1. INTRODUCTION
1.1 INTRODUCTION TO THE STUDY
The research will be conducted on the assessment of inventory management practice in Malabar cements Limited, Walayar, Palakkad.
The research
provides a knowledge of conducting research and to give solutions for the company affecting invento ry management. Inventory is the stock of any item or resource in campus where as inventory management is the process of reducing inventory cost, keeping inventory from under or over stocking and determining order and recorder points in order to achieve organiational goals. Most studies show that in the company constitutes the ma!or category of assets on the balance sheet.
The main ob!ective of this study is to assess the inventory management practice of Malabar "ements Limited, Walayar, Palakkad.
1.2. OBJECTIVES OF THE STUDY
Primary Objectie
To analyse the efficiency of Inventory Mangement of Malabar "ements Limited, Walayar, Palakkad.
Sec!"#ary Objectie
To identify the optimum level of inventory to minimie cost. To determine the factors affecting the inventory management system of the company.
1.$. NEED FOR THE STUDY
The research is believed to have the following importance.
The study will show the over all inventory management system of the
company. The study will suggest solutions for the problem related to inventory
management function It enables employees of inventory management evaluate them selves It will indicate the strengths and weakness of the firm inventory management practice.
1.% SCOPE OF THE STUDY
The study is limited to assess the inventory management practice at specific area of . The time duration of this research will be from #ebruary up to May .This study is to find the facts and opinions of inventory management In accordance with the present trends it aims mainly at finding out the inventory control procedures. This study gives the brief information about the inventory management of the company. $ The study was done by using annual reports, inventory manual%etc.
1.& 'I(IT)TIONS OF THE STUDY
The study is estimated encounter the following constraints The managers who concern the study many not volunteer to respond the needed information in depth. "omple&ity of inventory system is to the difficulty of gathering information.
1.* INDUSTRY PROFI'E
India is the world's second largest producer of cement after "hina, with cement "ompanies adding nearly eight million tonnes (MT) capacity in *pril +-, taking the total Installed capacity to +- MT. * few of the leading manufactures are the /ltra Tech01rasim "ombine 2almia "ements. India "ements, 3oleim etc. With the boost given by the 1overnment to various infrastructure facilities, road networks and housing facilities, growth In the cement consumption is anticipated in the coming years.Infrastructure is backbone of any economy which is Petroleum, #ertilier, Iron, 4teel,"oal5 6anking, Insurance, Power and "ement etc. The cement Industry is one of the coreIndustries of the nation. "ement is a fundamental re7uirement of all constructions activities."ement is used in housing, bridges, roads, industrial construction etc. *s well as cement is6asic material which is used in all types of construction.In ancient time buildings were constructed with sand stone, bricks, lime and gypsum*nd in special case marbles were used. The house of ordinary citiens was usually made ofMud and those same times of special type of wood fire. In some cases lime and PoolanaWere used for getting beautiful finish for the interior surface. There were very skilled builders*nd masons famous for their work and art. 3owever, during 8th century slowly and gradually new types of material and cement 2eveloped in 9urope. :ama frost patented cement in 8 and established works at 4wanscomde, the first in the London district. :oseph *spadin a 6ritish stone mason, obtain a Patent for a cement *spadin first patent is dated +st ;ctober 8+<, the patented on artificial Made by calcinations of an argillaceous lime stone kwon as Port land cement because it =easonable a stone 7uarried on the isle of Portland near 9ngland with this investment *spadin Laid the foundation for today. "ement is a powdered material with water forms a paste that hardens slowly. It is Made by various types of raw materials. The prominent raw
material composed in the mi&ture Is calcium carbonates as limestone and other alumina silicates as clay or shale. 2uring the
STREN+TH )ND PROB'E(S OF CE(ENT INDUSTRY>5 STREN+TH,-
The following are the inherent and ac7uired strength of the cement industry. "ement is basic and strategic industry to build the infrastructure of Indian economy. . "ement is an important for the housing construction that generates ma&imum employment In the economy. +. "ement industry contributes the e&ports and give the profit of foreign e&change to "ountry. ?. #or cement industry special rural infrastructure and housing schemes as well as five year Ta& holding on income from investment in modern infrastructure such as roads air "onsumption in medium term. <. "ement industry contributes in ta& e&cise duties by which income of government is Increased. @. "ement is a self5sufficient industry with negligible imports. A. "ement has no substitute. 8. #undamental technological progress in the cement industry has been insignificant since, More than ? years. Main improvements on e&isting technology are concentrate in energy saving and distribution of cement bulk transportation.
PROB'E(S OF CE(ENT INDUSTRY,-
The following are main problems of the cement industry.
. Inade7uate production>5 The main factors responsible for shortfall in production are>
•
2rastic power cuts ranging from + to ABC in various cement
•
producing states. 4hortage of coal. Inade7uate availability of Wagons.
• •
Limited availability if furnace oil.
+. Manufacturing cost problems>5 The ma!or inputs for cement industry are lime5stone, coal, power, and gypsum cement Is a high cost industry as a result. "ement has become frightening e&pensive costs, both Manufacturing and non5manufacturing have gone up. It is difficult to control cost.
?. ;perational Inefficiency>5 ;perational inefficiency affects the cost of production. ;perational inefficiency can be *ffected by the internal factors as well as e&ternal factors of the company.
<. "ost 9scalation and rigid price>5 In the case of all other industries, there was rise in the cost of production of cement. 6ut the special point in the case of cement industry was that some of the ma!or cost rises were 2ue to the government policies. The shortage of wagons for the movement of cement was *lways a serious.
B. 1overnment policies =ules and =egulation>5 The various policie s rules and regulatio ns of the central and state government not ;nly encourage the industry but have also adversely affected the industry. The various steps Taken by government vi., administrated prices of inputs, like in the e&cise duty increase in =ailway fright, low off take by government reduction in
loading capacity of trucks, compulsory :ute bag packaging high electricity duty, sales ta&, power tariff etc. *dversely affects the Industry.
