastructural problems:The cement industry is facing various problems. Infrastructure facility is one of the Main problem faced by the industry. Infrastructural facility means the facility of availability Of adequate quantity and quality of coal railway wagons regularity of power supply, sea-port, Bridges, roads and canals, which is of vital importance for optimizing capacity utilization in Cement industry. The cement plants are located nearer to the lime stone deposit area, which Are not properly connected with rail road, power and communication services which affect to The cement industry. 7. istration problem:istration problem includes the workers problem, selling and distribution of Cement problem etc. 8. Other problem:Other problems included the pollution problem, location problem, low export, under Develop rural market etc. 1.7 COMPANY PROFILE Malabar Cements Ltd., a fully owned Govt. of Kerala Undertaking, is synonymous with superior quality cements, vouched by customers spread across the state of Kerala. The Company was incorporated in April 1978 and commenced production in April 1984 at its Walayar plant. At Malabar Cements, product improvement is not just a one-time strategy for boosting sales, rather a quest of excellence. Perfecting the product quality is everybody's concern here. Our distinction begins with scientifically selecting the best raw materials for clinker. Stringent quality control is exercised right from preblending raw materials, clinkerisation, clinker grinding, and finally to cement packing.

Malabar Cements contributes to the developmental activities of the State by supplying the basic construction material. Only Malabar Cements can supply its cement, 'factory fresh', without any deterioration in the original strength either due to moisture or humidity, within 12 hrs anywhere in Kerala. With a production capacity of 4.2 lakh tons of cement per annum,the unit at Walayar is the largest. As part of expansion programme, it has commissioned a 2.0 lakh tons clinker-grinding unit at Cherthala in Alappuzha district in August 2003. Thus the total installed capacity of MCL is 6.2 lakh tons. MCL is the first public sector company to receive ISO Certification & to win the National Award for best achievement in Energy Conservation. Till date, MCL has experienced no loss of production due to labour unrest. In just over 15 years of commissioning, Malabar Cements has been able to meet about 10% of total cement consumption in Kerala. With the expansion plans in progress, the figures are sure to rise further. Cement is a necessary constituent of infrastructure development and a key raw material for the construction industry. As late as the 70’s, the State of Kerala was virtually starving for cement. The state lacked a portland cement factory in either private or government Sector. In 1961-62, the Geological Survey of India located a limestone deposit in the Pandarethu valley of the Walayar region on the northern side of the Palakkad gap. Located in dense forest area, the hilly terrain was required heavy investment to mine. The State Govt. ventured

to

put

up

a

Cement

factory

in

the

region.

The feasibility study conducted revealed that the construction of a 1200 tpd dry process cement plant using the Pandarethu limestone is feasible. KSIDC obtained an Industrial License for the manufacture of cement in November 1976 and decided to go ahead with the project and formed “Malabar Cements Limited” to set up, own and operate the proposed cement plant. The plant was successfully commissioned in 1984 and the commercial cement started on

1984.

production

Now, The Company is all equipped to set precedence among public sector units in the state. The launch of two Superior quality products under the brand name ‘Malabar Super’ and ‘Malabar Classic’, in the year 1994-95 gave a boost to the market presence. Various modifications carried out since 1995 have improved production and productivity of Malabar Cements. A 2.5 MW multifuel power plant was commissioned in June 1998 to complement 25% of the total power requirement for the Walayar plant operations. As part of expansion, the company has commissioned a 600 tpd Grinding Unit at Cherthala in August 2003. The modernization of Cement Mill, completed in December 2004, helped to increase the cement production. The company has upgraded the plant with state-of-the-art technology; Belt bucket elevators, Kiln automation, modification of cement mill internals etc, are few to mention. The 0.42 million tones capacity is less than 10% of the cement consumption in Kerala and expansion will alow the company to harness

the

markets

beyond

its

core

1978

1979

segment.

1980

1982

1983

1984

1987

1994

1997

1998

2000

COMPANY POLICY

VISION $ MISSION

Growth Story Some of the major milestones while on our growth… Feasibility Study for a cement plant at Walayar. - 1975 Industrial License for the manufacture of Cement - 1976 Date of Incorporation of Malabar Cements - 1978 Commencement of mining activities - 1981 Commissioning of Walayar Plant - 1984 Commencement of clinker production - 1984 Commercial Cement Production started - 1984 43-grade OPC cement – ‘Malabar Super’ launched - 1994 New product: ‘Malabar Classic’ launched - 1994

Obtained

ISO:

9002

certification,

first

PSU

in

Kerala

to secure this certification - 1996 Installation of 2.5 MW multi-fuel power gen. set - 1998 Introduction of ‘Malabar Aiswarya’ brand - 2003 Commissioned

of

600

tpd

cement

grinding

unit

at

Cherthala - 2003 Modernization of Cement Mill to close circuiting - 2005 Introduced ERP system for integrated operation of all functional areas. - 2007 Switched over to Quality Certification ISO : 9001 :2008 – 2010 ISO Certification “IS/ISO 9002 : 1994” certification obtained in November 1996. First PSU to secure this certification. Switched over to the revised standard ISO 9001 : 2000 in Aug’2003. Switched over to Quality Certification ISO : 9001 :2008 in 2010 Awards Kerala State Pollution Control Board Award – 1990-91 Secured first State award for Energy conservation - 1992 VSSC Rolling Trophy for safety measures - 1994 & 1995 NCBM

