A

PROJECT REPORT
ON

“A STUDY OF INVENTORY MANAGEMENT”

AT
P.K RUBBER AND ENGINEERING
Submitted by
KOMAL SANJAY HIRAVE
Under the guidance of

PROF. TEJALI DESARDA

Submitted To

SAVITRIBAI PHULE PUNE UNIVERSITY.

In partial fulfillment of the requirement for the award of the degree

Of
MASTER OF BUSINESS ADMINISTRATION (MBA)
Through

PDEA’S
Institute Of Technical Education, Research and Management,
Akurdi, Pune-411035
2018-2020
 DECLARATION

I the undersigned , hereby declare that Project Report on “A STUDY OF INVENTORY

MANAGEMENT.” At P.K. RUBBER AND ENGINEERING Written and submitted by
me to the Savitribai Phule Pune University in Partial Fulfillment of the requirement for the
award of degree of Master of Business Administration under the guidance of Prof. Tejali
Desarda is my original work and the conclusion drawn therein are based on the material
collected by myself. this declaration will hold good & in my wise belief with full
consciousness.

Date: Komal Hirave

Place: MBA (Finance)

 ACKNOWLEDGEMENT

It has given immense pleasure to me in completing this project and submitting the
project report. This project started as a journey to me. The two months internship at
P.K.RUBBER AND ENGINEERING has taught me a lot. During this period 15th May 2019
to 15th July 2019 my journey was filled with knowledge, hard Work, encouragement,
determination, efficiency and effective evaluation of work.

I feel grateful to take this opportunity to express my sincere gratitude towards many
people who made this experience memorial one. First of all I am indebted to Mr. Pratap K.
Jena sir for giving me such an excellent opportunity to work with him. I would like to
express my gratitude to Director of our institute Dr. Manohar G. Chaskar for his
everlasting support & motivation.

I would like to express my gratitude and regards to my project guide Prof. Tejali
Desarda for her exemplary guidance monitoring & constant encouragement throughout the
course of this summer internship. I would also like to thank each and every person of the
concerned organization for their guidance and co-operation.

Date:-

Place:- Akurdi,Pune
 Executive summary
Inventory management is a art and science of dealing with storing ,tracking managing,
ordering inventory or stock from your supplier to retail outlets. It’s end to end starting with
the moment you ordered raw materials until the products lands in the hands of the customer.
In recent times, the sourcing of low cost become an essential competitive strategy in many
manufacturing sectors and retail. The international sourcing affords many advantages in the
lower price form and access the expanded market. Today, many senior executives start to
diagnose the bigger risk recognized to the sophisticated probability of disruptions of service
and product flow in the network of global sourcing. In our case the management of Apple,
Top oil and Amazon wants to enhance their profitability by reducing the risk of shortage of
various products. They wants to withhold the appropriate stock in their warehouses.
Therefore, in this write up we explain the best strategy to maintain the stock in Company’s
warehouse as well as analyze the three different case study and recommend the best possible
solution of stock maintenance, which must be preserved or maintain by the companies for
reducing the shortage risk of stocks or inventory. Introduction many companies, particularly
manufacturing and retailing companies, might hold large amounts of inventory. They usually
hold inventory so that they can meet customer demand as soon as it.
 PRELIMINARY PAGES
Sr. No PARTICULAR PAGE NO.
1. Title of Project
2 Institute Certificate I
3 Company Certificate II
4. Declaration III
5. Acknowledgement IV
6. Executive Summary V

INDEX
S.NO. PARTICULAR PAGE NO.

1 Introduction 1-2

2 Industry profile 3-4

3 Company profile 5-12

4 Literature Review 13-34

15 Objectives of the Study 35

6 Scope of the study 36

7 Research Methodology 37-38

8 Data Analysis and Interpretation 39-49

9 Observations and findings 50-51

10 Limitations 52

11 Suggestions or Recommendations 53

12 Conclusion 54

13 Bibliography 55

14 Annexure 56-58
 INTRODUCTION
Financial Management is concerned with the duties of the managing finance by the financial
manager in the business firm. Financial managers actively manage the financial affairs of
type of business, namely finance and non- financial , private and public, the large and small
profit seeking and non profit. They perform such varied task as budgeting, financial
forecasting, cash management credit administration investment analysis, funds management
and inventory management.
A term inventory refers to the stock file of the product a firm is offering for sale and the
components that make up the product. In other words, Inventory is composed of assets that
will be showed in future in the normal course of the business operations. The assets which
firms store as inventory in anticipation of need are:
 Raw materials
 Work in process (Semi Finished goods)
 Finished goods
The raw material inventory contains item that are purchased by the firm from other and are
converted into finished goods through the manufacturing (production) process. They are an
important input of the final product .The working process inventory consists of its currently
being used in the production process.
They are normally semi-finished goods that are at various stages of production in a multi
stage production process. A finished goods represented final or completed products which are
available for sale. The inventory of such goods consists of items that has been produced but
are you be sold.
Inventory, as a current asset, differs from other current assets because only financial
managers are not involved. Rather all the functional areas, finance, marketing production, and
purchasing are involved. The views concerning the appropriate level of inventory would
differ among the different functional areas.
The job of the financial manager is to reconcile the conflicting view points of the
various functional areas regarding the maximizing the owner's wealth. Thus, inventory
management, like the management of other current assets, should be related to the overall
objective of the firm. It is in this context that the present chapter is devoted to the main
elements of inventory management from the view point of financial management
The objective of inventory management is explained in some detail sections. Section two is
concerned with inventory management techniques. Attention is given here burl concepts
relevant to the management and control of inventory.

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The aspects covered are :

 Determination of the type of control required

 The basic economic order quantity
 The reorder point and
 Safety stocks

As a matter of fact, the inventory management techniques are a part of production

management But a familiarity with them is of great help the financial managers in planning
and budgeting invent.

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 INDUSTRY PROFILE
 What is engineering?

What do Scotty on the Starship Enterprise, Neil Armstrong. Leonardo Da Vinci and Bill Nye
all have in common? They’re all engineers! Engineers are capable of doing some amazing
things: they solve problems in society that might seem impossible at first like designing and
building the first suspension bridge, assembling the equipment to put man on the moon , or
creating the steam engine. In fact, that's where the word ‘Engineer’ comes from: engineers
are the individuals responsible for building everything from the steam engine to the engine
your car But, what exactly is engineering ?
Engineering is a scientific field and job that involves taking our scientific understanding of
the natural world and using it to invent, design, and build things to solve problems and
achieve practical goals. This can include the development of road, bridges, cars planes,
machine, tools, processes and computers. The things engineers build are called technology
.Without technology , the modem world simply wouldn't exist. We're surrounded by the work
of engineers practically every moment of our lives.

 Development of Engineering Industry in India-

The Indian Engineering sector has witnessed a remarkable growth over the last few years
driven by increased investments in infrastructure and industrial production. The engineering
sector, being closely associated with the manufacturing and infrastructure sectors, is of
strategies importance to India's economy. India an its quest to become a global superpower
has made significant strides towards the development of its engineering sector. The
Government of India has appointed the Engineering Export Promotion Council (EEPC) as the
apex body in charge of promotion of engineering goods, products and services from India
exports transport equipment, capital goods, other machinery/ equipment and light engineering
products such as castings, forgings and fasteners to various countries of the world. The Indian
semiconductor industry offers high growth potential areas as the industries which source
semiconductors as inputs are themselves witnessing high demand.
India became a permanent member of the Washing Accord (WA) in June 2014. The country
is now a part of an exclusive group of the 17 countries who are permanent signatories of the
WA, an elite international agreement on engineering studies and mobility of engineers.

