Material Management And Control With Reference To KS & DL Chapter - 1

Material Management And Control With Reference To KS & DL Chapter - 1

CHAPTER 01INTRODUCTION1.1 INTRODUCTION TO MATERIALSMaterials are one of the important basic items in production. Materials cost constitutes the first and the most important elements of cost. It is used in any manufacturing industry. The word material cover raw-materials, semi-finished materials, spare parts and components consumable store and packing materials.As materials constitute a very significant of total cost of finished project in most of the manufacturing industries. Hence, a proper recording and control over the material costs is essentials. Material represents large investment of capital and a substantial percentage of cost of production. Therefore, there exists on obvious need for effective material management in a organization. Material management considers both the theory of costing materials and inventories and machines of cost calculations and record keeping.1.2 TYPES OF MATERIALS In any manufacturing industry the materials are classified into two types they are: A. Direct materials. B. Indirect materials. A. Direct materials: Direct materials are those materials, which can be identified or readily traced with the cost objective which may be a project, a group of products a customer an order or a project. A direct material is capable of being obviously linked with the cost objective. Materials are classified as direct because of their importance rather than physical conclusion is the end product. Direct materials have the following features. Specific purpose: Material passing from one process to another requires a specific material. Therefore materials are used for a specific job or a production order. Production process: Material passing from one process to another process where in the finished materials of one process becomes raw materials for next process. The materials passes through the entire production process upto the end product obtained. Acquisition expenses: Charges incurred for acquiring the materials for production purposes charges as freight, taxes and acquisition charges. B. Indirect materials: Indirect materials are material traceable to finished product. Examples are oils greases, waste materials, blooms, rags, cleaning materials. Sometimes the cost of materials is difficult to assign therefore it is treated as indirect materials.1.3 REQUISITES FOR MAINTAINING RECORDS FOR MATERIAL CONTROLA proper recording and control over the material costs is essential because of the following reasons. Determination of quality of product:The exact quality of the specification of materials required should be determination according to the required quality of the product. If superior quality of materials were purchased it would mean higher cost due to high prices. if the quality of materials purchased is too low, the product will be of lower quality. Price influenced by cost:The price paid should be the minimum possible otherwise the higher cost of the finished products would make the product uncompetitive in the market due to its higher price for the product. Prevent from interruption: There should be no interruption in the product process for want of materials and stores including oil for a machine. Sometimes there will be out of stock situation may lead to stoppage of machines. Fixation of levels: Based on the type and requirement materials are valued and level are fixed this is mainly to control materials as per the usage and amount invested. Avoid unnecessary locked up to funds: There should be no over stocking of materials because that would result in lost of interest charges, higher godown charges, determination in quality and losses. 1.4 INTRODUCTION TO MATERIAL MANAGEMENT Material management is a function responsible for coordinating of planning, sourcing, purchasing, moving, storing and controlling materials in a useful manner so as to provide predetermined services to the customer at a minimum cost. Every material manager should try to apply proper material planning, purchasing, handling, storing, materials so as to achieve the desired objective of stock holding costs. This has necessitated professional management function which demands an ability to bring together conflicting and yet interrelated functions viz, materials planning, purchasing, receiving and inspection, stores, inventory control, scrap and surplus disposal. The economic pressure in the form of inflation and credit squeeze have placed exacting demands on the materials manager. The important advantages of integrated materials management are better accountability, better performance and better growth and adaptability to electronic data processing. 1.5 DEFENITION OF MATERIAL MANAGEMENTMaterials management can thus also be defined as a joint action of various materials activities directed towards a common goal and that is to achieve an integrated management approach to planning, acquiring, processing and distributing production materials from the raw material state to the finished product state.

1.6 Materials Management's scope:The scope is vast. Its sub functions include Materials planning and control, Purchasing, Stores and Inventory Management besides others.Basically, under its scope are:1.Emphasis onthe acquisition aspect.2. Inventory control and stores management.3. Material logistics, movement control and handling aspect.4. Purchasing, supply, transportation, materials handling etc.5. Supply management or logistics management.6. All the interrelated activities concerned with materials.