National

Award

for

the

Best

improvisation

in energy - 1998 Kerala State Energy Conservation Award - 1998 Govt. of Kerala awarded for outstanding achievement in Pollution abatement - 2007 Introduced ERP system for integrated operation of all functional areas. 2007 Kerala Trade Award of Kerala Government - 2010 Kerala State Pollution Control Board Award - 2011 Kerala State Pollution Control Board Award - 2012

1.8 PRODUCT PROFILE Malabar Cements uses the state of the art, dry process technology for the manufacturing of super quality cement and the quality is much above the national standards. For Various applications, the company has three brands viz, "Malabar Super", "Malabar Aiswarya" & "Malabar Classic"

1. MALABAR SUPER A fabulous product in every sense: Super in strength, Wonderful in workability, Incredible in aging, Implausible in durability, and Fantastic in strength gain. An AMAZING performer!

Tests carried out by Bureau of Indian Standards have established unshakeable credentials of Malabar Super. Super strength accelerates setting time and fine finish. Malabar super is superior in strength to ordinary '43' grade cement. It attains the 28 days' strength required as per IS in just 7 days time. Not only that, the strength attained in 28 days time is about 50 percent more than the IS specification. The amazing strength of Malabar Super arises from it's unequalled particle fineness, 33 percent more than the IS specification and consistency in composition, made so by computerized process control system. 2. MALABAR CLASSIC

Superior in its class of cements, it offers better setting properties delayed initial set and early final set offering more working time and reduced observation time.

Structures achieve excellent dimensional stability with the heat resistant properties of MALABAR CLASSIC. It also reduces heat generation during hydration, making it a better workable finished product absolutely reliable. The extra fineness welded into it allows MALABAR CLASSIC better coverage and finish in wall and roof plastering. This in turn, reduces paint consumption. 3. MALABAR AISWARYA It brings prosperity in many ways. It increases the life of your structures by safeguarding against sulphate attack. Aiswarya offers high quality at reduced

price.

Aiswarya generates less heat of hydration, reduces the formation of getting cracks. This product is best studied for constructions in soil and water with excess alkali metals, sulphates, alumina, iron and acidic waters. To obtain the best quality cement, only glassy granulated slag is used for product

manufacturing. With very low magnesium oxide content this provides shape stability for concrete structures.

The Making of Cement MCL manufactures cement through the most modern dry process method based on world-renowned German technology. The major raw materials for cement manufacture are limestone and laterite, which are natural minerals obtained within the state. These raw materials provide all necessary ingredients of cement like lime, silica, alumina and iron oxide. The entire manufacturing process is computer controlled from a central control room and stringent quality control measures are applied at all stages of production. We are in the process of installing X - Ray Analyzer for better quality control. The state of the art pollution control measures like bag filters are also being installed. The process generally involves three stages of production. 1. Raw meal production. The limestone obtained from captive mines is enriched with higher quality limestone procured from nearby states as and when required. The raw mix normally contains 95% limestone and 5% laterite. The raw materials are crushed to around 20-25 mm size and the proportioned raw materials are ground in a ball mill in dry condition to a very fine powder. The resultant product is called raw meal and is stored in concrete silos where it is pneumatically homogenized to get a uniform product. 2. Clinker production Clinker is produced in a rotary kiln, which is a cylindrical steel shell of 65m length and diameter 4.2m, lined with refractory bricks. The kiln is inclined at 3% and set rotating at a speed of 2 – 2.2 rpm. It is provided with a 4-stage multi cyclone pre-heater system through which the homogenized raw meal is fed to the kiln inlet by means of belt bucket elevators. The Kiln is fired with

pulverized coal and maintained at a temperature of about 14500C. In the preheater and kiln, the raw meal undergoes a series of physical as well as chemical changes giving rise to the cement minerals. The resultant product in nodular form obtained from the kiln is called clinker. Clinker is immediately quenched in the clinker cooler to stabilize its properties and stored in the clinker stockpile. 3. Cement production. Cement is produced by grinding clinker with 3-5% gypsum in a closed circuit ball mill to required fineness. Gypsum is added to control the setting properties of cement. Grinding clinker and gypsum produces ordinary Portland cement (OPC). Fly ash / Slag at required proportion is ground along with clinker and gypsum to produce Portland pozzolana cement (PPC) / Portland slag cement (PSC). The ground cement is stored in concrete silos and packed in 50 Kg bags using electronic packing machines.