Page-3
1) The Indian Engineering Industry Scenario

The global market for Machine Tools is projected to reach US $ 140.5 billion by 2020,
driven by the steady recovery in the global Purchasing Managers Index (PMI). Asia-Pacific
represents the largest market worldwide. The region also ranks as the fastest growing market
point with a CAGR 9.4% over the analysis period led by rapidly growing manufacturing and
industrial activity, especially in countries such a India , Thailand, Malaysia, Taiwan, and
South Korea. Government initiatives such as development of SEZs, industrial corridors, and
industrial clusters, fab cities and textile parks, and subsidies and tax cuts to manufacturing
groups are also fuelling growth in the industrial sector in the region. Improvements in road,
rail and marine infrastructure trade related benefits from governments such as abolishment/
reduction in import duties and excise duties on certain imported raw materials and semi-
finished goods and special export related incentives on finished goods, machinery and
equipment.

2) SWOT Analysis of Engineering Inventory Industry in India.

SWOT analysis refers to analyzing the strengths, Weaknesses, Opportunities and Threats.
However, SWOT analysis in management refers to is a structured planning method used to
evaluate the strengths, weaknesses opportunities and threats involved project or in a business
venture. A SWOT analysis can be carried for product, place, industry or person. It involves
specifying the objective of the business venture or project and identifying the internal and
external that are factors that are favorable and unfavorable to achieve that objective. Some
authors credit SWOT to Albert Humphrey, who led a convention at Stanford Research
Institute (now SRI International) in the 1960s and 1970 using data Fortune 500 companies
Humphrey, Albert (2005).

Page-4
 COMPANY PROFILE
P.K. RUBBER &
ENGINEERING
About Company

P.K RUBBER AND ENGINEERING is Manufacturing company. was established in 2013.

The Director of P.K RUBBER & ENGINEERING are Pratap K. Jena.
P. K. Rubber & Engineering has made a name for itself in the list of top suppliers of
Rubber Gaskets ,Roadway Safety in India. The supplier company is located in Jyotiba Nagar,
Talwade Pune, Maharashtra and is one of the leading sellers of listed products. It is listed in
Trade India's list of verified sellers offering supreme quality of Rubber O Rings ,Silicone
Rubber Gasket etc. Buy Rubber Gaskets ,Roadway Safety in bulk from us for the best quality
products and service.
They Products Offered are quality assured before final delivery against the diverse
parameters by their experts. They use some key points First of all Optimum client’s
satisfaction, Advanced and innovative technology, Well-equipped manufacturing facility,
Customized packaging, Competitive prices. The main focus is on customer satisfaction and
market leadership, which is why they are committed to achieve excellence in quality of our
products and services. It is a Proprietorship which has no branch. And the area of work of
the company is in all Pune District.

Vision:-

To be the preferred destination for sourcing engineering – non engineering cheering

industries .

 We have member of P.K RUBBER AND ENGINEERING with persistent pledge to

produce excellent quality control panel as per need of our customers and achieve
optimum utilization of our resources by.

 Striving for zero accidents. Zero quality complaints and down time.

 Enhancing individual competencies through continuous overall excellence through

people.

 Total motivated involvement through participated management activities with high

degree of professionalism.

Page-5
Mission:-

Customer :

To develop strong bounding through exceeding customer’s expectations quality, cost

& delivery performance while developing innovative design for control panel.

Employees:

To create an organization that promotes excellence by providing trainings, freedom

to experiments, encouragement & work life balance.

Supplier Partner:

To develop long term business relationship by ensuring enhancement of their process

capabilities & developing transparent terms.
P.K RUBBER & ENGINEERING has high level concern for environment experts our
vendors to follow the same.
We are constantly on the lookout for strategic tie-ups with vendors having Innovative
technology.

QUALITY POLICY

P.K RUBBER & ENGINEERING has great importance to quality in all aspects of
organizational activities. Our guiding philosophy in this respect is The Race To Quality Has
no Finish Line.

Although designing critical panels and assemblies to rough task, but to ensure the
compliance with customer requirements is each and every employees responsibility. And
hence we are committed individual towards achieving our goal of zero defects.

A manufacturing process that take care of monitoring measuring and analysis of all
the process responsible for quality of the product including capability studies help our
customer reduce the need of part inspection at the lines FMEA (failure mode & effect
analysis) are live documents and are continuously improved.

Page-6
 Total employee’s involvement in delivering the highest quality products is achieved
by encouraging employees to participate in Kaizen Activities and Suggestion Schemes. We
even reward all the employees participating in such activities to motivate them.

Now we are at crucial juncture in our organizational life having set our eyes on
redefining the future. However, our core belief remains the same that the customers
everything and it the quality that can only serve them the best.

Page-7
 Organization structure
Director

Finance Marketing Human Production

F
Resource

Finance
F Trade Training
Manager Marketing Group

Accountant Executive
Manager
Production Technical/ Maintenance
Planning Industrial Staff
Design

Electrical Installation
Design Commissioning

Page-8
CLIENTS

Page-9
Most Popular Products

Rubber O Ring

Silicon Rubber Gasket

Page-10
Plastic Speed Breaker

Silicone Rubber Sleeves

Page-11
Rubber Bellow

Rubber Grommet

Rubber Hose

Page-12
MEANING OF INVENTORY
Inventory is a list for goods and materials, or those and materials themselves, held
available in stock by a business. It is also used for a list of the contents of a household and for
a list for testamentary purpose of the possessions of someone who has died. In accounting
inventory is considered an asset.

TYPES OF INVENTORIES

Inventories play a major role in a business or depending on nature of the businesses.

The inventories may be classified as under

(I) Raw Materials

Materials and components scheduled for use in making product. These are the basic
inputs, which are converted into finished products through manufacturing process. Raw
material inventories are those units, which have been purchased and stored for future
production.

(II) Work in Progress

Materials and component that we begun their information to finished goods. Materials
issued to the stop floor, which have not yet become finished products they are value added
materials to the extent of labor cost incurred.

(III) Finished Goods

Finished goods are a completed part that is ready for a customer order. These goods
have been inspected and have passed final inspection requirements so that they can be
transferred out of work-in- process and in to finished goods inventory. From this point,
finished goods can be sold directly to the final user, sold to retailers, sold to wholesalers, sent
to distribution centers, or held in anticipation of a customer order.

STORES & SPARES

The level of four kind of inventory dependent upon the nature of the business. Supplies
include office and cleaning materials like soap brooms, oil, light, blue etc. these materials do
not directly enter production, but are necessary for production process.
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Need for inventory control

Transaction motive:

Every firm has to maintain some level of inventory to meet the day-to-day
requirements sales, production process, customer demand etc. In the finished goods as well as
raw material are kept as inventories for smooth production process of the firm.

Precautionary motive:

A firm should keep some for unforeseen circumstances also like loss due to natural
calamities in a particular area, strikes. lay outs etc so the firm must have some finished goods
as well as raw-materials to meet circumstances.

Speculative motive:

The firm may be keep some inventory in order to capitalize an opportunity to

make profit due to price fluctuations.

BASIC REASONS TO KEEPING AN INVENTORY:

There are three basic reasons for keeping an inventory

1.TIME :The time lags present in the supply chain, from supplier to user at every stage, entry
requires that you maintain certain amount. of inventory to use in this “lead time”.