1.7 Objectives: To identify personnel authorized, responsible and verify the activities of materials management function for effective functioning of quality system. The objective of materials management may be subdivided into primary and secondary objective.The primary objective are as follows:1. Maintaining continuity of supply with consistency of quality.2. Minimizing investments in inventories.3. Assuring a high inventory turnover.The secondary objective are:1. Material cost reduction through simplification, standardization, value analysis inventory control etc.,2. Co-coordinating the functions of planning, scheduling, storage, materials handling traffic etc.,3. Development of personnel relating to materials management.1.8 FUNCTIONS OF MATERIAL MANAGEMENTThe functions of materials management include:A. Material requirement planning [MRP]B. PurchasingC. Receiving and inspection of materialsD. StoresE. Materials handlingF. Dispatch of finished goodsA. Material requirement planning:The activities involved in material requirement planning are as under:1. Requirement planning of materials2. Indent amendments generation3. Material clearance4. Fixation of target sales5. Production planningB. Purchasing:The activities involved in purchasing process are as under:1. Receipt of indent and amendment and registration2. Tender3. Placement of purchase order4. Follow up purchase order5. Vendor performance evaluation6. Insurance coverage7. Licensing for imported items8. Clearance of imported consignmentsC. Receiving and inspection of materials:The activities involved in inspection process are as follows:1. Quality checking2. Checking sample in laboratory3. Comparing samples with actual specification in purchase order4. Checking the required utility for consumption purpose5. Inspecting quality of materials before placing bulk orders6. Rejecting samples if the does not match with the specificationD. Stores:Stores function consists of the following activities:1. Materials receipt and identification2. Recording in related documents3. Insurance coverage4. Storage, preservation and issue of materials5. Classification and codification of materials 6. Physical verification7. Inventory controlE. Materials handling:Materials handling function consists of following activities:1. Procurement of materials2. Delivery of materials at plant3. Finished products handled at the time of packing4. Dispatch of finished productsD. Dispatch of finished products:The activities included are:1. Selection of transport carriers2. Disposal of scrap3. Dispatch of goods at warehouse4. Proper storage and handling of finished goods channel of distribution1.9 ORGANIZATION CHART OF MATERIAL MANAGEMENT.Material management is structured on the basis of functions such as stores, transport, receiving and purchase and inventory control. Stores for manufacturing divisions will be under one individual who will report of the material management. All purchasing activities will be again under one individual who will report to the chief material managers.

The organization chart of material management is as follows.

1.10 PRODUCTS GROUPThe important product groups are:1. Soaps2. Detergents 3. Agarbathies4. Talcum powder5. Cosmetics

1.11 MATERIAL CONTROLMaterial control is the regulation of the function of organization, relations to the procurements, storage and usage and of materials in such a way as to maintain in such a way as to maintain an even flow of production without excessive investment in material stock.1.12 MEANING AND DEFINITIONMaterial control is defined as safeguarding of companys property in the form of materials by a proper system of recording and also maintain them at the optimum level considering operating requirements and financial resources of the business.1.13 ADVANTAGES OF MATERIAL CONTROLThe material control system is follows: 1. Effect purchases of materials of the right quality consistent with the standards prescribed in respect of the finished products.2. To process materials with acceptable commercial term with a view to effecting maximum economy in the cost of buying.3. To make available on assured supply of materials, so as to keep the cycle of production going without any interruption.4. To ensure effective utilization of materials 5. To prevent overstocking of materials and the consequent locking of working capital.

1.14 MATERIAL CONTROL IN KS &DLProduction planning and control:Preparation of detailed of products and materials required to be purchased in order to realize linked production programs or sales forecast approved by the top management.Control of loading and other activities to be carried out concurrently to avoid holdups in production.