@. Infrastructural problems>5 The cement industry is facing various problems. Infrastructure facility is one of the Main problem faced by the industry. Infrastructural facility means the facility of availability ;f ade7uate 7uantity and 7uality of coal railway wagons regularity of power supply, sea5port, 6ridges, roads and canals, which is of vital importance for optimiing capacity utiliation in "ement industry. The cement plants are located nearer to the lime stone deposit area, which *re not properly connected with rail road, power and communication services which affect to The cement industry.
A. *dministration problem>5 *dministration problem includes the workers problem, selling and distribution of "ement problem etc.
8. ;ther problem>5 ;ther problems included the pollution problem, location problem, low e&port, under 2evelop rural market etc. 1. CO(P)NY PROFI'E
Malabar "ements Ltd., a fully owned 1ovt. of Derala /ndertaking, is synonymous with superior 7uality cements, vouched by customers spread across the state of Derala. The "ompany was incorporated in *pril -A8 and commenced production in *pril -8< at its Walayar plant. *t Malabar "ements, product improvement is not !ust a one5time strategy for boosting sales, rather a 7uest of e&cellence. Perfecting the product 7uality is everybody's concern here. ;ur distinction begins with scientifically selecting the best raw materials for clinker. 4tringent 7uality control is e&ercised right from pre5 blending raw materials, clinkerisation, clinker grinding, and finally to cement packing.
Malabar "ements contributes to the developmental activities of the 4tate by supplying the basic constructio n material. ;nly Malabar "ements can supply its cement, 'factory fresh', without any deterioration in the srcinal strength either due to moisture or humidity, within + hrs anywhere in Derala. With a production capacity of <.+ lakh tons of cement per annum,the unit at Walayar is the largest. *s part of e&pansion programme, it has commissioned a +. lakh tons clinker5grinding unit at "herthala in *lappuha district in *ugust +?. Thus the total installed capacity of M"L is @.+ lakh tons. M"L is the first public sector company to receive I4; "ertification E to win the Fational *ward for best achievement in 9nergy "onservation. Till date, M"L has e&perienced no loss of production due to labour unrest. In !ust over B years of commissioning, Malabar "ements has been able to meet about C of total cement consumption in Derala. With the e&pansion plans in progress, the figures are sure to rise further.
"ement is a necessary constituent of infrastructure development and a key raw material for the construction industry. *s late as the AGs, the 4tate of Derala was virtually starving for cement. The state lacked a portland cement factory in either private or government 4ector. In -@5@+, the 1eological 4urvey of India located a limestone deposit in the Pandarethu valley of the Walayar region on the northern side of the Palakkad gap. Located in dense forest area, the hilly terrain was re7uired heavy investment to mine. The 4tate 1ovt. ventured
to
put
up
a
"ement
factory
in
the
region.
The feasibility study conducted revealed that the construction of a + tpd dry process cement plant using the Pandarethu limestone is feasible. D4I2" obtained an Industrial License for the manufacture of cement in Fovember -A@ and decided to go ahead with the pro!ect and formed HMalabar "ements Limited to set up, own and operate the proposed cement plant. The plant was successfully commissioned in -8< and the commercial cement started on
-8<.
production
Fow, The "ompany is all e7uipped to set precedence among public sector units in the state. The launch of two 4uperior 7uality products under the brand name JMalabar 4uperG and JMalabar "lassicG, in the year --<5-B gave a boost to the market presence. Karious modifications carried out since --B have improved production and productivity of Malabar "ements. * +.B MW multi5 fuel power plant was commissioned in :une --8 to complement +BC of the total power re7uirement for the Walayar plant operations. *s part of e&pansion, the company has commissioned a @ tpd 1rinding /nit at "herthala in *ugust +?. The moderniation of "ement Mill, completed in 2ecember +<, helped to increase the cement production.
The company has upgraded the plant with state5of5the5art technology 6elt bucket elevators, Diln automation, modification of cement mill internals etc, are few to mention. The .<+ million tones capacity is less than C of the cement consumption in Derala and e&pansion will alow the company to harness
the
markets
beyond
its
core
-A8
-A-
segment.
-8
-8+
-8?
-8<
-8A
--<
--A
--8
+
CO(P)NY PO'ICY
VISION / (ISSION
+r!0t St!ry S!me ! te maj!r mi3e4t!"e4 0i3e !" !5r 6r!0t7 #easibility 4tudy for a cement plant at Walayar. 5 -AB
Industrial License for the manufacture of "ement 5 -A@ 2ate of Incorporation of Malabar "ements 5 -A8 "ommencement of mining activities 5 -8 "ommissioning of Walayar Plant 5 -8< "ommencement of clinker production 5 -8< "ommercial "ement Production started 5 -8< JMalabar "lassicG launched 5 --<
;btained
I4;>
-+
certification,
first
P4/
in
Derala
to secure this certification 5 --@ Installation of +.B MW multi5fuel power gen. set 5 --8 Introduction of JMalabar *iswaryaG brand 5 +? "ommissioned
of
@
tpd
cement
grinding
unit
at
"herthala 5 +? Moderniation of "ement Mill to close circuiting 5 +B Introduced 9=P system for integrated operation of all functional areas. 5 +A 4witched over to Nuality "ertification I4; > - >+8 +
ISO Certiicati!"
HI40I4; -+ > --< certification obtained in Fovember --@. #irst P4/ to secure this certification. 4witched over to the revised standard I4; - > + in *ugG+?. 4witched over to Nuality "ertification I4; > - >+8 in +
)0ar#4 8era3a State P!335ti!" C!"tr!3 B!ar# )0ar# 9 1::;-:1 Sec5re# ir4t State a0ar# !r E"er6y c!"4erati!" - 1::2 VSSC R!33i"6 Tr!<y !r 4aety mea45re4 - 1::% = 1::& NCB(
Nati!"a3
)0ar#
!r
te
Be4t
im
i" e"er6y - 1::> 8era3a State E"er6y C!"4erati!" )0ar# - 1::> +!t. ! 8era3a a0ar#e# !r !5t4ta"#i"6 acieeme"t i" P!335ti!" abateme"t - 2;; I"tr!#5ce# ERP 4y4tem !r i"te6rate# !
