International Journal of Engineering Research ISSN:2319-6890)(online),2347-5013(print)

Volume No.3, Issue No.6, pp : 378-383 01 June 2014

An Analytical Study on Inventory Management in Commercial Vehicle

Industry in India
Dr. Srinivasa Rao Kasisomayajula
KLUBS, Koneru Laxmaiah University, Vaddeswaram, Guntur
[email protected]
Abstract: Inventory means “the aggregate of tangible property composition, circulation and growth of the inventory in the
which are sale in the ordinary course of business, process of selected companies during the period under study.
production for such sale, and to be available for sale”. II. Review of literature
Inventory constitutes a major component of working capital. Niranjan Mandal and Dutta Smriti Mahavidyalaya, (2010) in
Inadequate inventory adversely affects smooth running of their study makes an attempt to provide an insight into the
business, whereas excess of it involves extra cost, thus conceptual side of working capital and to assess the impact of
reducing profits. To evaluate the practices and performances working capital management on liquidity, profitability and non-
in inventory management in the Commercial Vehicle Industry insurable risk of ONGC, a leading public sector enterprise in
in India, the present paper attempt has been made to analyse India over a 9 year period (i.e. from 1998-99 to 2006-07). It also
size, composition, circulation and growth of the inventory in makes an endeavour to observe and test the liquidity and
the selected companies during the period under study. profitability position of the enterprise and to study the
Key Words: Inventory Management, Indian Automobile correlation between liquidity and profitability as well as between
Industry profitability and risk. They may be concluded that working
capital management is very much useful to ensure better
I. Introduction productive capacity, good profitability and sound liquidity of an
Inventory constitutes a major component of working capital. To enterprise, specifically the PSE in India, for managerial decision
a large extent, the success or failure of a business depends upon making regarding the creation of sufficient surplus for its growth
its inventory management performances. Proper management and survival stability in the present competitive and complex
and control of inventory not only solve the problem of liquidity environment.
but also increase profitability. Inventory establishes a link Koti Reddy and Raghav Baheti (2010) in their study seeks to
between production and sales. Every business undertaking needs examine current policies and practices of working capital
inventory in adequate quantity for efficient processing and in- management at Saregama India Limited and tries to identify the
transit handling. Since, inventory itself is an idle asset and strengths and weaknesses of the company; the opportunities it
involves holding cost; it is always desirable that investment in has and the threats it faces. It contains a detailed analysis of the
this asset should be kept at the minimum possible level. various factors affecting the working capital requirements of the
Inventory should be available in proper quantity at all times, company and the impact they have on its profitability. The study
neither more nor less than what is required. Inadequate inventory concludes by suggesting solutions to address the concern areas
adversely affects smooth running of business, whereas excess of that have been identified. The company is recommended to
it involves extra cost, thus reducing profits. The primary focus on digital sales, incentivize cash sales, follow a forecasting
objective of inventory management is to avoid too much and too model that captures the tastes and preferences of consumers and
little of it so that uninterrupted production and sales with strictly implement its credit policy.
minimum holding costs and better customer‟s services may be Jasmine Kaur (2010) his study is concerned with the problems
possible. The term „inventory‟ refers to the stockpile of the that arise in attempting to manage the Current Assets, Current
products a firm is offering for sale and various components that Liabilities and the interrelation that exists between them. This is
make up these products. As per accounting terminology, a two-dimensional study which examined the policy and
inventory means “the aggregate of these items of tangible practices of cash management, evaluate the principles,
property which i) are held for sale in the ordinary course of procedures and techniques of Investment Management,
business, ii) are in the process of production for such sale, and Receivable and Payable Management dealt with analyzing the
iii) are to be available for sale”. Thus, inventory includes the trend of working capital management and also to suggested an
stock of raw materials, goods-in-process, finished goods and audit program to facilitate proper working capital management
stores and spares. James H. Greene states that inventory in Indian Tyre Industry. He revealed that there is a standoff
comprises “the movable articles of the business which are between liquidity and profitability and the selected corporate has
eventually expected to go into the flow of trade”. In commercial been achieving a trade off between risk and return. Efficient
Vehicle Industry, which is the subject matter of the present management of working Capital and its components have a
study, inventory involves raw materials, work-in progress, direct effect on the profitability levels of tyre industry.