Storage exercises:Control of physical materials exercising control over materials in stock to prevent physical deterioration of theft etc.,Inventory planning and control: Control over policies and procedures to regulate systematically the materials kept in stock.External transport:Control of efficient usage of external transport activities. These activities are concerned with the movement of materials from suppliers to the manufactures and from the manufactures to customers.Internal transport and materials handling:Control over the efficient use of materials transport and materials instruments. The internal transport and material handling tools are used for movement of materials from one point to another within factory premises.

ConclusionTherefore proper materials control results in continuous production activities which is all supported by other activities such as purchasing, stores, accounting, control and consumption. Proper delivery and usage of materials can make the production activities a successful completion. 1.15 FINANCE Financial Management is nothing but management of the limited financial resource the organization has, to its utmost advantage. Resources are always limited, compared to its demands or needs. This is the case with every type of organization. Proprietorship or limited company, be it public or private, profit oriented or even non-profitable organization. It was a branch of economics till 1890, and as a separate discipline, it is of recent origin. Still, it has no unique body of knowledge of its own, and draws heavily on economics for its theoretical concepts even today. 1.16 IMPORTANCE OF FINANCEIn general, the term Finance is understood as provision of funds as and when needed. Finance is the essential requirementsine qua non-of every organization.Required Everywhere: All activities, be it production, marketing, human resource development, purchases and even research and development, depend on the adequate and timely availability of finance both for commencement and their smooth continuation to completion. Finance is regarded as the life-blood of every business enterprise.

Efficient Utilization More Important: The efficient management of business enterprise is closely linked with the efficient management of its finances. The need of finance starts with the setting up of business. Its growth and expansion require more funds. Needless to say, profitability of any firm is dependent on its as well as its efficient utilization.1.17 CONCEPT OF FINANCIAL MANAGEMENT Financial management is that managerial activity which is concerned with the planning and controlling of the firms financial resources. It is an integrated decision making process concerned with acquiring, financing and managing assets to accomplish the overall goal of a business organization . It can also be started as the process of planning decisions in order to maximize the shareholders wealth. Financial managers have a major role in cash management, acquisition of funds and in all aspects of raising and allocating capital. As far as business organizations are concerned, the objective of financial management is to maximize the value of business.Financial Management deals with procurement of funds and their effective utilization in the business- S.C. Kuchhal. From his definition, two basic aspects emerge: Procurement of funds. Effective and judicious utilization of funds.Financial management has become so important that is has given birth to financial Management as a separate subject.

1.18 SCOPE OF FINANCIAL MANAGEMENT An integral part of the overall management, financial management is mainly concerned with acquisition and use of funds by an organization. Based on financial management Guru Ezra Solomons concept of financial management, following aspects are taken up in detail under the study of financial management: Determination of size of the enterprise and determination of rate of growth. Determining the composition of assets of the enterprise. Determining the mix of enterprises financing I, e. consideration of level of debt to equity, etc. Analyze planning and control of financial affairs of the enterprise.1.19 AIMS OF FINANCE FUNCTION The following are the aims of finance function:Acquiring sufficient and suitable funds: If the funds are not available as and when required, the firm would be, definitely, affected.Proper utilization of funds: It is more necessary that careful planning and cost- benefit analysis should be made before the actual commencement of projects.Increasing profitability: To achieve profitability, the cost of funds should be low. Idle funds do not yield any return, but incur cost. So, the organization should avoid idle funds.Maximizing firms value: The ultimate aim of finance function is maximizing the value of the firm, which is reflected in wealth maximizing of shareholders.