1.> PRODUCT PROFI'E
Malabar "ements uses the state of the art, dry process technology for the manufacturing of super 7uality cement and the 7uality is much above the national standards. #or Karious applications, the company has three brands vi, OMalabar 4uperO, OMalabar *iswaryaO E OMalabar "lassicO
1. ()')B)R SUPER
* fabulous product
in every sense> 4uper in strength, Wonderful in
workability, Incredible in aging, Implausible in durability, and #antastic in strength gain. *n *M*IF1 performerQ
Tests carried out by 6ureau of Indian 4tandards have established unshakeable credentials of Malabar 4uper. 4uper strength accelerates setting time and fine finish. Malabar super is superior in strength to ordinary '
4uperior in its class of cements, it offers better setting properties delayed initial set and early final set offering more working time and reduced observation time.
4tructures achieve e&cellent dimensional stability with the heat resistant properties of M*L*6*= "L*44I". It also reduces heat generation during hydration, making it a better workable finished product absolutely reliable. The e&tra fineness welded into it allows M*L*6*= "L*44I" better coverage and finish in wall and roof plastering. This in turn, reduces paint consumption. $. ()')B)R )IS?)RY)
It brings prosperity in many ways. It increase s the life of your structures by safeguarding against sulphate attack. *iswarya offers high 7uality at reduced
price.
*iswarya generates less heat of hydration, reduces the formation of getting cracks. This product is best studied for constructions in soil and water with e&cess alkali metals, sulphates, alumina, iron and acidic waters. To obtain the best 7uality cement, only glassy granulated slag is used for product
manufacturing. With very low magnesium o&ide content this provides shape stability for concrete structures.
Te (a@i"6 ! Ceme"t
M"L manu factures cement through the most modern dry process method based on world5renowned 1erman technology. The ma!or raw materials for cement manufacture are limestone and laterite, which are natural minerals obtained within the state. These raw materials provide all necessary ingredients of cement like lime, silica, alumina and iron o&ide. The entire manufacturing process is computer controlled from a central control room and stringent 7uality control measures are applied at all stages of production. We are in the process of installing R 5 =ay *nalyer for better 7uality control. The state of the art pollution control measur es like bag filters are also being installed . The process generally involves three stages of production. . Ra0 mea3
"linker is produced in a rotary kiln, which is a cylindrical steel shell of @Bm length and diameter <.+m, lined with refractory bricks. The kiln is inclined at ?C and set rotating at a speed of + +.+ rpm. It is provided with a <5stage multi cyclone pre5heate r system through which the homogenied raw meal is fed to the kiln inlet by means of belt bucket elevators. The Diln is fired with
pulveried coal and maintained at a temperature of about
"ement is produced by grinding clinker with ?5BC gypsum in a closed circuit ball mill to re7uired fineness. 1ypsum is added to control the setting properties of cement. 1rinding clinker and gypsum produces ordinary Portland cement (;P"). #ly ash 0 4lag at re7uired proportion is ground along with clinker and gypsum to produce Portland poolana cement (PP") 0 Portland slag cement (P4"). The ground cement is stored in concrete silos and packed in B Dg bags using electronic packing machines.
1.: CH)PTER SCHE()
INTRODUCTION IFT=;2/"TI;F T; T39 4T/2S ;6:9"TIK94 ;# T39 4T/2S
CH)PTER 1 F992 #;= T39 4T/2S 4";P9 ;# T39 4T/2S LIMIT*TI;F4
IF2/4T=S P=;#IL9 ";MP*FS P=;#IL9 P=;2/"T P=;#IL9 "3*PT9= 4"39M*
'ITER)TURE REVIE? 4T/2I94 =9L*T92 T; IFK9FT;=S M*F19M9FT
CH)PTER 2
IFK9FT;=S M*F19M9FT T39 =949*="3 M;29L
RESE)RCH (ETHODO'O+Y =949*="3 294I1F
CH)PTER
$
P=;6L9M 4T*T9M9FT P9=I;2 4T/2S 4*MPLIF1 294I1F 4;/="94 ;# 2*T* 4T*TI4TI"*L T;;L4 /492
CH)PTER %
D)T) )N)YSIS )ND INTERPRET)TION
FINDIN+SA SU++ESIONS )ND CH)PTER &
CONC'USIONS
2. 'ITER)TURE REVIE? 2.1 STUDIES RE')TED TO INVENTORY ()N+E(ENT
Inventory, in most of the industries, accounts for the largest Proportion of gross working capital. * number of studies, Therefore, have been conducted to find the determinants of Investment in inventories. The following discussion provides a 6rief review of studies, dealing with factors influencing Investments in inventory in India. 9conomic studies to analye the factors that influence Inventory accumulation in India, are based on time series and Pooling of cross section of time series data pertaining to ManufacturersG inventories. DrishnamurtyGs study (-@<) was *ggregative and dealt with inventories in the private sector of the Indian economy as a whole for the period -<85@. This study used 4ales to represent demand for the product and suggest the Importance of accelerator. 4hort5term rate of interest had also been #ound to be significant. 4astryGs study (--@) was a cross5section analysis of total Inventories of companies across several heterogenous industries #or the period -BB5@ using balance sheet data of public limited "ompanies in the private sector. The study brought out the Importance of accelerator represented by change in sales. It also 4howed negative influence of fi&ed investment on inventory Investment. Drishnamurty and 4astryGs study in -A was perhaps the most comprehensive study on manufacturersG inventories. They used "MI data and the consolidated balance sheet data of public limited companies published by =6I, to analye each of the ma!or components i.e. raw material, goods5in5process and finished goods for + industries over the period -<@5@+. It was a time series study but some inter5industry cross section analysis had also been done. *ccelerator represented by change in sales, bank finance and short5term interest rate were found to be important determinants. /tiliation of productive capacity and price anticipations had been found toe of some relevance. *nother study conducted by them in -AB analyed inventory