2.UNCERTAINTY : Inventories are maintained as buffers to meet uncertainties in demand,

supply and movement of goods.

3. ECONOMIES OF SCALE: Ideal condition of “one unit at a time a place where user need
it, when he needs it “principle tends to incur lots of costs in terms of logistics. So bulk
buying, movement and storing brings.

Page-14
ESSENTIALS OF INVENTORY CONTROL :

The important requirements of inventory control are:

 A firm needs inventory control system to effectively manage its inventory.

 Proper classification of materials with codes, material standardization and
simplification.
 The operation of a system of internal check to ensure that all transactions involving
material and equipment are checked by properly authorized and independent persons.
 The operation of a system of perpetual inventory so that it is possible to determine at
any time, the amount and value of each kind of material in stock.
 A suitable method and valuation materials is essential because it affects the cost of
jobs and the value of closing stock of materials.

Objectives of Inventory Control

The main objectives of inventory control are:

1. To maintain a large size of inventory for efficient and smooth production and sales
operation.

2.To maintain a minimum investment in inventories to maximize profitability.

3.To ensure a continuous supply of raw materials to facilities uninterrupted production.

4.To maintain sufficient stocks of raw materials in periods of short supply in anticipate price
change.

5.Maintain sufficient finished goods inventory for smooth sales operations and efficient
customer services.

6.Minimize the carrying cost and time.

7.Control investment in inventories and keep it at an optimum level.

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Advantages Inventory control

The following are suggested advantage :

1.Elimintes wastages in use of material.

2. It reduces the risk of loss form fraud and theft.
3.It helps in keeping perpetual inventory and other records to facilitate the preparation of
accurate material reports management.
4. To reduce the capital tied up in inventories.
5. It reduces cost of storage.

Disadvantages of Inventory Control

Every firm has to maintain optimal level of inventories. It not the following will be the
result in form of losses.

1. Opportunity cost : Every firm has to maintain inventory for that some investment
is needed it is known as opportunity cost and handle the investment in inventory are
more the funds are blocks up with inventory.

2. Excessive inventories : I will lead to firm losses due to excessive carrying costs
the risk of liquidity. It is also referred a danger level.

3. Inadequate Inventory : It is another danger which results is production hols-up

and failure to meet delivery commitments. In adequate raw materials and work- in
process inventors will results in frequent production interruptions. It finished goods
are not sufficient customers may shifts to competitors.

4. Danger due to physical decoration : It is one of the reason with the inventories
due to maintaining stocks at high levels they will be deteriorated due to passage of
time, sometimes due to mishandling or improper storage facilities.

Costs involved in Inventory

Every firms is maintains inventory depending upon requirement and other features of
firm for holding such inventory some cost will be incurred are as follows.

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Carrying Cost

This is the cost incurred in keeping or maintaining an inventory of one unit of raw
materials, work- in-process or finished goods. Here there are two basic cost involved.

Cost of Storage

It includes cost of storing one unit or raw material by the firm. This cost may be for the
storage of materials. Like rent of spaces occupies by stock, stock for security, cost of
infrastructure, cost of insurance, and cost of pilferage, warehousing costs handling cost etc.

Cost of Financing

This cost includes the cost of funds invested in the inventories. It includes the required
rate of return on the investments in inventory in addition to storage cost etc. The carrying cost
include therefore both real cost and opportunity associated with the funds invested in the
inventories.
The total carrying cost is entirely variable and rise in directly proportion to the level of
inventories carried.

Total carrying cost= (carrying cost per unit) X (Average inventory)

Cost of Ordering

The cost of ordering includes the cost of acquisition if inventories.

It is the cost of preparation and execution of an order including cost of paper work and
communicating with the supplier.
The total ordering cost is inversely proportion to annual inventory of firm. The ordering cost
may have a fixed component, which is not affected by the order size and a variable
component which changes with the order size.
Total Ordering Cost = ( No of orders ) X ( cost per order).

Cost of Stock out

It Is also called its hidden. The stock out is the situation when the firm is not
having units of an item is stores but there is a demand for that item either for the
customers or the production department. The stock out refers to zero level inventories. So
there is a cost of stock out in the sense that the firm faces a situation of lost sales or back
orders. The stock outs are quite often expensive.
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 Even the good will of firm also be effected due to customers dissatisfaction and may lose
in case of finished goods, where as in raw materials a work in process can cause the
Production process to stop and it is expensive because employees will be paid for the time not
spine in producing goods. The carrying cost and the ordering cost are opposite forces and
collectively. They determine the level of inventories in a firm.

Total Cost = (Cost of items purchased)+(Total Carrying and ordering cost)

Valuation of Inventory

The methods of valuing inventory are combination of the actual cost and replacement
cost plans. The chief advantage of the cost or net realizable value rule is that it in
conservative. Hence the methods of valuation of inventory are quite independent of system of
mincing.

In balance sheet closing stock is shown under current assets and it also credited to
manufacturing trading accounts. The inventories are valued on the basis as follows :

I) Cost Of raw materials in stock may include freight charges and carrying cost. But such cost
should not exceed market price.

II) Work-in-process is generally valued at cost , which includes cost of materials, labor. And
the proportionate factory overhead, as it is reasonable according to degree of completion.

III) Cost finished goods wound normally to the total it includes prime cost plus appropriate
amount of the overhead. selling and distribution of cost is deducted on the other hand work in
progress may be valued at work in progress may be valued at work cost , marginal cost,
prime cost or , even at direct materials.

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 Purchases & stores procedure
In Inventory management the purchase department store department plays a major
role to be the effective inventory.
The main function of each department are as follows :

Checking
Purchasing Tenders and Receiving & & Passing
Purchase Inspecting Bill for the
Requisition Quotation Order Payments
Materials
Requistio
1.Purchase Requisition-

Purchase requisition is the basis for placing the purchase order for materials and
supplies. It is a written request prepared by the foremen or authorized officer or responsible
officer of the user department and hand over to the purchase department. The purchase
requisition includes the details like material code number, type of materials, quality and
quantity of materials etc.
Generally, the purchase requisition is prepared in three copies. The first copy is sent to the
purchase department. The second copy is sent to the production and control department. The
user department for the future reference retains the third copy.

2.Tenders and Quotation-

On the basis of the various sources of supply, the purchase department or the
purchasing officer can call for tenders or quotations. Thus, received quotations or tenders are
compared with their catalogues, past records and published statements. If purchase
department or purchase officer decides to invite tender, it or he/she can invite any of the
following types of tenders.

1. Single Tender: A tender is called from only on source i.e. supplier.

2. Restricted Tender: Tenders are invited from the selected suppliers on the basis of the
past experience and their good will.
3. Open Tender: Tenders are invited from all the suppliers through advertisement in
newspaper and journals.

3.Purchase Order-

After selecting the right supplier, the purchase department or the purchase officer
can prepare the purchase order and send the same to the supplier without any further delay. A
purchase order is the commitment by a buyer to pay for goods ordered. Similarly, it is the
seller’s authority to charge the buyer for supplies made. It becomes a legal contract.

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A purchase order is prepared in six copies. The first copy is sent to the supplier, the second
copy is sent to the department, which initiated the purchase requisition, the third copy is sent
to the Accounts Department, fourth copy is sent to the Finance Department, fifth copy is sent
to the Stores Department and finally, the last copy is retained by the Purchase Department.