1.20 FUNCTIONS OF FINANCEFinancial Decisions or finance functions are closely inter-connected. When a decision involves finance, it is a financial decision in a business firm. We can classify the finance functions or financial decision into four major groups:1.Investment Decision: Investment decision relate to selection of assets in which funds are to be invested by the firm. Resources are scarce and limited. Assets can be classified, under two broad categories: Long term Investment Decisions-Long-term assets: The long-term capital decision are referred to as capital budgeting decision, which relate to fixed assets. The fixed assets are long term, in nature. Basically, fixed assets create earnings to the firm. Short-term Investment Decisions-Short- term assets: The short-term investment decisions are, generally, referred as working capital management. The finance manager has to allocate among cash and cash equivalents, receivables and inventories.2. Finance decision: Finance decision is concerned with the mix or composition of the sources of raising the funds required by the firm. In other words, it is related to the pattern of financing. In finance decision , the finance manager is required to determine the proportion of equity and debt, which is know as capital structure. There are two main sources of funds, shareholders funds (variable in the dividend) and borrowed funds (fixed interest- bearing). 3. Liquidity Decision: Liquidity decision is concerned wit the management of current assets. Basically, this is working capital management. Working capital Management concerned with the management of current assets. It is concerned with short-term survival. Short term- survival is a prerequisite for long-term survival. 4. Dividend Decision: The term dividend relates to the portion of profit, which is distributed to shareholders of the company. It is a reward or compensation to them for their investment made in the firm. The dividend can be declared from the current profit or accumulated profits.1.21 ROLE OF FINANCE MANAGERThe role of finance manager, in a modern business, is pervasive in all the activities of business firm, including production and marketing. To sum up, finance function or decisions include the following important areas, where the finance manager has to contribute: Investment decision or long term assets-mix decision Finance decision or capital-mix decision Liquidity decision or short-term assets mix decision Dividend decision or profit allocation decision1.21 INTRODUCTION TO INVENTORYInventories constitute the most significant part of current assets of a large majority of companies in India. On an average, inventories are approximately 60 per cent of current assets in public limited companies in India. Because of the large size of inventories maintained by firms, a considerable amount of funds is required to be committed to them. It is, therefore, absolutely imperative to manage inventories efficiently and effectively in order to avoid unnecessary investment. A firm neglecting the management of inventories will be jeopardizing its long-run profitability and may fail ultimately. It is possible for a company to reduce its levels of inventories to a considerable degree, e.g., 10 to 20 per cent, without any adverse effect on production and sales, by using simple inventory planning and control techniques. The reduction in excessive inventories carries a favorable impact on a companys profitability.

1.22 PROBLEMS OF INVENTORYIn the context of inventory management, the firm is faced with the problem of meeting two conflicting needs: To maintain a large size of inventories of raw material and work-in-process for efficient and smooth production and of finished goods for uninterrupted sales operations. To maintain a minimum investment in inventories to maximize profitability.Both excessive and inadequate inventories are not desirable. These are two danger points within which the firm should avoid. The objective of inventory management should be to determine and maintain optimum level of inventory investment. The optimum level of inventory will lie between the two danger point of excessive and inadequate inventories.The firm should always avoid a situation of over investment or under-investment in inventories. The major dangers of over investment are: (a)unnecessary tie-up of the firms funds and loss of profit, (b) excessive carrying costs, and (c) risk of liquidity.1.23 LEVEL OF INVENTORIESMaintaining and inadequate level of inventories is also dangerous. The consequences of under-investment in inventories are (a) production hold-ups and (b) failure to meet delivery commitments. An effective inventory management should Ensure a continuous supply of raw materials to facilitate uninterrupted production. Maintain sufficient stocks of raw materials in periods of short supply and anticipate price changes. Maintain sufficient finished goods inventory for smooth sales operation, and efficient customer service. Minimize the carrying cost and time, and Control investment in inventories and keep it at an optimum level. Ideally, the material control must ensure that the following requirements are fully met: There should be proper coordination and cooperation between various departments dealing in materials; viz., purchasing department, stores department, receiving and inspecting department, accounting department, etc. There should be central purchasing department under the control of a competent and expert purchase manager. There should be proper classification and codification of materials. Materials requirements should be properly planned. The perpetual inventory system should be operated so that up-to-date information is available about the quantity of materials in stock. Adequate records should be introduced to control materials during production and quantities manufactured for stock. The storage of all materials should be well-planned subject to adequate safeguards and supervision. The various stocks levels like minimum, maximum, etc., should be fixed for each item of material. Purchase of materials should be controlled through budgets. An efficient system of internal audit and internal check should be operated so that all transactions involving materials are checked by reliable and independent persons. There should be regular reporting to management regarding purchases, issues and stock of materials. Special reports should be prepared for obsolete items, spoilage, returns to suppliers, abnormal losses, etc.