spares and stores, finished goods, goods in transit and other Ranjith Appuhami (2008) the purpose of his research is to
inventory. To evaluate the practices and performances in investigate the impact of firms' capital expenditure on their
inventory management in the Commercial Vehicle Industry in working capital management. The study used Shulman and
India, the present paper attempt has been made to analyse size, Cox's (1985) Net Liquidity Balance and Working Capital

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 International Journal of Engineering Research ISSN:2319-6890)(online),2347-5013(print)
Volume No.3, Issue No.6, pp : 378-383 01 June 2014

Requirement as a proxy for working capital measurement and commercial vehicle companies namely, Asian Motor Works Ltd.
developed multiple regression models. The empirical research and Tata Marcopolo Motors Ltd. were incorporated in the year
found that firms' capital expenditure has a significant impact on 2002 and 2006 respectively, thus they have also been excluded
working capital management. The study also found that the for the comparative study.
firms' operating cash flow, which was recognized as a control V. Objectives of the study
variable, has a significant relationship with working capital The present study attempts to achieve the following objectives.
management, which is consistent with findings of previous 1. To study the size of inventory of the selected units in
similar researches. The findings enhance the knowledge base of Indian commercial vehicle Industry.
working capital management and will help companies manage 2. To examine the composition of inventory in these units.
working capital efficiently in growing situations associated with 3. To know the circulation of inventory in these units.
capital expenditure. 4. To study the growth of inventory in these units.
Pradeep Singh (2008) in his study made an attempt to examine VI. Hypotheses of the study
the inventory and working capital management of Indian The following hypotheses are helpful to achieve the above
Farmers Fertilizer Cooperative Limited (IFFCO) and National objectives.
Fertilizer Limited (NFL). He concluded that the overall position 1. There is no correlation between inventory and sales of
of the working capital of IFFCO and NFL is satisfactory. But Ashok Leyland Ltd.
there is a need for improvement in inventory in case of IFFCO. 2. There is no correlation between inventory and sales of
However inventory was not properly utilized and maintained by Tata Motors Ltd.
IFFCO during study period. The management of NFL must try 3. There is no correlation between inventory and sales of
to properly utilize the inventory and try to maintain the Force Motors Ltd.
inventory as per the requirements, so that liquidity will not 4. There is no correlation between inventory and sales of
interrupt. Eicher Motors Ltd.
III. Indian Automobile Industry Present status 5. There is no correlation between inventory and sales of
Indian automobile industry is nearly six decades old. The Indian SML Isuzu Ltd.
Automobile industry is the seventh largest in the world with an VII. Period of the Study
annual production of over 2.6 million units in 2012. India The period of the study selected only ten years from 2003-04 to
emerged as Asia‟s fourth largest exporter of automobiles, behind 2012-13.
Japan, South Korea and Thailand. The industry encompasses VIII. Methodology
commercial vehicles, multi-utility vehicles, passenger cars, two The study is analytical in nature. The data used for the study is
wheelers, three wheelers, tractors and auto components. Out of secondary data. The required data for the commercial vehicle
262 total number of companies, 220 Auto ancillaries, 7 companies were collected from the compilation made by the
commercial vehicle companies, 5 motor cycles / moped Centre for Monitoring Indian Economy (CMIE) for the period
companies, 8 passenger car manufacturers 12 scooter and three 2003-04 to 2012-13. Prowess database of CMIE is the most
wheeler companies and 10 tractor manufacturing companies. It reliable and empowered corporate database. It contains a highly
employs 5,00,000 people directly and nearly one crore people normalized database built on a sound understanding of
indirectly and is now inhabited by global majors in keen disclosures on were over 7000 companies in India. Some of the
contention. India manufactures about 40,00,000 two wheelers, data collected from journals, websites, books etc. Editing,
6,50,000 passenger cars, 2,00,000 Multi Utility Vehicle, classification and tabulation of the financial data, which will be
2,70,000 Commercial Vehicles and 3,40,000 tractors annually. collected from the above-mentioned sources, will be done as per
Today, the Indian automobile industry is ranked first in the the requirements of the study.