The time, date and mode of delivery are mentioned in the purchase order. If the order is not
executed as per the specifications of the purchase order, the purchase department or the
purchase officer should take follow up action. A remainder may be sent to the supplier for the
execution of order as early as possible. Oral communication may also be followed.

4.Receiving & Inspecting of Materials

The purchase department while receiving the materials performs the

following functions.

1. Prepare the statement of goods received.

2. Indicate the identification mark for each type of materials separately.
3. Checking the quantity and quality of materials.

The receipt of materials is compared with purchase order and delivery note issued by
the suppliers. If the materials are not received as per the specification of the purchase order
and delivery note, the materials may be rejected. Thereafter, an inspection report is prepared
in a specified form and the same is sent to the supplier for proper execution of an order.
Sometimes, the materials may be rejected due to inferior quality. If the materials are rejected,
proper reasons for such rejection should be clearly specified in the rejection report.

5. Checking and passing bills for Payments

The purchase manager or the purchase officer should check the invoices for early
settlement. If the materials are received in good condition as per the specification of the
purchase order, the delivery note may be issued by the seller. Terms and prices are checked
against the purchase order.

If an invoice is correct in all respects, the purchase manager or the purchase officer will pass
the invoice and send the same to accounts department and finance department for payment.
The invoice may be impressed with the rubber stamp as Bill Passed for Payment.

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Purchase Department

The purchase procedure of the company differ from one to the other. It is responsible for
purchase or all necessary goods of proper quality to produces without interruption to supply
the finished goods.

1) It received purchase requisitions.

2) Invites quotations or tenders from supplies with desired quality.
3) Issue purchase orders to the selected supplier.
4) Certify the quality and quantity of order received in specified time
5)Approve purchase invoice for payment for checking invoice for paying after
checking prices and extensions if any needed.

Material Cost

Materialist cost of a job or cost unit can be ascertained multiplying the quantity consumed
for the job or cost unit by the price of the materials. For ascertaining the quantity consumed
for each job or unit we have devised material requisition which will indicate the quantity
required for the job and the job number against which the material cost will be change
directly.
For indirect material issued the material requisition will not indicate the job number but the
cost center number will be indicated for charging to relevant cost center as indirect materials.

Thus order to ascertain material Cost

1. Make valuation of purchase.

2. Make use of proper valuation of material issue and closing stock following different
method such as, FIFO, LIFO WEIGHTED AVG , Etc.

The purchase price of material is directly obtained from the suppliers receives and have to
be issued to production before the invoice of materials is received.

The rate per unit, total price of the item a shown in the purchase order plus sundry
charges such as delivery and forwarding charges sales tax, duty etc, may be borne by
suppliers, governments controlled prices by notifications, suppliers, catalogues and circulars
may be valuable guides for obtaining rates of materials.

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Delivery charges may be estimated with reference to the kind of transport with charges
incurred. The price may also include sales tax, excise duty, fright etc, so the total cost and
rate per unit can be computed and entered in the stores received registered and posted to
stores ledger for the issue of material to production.
In some cases material needs adjustment for any discount allowed charges for transport
containers etc. Discounts may be like trade discount quantity discount, cash discounts etc.
Transportation and storage costs, may not include the cost of air, sea land transport and other
stories costs, where the purchaser has to bear the costs. Cost of containers with retarded may
not make a separate charge because of non refundable and also sales tax, excise duty,
insurance etc., all the items are added to Purchase price.

Inventory Control Department

In may be a subdivision of the cost accounting department, although in many concerns, it

is a part of the stores keeping department.

A) It keeps perpetual inventory records.

B) Adjust the stock on receipt of the property authorized adjustment notes.

C) Prepare weekly or monthly, statement of receipts, issue, balance and average

consumption of materials both in terms of quantity and value

RECEIPT AND ISSUE OF INVENTORIES

a) Receipt Inventories in to store

After incoming materials have been examined and approved they are passed on the
appropriate stores together with the goods received note. Articles are inspected and passed
and on the stares in the usual way. In order to keep the accounting procedure uniform, it is
desirable that a goods received note be prepared for these articles also, the store keeper than
places the inventory in appropriate bin or shelf and make necessary entries in the receipt
column of the Bin Card.
A location code for materials helps in proper store- keeping with greater efficiency,
because stores can be easily identified. It is a part and parcel of stock control procedure.
Location code helps in mechanized accounting and safeguard against omission in accounting
as verification.

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BIN CARD

DESCRIPTION: MAXIMUM LEVEL:

MATERIAL CODE : MINIMUM LEVEL:
LOACATION CODE : ORDERING LEVEL:
BIN NO : UNITS:
STORES LEDGER NO :

RECEIPTS ISSUES BALANCE AUDIT

Date Goods Qty Date Requisition Qty Qty Initial &
received (units) Note No. (units) (units) Date
Note No.

BIN CARD

For each kind of materials or article Bin Card attached to the bin which each
individual's materials are stored. A bin card provides a running record of receipts, issues and
stock in the simplest form. An entry will be made at the time of each receipt or issue and new
balance will be extended.

These cards should agree with the quantities entered in the relevant account in the stores
ledger. The main advantage is to enable the store Keeper to ascertain at a glance the quantity
of materials in stock and remind him to place purchase requisition for further suppliers the
ordering level has been reached more over they provide an independent check on stores
ledger and anciently a second perpetual inventory. In the bin card is from three years then the
transactions are made in same card. If Bin Card does not exist new Bin Card to be opened.

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 Issue Material from Stores

The storekeeper issue materials on receipt of proper authorized document usually

called a materials requisition or a specification of material. Material requisition is a document
which authorities and records the issue of materials for use.

The materials requisition details the items required for the quantity, description, and
code or past number and the cost center of job to be charged. Requisition is normally
prepared in triplicate: the department receiving the goods retains one copy and the other two
copies are handed over the two copies are handed over to the storekeeper. He keeps one along
with him and enters on the issue sides of the appropriate bin card day- today transaction are
noted in stores ledger. Store Ledger:

The stores ledger which is usually a loose leaf or card type, contains an account for
each class of materials their ledger is kept in the cost department and contains such
information as well as facilitate the ascertainment of all details relating to the materials in the
minimum of time.

STORES LEDGER ACCOUNT

FORM NO : FOLIO:

MATERIALS : MAXIMUM LEVEL :

GRADE : MINIMUM LEVEL :

UNITS : ORDERING LEVEL:

CODE NO : ORDERING LEVEL:

LOCATION

Date CSRV/STD Production Receipts

NO. MIR Order & Issue
NO. No./Section Quantity
In Out Balance

Page-24
 Materials returned to Stores

Where materials are issued in excess of requirement the excess quantity is return to the
stories together with materials return note.

Since the materials return to store form work order reduction in the amount recorded as
issued, the preferable entry is to enter the number of units and the value of materials retuned
and received in a different work in the issued column of the stores ledger account.

These values are deducted from total issues, and amount returned by each department as
shown by materials return note is deducted where return of materials to stores return of
material to stores is a major problem it is customary to use a materials and supplies journal
for keeping records of items.

MATERIAL RETURN NOTE

FROM : NO:

DEPARTMENT: DATE:

JOB NO : ORDER NO:

Qty. Description Code No. Office Use Only Remarks

Rate amount
Approved Returned Returned Bin No. Cost Priced By
By By By Stores Officer
Ledger Ref. No.
Follow
No.