1.9 CHAPTER SCHEMA

INTRODUCTION INTRODUCTION TO THE STUDY OBJECTIVES OF THE STUDY

CHAPTER 1

NEED FOR THE STUDY SCOPE OF THE STUDY LIMITATIONS INDUSTRY PROFILE COMPANY PROFILE PRODUCT PROFILE CHAPTER SCHEMA

LITERATURE REVIEW STUDIES RELATED TO INVENTORY MANGEMENT

CHAPTER 2

INVENTORY MANGEMENT THE RESEARCH MODEL

RESEARCH METHODOLOGY RESEARCH DESIGN

CHAPTER

3

PROBLEM STATEMENT PERIOD STUDY SAMPLING DESIGN SOURCES OF DATA STATISTICAL TOOLS USED

CHAPTER 4

DATA ANAYSIS AND INTERPRETATION

FINDINGS, SUGGESIONS AND CHAPTER 5

CONCLUSIONS

2. LITERATURE REVIEW 2.1 STUDIES RELATED TO INVENTORY MANGEMENT Inventory, in most of the industries, s for the largest Proportion of gross working capital. A number of studies, Therefore, have been conducted to find the determinants of Investment in inventories. The following discussion provides a Brief review of studies, dealing with factors influencing Investments in inventory in India. Economic studies to analyze the factors that influence Inventory accumulation in India, are based on time series and Pooling of cross section of time series data pertaining to Manufacturers’ inventories. Krishnamurty’s study (1964) was Aggregative and dealt with inventories in the private sector of the Indian economy as a whole for the period 1948-61. This study used Sales to represent demand for the product and suggest the Importance of accelerator. Short-term rate of interest had also been Found to be significant. Sastry’s study (1996) was a cross-section analysis of total Inventories of companies across several heterogenous industries For the period 1955-60 using balance sheet data of public limited Companies in the private sector. The study brought out the Importance of accelerator represented by change in sales. It also Showed negative influence of fixed investment on inventory Investment. Krishnamurty and Sastry’s study in 1970 was perhaps the most comprehensive study on manufacturers’ inventories. They used CMI data and the consolidated balance sheet data of public limited companies published by RBI, to analyze each of the major components i.e. raw material, goods-in-process and finished goods for 21 industries over the period 1946-62. It was a time series study but some inter-industry cross section analysis had also been done. Accelerator represented by change in sales, bank finance and short-term interest rate were found to be important determinants. Utilization of productive capacity and price anticipations had been found toe of some relevance. Another study conducted by them in 1975 analyzed inventory

investment in the context of flexible accelerator with financial variables. Both RBI and Stock Exchange Official Directory, Mumbai data for seven important industries had been taken for the period of 1956-69. Their study of pooled cross section was in current prices whereas time series analysis based on RBI data was a constant price. OLS results showed the important influence of accelerator, internal and external funds flow and fixed investment on inventory investment. Materials management has been considered as a separate field of management discipline only in the recent past and is accorded the status of a separate functional area. While the concept got wide popularity and recognition in all the advanced countries. In India, it is yet at an infant stage. On of its latest origin, unfortunately research in the area of materials management both at the micro and macro levels was conspicuously absent. There does not exist adequate indigenous literature on this subject. However, in recent years on of the growing importance of material management, few research studies were conducted at various universities in our country which highlighted some of the problems faced by selected central and state public sector undertakings in the country. Apart from the above research work, a few studies were conducted at istrative Staff College of India, Hyderabad and some studies were conducted by individual authors which focused to some extent on the existing policies, procedures and problems of industrial organizations in the field of materials management. Besides the above studies, there are a number of reports submitted by governmental committees from time to time. In addition to this, some studies were conducted on Inventory Management in India. Bansal G.D., in his study on Material Management, A Case Study of Bharat Heavy Electrical Limited, Bhopal unit, (BHEL)’, has evaluated the existing systems of inventory management. He emphasized the need for automatic replenishment system in the undertaking. He also studied the application of ABC analysis and EOQ technique of inventory control. He also pointed out the accumulation of surplus stores and non-moving items in the organization. He recommended that the surplus and obsolete stores, which are no longer

required, should be disposed off as early as possible at the best available price. Further, he has suggested the preparation of monthly classwise statements on inventories for effective control over them. And he suggested the introduction of reconciliation of stores’ ledgers with ledgers to avoid misappropriation of stores. The study also revealed that raw material, components and stores, and spares for production and operation are above their actual consumption level. The inventories in general are found to be above their routine requirements. The holdings of stores and spares generally are of the order of two to three years’ requirements and these are considered as excess. Rama Krishna Rao B., in his thesis ‘Materials Management in Heavy Engineering Industry’ a case study of Bharat Heavy Plate & Vessels Limited (BHPV), Visakhapatnam in 1979, he has evaluated the performance of materials management in BHPV and identified some problems pertaining to materials management in BHPV in particular and heavy engineering industry in general. The method of investigation involves documentary evidence and survey of expert opinion. He has evaluated the existing purchase systems and lead-time involved in procurement of materials and suggested that the long lead-time should be reduced. His study pinpointed the excess inventory in of number of months cost of production in all the engineering units. He also highlighted some of the problems in the area of materials management such as delay on the part of customers in supplying their own materials, existence and disposal of surplus and non-moving items, excessive lead time and excessive dependence on imports. He also found that the istrative and procurement lead times of the company are on the higher side due to the peculiar nature of the industry. He suggested the liberalized purchase procedures, increasing financial powers to the personnel, opening up of liaison offices in various countries to reduce the lead-time. In comparison with the BPE norms, the inventory levels of various stores items in BHPV and the overall inventory accumulation in Heavy Engineering Group was relatively higher and he suggested for drastic reduction in the inventory levels.