investment in the conte&t of fle&ible accelerator with financial variables. 6oth =6I and 4tock 9&change ;fficial 2irectory, Mumbai data for seven important industries had been taken for the period of -B@5@-. Their study of pooled cross section was in current prices whereas time series analysis based on =6I data was a constant price. ;L4 results showed the important influence of accelerator, internal and e&ternal funds flow and fi&ed investment on inventory investment. Materials management has been considered as a separate field of management discipline only in the recent past and is accorded the status of a separate functional area. While the concept got wide popularity and recognition in all the advanced countries. In India, it is yet at an infant stage. ;n account of its latest srcin, unfor tunately research in the area of materials managemen t both at the micro and macro levels was conspicuously absent. There does not e&ist ade7uate indigenous literature on this sub!ect. 3owever, in recent years on account of the growing importance of material management, few research studies were conducted at various universities in our country which highlighted some of the problems faced by selected central and state public sector undertakings in the country. *part from the above research work, a few studies were conducted at *dministrative 4taff "ollege of India, 3yderabad and some studies were conducted by individual authors which focused to some e&tent on the e&isting policies, procedures and problems of industrial organiations in the field of materials management. 6esides the above studies, there are a number of reports submitted by governmental committees from time to time. In addition to this, some studies were conducted on Inventory Management in India. 6ansal 1.2., in his study on Material Management, * "ase 4tudy of 6harat 3eavy 9lectrical Limited, 6hopal unit, (639L)G, has evaluated the e&isting systems of inventory management. 3e emphasied the need for automatic replenishment system in the undertaking. 3e also studied the application of *6" analysis and 9;N techni7ue of inventory control. 3e also pointed out the accumulation of surplus stores and non5moving items in the organiation. 3e recommended that the surplus and obsolete stores, which are no longer
re7uired, should be disposed off as early as possible at the best available price. #urther, he has suggested the preparation of monthly classwise statements on inventories for effective control over them. *nd he suggested the introduction of reconciliation of storesG ledgers with account ledgers to avoid misappropriation of stores. The study also revealed that raw material, components and stores, and spares for production and operation are above their actual consumption level. The inventories in general are found to be above their routine re7uirem ents. The holding s of stores and spares generally are of the order of two to three yearsG re7uirements and these are considered as e&cess. =ama Drishna =ao 6., in his thesis JMaterials Management in 3eavy 9ngineering IndustryG a case study of 6harat 3eavy Plate E Kessels Limited (63PK), Kisakhapatnam in -A-, he has evaluated the performance of materials management in 63PK and identified some problems pertaining to materials management in 63PK in particular and heavy engineering industry in general. The method of investigation involves documentary evidence and survey of e&pert opinion. 3e has evaluated the e&isting purchase systems and lead5time involved in procurement of materials and suggested that the long lead5time should be reduced. 3is study pinpointed the e&cess inventory in terms of number of months cost of production in all the engineering units. 3e also highlighted some of the problems in the area of materials management such as delay on the part of customers in supplying their own materials, e&istence and disposal of surplus and non5moving items, e&cessive lead time and e&cessive dependence on imports. 3e also found that the administrative and procurement lead times of the company are on the higher side due to the peculiar nature of the industry. 3e suggested the liberalied purchase procedures, increasing financial powers to the personnel, opening up of liaison offices in various countries to reduce the lead5time. In comparison with the 6P9 norms, the inventory levels of various stores items in 63PK and the overall inventory accumulation in 3eavy 9ngineering 1roup was relatively higher and he suggested for drastic reduction in the inventory levels.
Phaniswara =a!u 6 produced a research work entitled JMaterials Management in *ndhra Pradesh 4tate =oad Transport "orporation (*P4=T") in the year -8@. In his study, he e&amined the materials management practices and purchasing systems in *P4=T" on the basis of various parameters like material consumption per vehicle, material consumption per kilometer, inventory per vehicle, inventory in terms of number of monthGs consumption etc. 3e highlighted some ma!or problems in the procurement of materials. The study was primarily based on secondary data collected from published annual reports of *P4=T", the records of MI4, the reports on performance of Fationalied =oad Transport /ndertaking of "I=T, Pune etc., coupled with personal interview with various officials of the corporation. The study revealed the increasing levels of materials consumption in *P4=T" as compared to other undertakings. 3e observed the absence of the use of important analytical techni7ues like value analysis and network techni7ues in the purchasing system of *P4=T". The inventory control system in *P4=T" was critically e&amined in respect of stock out pattern, reordering and review policies, lend time patterns, stock out levels etc. 3e mainly suggested the reclassification of stores items based on the criticality, the refi&ation of reorder level and reorder 7uantities. The study also showed the wastage caused by maintenance of unnecessary stock records relating to items, which were no longer used. 3ari =. 4wami in his research work HMaterials Management in Public /ndertakings has evaluated the performance of materials management in the central public undertaki ngs in =a!asthan such as, Instrumentation Limited, Dota unit> 3MT, *!mer unit> 3industan ink Limited, 2ebari unit 3industan "opper Limited, Dhetri unit and 4ambhar 4alts Limited. The study covered various aspects of materials management in these enterprises from -AA5A8 to -858+. The methods of investigation include 7uestionnaire interview, on the spot study and deskwork techni7ues etc. It has been observed that the cost of materials accounts for more than B per cent of the total cost of production in the selected units of the study. /nfortunately, the importance of proper materials management was not fully realied by public undertakings in
=a!asthan and very little attention has been paid so far, to the task of controlling investment in inventories through the application of various scientific techni7ues of materials management. The research opined that, materials management should not cover the inspection function, as it re7uires an autonomous and independent status in the organiation. The study revealed that the lead5time in the selected public enterprises was considerably long and suggested to reduce administrative lead5time by e&pediting purchase files. The study also revealed that the inventory of selected public enterprises had been accumulated due to the following reasons faulty purchases, heavy re!ections, high lead time, uncongenial organiation, lack of scientific and modern techni7ues of materials management, defective inventory control and inflationary tendencies in the economy. 3e suggested that the inventory holdings could be reduced by adopting integrated system of materials management, appointing 7ualified and trained inventory managers, reducing lead time, setting and regulating consu mption and stocking norms of raw materials and other goods, applying modern techni7ues of materials management and identifying slow and non5moving items. The study tested fully its hypothesis Hthe public enterprises had suffered losses or earned low level of profits relates to the inefficient management of materials. If the public enterprises followed standard techni7ues of materials management, they would not only generate resources for their own e&pansion but would also have contributed towards economic growth. The very important reason for public enterprises having suffered losses or earned low level of profits relates to the inefficient management of materials. 3ad public undertaking in =a!asthan managed materials in an efficient and effective manner, they would not only have generated resources for their own e&pansion but would also have contributed towards economic growth. In the year -8, D. 4ambasiva =ao condu cted a research study entitl ed HMaterials Management in Public 4ector 4hipbuilidng Industry. 3e made a review of studies conducted earlier on materials management in the Indian industries and he threw light on planning and budgeting of materials management in 3industan 4hipyard Limited. 3e did an in5depth study in the