world in the production of three wheelers, second in the
production of two wheelers, fourth in the production of IX. Financial and Statistical Tools
commercial vehicles and ninth in passenger vehicles. For assessing the size, composition, circulation and growth of
IV. Selection of Sample companies the inventory position, Mean, Standard deviation and Co-
There are 46 companies operating in the Indian Automobile efficient of variation is used. To find out the relationship
Industry. The companies under automobile industry are between sales and inventory linear regression analysis, Karl
classified into five sectors namely; Commercial vehicles, Motor persons co-efficient of correlation is used. To test the results of
cycles / mopeds, Passenger cars, Scooters and three wheelers regression and correlation co-efficient t test is applied.
and Tractors. Out of five sectors in the Indian Automobile
Industry, commercial vehicle sector has been selected for the X. Limitations of the Study
purpose of the study. In order to select the sample companies The data used in this study have been taken only from secondary
from the commercial vehicle sector for the study, only those sources and as such it findings depends entirely on the accuracy
companies which were established before liberalization period of such data.
only selected. Thus, the number of companies selected under the
study is restricted to five out of seven companies viz., Ashok XI. Data Analysis and Findings of the study
Leyland Ltd. (ALL), Tata Motors Ltd. (TML), Force Motors 1. Size of Inventory
Ltd. (FML), Eicher Motors Ltd.(EML) and SML Isuzu The basic objective of inventory management is, to optimise the
Ltd.(SML). All the 27 manufacturing units of five companies size of inventory in a firm, so that, smooth performance of
are selected for the study based on census method. Other two production and sales functions may be possible at the minimum
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 International Journal of Engineering Research ISSN:2319-6890)(online),2347-5013(print)
Volume No.3, Issue No.6, pp : 378-383 01 June 2014

cost. The holding of surplus and slow moving inventories extra that the lower shares of working capital funds were tied up in
costs, wherein, the inventory-carrying cost alone is estimated to inventories and TML, EML and FML had managed well their
be between 10 and 20 percent in India while the interest payable inventory during the period of study.
on money borrowed from banks for obtaining inventories is Table2: Statistical Values of Ratios Relating to Inventory
around 18 per cent. To what extent the selected units have been Size
successful in optimising their inventory holdings during the ALL TML FML EML SML Industry
period is evaluated in this paper. Inventory to Current Assets Ratio
Table 1 portrays the size of inventories in the selected Mean 36.71 28.60 51.97 27.26 32.81 31.28
companies, during the period of study. This table reveals that the
size of inventory in the industry has gradually increased from C.V. 0.15 0.26 0.14 0.41 0.25 0.16
Rs.1880.99 crores in 2003-04 to Rs.4927.56 crores in 2012-13, t 2.10*** -3.30* 11.39* -1.09 0.59
i.e., more than double, except during the years 2004-05 and Inventory To Total Assets Ratio
2011-12 when the investment in inventory has slightly come
Mean 31.78 19.68 60.74 25.03 85.19 23.68
down. Among the firms, the increase in inventory has been
observed most in SML i.e., more than three times. The inventory C.V. 0.23 0.33 0.24 0.47 0.53 0.27
size of ALL has shot up from Rs. 517.67 crores in 2003-04 to t 3.36* -10.63* 8.37* 0.60 4.56*
Rs. 1638.24 crores in 2012-13 with slight falls in 2005-06, TML
Source: computed from annual reports of the respective
from Rs. 1105.1 crores to Rs. 2935.59 crores, and FML from Rs.
companies
183.4 crores to Rs.193.73 crores during the period of study. The
2. Composition of Inventory
size of inventory of EML has decreased from Rs. 30.56 crores in
In commercial vehicle industry, the major components of
2003-04 to Rs. 22.03 crores in 2012-13. On the whole, it is
inventory include raw materials, work-in progress, finished
evident that the size of the inventory among the firms in the
goods, stores and spares, goods in transit and other inventory.
industry has been on the increase at a slightly faster rate except
Table 3 which contains the statistical values (mean and C.V.) of
EML.
proportionate shares of these components to total inventory,
Table 1: Size of Inventory (Rs. in Crores)
shows that raw materials, work-in progress and finished goods
Year ALL TML FML EML SML Industry
constitute about 90 per cent of the total inventory in the industry.