Phaniswara Raju B produced a research work entitled ‘Materials Management in Andhra Pradesh State Road Transport Corporation (APSRTC) in the year 1986. In his study, he examined the materials management practices and purchasing systems in APSRTC on the basis of various parameters like material consumption per vehicle, material consumption per kilometer, inventory per vehicle, inventory in of number of month’s consumption etc. He highlighted some major problems in the procurement of materials. The study was primarily based on secondary data collected from published annual reports of APSRTC, the records of MIS, the reports on performance of Nationalized Road Transport Undertaking of CIRT, Pune etc., coupled with personal interview with various officials of the corporation. The study revealed the increasing levels of materials consumption in APSRTC as compared to other undertakings. He observed the absence of the use of important analytical techniques like value analysis and network techniques in the purchasing system of APSRTC. The inventory control system in APSRTC was critically examined in respect of stock out pattern, reordering and review policies, lend time patterns, stock out levels etc. He mainly suggested the reclassification of stores items based on the criticality, the refixation of reorder level and reorder quantities. The study also showed the wastage caused by maintenance of unnecessary stock records relating to items, which were no longer used. Hari R. Swami in his research work “Materials Management in Public Undertakings” has evaluated the performance of materials management in the central public undertakings in Rajasthan such as, Instrumentation Limited, Kota unit: HMT, Ajmer unit: Hindustan Zink Limited, Debari unit; Hindustan Copper Limited, Khetri unit and Sambhar Salts Limited. The study covered various aspects of materials management in these enterprises from 1977-78 to 1981-82. The methods of investigation include questionnaire interview, on the spot study and deskwork techniques etc. It has been observed that the cost of materials s for more than 50 per cent of the total cost of production in the selected units of the study. Unfortunately, the importance of proper materials management was not fully realized by public undertakings in

Rajasthan and very little attention has been paid so far, to the task of controlling investment in inventories through the application of various scientific techniques of materials management. The research opined that, materials management should not cover the inspection function, as it requires an autonomous and independent status in the organization. The study revealed that the lead-time in the selected public enterprises was considerably long and suggested to reduce istrative lead-time by expediting purchase files. The study also revealed that the inventory of selected public enterprises had been accumulated due to the following reasons; faulty purchases, heavy rejections, high lead time, uncongenial organization, lack of scientific and modern techniques of materials management, defective inventory control and inflationary tendencies in the economy. He suggested that the inventory holdings could be reduced by adopting integrated system of materials management, appointing qualified and trained inventory managers, reducing lead time, setting and regulating consumption and stocking norms of raw materials and other goods, applying modern techniques of materials management and identifying slow and non-moving items. The study tested fully its hypothesis “the public enterprises had suffered losses or earned low level of profits relates to the inefficient management of materials. If the public enterprises followed standard techniques of materials management, they would not only generate resources for their own expansion but would also have contributed towards economic growth.” The very important reason for public enterprises having suffered losses or earned low level of profits relates to the inefficient management of materials. Had public undertaking in Rajasthan managed materials in an efficient and effective manner, they would not only have generated resources for their own expansion but would also have contributed towards economic growth. In the year 1980, K. Sambasiva Rao conducted a research study entitled “Materials Management in Public Sector Shipbuilidng Industry.” He made a review of studies conducted earlier on materials management in the Indian industries and he threw light on planning and budgeting of materials management in Hindustan Shipyard Limited. He did an in-depth study in the

areas of procurement of materials, codification and standardization, vendor analysis, and inventory control in the light of inventory norms fixed by the Bureau of Public Enterprises of the company under study. He conducted the study under certain limitations like absence of proper records, confidential nature of the information, un-disclosure of certain information, reluctance of officials in providing the necessary data pertaining to inventory control. In his study, he highlighted the problems faced by the Indian shipbuilding industry in general and specific problems of Hindustan Shipyard Limited. The problems include international parity price on the involvement of the directorate of shipping in fixing the price of the ships constructed. Inadequate use of installed capacity, paucity of funds, paucity of orders, paucity of trained manpower, high cost of material inputs, delays in procurement of material and equipment, due to the undevelopment and underdevelopment of ancillary units, the shipbuilding industry is facing severe hardships in obtaining the necessary inputs by paying scarce foreign exchange reserves. Even if at all there are some indigenous ancillary industries to shipbuilding industry, the prices of the products of ancillaries tend to be high because of the incidence of duties, taxes and high overhead schedules are postponed after receipt of major material and components due to lack of coordination among the various departments by drawing offices, production planning and control department, purchase department, stores organization and production department. Finally, his study highlighted the significance of materials management function in shipbuilding industry and suggested that the procurement policies, procedures and systems need to be improved to achieve higher operational efficiency in this critical area. In the year 1996, (Ms) Prameela Devi did a research work entitled “Materials Management in Public Sector Heavy Engineering Industry. A Case Study of Bharat Heavy Plates and Vessels Limited, Vishakapatnam.” She laid emphasis on the problems faced by materials management department in BHPV Limited. She did a comparative study of inventory management practices of BHPV with the public sector heavy engineering units. She found some weaknesses in the materials management function of BHPV and suggested some measures to turn