areas of procurement of materials, codification and standardiation, vendor analysis, and inventory control in the light of inventory norms fi&ed by the 6ureau of Public 9nterprises of the company under study. 3e conducted the study under certain limitations like absence of proper records, confidential nature of the information, un5disclosure of certain information, reluctance of officials in providing the necessary data pertaining to inventory control. In his study, he highlighted the problems faced by the Indian shipbuilding industry in general and specific problems of 3industan 4hipyard Limited. The problems include international parity price on the involvement of the directorate of shipping in fi&ing the price of the ships constructed. Inade7uate use of installed capacity, paucity of funds, paucity of orders, paucity of trained manpower, high cost of material inputs, delays in procurement of material and e7uipment, due to the undevelopment and underdevelopment of ancillary units, the shipbuilding industry is facing severe hardships in obtaining the necessary inputs by paying scarce foreign e&change reserves. 9ven if at all there are some indigenous ancillary industries to shipbuilding industry, the prices of the products of ancillaries tend to be high because of the incidence of duties, ta&es and high overhead schedules are postponed after receipt of ma!or material and components due to lack of coordination among the various departments by drawing offices, production planning and control department, purchase department, stores organiation and production department. #inally, his study highlighted the significance of materials management function in shipbuilding industry and suggested that the procurement policies, procedures and systems need to be improved to achieve higher operational efficiency in this critical area. In the year --@, (Ms) Prameela 2evi did a research work entitle d HMaterials Management in Public 4ector 3eavy 9ngineering Industry. * "ase 4tudy of 6harat 3eavy Plates and Kessels Limited, Kishakapatnam. 4he laid emphasis on the problems faced by materials management department in 63PK Limited. 4he did a comparative study of inventory management practices of 63PK with the public sector heavy engineering units. 4he found some weaknesses in the materials management function of 63PK and suggested some measures to turn
up the materials management function and for the overall performance of 63PK Limited. 4he highlighted the difficulties of materials management in !obbing industry like 63PK with that of the industrial units, which are of continuous process industry. The researcher observed that fre7uent changes taking place in materials management adversely affects the smooth functioning of materials management. 4he also observed that the number of items in the inventory is on the increase and she suggested that enforcing strict control on the delegation of powers should curb it. #or determination of the appropriate 7uantity to be procured and minimum capital without any delay in the production is of importance, in satisfying the conflicting interests. #or it, she gave some solutions like 4IM (selective inventory management) which consists of Pareto analysis (*6" analysis), criticality analysis (K92 analysis), movement analysis (#4F analysis) and availability analysis (492, 1;L#, 4;4 etc.). 4he further highlighted the deficiencies of the management and they are as follows.
*doption
of
inventory
control
methods
like
classification,
codification, and standardiation, variety reduction, value analysis, *6" analysis is not systematically implemented. 9conomic order 7uantity was not adopted. Kender rating techni7ues and value analysis were not followed. Materials management manuals were not even prepared in 63PK. 6uying cost or inventory carrying cost of materials was not worked out systematically. "omputeriation was not e&tensively done. 4o far, a good number of research studies were conducted by different researchers in different institutions in universities and they tried to cover all the aspects of materials management in both public sector and private sector industrial units located throughout the country. 6ut there was not even a single work done in the area of materials management in shipbuilding units managed by defence production department. *s such, researcher found this gap and took up the study of HMaterials Management in Indian 4hipyards> * "ase 4tudy of 1oa shipyard Limited. *part from the above research studies, as a result of growing awareness of the sub!ect, some studies were conducted in the area of materials and inventory
management which focuses attention on the e&isting policies, procedure s and problems. 4ome of them are> H=ationaliing Materials Management, (2atta *.D., --), H9ssentials of Materials Management, (1okarn P.=., -8@), HInventory Management, Te&t and "ases, (1opalakrishnan P. and 4andilya M.4., -A8), H4pare Parts Management, Te&t and "ases, (1opalakrishnan P. and 4undaresan M., -AA), HMaterials Management, Procedures Te&t and "ases, (2atta *.D., -8<), HManagement of Materials, ("howdary 6.D. =oy, -A-), HMaterials Management, (4harma P.".,-8@), HIntegrated Materials Management, (Patel, "huna Walla and Patel, -8<), HIntegrated Management> "oncepts and "ases, (Kerma M.M., -8<), These books are te&tual in nature, which e&plain mainly the functions, procedures and problems in the area of materials management, which mainly intended to cater the needs of students, researchers and professionals dealing with the sub!ect. 3owever, in some te&tbooks, some typical and useful case studies were discussed at length for the benefit of the readers. In addition to the above mentioned te&t books, which deal with all the aspects of materials management, thee are some other te&t books e&clusively on inventory management such as
Inventory Management in India ("handda =.4., -8<), Inventories in Indian Manufacturing (Drishna Murthy D. and 4astry 2./., -A),
Inventory Management (Institute for #inancial Management and =esearch, -8), Purchasing and Inventory Control (Menon D.s -8B),
Inventory Holding by Manufacturers in India and United States (Maumdar 3.D., and 4oloman M.:. -@),