1.24 NEED TO HOLD INVENTORIES Maintaining inventories involves tying up the companys funds and incurrence of storage and handling costs. If it is expensive to maintain inventories, why do companies hold inventories? There are three general motive for holding inventories.Transaction motive emphasizes the need to maintain inventories to facilitate smooth production and sales operations.Precautionary motive necessitates holding of inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors.Speculative motive influences the decision to increase or reduce inventory levels to take advantage of price fluctuations.A company should maintain adequate stock of material for continuous supply to the factory for an uninterrupted production. If is not possible for a company to procure raw materials whenever it is needed.1.25 TYPES OF INVENTORY Inventories may be held for a variety of purposes, but general, there are five types of inventories that an organization can use for serving these purpose. There are:Movement of inventories: Movement of inventories are also called transit or pipeline inventories. Their existence owns to the fact that transaction time is involved in transferring substantial amount of resources.Buffer inventories: buffer inventories are held to protect against the uncertainties of demand and supply. And organization generally knows the average demand for various items that it needs.Anticipation inventories: anticipation inventories are held for the reason that a future demand for the product is anticipated.Decoupling inventories: the idea of the decoupling inventories is to decouple, disengage, different parts of the production system. As we can observe easily, different machines or equipment and people normally work at different rates-some slower and some faster.Cycle inventories: cycle inventories are held for the reason that purchases are usually made in lots rather than for the exact amounts which may be needed at a point of time. Of course if all purchases are made exactly as and when the item is required, there would be no cycle inventories. But, practically, then the cost involved in obtaining the items would be very large.1.26 INVENTORY COSTS In determining an optimal inventory policy, the criterion most often is the cost function. The classical inventory analysis identifies four major cost components. Depending on the structure of an inventory situation, some, or all, of these are included in the objective function.1. Purchase cost: This refers to the nominal cost of inventory. It is the purchase price for the items that are bought from outside sources, and the production cost if the items are purchased within the organization. This may be constant per unit, or it may vary as the quantity purchased or produced increases or decreases.2. Ordering cost or set-up cost: The term ordering costs is used in case of raw materials (of supplies) and includes the entire costs acquiring raw materials. They include costs incurred in the following activities: requisitioning, purchase ordering, transporting, receiving, inspecting, and storing (store placement). Ordering costs increase in proportion to the number of orders placed.

3. Carrying costs: costs incurred for maintaining a given level of inventory are called carrying costs. They include storage, insurance, taxes, deterioration and obsolescence. The storage costs comprise cost of storage space (warehousing), stores handling costs and clerical and staff service costs (administrative costs) incurred in recording and providing special facilities such as fencing, lines, racks etc.

Ordering and carrying costsOrdering cost Carrying costsRequisitioning WarehousingOrder placing HandlingTransporting Clerical and staffReceiving, inspecting and storing Insurance Clerical and staff Deterioration and obsolescence5. Stock out costs: stock out cost means the cost associated with not serving the customers. Stock outs imply shortages. If the stock out is internal it would imply that some production is lost. While if the stock out is external, it would result in a loss of potential sales and/or loss of customer goodwill.1.27 STOCK LEVELSOne of the major objectives of a system of material control is to ensure that there are no under stocking and overstocking. A scientific approach to achieve this objective is to adopt a system of stock levels. These levels are maximum level, minimum level. Re-order level and re-order quantity. Maximum level: the maximum stock level is the level above which stocks should not normally be allowed to rise. It is the maximum quantity of a material that may be in store. The following factors are considered while fixing this level.