2003-04 517.67 1105.10 183.40 30.56 44.26 1880.99 Stores and spares rank at the fourth place with regard to its share
2004-05 595.34 987.51 132.29 29.33 46.52 1791.26 in total inventory in all the units; finished goods rank at the first
2005-06 410.46 1159.29 148.15 36.05 59.83 1818.06 place regarding its share in total inventory in ALL, TML and
SML whereas raw material ranks at the first place in FML and
2006-07 506.94 1147.44 152.26 126.25 60.35 1993.24
EML. It is evident from the table 3 that industry average for
2007-08 568.08 1601.36 185.06 161.25 88.55 2604.30 finished goods proportion works out to 43.90 per cent; as against
2008-09 902.56 2012.24 213.84 161.23 91.14 3386.60 this, ALL has this share to the tune of 45.47 per cent, TML
45.67 per cent and SML 42.77 per cent in the total inventory.
2009-10 1070.32 2500.95 203.92 168.91 87.33 4222.07
This table further shows that mean values of the raw materials
123.5
2010-11 1223.91 2421.83 240.67 210.38
0
4376.81 proportion to total inventory have been higher in EML as well as
149.2 FML than the industry. The Coefficient of Variation has been
2011-12 1330.02 2229.81 196.03 19.37 3927.18
9 more in TML, (i.e., 0.26), than the industry coefficient of
160.0 variation. Work-in-progress also occupies an important place in
2012-13 1638.24 2935.59 193.73 22.03 4927.56
0
the inventory in the industry, with 12.56 per cent mean value.
Source: computed from annual reports of the respective This share has relatively been less in EML, where the trend has
companies been fluctuating in this ratio, and the proportion of work-in
progress has increased slightly in the firms during the period.
Table 2 shows the values of mean and co-efficient of variation The C.V. has been relatively high in EML and ALL. Goods-in-
(C.V.) and„t‟ values of the size of inventory. It reveals that the transit have constituted a significant proportion of total
inventory has constituted a high proportion of total investment in inventory in TML and SML. Moreover, the proportion of goods-
the industry. The mean value of inventory to current assets ratio in-transit has been nil in ALL, FML and EML. Other materials
for the overall industry is 31.28 per cent; with it has been 51.97 have not constituted a significant proportion of total inventory in
per cent in FML, 36.71 per cent in ALL, 32.81 per cent in SML, this industry. Among the firms in the industry, the mean values
28.60 per cent in TML and 27.26 per cent in EML. FML has of „other inventory‟ proportionate to aggregate inventory, swings
relatively a high mean value among the firms and its „t‟ value between 0.29 and 4.07, with relatively high variations.