Inventory Holdings by Manufacturers in India and United States (=a!eshwar =ao D. -8B),
Working Capital Planning and Control in Public nterprises in India! Problems of Working Capital (Mishra =.D., -AB),
Management of Working Capital (*garwal F.D., -8?). In all these books, an attempt had been made by the respective authors to e&plain the concepts, importance, tools and techni7ues and problems of inventory management with some case studies. #or instance, Drishna Murthy and 4astry have studied inventory behaviour of + industries comprising - per cent of output and -@ per cent of inventories of the group of the industries covered by the census of manufacturers. The study deals only with inventory holdings of the manufacturers and the analysis is mainly in terms of the prices prevailed during the study period. 4imilarly, the I#M=Gs survey HInventory Management summaries briefly the findings of four important surveys, it conducted in the area of inventory management practices in Indian industry. * study on control practices in Indian industry conducted by the faculty members of the :amnalal 6a!a! Institute of Management 4tudies, /niversity of 6ombay concluded that most of the companies were still guided by rules of thumb and intuition in deciding on how much capital to invest in inventory. ;ut of the ++< companies approached, ?@ responded and among them only ? reported using inventory control techni7ues. ;nly si& out of the ? companies took into account inventory costs in controlling inventories. The faculty members of the *dministrative 4taff "ollege of India made a survey on spare parts management practices in India in -AA. + organiations were covered under this study. The survey findings indicate that a ma!or bottleneck is the painful slow process of import substitution. This is mainly because inability of ancillaries to provide 7uality goods, scarcity of certain raw materials etc. The faculty membe rs of the *dministrative 4taff "ollege of India made another study on inventory management practices with a focus on the Tandon "ommittee recommendations concerning inventory norms. The study indicated that industries were found to carry by an large more stocks of raw materials including spare parts and imported items than the suggested norms by Tandon "ommittee. It also revealed that industries e&cept in engineering and te&tile
sectors were managing the workin5 progress inventory within the specified norms. To highlight the range of problems affecting inventory management and to get an appreciation of the techni7ues and practices adopted in the Indian conte&t and to tackle these problems, the I#M= has conducted an empirical study on inventory management practices in public sector undertakings and public limited companies in the private sector in -A-. While it was intended to cover + organiations, response was actually received from <8 organiations only. The study revealed that a ma!ority of the respondents gave high priority in inventory management, to the financial ob!ectives of ma&imiing the return on the investment. It also revealed that there is considerable scope for reducing the spares inventory in the engineering and process industries. There is a general lack of appreciation of the benefits of, and the need for integrated materials management. Most of the respondents viewed that materials management functions as a service centre, and a few conferred on it the status of a profit centre. In most instances, thee is a very strong case for the materials managemen t function to be elevated too much higher status with close and continuing association with top management. In addition to this, there are a number of reports submitted to the government from time to time. #or instance, the committee on public undertakings in its <th report on HMaterials Management, Parliamentary "ommittee on Public 4ector /ndertakings, pointed out source of the deficiencies in the realm of materials management of the public sector undertakings in India. The 6P9 J1uidelines for Materials Management in Public 4ector 9nterpriseG, 6ureau of Public 9nterprises, Ministry of #inance, 1overnment of India, Few 2elhi, -A- has issued guidelines on material management to the public sector undertakings to introduce modern methods and for improving their materials management function. The
administrative
reforms
commission,
=eport
on
Public
4ector
/ndertakings, Few 2elhi, -@A made some recommendations for reducing inventory levels. The =6I 4tudy 1roup, on the follow5up of 6ank credit,
6ombay, -AB was appointed to frame guidelines and to lay down norms for bank credit to be made applicable to all classes of industrial borrowers (popularly known as Tandon "ommittee report). It classified inventories and prescribed inventory norms for B industries. The #ifth report of the "ommittee on Inventory control, 6ureau of public enterprises (6P9), Ministry of #inance, 1overnment of India, Few 2elhi, -A+ appointed by 6P9 in -A+ e&amined inventories of the following three public sector undertakings vi".! 3industan 4hipyard Limited, 3industan "ables Limited, and Fational Mineral 2evelopment "orporation Limited. The committee fi&ed inventory levels for 34L and made some concrete recommen dations to reduce inventory levels in all the three undertakings. *part from the research studies conducted at various universities and institutions and te&tbooks published on the sub!ect, there are a few famous !ournals on materials management published in India. Though the !ournals, e&perts, professional and practitioners in the field of materials management have shared their thoughts in the form of writings. 3ereunder, an attempt has been made to review some of the important articles published in various !ournals in India. Pren. KratGs, JMaterials Productivity in Indian Industries,G published in Indian
Management! *ll Indian Management *ssociation, new 2elhi, 2ecember, -A8, highlighted the importance of increasing materials productivity in Indian industries. =avindra Dumar described materials management as a truly creative, productive and profit centre. =enuka =a!a 1opalanGs, JIncreased ProductivityG published in the Materials Manager! Indian Institute of Materials Management (IIMM), stressed the importance of productivity through efficient materials management in manufacturing enterprises. 4uresh DrishnaGs J=ole of Materials Management Professionals in Industrial 1rowth,G stressed the need for professionalism in materials management to achieve the organiational goals. Drishna 4wamy 4Gs JTrust The Dey to 6etter Materials ManagementG published in #he Materials Manager! Indian Institute of Materials Management (IIMM), emphasied the need for maintaining good vendor relations.
4omaya!ulu 4.K.=. highlighted an integrated view of the role of materials management in improving the profitability of the undertakings. *l Prased =Gs JIncreased Productivity through 6etter Materials ManagementG published in
#he Materials Manager , Indian Institute of Materials Management (IIMM), emphasied the need for proper planning and good inventory management systems in achieving
organiational
goals.