1. Rate of consumption of the material, 5. Cost of storage,2. Storage space available, 6. Insurance costs,3. Amount of capital needed, 7. Bulk purchase of seasonal materials, 4. Risk of obsolescence and deterioration, 8. Re-order quantity for the material.Formula: = Re-order level + Re-order quantity (minimum consumption * minimum re-order period)Minimum level: minimum level is that below which stock should not normally be allowed to fall. In case any item of materials fall below this level, there is a danger of stoppage in production and top priority should be given tot the purchase of new materials. I setting this level, the following factors must be taken into account.1. Rate of consumption of material,2. Time required obtaining delivery of the new materials,3. Re-order level.Formula: = Re-order level (Normal consumption* Normal re-order period) Re-order level: this is that level of material at which a new order for material is placed. It is at this level that purchase requisition is made out. This level is above minimum level but below maximum level. It is after a consideration of the following factors:1. Rate of consumption of material,2. Minimum level,Lead time or delivery time, i.e., the normally taken from the time of raising purchase requisition to receipt of materials. Formula: = (Maximum consumption * Maximum re-order period)Danger level: this is a level at which normal issue of material are stopped and urgent action is taken for purchase of materials so that production is not interrupted due to shortage of materials.Formula: =Average or normal consumption * Maximum re-order period for emergency purchasesAverage stock level: average stock level is calculated by the following formula: Average stock level = minimum level + maximum level 2Average stock level may also be computed by the following formula:Average stock level = minimum level + (Re-order quantity)1.28 SELECTIVES APPROACHES TO INVENTORY CONTROLIn practice, all items of inventory cannot, and need not, be controlled with equal attention. An effective inventory calls for an understanding and knowledge of the nature of inventories. Here we shall consider the following types: ABC; JIT; Out sourcing; Computerized Inventory control systems; VED; HML; SDE; S-OS; FNS; XYZ; 1. Re-order quantity (or Economic Order Quantity)Re-order quantity is the quantity to be ordered whenever materials are to be purchase. By setting this quantity, the buyer is saved the task of re-calculating how much he should buy each time he orders. This quantity may, of course, be revised if circumstances warrant it.Re-order quantity is sometimes known as economic order quantity because it is the quantity which is most economic to order. In other words, economic order quantity is the size of the order which gives maximum economy in purchasing any material and ultimately contributes towards maintaining the material at the minimum cost. It equates the cost of ordering with the cost of storage of materials. Economic order quantity may be determined by the following formula:EOQ = 2.A.B/C.S Where EOQ = Economic order quantity A = Annual consumption B = Buying cost per order C = Cost of unit of materials S = Storage and carrying cost percentage of costAlternatively, EOQ = 2.A.B/S Where S = Storage cost per unit per annum 2. ABC Inventory Control System:The firm should be selective in its approach to control investment in various types of inventories. This analytical approach is called the ABC analysis and tends to measure the significance of each item of inventories in terms of its value. The high-value items are classified as A items and would be under simple control. C items represent relatively least value and would be under simple control. B items fall in between these two categories and require reasonable attention of management. The ABC analysis concentrates on important items and is also known as control by importance and exception (CIE). As the items are classified in the importance of their relative value, this approach is also known as proportional value analysis (PVA).The following steps are involved in implementing the ABC analysis: Classify the items of inventories, determining the expected use in units and the price per unit for each items. Determine the total value of each item by multiplying the expected units by its units price. Rank the items in accordance with the total value, giving first rank to the item with highest total value and so on. Compute the ratios (percentage) of number of units of each item to total units of all items and the ratio of total value of each item to total value of all items. Combine items on the basis of their relative value to form three categories- A, B & C.3. Just in-time (JIT) Systems:Japanese firms popularized the just-in-time system in the world. In a JIT system material or the manufactured components and parts arrive to the manufacturing sites or stores just few hours before they are put to use. The delivery of material is synchronized with the manufacturing cycle and speed. JIT system eliminates the necessity or carrying large inventories and thus, saves eliminates the necessity of carrying large inventories. The system requires perfect understanding and coordination between the manufacturer and suppliers in items of the timing of delivery and quantity of the