up the materials management function and for the overall performance of BHPV Limited. She highlighted the difficulties of materials management in jobbing industry like BHPV with that of the industrial units, which are of continuous process industry. The researcher observed that frequent changes taking place in materials management adversely affects the smooth functioning of materials management. She also observed that the number of items in the inventory is on the increase and she suggested that enforcing strict control on the delegation of powers should curb it. For determination of the appropriate quantity to be procured and minimum capital without any delay in the production is of importance, in satisfying the conflicting interests. For it, she gave some solutions like SIM (selective inventory management) which consists of Pareto analysis (ABC analysis), criticality analysis (VED analysis), movement analysis (FSN analysis) and availability analysis (SED, GOLF, SOS etc.). She further highlighted the deficiencies of the management and they are as follows. Adoption of inventory control methods like classification, codification, and standardization, variety reduction, value analysis, ABC analysis is not systematically implemented. Economic order quantity was not adopted. Vender rating techniques and value analysis were not followed. Materials management manuals were not even prepared in BHPV. Buying cost or inventory carrying cost of materials was not worked out systematically. Computerization was not extensively done. So far, a good number of research studies were conducted by different researchers in different institutions in universities and they tried to cover all the aspects of materials management in both public sector and private sector industrial units located throughout the country. But there was not even a single work done in the area of materials management in shipbuilding units managed by defence production department. As such, researcher found this gap and took up the study of “Materials Management in Indian Shipyards: A Case Study of Goa shipyard Limited.” Apart from the above research studies, as a result of growing awareness of the subject, some studies were conducted in the area of materials and inventory

management which focuses attention on the existing policies, procedures and problems. Some of them are: “Rationalizing Materials Management,” (Datta A.K., 1990), “Essentials of Materials Management,” (Gokarn P.R., 1986), “Inventory Management, Text and Cases,” (Gopalakrishnan P. and Sandilya M.S., 1978), “Spare Parts Management, Text and Cases,” (Gopalakrishnan P. and Sundaresan M., 1977), “Materials Management, Procedures Text and Cases,” (Datta A.K., 1984), “Management of Materials,” (Chowdary B.K. Roy, 1979), “Materials Management,” (Sharma P.C.,1986), “Integrated Materials Management,” (Patel, Chuna Walla and Patel, 1984), “Integrated Management: Concepts and Cases,” (Verma M.M., 1984), These books are textual in nature, which explain mainly the functions, procedures and problems in the area of materials management, which mainly intended to cater the needs of students, researchers and professionals dealing with the subject. However, in some textbooks, some typical and useful case studies were discussed at length for the benefit of the readers. In addition to the above mentioned text books, which deal with all the aspects of materials management, thee are some other text books exclusively on inventory management such as Inventory Management in India (Chandda R.S., 1984), Inventories in Indian Manufacturing (Krishna Murthy K. and Sastry D.U., 1970), Inventory Management (Institute for Financial Management and Research, 1980), Purchasing and Inventory Control (Menon K.s 1985), Inventory Holding by Manufacturers in India and United States (Mazumdar H.K., and Soloman M.J. 1960), Inventory Holdings by Manufacturers in India and United States (Rajeshwar Rao K. 1985), Working Capital Planning and Control in Public Enterprises in India, Problems of Working Capital (Mishra R.K., 1975),

Management of Working Capital (Agarwal N.K., 1983). In all these books, an attempt had been made by the respective authors to explain the concepts, importance, tools and techniques and problems of inventory management with some case studies. For instance, Krishna Murthy and Sastry have studied inventory behaviour of 21 industries comprising 91 per cent of output and 96 per cent of inventories of the group of the industries covered by the census of manufacturers. The study deals only with inventory holdings of the manufacturers and the analysis is mainly in of the prices prevailed during the study period. Similarly, the IFMR’s survey “Inventory Management” summarizes briefly the findings of four important surveys, it conducted in the area of inventory management practices in Indian industry. A study on control practices in Indian industry conducted by the faculty of the Jamnalal Bajaj Institute of Management Studies, University of Bombay concluded that most of the companies were still guided by rules of thumb and intuition in deciding on how much capital to invest in inventory. Out of the 224 companies approached, 36 responded and among them only 13 reported using inventory control techniques. Only six out of the 13 companies took into inventory costs in controlling inventories. The faculty of the istrative Staff College of India made a survey on spare parts management practices in India in 1977. 200 organizations were covered under this study. The survey findings indicate that a major bottleneck is the painful slow process of import substitution. This is mainly because inability of ancillaries to provide quality goods, scarcity of certain raw materials etc. The faculty of the istrative Staff College of India made another study on inventory management practices with a focus on the Tandon Committee recommendations concerning inventory norms. The study indicated that industries were found to carry by an large more stocks of raw materials including spare parts and imported items than the suggested norms by Tandon Committee. It also revealed that industries except in engineering and textile