Parsed
Mukher!ee
4.D.Gs
JMaterials
Management in #ood "orporatio n of Indian (#"I) publi shed in $ok Udyog! Few 2elhi, felt that the key result areas in material function have a direct and important bearing on productivity or purchasing, transportat ion, materials handling and realiations from disposal of obsolete surplus and waste products in #ood "orporation of India (#"I)G. 3e also felt that the materials management is a profit center of great importance in industries where B to @ per cent of the cost of production is on materials and where the entire working capital is in the form of inventory. *ccording to Mahadevan, -8+, materials management is vital to corporate management and goals and no wonder it constitutes one of the B MGs of the corporate Marketing Management by sales, Man Management by personnel, Money management by #inance, Machine Management by workersG factory , Materials management by Materials. 1urani K.1. emphasied the need for cost reduction and cost savings in the area of materials management by a combined approach and teamwork of all persons in the organiation. Mahalanobis P."Gs, J* Few Look at Materials Management,G published in #he Materials Manager! Indian Institute of Materials Management (IIMM), stressed the need for materials management in improving productivity. 3e stressed the need for total materials control to achieve better results. 4reenath 3.=.Gs, JMaterials Management in a 4teel PlantG, viewed the importance of the role of materials management in the productivity of steel plants. 3e suggested regular interaction between materials management
groups,
centralied
procurements,
e&tensive
use
of
computeriation etc., to improve the productivity of steel plants. 4ari, *.=. (-AA) in his article JMaterials Management in the Industrial 9conomyG, published in #he Indian %uyer highlights the importance of modern materials
management in the present competitive market. The author has discussed in details the silent points to curb and control e&cess inventory. 3e also stressed on the purchasing function at large. JMaterials Management in Process IndustriesG, an article published in #he Materials Manager by "handramouli. D. published by Indian Institute of Materials Management (IIMM), in -8?, differentiated the materials management function between engineering and processing industries. 3e highlighted the problems of materials management in the process industry. =amaswamy 4., in his article J9ffective Materials Management5key to ProductivityG, in #he Materials Manager , published by Indian Institute of Materials Management (IIMM), -8?, highlighted the importance of materials management function to contribute effectively to the productivity of the organiation. 3ans 6usch #. viewed materials management as a total concept involving organiational structure unifying a single responsibility, the systematic flow and control of materials. 3e stressed the need for implementing modern concepts in materials management. Madho Farain stressed the need to develop professional personality and other managerial virtues for the people working in the materials management area in his article JMaterial manager in the managerial hierarchy of the Indian industryG. Dapok M.L.Gs article, JProductivity in Materials ManagementG, in
#he Materials Manager !ournal published by Indian Institute of Materials Management in -88, felt that materials management can contribute to the growth and profitability of an organiation to achieve better productivity in materials management. 3e suggested to maintain good relationship with the suppliers and to remove the fear comple& of stock outs. =ama Drishna =ao 6., in his article J4ome Problems of Materials ManagementG, reviewed the inventory position in central public sector heavy engineering units and highlighted the problems faced by engineering units in particular and all central public sector undertakings in general. =oy "howdhury 6ipul D.Gs JMaterials Management *vailability =esearchG article outlined some of the salient points necessary for the development and disposal of availability research in the area of materials management. 4ome methods are also discussed and these can be used for setting certain types of research
work. =ao and =ama =ao, in their article JInformation and Material Management,G published by the conomic #imes in -AA, have emphasied the need for constructive information system to the materials management sphere to achieve good results. *disesh Iyer, discussed the methods of valuing inventories in his article JInventory "ontrolG, published by #he Chartered &ccountant !ournal. 3e is of the opinion that the work5in5pr ogress inventories have to be valued as per the cost account ledgers instead of attempting physical valuation. Dulkarni, P.K., (-AA) discussed *6" analysis techni7ues at a length in his article J*6" analysis> * Techni7ue of Inventory ManagementG. Pillai and *shok *garwal discussed the inventory management in Indian *ir Transport Industry and found its weaknesses and suggested remedial measures for efficient inventory management. =ao D.KGs, article JTechni7ues of Inventory ManagementG in #he conomic #times considered fou r costs vi".! replenishment cost, inventory carrying cost, under5stocking cost and overstocking cost in developing an inventory system. 1opalkrishnan P., in his article published in #he Hindu entitled JImportance of Inventory controlG, stressed the need for inventory control in view of the Tandon "ommittee norms and suggested some methods to control inventor ies. 1angahara =ao M. and =ama Dishan =ao 6. analyed the trend s in inventory levels besides bringing into focus the causes for inventory accumulation in all central public sector undertakings during the period from -A5A to -A85A-. 1anesh Dulkarni highlighted the problems of valuation of work5inprogress in the conte&t of identification of materials and valuation in his article (-8?) JWork5in5progressG. =amakishna =ao 6. in his thesis JInventory control in public sector unitsG highlighted the problems of inventory control in public sector units and he classified the costs for inventory accumulation as internal and e&ternal. *ccording to him, unrealistic government policies with regard to import licences and erratic delivery schedules and long lead times are responsible for inventory accumulation in public sector units. =ao and 1upta viewed that the effective management of inventory reduces the cost of production and conse7uently increases the profitability of the enterprises. *ll the above research studies conducted at
various universities in India and other published research studies and surveys in this area and te&t books brought out and research papers published in !ournals, newspapers etc., revealed that the various facets of materials management have not been fully developed and are not satisfactory. There is no common opinio n on what functions have to be covered under the preview of materials management. 9ven the method, techni7ues, procedures and systems suggested by various authors to control the inventories varied widely. 3owever, the materials management has been identified as the most potential area of prime importance to increase the productivity and efficiency of an organiation. 9ven then, serious attempts of research have not been made in this area. The present study has been to some e&tent able to highlight the importance of the materials management as one of the important functional areas in an industry like shipbuilding.