Page-25
 MATERIAL TRANSFER NOTE

NO: DATE :
FROM : TO:
DEPARTMENT: DEPARTMENT
JOB NO : JOB NO :
ORDER NO : ORDER NO:

Qty. Description Code No. Office Use Only Remarks

Rate Amount
Approved Issued Received Cost Ref. Priced By
By By No. Officer

Transfer of materials

Transfer of materials form one job to another is prohibited unless the detail is adequately recorded
on the materials Transfer note. Such transfer is permissible only where an urgent order has to be
made and work started on a lees urgent order may be appropriates. Such a not shows are incessancy
date for ordering and debiting the cost accounts affected. These not are passed direct to the cost
office for the appropriate adjustment in the work- in- progress ledger.
All these four notes including stores ledger and bin card are major for inventory management which
are valued and checked for every quarterly of half yearly or annual.

Valuation of Materials Issues

The fixation of the price at which the materials are issued are to be charged to production is
an important one from the point of view to inventory management. These are numerous
factors to be taken into amount in pricing the material they are

a) The nature of the business and type of production. The frequency of purchase price
fluctuations and issues of materials.
b) Rang of price fluctuation and value of material issued and size of bath of materials
issued.
c) Requirement that purchasing efficiency should be revealed or not.
d) The accuracy with which issues can be computed.
e) The durability or stock i.e. whether it evaporates absorbs moisture or deteriorate
quickly.
f) The length of inventory turnover period and quantity of material to be handled with
the necessity for maintaining uniformity within an industry.

Page-26
Last in first out (LIFO)
This is the price paid for the material last taken into stock from which the
materials to be priced could have been drawn. This method also ensure material being used at
the actual cost. Its use is based on the principle that should be as closely as possible related
to current price level. Under this method production cost is calculated on basis on
replacement cost.

Advantages

(I) Production is charged the most recent prices so that it is based on the principle that cost
should be related to current price levels.

(II) It Obviates the necessity for continuously ascertaining the replacement price.

(III) Neither profit nor loss is usually made by using this method.

(IV) In the times of rising prices there is no wind fall profit as would have been obtained
under FIFO.

Disadvantages

(I) Needs more clerical work.

(II) Compassion among similar jobs is very difficult.
(III) Stock values relating to prices of the oldest cost on hand may be entirely out of the
current replacement prices.

Weighted average price

This is the price which is calculated by Z dividing the total cost of material in the stock
from which the material to be priced have been drawn, by the total quantity of material in the
stock.
This method differs from all other methods because here issue prices are calculated on
receipts of materials and not on issue of materials. Thus as soon as new lot is received a new
price is calculated and issues are then taken.

Page-27
Advantages

(1) This method is advantageous where the price varies widely as its use even out the
effect of these wide variations.
(II) The basis of price calculations is a simple one involving only the division of total
amount of material in stock by quality in stock.
(III) Calculation of new prices arises only when receipt of stocks are received.
(IV) Stock records under this method give a fair indication of the stock values, which can
be used financial analysis.

Disadvantages

This method is completed than simple average because it takes into consideration the
total quantities and total costs in stock.

(I) Profit or loss may be incurred as in simple average price.

(II) As LIFO or FIFO this method calls for many calculations.
(III) In order to calculate the accurate value of issues the average price must normally be
calculated to four to five decimal places.

Standard price

It is the predetermination of fixed price on basis of a specification of all factors affecting

price like the quantity of materials in hand and to be normally purchased and rate of discount
compared with existing price including or excluding freight and warehousing expenses.

A standard price for each material is set and the actual price paid is compared with
standard. It is paid exceeds the standard loss will be realized if not profit will be obtained.

Advantages

(I)The method is easy to operate.

(II) Comparing the actual prices with the standard price will determine the efficiency of
purchase department.

(III) The effect of price variations is eliminated from job costs.

(IV) It reduces classical costs by eliminating detailed cost records.

(V) In times of inflation price fluctuation is very difficult to fix a standard price.

(VI) This method also incurs a profit or loss on issues and closing stock.
Page-28
Inflated price

This is the price , which includes a charged designed to cover the cost of
contingencies or related costs.
This price include not only the cost involved in bringing the material to the purchase
premises but also the loss due to evaporation and breakage etc. , as well as carrying costs.
Increased gradually every year from 2015- 2016.

METHODS OF INVENTORY MANAGEMENT

1. Economic Order Quantity (EOQ):

The correct quantity to buy the quantity which the cost of acquisition equals the cost
of possession This is technically known as the economic order quantity of the reorder
quantity. EOQ helps to achieve the lowest unit cost.

The concept of economic order quantity is primarily based on the consideration of the
acquisition cost and possession cost, which has been discussed below

Limitation of EOQ

 The calculation of EOQ is based on the accuracy of the information of the ordering
cot and the carrying cost on which they are based.

 The concept is based on the assumption that the usage of material is both Predictable
and evenly distributed.

 Acquisition cost and the carrying cost is not easy to be calculated.

 The data related with the acquisition cost and the possession cost is not available with
the company. So should not be feasible for the company to calculate the acquisition
cost and the possession as a result it is difficult to calculate the EOQ.

2. ABC Analysis

In inventory planning/control process is the classification of different types of

inventory to the type and degree of control required for each. The ABC system is widely used
classification technique for the purpose. On the basis of the cost involved, the Various items
are classified into three categories.
Page-29
1 A Consisting of toms with the largest investment

2. C With relatively low investment, but fairly large number of items

3. B Which stands mid-way between category A and C

1. Setting up of various level-

Another important technique of inventory planning and control is the setting the various
levels for the inventory control. Various levels should keep in mind.

2. Maximum stock level-

Maximum stock level represents the upper limit beyond which the quantity of any one not or
normally allowed to rise. The main object of establishing this limits to ensure that
unnecessary working capital a not blocked in the stores.

Maximum Level = Reordering Level + Reordering – Minimum Quantity Consumption

3. Minimum Stock level -

This is the lower limit below which the stock of any item should not allow to fall This is also
known as buffer stock. The main object behind the time limit is to protect against the stock
out of a particular item.

Minimum stock level= Reorder level (Normal Usages * Average Per Period Delivery
time)

4.Reorder level:

Reorder level is fixed between the minimum and maximum stock level. When the purchase
of the material reaches point the company should initiate for the purchase of the material. The
reorder level is slightly more than the minimum stock level guard against Normal Usages
and Abnormal delay in supply.

Reorder-level= Maximum consumption * Maximum period required during the period

for delivery.

Page-30
5. Danger level :

This is generally fixed below the minimum stock level, Normal stock should not be below the
minimum level. If it reaches the danger level any point of time , urgent action for
replenishment of stock must be
taken to prevent the stock out.

6. Just in time

The Just in Time (JIT) method works to lessen the volume of inventory that a business has on
hand. It is considered a risky technique because you only purchase inventory a few days
before it is needed for distribution or sale so that the items arrive just in time for use.
JIT helps organizations save on inventory holding costs by keeping stock levels low, and
eliminates situations where dead-stock sits on shelves for months on end. You need to
conduct thorough research into customer buying habits, seasonal demand and source for
reliable suppliers and channels of transportation before implementing JIT into your business
operations to minimize and screw ups.

7.Preparation of Inventory Budget

Organizations using huge material requirement normally prepare purchase budget. The
purchase budget should be prepared well in advance. The budget for production and
consumable material and for capital and maintenance material should be separately prepared.
Sales budget generally provide the basis for preparation of production plans. Therefore the
first step in the preparation of a purchase budget is the establishment of sales budget.
As per production plan, material schedule is prepared depending upon the amount and return
contained in the plan . To determine the net quantities to be procured, necessary adjustments
for the stock already held is to be made.
They are valued as standard rate or current market. In thin way, material procurement budget
prepared .
The budget so prepared should be communicated to all departments concerned so that the
actual purchase commitments can be regulated as per budgets.
At periodical intervals actual are compared with the budgeted figures and reported to
management which provide a suitable basis for controlling the purchased of materials.