indicates that the mean value of this firm varies significantly at 1
per cent level from industry mean value. In the case of FML, Table3: Composition of Inventory (in Percentage)
ALL and SML, the mean value of inventory to CA ratio is more Particulars ALL TML FML EML SML Industry
than the industry means value. The percentage of inventory to Raw Material
total current assets of commercial vehicle industry showed Mean 35.96 30.65 49.02 49.47 40.97 34.44
declining trend from 39.11% in 2003-04 to 29.59% in 2012-13. C.V. 0.10 0.26 0.13 0.15 0.12 0.16
Similarly, TML, EML and FML‟s inventory to total current Work-in-progress
assets ratios were also registered declining trend. This indicates
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 International Journal of Engineering Research ISSN:2319-6890)(online),2347-5013(print)
Volume No.3, Issue No.6, pp : 378-383 01 June 2014

Mean 13.27 12.65 15.45 7.01 7.46 12.56 C.V. 0.28 0.22 0.21 0.51 0.44 0.23
C.V. 0.32 0.16 0.09 0.34 0.22 0.16 t - - - - -9.97*
Finished goods 13.37* 13.47* 10.40* 11.73*
Mean 45.47 45.67 24.97 36.81 42.77 43.90 Holding period of Finished goods
C.V. 0.14 0.18 0.24 0.24 0.11 0.13
Stores and Spares Mean 1.51 0.93 1.22 0.65 1.25 1.04
Mean 3.26 7.05 6.49 2.77 0.54 5.56 C.V. 0.28 0.40 0.35 0.85 0.23 0.31
C.V. 0.22 0.35 0.27 0.17 0.28 0.29
t 4.64* -3.31* 1.81 -1.78 1.70
Goods-in-transit
Mean -- 3.01 -- -- 7.97 1.98 Source: computed from annual reports of the respective
C.V. -- 0.69 -- -- 0.52 0.57 companies
Other Inventory
Mean 2.05 0.97 4.07 3.95 0.29 1.56 It has been observed from the table 4 that the average
C.V. 0.32 0.41 0.44 1.56 0.25 0.39 holding period for raw material for the industry is 1.10 months.
Among the firms in the industry, it ranged between 0.79 months
3. Circulation of Inventory to 3.24 months. The holding period of raw material of FML is
Circulation of Inventory directly affects the profitability of a higher than that of any other companies in the industry. The high
firm. Other things are remaining the same, the faster the C.V. values of EML confirm that, variations in holding period of
circulation, the larger the profits. Each turnover adds to the aggregate inventory during the period have been relatively high.
volume of profits. A high inventory turnover means that the firm The holding period for raw material in ALL, TML and FML
has conducted more business with less amount of inventory. In vary significantly at 1 per cent level, similarly for EML and
order to judge the velocity with which inventory and its SML it varies at 5 per cent level of significance, from that of the
components have circulated in the selected companies during the industry Mean value. It is further observed from the table that
period of study, the following ratios have been computed: the average holding period for work-in progress in the industry
1. Holding period of aggregate inventory is 1.52 months; among the firms in the industry, it ranged
2. Holding period of raw materials between 0.12 months to 1.52 months. The mean values of all the
3. Holding period of work-in progress companies vary significantly at 5 per cent level, from the
4. Holding period of finished goods industry mean. The high Co-efficient of Variation values of
The statistical values (mean, C.V. and„t‟ value) relating to these EML confirms that, variations in this ratio during the period
ratios, in relation to the firms have been given in Table 4. The have been relatively high.
average inventory holding period for the industry as a whole
comes to 1.31 months. Among the companies in the industry, 4. Growth Trends in Inventory and Sales
FML (2.44 months) has the highest inventory holding period. The sales of a concern directly affect its profit and the holding of
TML has the minimum holding period for inventory. And both inventory involves cost. Every increase in the inventory is
these Mean values significantly vary at 1 per cent level from the expected to be accompanied by an adequate increase in sales so
industry mean. The Co-efficient of Variation values indicates that the increased cost of inventory may be recovered from the
that all the companies in the industry have experienced less increased profits. In the commercial vehicle industry, there is
variation, than that of the industry. The Co-efficient of Variation emphasise to meet the production requirements without any
values which oscillate between 0.25 and 0.76 also confirm that, interruption, by means of holding enough level of inventory. For
the variations in this ratio during the period have been relatively the purpose of comparing the growth in sales with the growth in
high. inventory during the period under review, progressive base year
growth rate and average growth rate have been computed.