sectors were managing the workin- progress inventory within the specified norms. To highlight the range of problems affecting inventory management and to get an appreciation of the techniques and practices adopted in the Indian context and to tackle these problems, the IFMR has conducted an empirical study on inventory management practices in public sector undertakings and public limited companies in the private sector in 1979. While it was intended to cover 200 organizations, response was actually received from 48 organizations only. The study revealed that a majority of the respondents gave high priority in inventory management, to the financial objectives of maximizing the return on the investment. It also revealed that there is considerable scope for reducing the spares inventory in the engineering and process industries. There is a general lack of appreciation of the benefits of, and the need for integrated materials management. Most of the respondents viewed that materials management functions as a service centre, and a few conferred on it the status of a profit centre. In most instances, thee is a very strong case for the materials management function to be elevated too much higher status with close and continuing association with top management. In addition to this, there are a number of reports submitted to the government from time to time. For instance, the committee on public undertakings in its 40th report on “Materials Management,” Parliamentary Committee on Public Sector Undertakings, pointed out source of the deficiencies in the realm of materials management of the public sector undertakings in India. The BPE ‘Guidelines for Materials Management in Public Sector Enterprise’, Bureau of Public Enterprises, Ministry of Finance, Government of India, New Delhi, 1979 has issued guidelines on material management to the public sector undertakings to introduce modern methods and for improving their materials management function. The

istrative

reforms

commission,

Report

on

Public

Sector

Undertakings, New Delhi, 1967 made some recommendations for reducing inventory levels. The RBI Study Group, on the follow-up of Bank credit,

Bombay, 1975 was appointed to frame guidelines and to lay down norms for bank credit to be made applicable to all classes of industrial borrowers (popularly known as Tandon Committee report). It classified inventories and prescribed inventory norms for 15 industries. The Fifth report of the Committee on Inventory control, Bureau of public enterprises (BPE), Ministry of Finance, Government of India, New Delhi, 1972 appointed by BPE in 1972 examined inventories of the following three public sector undertakings – viz., Hindustan Shipyard Limited, Hindustan Cables Limited, and National Mineral Development Corporation Limited. The committee fixed inventory levels for HSL and made some concrete recommendations to reduce inventory levels in all the three undertakings. Apart from the research studies conducted at various universities and institutions and textbooks published on the subject, there are a few famous journals on materials management published in India. Though the journals, experts, professional and practitioners in the field of materials management have shared their thoughts in the form of writings. Hereunder, an attempt has been made to review some of the important articles published in various journals in India. Pren. Vrat’s, ‘Materials Productivity in Indian Industries,’ published in Indian Management, All Indian Management Association, new Delhi, December, 1978, highlighted the importance of increasing materials productivity in Indian industries. Ravindra Kumar described materials management as a truly creative, productive and profit centre. Renuka Raja Gopalan’s, ‘Increased Productivity’ published in the Materials Manager, Indian Institute of Materials Management (IIMM), stressed the importance of productivity through efficient materials management in manufacturing enterprises. Suresh Krishna’s ‘Role of Materials Management Professionals in Industrial Growth,’ stressed the need for professionalism in materials management to achieve the organizational goals. Krishna Swamy S’s ‘Trust – The Key to Better Materials Management’ published in The Materials Manager, Indian Institute of Materials Management (IIMM), emphasized the need for maintaining good vendor relations.

Somayajulu S.V.R. highlighted an integrated view of the role of materials management in improving the profitability of the undertakings. Al Prased R’s ‘Increased Productivity through Better Materials Management’ published in The Materials Manager, Indian Institute of Materials Management (IIMM), emphasized the need for proper planning and good inventory management systems in achieving

organizational

goals.

Parsed

Mukherjee

S.K.’s

‘Materials

Management in Food Corporation of Indian (FCI) published in Lok Udyog, New Delhi, felt that the key result areas in material function have a direct and important bearing on productivity or purchasing, transportation, materials handling and realizations from disposal of obsolete surplus and waste products in Food Corporation of India (FCI)’. He also felt that the materials management is a profit center of great importance in industries where 50 to 60 per cent of the cost of production is on materials and where the entire working capital is in the form of inventory. According to Mahadevan, 1982, materials management is vital to corporate management and goals and no wonder it constitutes one of the 5 M’s of the corporate; Marketing Management by sales, Man Management – by personnel, Money management by Finance, Machine Management by workers’ factory, Materials management – by Materials. Gurani V.G. emphasized the need for cost reduction and cost savings in the area of materials management by a combined approach and teamwork of all persons in the organization. Mahalanobis P.C’s, ‘A New Look at Materials Management,’ published in The Materials Manager, Indian Institute of Materials Management (IIMM), stressed the need for materials management in improving productivity. He stressed the need for total materials control to achieve better results. Sreenath H.R.’s, ‘Materials Management in a Steel Plant’, viewed the importance of the role of materials management in the productivity of steel plants. He suggested regular interaction between materials management