2.2 THE RESE)RCH (ODE'
#irm performance
Management costs "ycle time
Turnover Poor customer service
Production fle&ibility 2elivery performance Perfect order performance 95business performance
IFK9FT;=9S M*F19M9FT
Loss of cost effectiveness Increased e&penditure
$. (ETHODO'O+Y $.1. RESE)RCH DESI+N =esearch design is systematic planning of research, usually including the formulation of a strategy to resolve a particular 7uestion the collection and recording of the evidence the processing and analysis of these data and their interpretation and the publication of results. *good research design must possess the important features of ob!ectivity, reliability, validity and generaliation. The research desig n followed to study the inventory management in the company is descriptive and analytical research design.
$.2. PROB'E( ST)TE(ENT * study of inventory management at leading cement "ompany is undertaken in order to know the inventory performance and position of the company and to know the strength and weakness of the company. Inventories constitute most significant part of assets of large ma!ority of the companies in India .Inventory a double edged sword is usually an asset of an organiation, if not used properly it will become liability .It is therefore absolutely very important to manage inventories efficiently and effectively in order to overcome unnecessary investment. *nd HTo identify the problems0challenges involved in the Inventory Management process at this company.
$.1 PERIOD OF STUDY
The study is conducted in
Primary source Primary data were collected through direct observations of various functions in the ;rganiations, through 7uestionnaire and from various department heads ,and also from the interviews. 4econdary source 4econdary data were collected from official documents like their annual report, company profile, organiation manuals and from the company websites and previous study reports.
This study is more based on secondary source of data that are collected through annual reports of the company.the data collection was aimed at study of effectiveness of inventory management of the company.
$.%. ST)TISTIC)' TOO'S USED
The various statistical tools used for data analysis is as follows>
Tables
1raphs
)"a3ytica3 t!!34 54e# i" ti4 4t5#y are ,
=atio analysis *bc analysis
%. D)T) )N)'YSIS )ND INTERPRET)TION
)BC )N)'YSIS )30ay4 Better C!"tr!3)
cate6!ry
!t!ta3"5mber
! t!ta3 materia3
! item4
c!4ta35e
)
1;
;
B
2;
2;
C
;
1;
Interpretation "ategory * materials represent AC of the total materials cost ,but it constitutes only C of the items or 7uantity(high value materials). "ategory
6 materials represent +Cof the total materials cost ,constitutes
+C of the material items(middle value materials). "ategory " though constitutes AC of the total items ,it represents only C ;f the total value(low value materials). Thus ,this analysis assumes that smaller number of items in inventory may have large money value,and the larger number of items have smaller money value.
R)TIO )N)'YSIS St!c@ t5r"!er rati! Tab3e 1, St!c@ T5r"!er Rati! i" Time4 i" 'a@4
year
Netsales
Average inventory
Stock Turnover Ratio
2009-10
18941.39
4498.07
4
2010-11
27770.44
!48.2!
2011-12
29818.21
134.7!
!
2012-13
2940!.17
9003.01
3
2013-14
27308.11
!!1.9!
4
stock turnover ratio 1! 14 12
Stock Turnover Ratio
10 8 ! 4 2 0
2009-10 2010-11 2011-12 2012-13 2013-14
Fi65re 1, St!c@ T5r"!er Rati!
St!c@ !3#i"6 rati! i" #ay4 Tab3e 1, St!c@ !3#i"6 rati!i" #ay4i" 3a@4
Sear 4tock turnover ratio(in times)
+-5 <
+5 B
+5+ @
++5? ?
+?5< <
aera6e <.<
4tock holding ratio(in days)
-
A?
@
++
-
8A.@
stock holding ratio 140 120 100 80
Stock "ol#ing ratio$in #ays%
!0 40 20 0
Fi65re 1, St!c@ !3#i"6 Rati!
&. FINDIN+SA SU++ESTIOS )ND CONC'USIONS &.1 FINDIN+S This study on the effectiven ess inventory management at Malabar "ementes Limited,Walayar, Palakkad help to find out the efficiency of at the organiation. The findings of the research from the study as follows>
This analysis assumes that smaller number of items in inventory may have large money value, and the larger number of items
have smaller money value. 6ased on stock turnover ratio , it indicates that the firmGs stock is turned over or converted into stock only @ times on an
average during the accounting period. The goods are lying in stock for 88 days.thus the inventory policy or management is poor.
&.2 SU++ESTIONS
/nder the *6" analysis, the management must have more control on " items than that on * E 6 items, because " class constitutes more of higher values. There should not be tight control e&ercised on stock levels, to avoid deterioration. This is done through maintaining low safety stock levels, continuous check on schedules E ordered fre7uently in inventories, in order to avoid over investment of working
capital. The inventory turnover ratio indicates whether investment in inventory is within proper limit. It also measures how 7uickly inventory is sold. It re7uires maintaining a high turnover ratio than lower ratio. * high turnover ratio implies that good inventory management and timely the inventories are being replenished, also reflects efficient business
activities. The management of the plant should incorporate TNM (Total Nuality Management), particularly in all departments of production to ensure better sales and reduce the inventory of finished products.
&.$ CONC'USIONS
In this study, a better inventory management will surely be helpful in solving the problems the company is facing with respect to inventory and will pave way for reducing the huge investment or blocking of money in inventory. Inventory is the physical asset of a company that can create problem if there is shortage, while in production and also if itGs in e&cess even after production. Inventory is constantly changing as 7uantities are sold and replenished.4ince the Inventory Turnover =atio shows the increasing trend, there will be more demand for the products in the future periods. If they could properly implement and follow the norms and techni7ues of inventory management, they can enhance the profit with minimum cost. #rom the study it is predicted that future sales have to be achieved and inventory level have to be maintained. The company has to periodically review the inventory to avoid production loss. 3ence it can be understood that efficient inventory management can take the company to new heights and inefficient inventory management can ruin the company.
BOO8S
*.KIF;2,"*LI"/T /FIK9=4ITS(+)