Table4: Statistical Ratios Relating to Movements of
Inventory Table 5: Growth Percentage of inventory and sales
ALL TML FML EML SML Industry Year ALL TML FML EML SML Indu-
Holding period of aggregate inventory stry
2003-04 I -- -- -- -- -- --
Mean 1.81 1.04 2.44 0.83 1.74 1.31
S -- -- -- -- -- --
C.V. 0.25 0.26 0.67 0.62 0.64 0.76
2004-05 I 15.00 -10.64 -27.87 -4.02 5.11 -4.77
t 4.58* -3.41* 8.62* -8.53* 3.64*
S 0.54 9.83 0.72 22.27 26.65 8.12
Holding period of Raw Material
2005-06 I -31.05 17.40 11.99 22.91 28.61 1.50
Mean 1.62 0.79 3.24 1.09 1.49 1.10
S 18.47 21.32 34.60 30.56 24.70 21.98
C.V. 0.33 0.12 0.35 0.50 0.27 0.19
2006-07 I 23.51 -1.02 2.77 250.2 0.87 9.64
t 4.61* -6.07* 7.14* - 3.17** 1
0.01** S 24.78 45.85 34.89 117.8 28.74 43.64
Holding period of work-in-progress 8
Mean 0.45 0.26 0.69 0.12 0.25 1.52 2007-08 I 12.06 39.56 21.54 27.72 46.73 30.66

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 International Journal of Engineering Research ISSN:2319-6890)(online),2347-5013(print)
Volume No.3, Issue No.6, pp : 378-383 01 June 2014

S 23.46 32.52 -9.35 45.37 23.44 29.51 significance of correlation) and linear regression equations have
2008-09 I 58.88 25.66 15.55 -0.01 2.92 30.04 been computed in table 6.
S 25.48 18.75 9.06 -17.39 3.85 16.34
2009-10 I 18.59 24.29 -4.64 4.76 -4.18 24.67
S 37.35 33.96 4.53 19.30 -1.70 32.44 Table 6: Linear Regression Results (Inventory to Sales
2010-11 I 14.35 -3.16 18.02 24.55 41.42 3.67 Ratio)
Name of the Linear Regression t-
S 8.40 4.97 -7.24 12.51 10.87 1.86 r R2
company Y = a + bX value
2011-12 I 8.67 -7.93 -18.55 -90.79 20.88 - ALL Y = 40.73 + 0.17X 0.88 0.78 5.37*
10.27 Y = 506.95 +
S -23.15 -10.42 -17.12 -68.58 -18.68 - TML 0.98 0.97 16.85*
0.07X
14.24
FML 104.00 + 0.10X 0.54 0.29 1.81
2012-13 I 23.17 31.65 -1.17 13.73 7.17 25.47
EML -22.02 + 0.10X 0.98 0.96 14.41*
S 2.15 3.92 2.74 -4.57 3.25 3.40 SML -14.17 + 0.21X 0.81 0.65 3.88*
Averag I 13.64 11.44 0.54 -3.58 15.33 11.25 Y = 595.83 +
e Industry 0.98 0.96 14.74*
S 13.76 20.51 70.70 -0.57 13.23 17.95 0.09X
Growth * indicates significant at 1% level.; Y = Inventory; X = Sales
Avg. 15.91 12.87 1.96 27.67 16.61 12.29 Source: Computed from annual reports of the respective units.
Inventory
Average 13.05 17.86 5.87 17.48 11.24 15.89 The value of correlation co-efficient between sales and
Sales
inventories is 0.98 in the industry. The„t‟ values indicate that the
Source: computed from annual reports of the respective
relationship between inventory (dependent variable) and sales
companies
(independent variable) have been significant at 1per cent level in
Where I = Inventory , S = Sales
all units in the industry except FML. Among the firms in the
Table 5 reveals that the average growth rate of sales has been
commercial vehicle industry all the units have significant
more than the growth rate of inventory in the industry. This
relationship between inventory and sales. The FML has to
trend is a healthy sign and indicates that the industry, TML and
improve its inventory level as per the operating requirements,
FML has moved in the positive direction though the rate is slow.
because of the fact that there is moderate correlation registered
TML and FML‟s average growth rate in sales has been more
inventory and Sales. The correlation is stronger in TML and
than the growth rate of inventory which indicates that very good
EML than in any other firms in the industry. It reflects on the
administration of inventory management in these two
effectiveness of management in controlling the inventory in
companies. ALL and EML, SML‟s average growth rate in
relation to sales. In the above table, linear regression equation
inventory has been more than the growth rate of sales which
has been used for the purpose of future projections. The values
indicates that the steps to be taken to improve the growth rate of
of parameter „b‟ indicate the sensitivity with which inventory in
sales. To have a look at the real growth that has taken place in
a concern changes for a unit of increase / decrease in sales.