Page-31
8. Maintaining Perpetual Inventory System

This is another technique to exercise control over inventory. It is known as automatic

inventory system. The basic objective of this system is to make available details about the
quality and value of stock of each item a all times. Thus, this system provides a rigid control
of over stock of materials as physical stock can be regularly verified with the stock records
kept in the stores and the cost office.

9. Inventory Turnover Ratio

These are calculated to minimize the inventory.

The ratio indicates how quickly the inventory is used for production. Higher the ratio, shorter
will be the duration of inventory at the factory. It is the index of efficiency of material
management
The comparison of various inventory turnover ratios at different items with those of previous
years may reveal the following four types of inventories.

I. Receiving store

To perform activities necessary to exercise control on quality and quantity of purchase

materials before they are accepted and taken into stock.
To Perform activities concerning storage and material and maintenance of records. Main
store may be either centralize and located at their point of use of materials.

II. Engineering store

In this store material required of running of plant, which do not directly contribute a part of
finish product are store. Machinery spare consumable, stationary etc. are stored in this and
issued as per requisition raised by various users.

III. Finished product store (warehouse)

To perform activities concerning receipt, packaging and packing , dispatch of finished goods
to different destination and handling of connected papers and documents.
Special store :

To perform activities of receipt, storage and issue of special materials.

Scrap yard :

To Perform activities of receipt, segregation and storage of different types scrap.

Page-32
Functions of store department

 Physical stock of storing and preserving material, technical job of providing storing
facilities and administrative procedure for documentation and accounting of material
movement.

 Classification and codification of numerous items of material by using suitable

method of codification is done in the store. Then the manual of material codes is
circulated among the staff and other concern department manager.

 The store department takes physical charge of the material forward a goods receiving
and inspection section and places them in the respective bin.

 The store department provides all necessary facilities for preserving the quality
material as long as they are in its custody.

 It examines that issue procedure is property forwarded by confirming that material

are supplied to production department only against written formal request by
authorized through document immaterial requisition note.

 It keeps watch on actual stock level and compares the same with preset stock limit so
that stock moves within level.

10. Valuation method

Valuation of Input Inventory

In P.K Rubber & Engineering , Input materials are raw material in nature. product which
is manufactured as per requirements or drawing or design. Further process is done to the
input material hence the value of input material also changes from the purchase value.

Therefore, Inventory for all purchase material is done on the basis of weighted average
rate. Examples of Input Inventory Plate Metal, Fittings, Castings, Formed and expanded
metal, Hardware, Sectional metal, Flat metal, Welding wire etc.

Page-33
Valuation of Finished Goods Inventory
Valuation of Finished Goods Inventory is done on basis of sale value. Sale value is
determined from the Purchase Order raised by the customer.

Valuation of WIP Inventory

Valuation of WIP Inventory is considered on the basis of percentage of completion of
the product with comparison to raw material used in the manufacturing process.

Page-34
OBJECTIVES OF THE STUDY

Primary objective :

The study of inventory management in P. K & ENGINEERING

Secondary Objective :

 To study Various techniques of inventory management.

 To understand effective management of inventory for maximization of profit.
 To study effective rate of inventory turnover.
 To study functions of store keeper for proper inventory management.
 To study the Documents and Records required for inventory management.
 To offer suitable suggestions for the improvement of inventory management
practices.
 Study calculation of EOQ and Inventory levels.

These two conflicting objectives of inventory management can also be expressed in terms
of cost and benefits associated with inventory The firm should minimize investment in
inventory implies that maintaining inventory costs, such that the smaller the inventory, the
lower is the cost to the firm. It should aim at level of inventory which will reconcile these
conflicting elements. That is to say, an optimum level of inventory should be determined on
the basis of the tradeoff between costs and benefits associated with the levels of inventory.

Page-35
 SCOPE OF THE STUDY
Inventory management is a simple concept-don't have too much stock and don’t have
too little. Since there can be a substantial costs involved in staying above and below the
optimal range, careful inventory management can make a huge difference in the right balance
can be quite a complex and time consuming task without the right technology.

Inventory management is very important for P.K RUBBER ENGINEERING. It enables

the business to meet or exceed expectations of the customers by making the products readily
available.

The scope of the study includes the Inventory turnover ratio, Analysis of Raw Materials,
work in progress and finished goods for three financial years.

It includes the detail information of Inventory management and their Methods, purchase
procedure, store department.

Page-36
 RESEARCH METHODOLOGY
Research is a careful and detailed study into a specific problem, concern, or issue using the
scientific method. It's the adult form of the science fair projects back in elementary school,
where you try and learn something by performing an experiment. This is best accomplished
by tuning the issue question, with the intent of the research to answer the question.

Research Methodology:-

Research methodology is a Term that basically means the science of how research is done
scientifically. It is way to systematically and logically solve a problem, help us understand
the process not just the product of research, and analyzes methods in addition to the
information obtained by them.

Research Design:-

A good research design has characteristics viz, problem definition , time required for
research project and estimate of expenses to be incurred the function of research design is to
ensure that the required data are collected and they are collected accurately and
economically. A research design is purely and simply the framework for a study that guide
the collection and analysis data.

Data Collection

Data collection the process of gathering and measuring information on variables of interest,
in an established systematic fashion that enables one to answer stated research questions, test
hypotheses, and evaluate outcomes.

Types of Data

1. Primary data is information that you collect specifically for the purpose of your
research project. An advantage of primary data is that it is specifically tailored to
your research needs. A disadvantage is that it is expensive to obtain. The data has
been gathered through interaction and discussions with the executives working in the
division. Some important information has been gathered through couple of
unstructured interviews of executive.

Page-37
 2. Secondary Data :Secondary data refers to data that was collected by someone other
than the user. Common sources of secondary data for social science include census,
information collected by government departments, organizational records and data that
was originally collected for other research purposes.

Tools and Techniques

As no study could be successfully completed without proper tools and techniques, same is
with my project. For the better presentation and right explanation I used tools of statistics and
computer very frequently. Basic tools which I used for project from statistics are-
- Bar Charts
- Pie charts
- Tables
Bar charts and pie charts are really useful tools for every research to show the result in a
well clear, ease and simple way. Because I used bar charts and pie charts in project for
showing data in a systematic way, so it need not necessary for any observer to read all the
theoretical detail, simple on seeing the charts any body could know that what is being said.

Technological Tools:-

Ms- Excel
Ms- Access
Ms- Word
Above application software of Microsoft helped me a lot in making project more
interactive and productive.

Page-38
 Part-A
I. What are the raw material used in the production of the Finished Goods Products
and segregate it into the direct or indirect material?

Natural rubber is found as a milky liquid in the bark of the rubber tree, which is use to
produce the raw rubber used in tire manufacturing, it is a indirect material the liquid latex is
mixed with acids that cause the rubber to solidify. The other primary ingredient in tire rubber
is carbon black. Carbon black is a fine, soft powder created when crude oil or natural gas is
burned with a limited amount of oxygen, causing incomplete combustion and creating a large
amount of fine soot. So much carbon black is required for manufacturing tires that rail cars
transport it and huge silos store the carbon black at the tire factory until it is needed. Sulfur
and other chemicals are also used in tires. Specific chemicals, when mixed with rubber and
then heated, produce specific tire characteristics such as high friction (but low mileage) for a
racing tire or high mileage (but lower friction) for a passenger car tire. Some chemicals keep
the rubber flexible while it is being shaped into a tire while other chemicals protect the rubber
from the ultraviolet radiation in sunshine.