groups,

centralized

procurements,

extensive

use

of

computerization etc., to improve the productivity of steel plants. Sari, A.R. (1977) in his article ‘Materials Management in the Industrial Economy’, published in The Indian Buyer highlights the importance of modern materials

management in the present competitive market. The author has discussed in details the silent points to curb and control excess inventory. He also stressed on the purchasing function at large. ‘Materials Management in Process Industries’, an article published in The Materials Manager by Chandramouli. K. published by Indian Institute of Materials Management (IIMM), in 1983, differentiated the materials management function between engineering and processing industries. He highlighted the problems of materials management in the process industry. Ramaswamy S., in his article ‘Effective Materials Management-key to Productivity’, in The Materials Manager, published by Indian Institute of Materials Management (IIMM), 1983, highlighted the importance of materials management function to contribute effectively to the productivity of the organization. Hans Busch F. viewed materials management as a total concept involving organizational structure unifying a single responsibility, the systematic flow and control of materials. He stressed the need for implementing modern concepts in materials management. Madho Narain stressed the need to develop professional personality and other managerial virtues for the people working in the materials management area in his article ‘Material manager in the managerial hierarchy of the Indian industry’. Kapok M.L.’s article, ‘Productivity in Materials Management’, in The Materials Manager journal published by Indian Institute of Materials Management in 1988, felt that materials management can contribute to the growth and profitability of an organization to achieve better productivity in materials management. He suggested to maintain good relationship with the suppliers and to remove the fear complex of stock outs. Rama Krishna Rao B., in his article ‘Some Problems of Materials Management’, reviewed the inventory position in central public sector heavy engineering units and highlighted the problems faced by engineering units in particular and all central public sector undertakings in general. Roy Chowdhury Bipul K.’s ‘Materials Management Availability Research’ article outlined some of the salient points necessary for the development and disposal of availability research in the area of materials management. Some methods are also discussed and these can be used for setting certain types of research

work. Rao and Rama Rao, in their article ‘Information and Material Management,’ published by the Economic Times in 1977, have emphasized the need for constructive information system to the materials management sphere to achieve good results. Adisesh Iyer, discussed the methods of valuing inventories in his article ‘Inventory Control’, published by The Chartered ant journal. He is of the opinion that the work-in-progress inventories have to be valued as per the cost ledgers instead of attempting physical valuation. Kulkarni, P.V., (1977) discussed ABC analysis techniques at a length in his article ‘ABC analysis: A Technique of Inventory Management’. Pillai and Ashok Agarwal discussed the inventory management in Indian Air Transport Industry and found its weaknesses and suggested remedial measures for efficient inventory management. Rao K.V’s, article ‘Techniques of Inventory Management’ in The Economic Ttimes considered four costs viz., replenishment cost, inventory carrying cost, under-stocking cost and overstocking cost in developing an inventory system. Gopalkrishnan P., in his article published in The Hindu entitled ‘Importance of Inventory control’, stressed the need for inventory control in view of the Tandon Committee norms and suggested some methods to control inventories. Gangahara Rao M. and Rama Kishan Rao B. analyzed the trends in inventory levels besides bringing into focus the causes for inventory accumulation in all central public sector undertakings during the period from 1970-71 to 1978-79. Ganesh Kulkarni highlighted the problems of valuation of work-inprogress in the context of identification of materials and valuation in his article (1983) ‘Work-in-progress’. Ramakishna Rao B. in his thesis ‘Inventory control in public sector units’ highlighted the problems of inventory control in public sector units and he classified the costs for inventory accumulation as internal and external. According to him, unrealistic government policies with regard to import licences and erratic delivery schedules and long lead times are responsible for inventory accumulation in public sector units. Rao and Gupta viewed that the effective management of inventory reduces the cost of production and consequently increases the profitability of the enterprises. All the above research studies conducted at

various universities in India and other published research studies and surveys in this area and text books brought out and research papers published in journals, newspapers etc., revealed that the various facets of materials management have not been fully developed and are not satisfactory. There is no common opinion on what functions have to be covered under the preview of materials management. Even the method, techniques, procedures and systems suggested by various authors to control the inventories varied widely. However, the materials management has been identified as the most potential area of prime importance to increase the productivity and efficiency of an organization. Even then, serious attempts of research have not been made in this area. The present study has been to some extent able to highlight the importance of the materials management as one of the important functional areas in an industry like shipbuilding.

2.2 THE RESEARCH MODEL

Management costs

Firm performance

Cycle time

Turnover

Production flexibility

Poor customer service

Delivery performance Perfect order performance E-business performance

INVENTOREY MANGEMENT

Loss of cost effectiveness Increased expenditure

3. METHODOLOGY 3.1.

RESEARCH DESIGN

Research design is systematic planning of research, usually including the formulation of a strategy to resolve a particular question; the collection and recording of the evidence; the processing and analysis of these data and their interpretation; and the publication of results. Agood research design must possess the important features of objectivity, reliability, validity and generalization. The research design followed to study the inventory management in the company is descriptive and analytical research design.