inventory and sales during the period under study, the average
Among the firms, the sales elasticity of inventory varies from
growth rates of inventory and sales at constant prices have been
0.07 units to 0.21 units. TML is less sensitive than other firms in
shown in the above table that the average growth rate of sales
the industry for the change in inventory as a result of change in
has been more than the growth rate of inventory in all the
sales. It is also inferred from the table that one unit increase in
companies selected for the study; whereas in the case of sales, it
sales volume shows 0.07 units increase in inventory levels in
is positive in all the companies except in EML. The maximum
TML. Moreover, SML is more sensitive than other firms in the
average growth has been achieved by FML (i.e) 70.70 per cent),
industry for change in inventory as a result of change in sales. It
while the growth is just marginal in the other companies. Hence,
is also inferred from the table that one unit increase in sales
it is also said that, as all the firms are already on the right track,
volume shows 0.21units in inventory levels in SML. The value
results achieved so far are also satisfactory.
of parameter „b‟ further brings out that, the commercial vehicle
XII. Regression Analysis industry can easily overcome the problem of overstocking by
increasing the level of operating activity, because its growth in
Relationship between Inventory and Sales: inventory is much less than the growth in sales.
The achievement of the maximum possible profit is the goal of
any enterprise. This object can be achieved by accelerating sales XIII. Results of the Hypotheses
to the extent possible. In order to have uninterrupted flow of The following results were obtained from the above study:
production and sales, inventories are to be made available, 1. There is correlation between inventory and sales of Ashok
whenever needed. Thus, the volume of sales and size of Leyland Ltd.
inventory holdings are related to each other. For the purpose of 2. There is correlation between inventory and sales of Tata
having in depth insight into the extent of relationship between Motors Ltd.
inventory and sales, the values of co-efficient of correlation (r), 3. There is correlation between inventory and sales of Force
co-efficient of determination (R2),„t‟ value (to test the Motors Ltd.

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 International Journal of Engineering Research ISSN:2319-6890)(online),2347-5013(print)
Volume No.3, Issue No.6, pp : 378-383 01 June 2014

4. There is correlation between inventory and sales of Eicher

Motors Ltd.
5. There is correlation between inventory and sales of SML
Isuzu Ltd.
It has been observed from that all the units in the commercial References:
vehicle industry have significant relationship between inventory i. Bhattacharya, H. “Working capital Management Strategies &
Techniques”, Prentice Hall of India Pvt. Ltd.., New Delhi , 2001.
and sales.
ii. James H. Greene, production and Inventory Control-systems and
XIV. Conclusion Decisions, published by D.B. Taraporewale sons & Co. (P) Ltd., Bombay, 1983,
While managing the inventory position of the company we have p.203.
to concentrate the four aspects of inventory management viz., iii. Pandey, I.M., “Financial Management” Vikas publishing House Pvt.
Ltd. New Delhi, 1999.pp.807-937
size, composition, circulation and growth of inventory. In this,
iv. Rao, K.V., “Management of working capital in Public Enterprises”,
overall analysis of inventory of all units in the Indian Deep& Deep publication, New Delhi, 1990.
commercial vehicle industry is very good in their management v. Vijay Kumar, A., “Working capital Management – A comparative
of inventory. Among the firms in the commercial vehicle study”, Northern Book Centre, New Delhi, 2001.
vi. Accounting Research and Terminology Bulletin, published by the
industry TML occupies the first place in the management of
American Institute of Certified Public Accountants, New York, 1961, p.28.
inventory. It is evidently proved through strong correlation vii. Jasmine Kaur (2010), Working Capital Management in Indian Tyre
between inventory and sales. FML‟s average growth rate of sales Industry, International Research Journal of Finance and Economics, Issue 46,
has been more than the growth rate of inventory which indicates Euro Journals Publishing, Inc.
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