II. What techniques are used for inventory planning and control?

The major production oriented techniques of inventory control and planning for managing
inventories efficiently are the ABC analysis, the EOQ model, and the re-order point.

III. What is the consumption of raw material for Finished Goods production?
The rubber manufacturing industry has used butyl rubber and hi-tech synthetic rubbers.
carbon black and rubber chemicals, it is a major raw materials for Finished goods.

IV. What is the Process of inventory planning and control to classify the different
type of inventory?

The process of inventory planning and control are research the existing periods where
inventory was out of synch with demand, study the demand and consumer spending trends in
the marketplace, assess inventory and supply costs, evaluate supplier performance ,set
category goals, and the establish an inventory management policy.
Two types of basic inventory systems exist in the business environment: periodic and
perpetual. A periodic inventory uses physical counts at specified intervals to maintain an
accurate count of on-hand inventory. Periodic inventory systems allow business owners to
spend less time on inventory management. Perpetual inventory systems update inventory
counts on a daily basis through order replenishment and sales of inventory.

Page-39
V. Which Valuation method is used for valuation of inventory?
FIFO (First in first out method) it is the most widely used method for inventory valuation.
FIFO method is closer to actual physical flow of goods because companies normally sell
goods in order in which they are purchased or produced.

VI. What method are used for verification of inventory?

Stock Verification method are used for actual counting, weighing and measuring of items in
stock which is necessary to support stock value as per ledger balance. ,Periodic Stock
Verification, Physical stock verification is normally done periodically, i.e., once or twice in a
year.

Page-40
Part-B

DATA ANALYSIS AND INTERPRETATION

Q1 . Sales

Sales
Year ( Rs. In Lakh)
2015-2016 222
2016-2017 230
2017-2018 508

Sales
60000000

50000000
Amount In lakh

40000000

30000000
Sales
20000000

10000000

0
2016 2017 2018
Years

INTERPRETATION -
The above graph shows that the sales during the year 2015-16 was Rs. 222 Lakhs it increased
to 230 lakhs in 2016-17 and in 2017-2018 it increased to 508 lakhs. It shows increasing trend.

Page-41
Q 2. Inventory Turnover Ratio
This ratio is often a firm’s inventory turns over during the course of the year. Because
inventories are the least liquid form of assets, a high inventory Turnover is ratio generally positive.
On the other hand, and usually high ratio compared to the average for the industry could mean a
business is losing sales because of inadequate stock on hand.

Uses

If a firm’s business has significant assets tied up in inventory, tracking its turnover is critical to
successful planning. If inventory is turning too slowly, it could indicate that is may be hampering the
firm’s cash flow.
Because this ratio judge’s annual inventory turns, it is usually conducted once a year

. The Formula : Cost of Goods Sold

Average value of inventory

Cost of goods Sold Avg. Inventory

Year (Rs In Lakh) Value of Turnover
Inventory Ratio
2015-2016 184.08221 11.91514 15.45
2016-2017 190.05362 11.07363 1.02
2017-2018 419.76092 11.75008 1.38

Inventory Turnover Ratio

40
35
Inventory Turniver Ratio

30
25
20
15 Inventory Turnover Ratio

10
5
0
2016 2017 2018
Year

INTERPRETATION-
The above graph shows inventory turnover ratio of the firm. The ratio was 15.45 during
2015-16, it increased to 17.16 during 2016-17 and increased to 35.72 during 2017-18.11
Page-42
Q3. Stock of Raw Material

Year Amount of Raw

Materials
(Rs. In Lakh)
2015-2016 2.57
2016-2017 2.58
2017-2018 3.85

Amount of Raw Material

4.5
4
Amount of Raw Material

3.5
3
2.5
2
Amount of Raw Material
1.5
1
0.5
0
2016 2017 2018
Year

INTERPRETATION-
The above graphs shows that the stock of raw material is Rs. 2.57494 Lakhs in 2015-16,
it increased to Rs. 2.8211 lakhs in 2016-16 and Rs. Lakhs 3.85817 lakhs in 2017-2018.

Page-43
Q4. Finished Goods (at Closing Stock)
Year Amount of Finished
Goods
(Rs. In Lakh)
2015-2016 15.01
2016-2017 16.88
2017-2018 12.44

Amount of Finished Goods

18
16
Amount of Finished Goods

14
12
10
8
Amount of Finished Goods
6
4
2
0
2016 2017 2018
Year

INTERPRETATION
The above graphs shows the amount of finished goods at cost. the stock of finished goods is
Rs. 15.01979 Lakhs in 2015-16, it increased to Rs. 16.88069 lakhs in 2016-17 and decreased
to Rs. 12.44366 lakhs in 2017-2018.

Page-44
Q5. Stores, Spares & Consumables ( Closing Stock)

Year Amount of Cost of

Stores and Spares
(Rs. In Lakh)
2015-2016 6.81
2016-2017 5.53
2017-2018 5.27

Amount of Cost of Stores and Spares

8
Amount of Cost of Stores & spares

4
Amount of Cost of Stores and
3 Spares
2

0
2016 2017 2018
Year

INTERPRETATION-
The above graphs shows the amount of stores and spares at the cost. the stock of finished
goods is Rs. 6.81738 Lakhs in 2015-16, it increased to Rs. 5.53905 lakhs in 2016-17 and
decreased to Rs. 5.27302 lakhs in 2017-2018.

Page-45
Q6.Raw Material Consumed

Year Amount of Cost of

Stores and Spares
(Rs. In Lakh)
2015-2016 172.30
2016-2017 169.70
2017-2018 386.07

Amount of Raw material Consumed

450
Amount of Raw Material Consumed

400
350
300
250
200 Amount of Raw material
150 Consumed

100
50
0
2016 2017 2018
Year

INTERPRETATION-
The above graphs shows consumption of raw materials. The consumption of raw material in
the year 2016 is Rs. 172.3057. the consumption of raw material decreased in the year 2017 is
169.69736 and it is decreased to Rs. 386.0765 lakhs in 2017-2018.