3.2.

PROBLEM STATEMENT

A study of inventory management at leading cement Company is undertaken in order to know the inventory performance and position of the company and to know the strength and weakness of the company. Inventories constitute most significant part of assets of large majority of the companies in India .Inventory a double edged sword is usually an asset of an organization, if not used properly it will become liability .It is therefore absolutely very important to manage inventories efficiently and effectively in order to overcome unnecessary investment. And “To identify the problems/challenges involved in the Inventory Management process at this company.”

3.1 PERIOD OF STUDY The study is conducted in 45 days 3.3.

SOURCES OF DATA  Primary source of data collection  Secondary source of data collection

Primary source Primary data were collected through direct observations of various functions in the Organizations, through questionnaire and from various department heads ,and also from the interviews. Secondary source Secondary data were collected from official documents like their annual report, company profile, organization manuals and from the company websites and previous study reports. This study is more based on secondary source of data that are collected through annual reports of the company.the data collection was aimed at study of effectiveness of inventory management of the company.

3.4.

STATISTICAL TOOLS USED

The various statistical tools used for data analysis is as follows:  Tables  Graphs Analytical tools used in this study are :  Ratio analysis  Abc analysis

4. DATA ANALYSIS AND INTERPRETATION ABC ANALYSIS (Always Better Control)

category

% of total number

% of total material

of items

cost(value)

A

10

70

B

20

20

C

70

10

Interpretation Category A materials represent 70% of the total materials cost ,but it constitutes only 10% of the items or quantity(high value materials). Category

B materials represent 20%of the total materials cost ,constitutes

20% of the material items(middle value materials). Category C though constitutes 70% of the total items ,it represents only 10% Of the total value(low value materials). Thus ,this analysis assumes that smaller number of items in inventory may have large money value,and the larger number of items have smaller money value.

RATIO ANALYSIS Stock turnover ratio Table 1: Stock Turnover Ratio (in Times) (in Lakhs) year

Net sales

Average inventory

Stock Turnover Ratio

2009-10

18941.39

4498.07

4

2010-11

27770.44

5648.26

5

2011-12

29818.21

5134.76

6

2012-13

29406.17

9003.01

3

2013-14

27308.11

6561.96

4

stock turnover ratio 16 14 12

Stock Turnover Ratio

10 8 6 4 2 0

2009-10 2010-11 2011-12 2012-13 2013-14

Figure 1: Stock Turnover Ratio

Stock holding ratio (in days) Table 1: Stock holding ratio(in days)(in lakhs) Year Stock turnover ratio(in times)

2009-10 4

2010-11 5

2011-12 6

2012-13 3

2013-14 4

average 4.4

Stock holding ratio(in days)

91

73

61

122

91

87.6

stock holding ratio 140 120 100 80 60

Stock holding ratio(in days)

40 20 0

Figure 1: Stock holding Ratio

5. FINDINGS, SUGGESTIOS AND CONCLUSIONS 5.1 FINDINGS This study on ”the effectiveness inventory management at Malabar Cementes Limited,Walayar, Palakkad” help to find out the efficiency of at the organization. The findings of the research from the study as follows:  This analysis assumes that smaller number of items in inventory may have large money value, and the larger number of items have smaller money value.  Based on stock turnover ratio , it indicates that the firm’s stock is turned over or converted into stock only 6 times on an average during the ing period.  The goods are lying in stock for 88 days.thus the inventory policy or management is poor.

5.2 SUGGESTIONS

 Under the ABC analysis, the management must have more control on C items than that on A & B items, because C class constitutes more of higher values. There should not be tight control exercised on stock levels, to avoid deterioration. This is done through maintaining low safety stock levels, continuous check on schedules & ordered frequently in inventories, in order to avoid over investment of working capital.  The inventory turnover ratio indicates whether investment in inventory is within proper limit. It also measures how quickly inventory is sold. It requires maintaining a high turnover ratio than lower ratio. A high turnover ratio implies that good inventory management and timely the inventories are being replenished, also reflects efficient business activities.  The management of the plant should incorporate TQM (Total Quality Management), particularly in all departments of production to ensure better sales and reduce the inventory of finished products.

5.3 CONCLUSIONS

In this study, a better inventory management will surely be helpful in solving the problems the company is facing with respect to inventory and will pave way for reducing the huge investment or blocking of money in inventory. Inventory is the physical asset of a company that can create problem if there is shortage, while in production and also if it’s in excess even after production. Inventory is constantly changing as quantities are sold and replenished.Since the Inventory Turnover Ratio shows the increasing trend, there will be more demand for the products in the future periods. If they could properly implement and follow the norms and techniques of inventory management, they can enhance the profit with minimum cost. From the study it is predicted that future sales have to be achieved and inventory level have to be maintained. The company has to periodically review the inventory to avoid production loss. Hence it can be understood that efficient inventory management can take the company to new heights and inefficient inventory management can ruin the company.

BOOKS

A.VINOD,CALICUT UNIVERSITY(2010)