Page-46
Part-C

STOCK LEVELS
During 2015-2016

The company requires 28889 units of Latex to manufacture of Rubber for the year 2015-
2016. EOQ is 1700 units. The company makes stock of rubber equal to 30 day
requirements and the normal lead time is10- 20 days. The company works for 300 days
in a year.

a. Re-order level = lead time*Average usage + stock of rubber

= (10*96.29) +2888.9

= 3851.9

Stock of = usage*period of stock/total working days in a year

Rubber
= 28889*30/300

= 2888.9
Average usage = usage/total working days in a year

= 28889/300

= 96.29

b. Minimum stock level = re-order level – (Average usage * Average lead time)

= 3851.9 – (96.29*10+20/2)

= 2408

c. Maximum stock level = re-order level + re-ordering quantity-

(Minimum usage * minimum lead time)

= 3851.9+1700-(96.29*10)

= 5551.9-962.9

= 4589

d. Danger level = Average usage*Maximum re-order period for emergency purchases

= 96.29*20

= 1925.8

e. Average stock level = ½(Minimum stock level + Maximum stock level)

= 2408+4589/2
= 3496 Page-47
During 2016-2017

The company requires 123596 units of Latex to manufacture of Rubber

for the year 2016-17.EOQ is 3335 units. The company makes stock of
rubber equal to 30 day requirement and the normal lead timeis10-20 days
The company works for 300 days in a year.

a. Reorder level = lead time*Average usage+ stock of rubber

= (10*412) +12360

= 16480

 Stock of = usage*period of stock/total working days in a

Rubber year
= 123596*30/300

= 12360
 Average
= usage/total working days in a year
usage
= 123596/300
= 412

b. Minimum stock level = re-order level – (Average usage * Average

lead time)
= 16480 – (412*10+20/2)

= 10300

c. Maximum stock level = re-order level +re-ordering quantity-

(Minimum usage * minimum lead time)

= 16480+3335-(412*10)
= 19815-4120
= 15695

d. Danger level = Average usage*Maximum re-order period for emergency

purchases
=
412*20
=
8240

e. Average stock = ½ (Minimum stock level + Maximum stock level)

level
= 10300+15695/2
= 13000
Page-48
During 2017-2018

The company requires 106066 units of Latex to manufacture of rubber

for the year 2017-18. EOQ is 3257 units. The company makes stock of
rubber equal to 30 day requirement and the normal lead timeis10-20 days
.The company works for 300 days in a year.

a. Reorder level = lead time*Average usage+ stock of rubber

= (10*354) +10606.6

= 141476

 Stock =usage* period of safety stock/ total working days in a year

= 106066*30/300

= 10606.6

 Average usage = usage/total working days in a year

= 106066/300

= 354

b. Minimum stock level = re-order level–(Average usage*Average lead time)

= 14147 – (354*10+20/2)

= 8837

c. Maximum stock level = re-order level +re-ordering quantity-

(Minimum usage*minimum lead time)
= 14147+3257-(354*10)
= 13864

d. Danger level =Average usage*Maximum re-order period for

emergency purchases

= 354*20

= 708

e. Average stock level = ½(Minimum stock level + Maximum stock level)

= 8837+13864/2
= 11350

Page-49
 OBSERAVTIONS AND FINDINGS

 The company is having good sales for their products during all the years of the study.

 The inventory turnover ratio is on a declining trend year after year in the period of
the study. It indicates inefficiency of management in turning their inventory into
sales.

 The company should adopt sophisticated techniques to manage its inventory in a

better manner.

 The EOQ calculated is suggesting that the company should obtain its inventory
requirements by placing orders frequently rather than one time replenishment.

 Company should take measures for maintenance of proper stores and spares so as to
avoid the frequent breakdown of the machinery.

 There is a need to develop good communication system between various departments

like marketing, planning, procurement, and production and distribution functions.

 The company may follow Just-in-Time technique, thereby can do away with waiting
time for a receipt of materials.

 Purchase procedure of the raw material is centralized therefore more time taken for
purchase.

 Measurable values observed during every purchase act & figure related with analysis
method.

 The sanctioning authorities for the purchase in every unit are not property defined.

 The company is maintaining cost of under the proper level. through continue
monitoring of works.

 The company is maintaining the cost of production under the proper level.
through continues monitoring of works.
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 Separate store is maintained by store clerk who maintain the ledger manually.
Periodic checking of the store ledger with the account department & Stores is done.
Errors are detected by cross checking Hence, inventory is controlled.

 Perpetual Inventory is done during Internal Audit, whereas periodic inventory is done
quarterly during Statutory Audit. Thus, Wastage & Loss is controlled.

 The company is profit making and also developing company.

 It is attributed by healthy work environment and management system.

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 LIMITATIONS OF THE STUDY

As every study of research contains some drawbacks or limitations, in the same way this
research also has some limitations as follows:

 The duration of the study was limited & hence elaborate & comprehensive project
survey was not undertaken.

 Because of a small period of time detail study about all the material was not possible
because of time limit.

 Some of the information was kept confidential by the store department.

 Study was confined only to the selected components in the stores department.

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 SUGGESTIONS AND RECOMMENDATIONS
SUGGESTIONS-

In the study of inventory management, in conducted that the inventory is the important part of
every organization. Every business tries to minimize the inventory cost and achieved the
production target.

Orders are released mostly for all the items covered in open order agreement contract to be
done immediately on the receipt of requirement. required are to be procured otherwise the
items procured will not get consumed and become nonmoving.

Linking up alternate part numbers and elimination zero duplicate code numbers that effective
utilization of the available items would be done and unnecessarily purchases could be
avoided.

With the help of inventory techniques company minimizes the cost of the inventory.

One more issue has seen that after finalizing the order from customer side, the requirement of
capacity of finished goods may changes, hence to maintain the requirement, additional
requirement of respective parts or spare may not be available. Hence, as the spares procured
need to be
set on various levels as the procurement of spares/stock is done on the basis of order for the
end product.

It is suggested that below said bin card need to be used, in which the regular check will help
to confirm the availability of required spares or part as and when required.

Below said BIN card will also have a track for GRN which can help identify manipulation or
wastage of parts.

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 CONCLUSION

Inventory management has to do with keeping accurate records of finished goods

that are ready for shipment. This often means posting the production of newly completed
goods to the inventory totals as well as subtracting the most recent shipment of finished
goods to buyers. When the company has a return policy in place, there is usually a sub-
category contained in the finished goods inventory to account for any returned goods that are
reclassified or second grade quality.

Accurately maintaining figures on the finished goods inventory makes it possible to

quickly convey information to sales personnel as to what is available and ready for shipment
at any given time. Inventory management is important for keeping costs down, while
meeting regulation. Supply and demand is a delicate balance, and inventory management
hopes to ensure that the balance is undisturbed.

Highly trained inventory management and high-quality software will help make inventory
management a success. The ROI of Inventory management will be seen in the forms of
increased revenue and profits, positive employee atmosphere, and on overall increase of
customer satisfaction.

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 REFERENCES

Financial Management : Mr. Ravi Kulkarni

Financial Management : Mr. Nitin Sarode
Management Accounting and Control : S.N Veena
Inventory Management : D.S. Jadhav
Material and Logistics Management : D.S Jadhav

Website:

www.moneycontrol.com
www.wekipedia.com
www.google.com

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 ANNEXURE

BIN CARD
Description …………. Minimum Level……
Material code……….. Maximum Level…..
Location code……….. Ordering Quantity……
Receipts Issues Balance Audit
Date G.R.No Qty Date Regn Qty Qty Date Initials
No

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GRN Number:

Goods Received Note

Supplier………………Date……………… .Advice Note Number……………

Order Number………Delivery Location………Cost centre…………………

Goods Pack Price Order Delivered Comments

Size Quantity Quantity
1
2
3
4
5
6
7
8
9
10

Received by……………………………..Checked by……………........................

1.Accounts/Finance dept. copy

2.Supplier copy
3.Stores/Goods Inward copy

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 Questionnaire: -

Question 1: What are the raw material used in the production of the Finished Goods
Products and segregate it into the direct or indirect material?

Question 2: What techniques are used for inventory planning and control?

I ABC analysis

II Economic Order Quantity (EOQ)

III Perpetual inventory system

· IV Setting of Various Levels.

Question 3: What is the consumption of raw material for Finished Goods production?

Question 4: What is the Process of inventory planning and control to classify the
different type of inventory to determine the type and degree of control required for each?

Question 5: Which Valuation method is used for valuation of inventory?

Question 6: What method are used for verification of inventory?

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