material. Poor quality materials or components could halt the production. The JIT inventory system complements the total management (TQM). The success of the system depends on how well a company manages its suppliers. The system puts tremendous pressure on suppliers. They will have to develop adequate systems and procedures to satisfactory meet the needs of manufactures4. out sourcing:A few years ago there was a tendency on the parts of many companies to manufacture all components in-house. Now more and more companies are adopting the practice out-sourcing. Out-sourcing is a system of buying parts and components from outside rather than manufacturing them internally. Many companies develop a single source of supply, and many others help developing small and middle size suppliers of components that they require. 5. Computerized inventory control systems:More and more companies, small or large size, are adopting the computerized system of controlling inventories A computerized inventory control system enables a company to easily track large items of inventories. It is an automatic system of counting inventories, recording withdrawals and revising balance. There is an in-built system of placing order as the computer notices that the reorder point has been reached. The computerized inventory system is inevitable for large retail stores, which carry thousands of items. The computer information of the buyers and suppliers are link to each other. as soon as the suppliers computer receives an order from the buyers system, the supply process is activated. 6. VED Analysis:In VED analysis, the items are classified on the basis of their critically to the production processor other services. In the VED classification of materials, V stands for vital items without which the production would come to a stand still. E in the system denotes essential item whose stock out adversely affect the efficiency of the production system. Although the system would not altogether stop for want of these items, yet their non availability might cause temporary losses in, or location of, production. The D items are the desirable items which are required but not immediately cause a loss of production. The VED analysis is done mainly in respect of spare part. 7. HML analysis:This is similar to the ABC analysis except that, in this analysis, the items are classified on the basis of unit cost rather than their usage value. The items are classified accordingly as their cost for unit is H-high, M-medium, or L-low. This type of analysis is useful for keeping control over materials consumption at the departmental level. 8. SDE ANALYSIS:This uses the criterion of the availability of items. In this analysis, S stands for scarce item which are In short supply. D refers to the difficult items-meaning the items might be available in the indigenous market but cannot be procured easily; while E represents Easily available items, from the local markets may be.9. S-OS analysis: S-OS analysis is base on the nature of suppliers, wherein S represents the seasonable items and OS represents the Off-seasonable items. This classification of item is done with the aim of determining proper procurement strategies.10. FSN Analysis:Based on the consumption pattern of the items, the FSN classification calls for classification of items, as Fast-moving, Slow-moving, non-moving. Some analysts classify the items as FNSD; Fast moving, Normal-moving, Slow-moving, and Dead (or non-moving). This speed classification helps in the arrangement of starts in the stores and in determining the distribution and handling patterns.11. XYZ Analysis: XYZ analysis is based on the closing inventory value of different items. Items, whose inventory values are high, are classed as X items while those with low investment in them are termed as Z items. Other items are the Y items whose inventory value is neither too high not too low.1.29 CHARACTERISTICS OF INVENTORIES It represents a financial investment of a company. It is a part of the goods sold and are therefore a business expenses. In an inventory use storage space require handling insurance and sometimes deteriorate becomes absolute or gets lost or stolen. The availability of the right time at the right item is necessary for operating any production process or satisfying a demand by a customer for a finished product. Inventories are not self correcting. They must be managed effective and management requires measure of performance.1.30 METHODS OF PRICING MATERIAL ISSUESIt should be noted that methods discussed here are methods of pricing the issue of materials and not the methods of physically issuing materials.Some of the important methods of pricing issues are as follows:1. FIRST-IN-FIRST-OUT (FIFO)This method is based on the assumption that materials which are purchased first are issued first. It Uses the price of the first batch of materials purchased for all issues until all units from this batch have been issued. After the first batch is fully issued, the price of the next batch received becomes the issue price.ADVANTAGESThe following advantages are claimed for FIFO method: This method is based on a realistic assumption that materials which are received first are issued first. Materials are issued at actual cost. Thus, no unrealized profit or loss results from the use of this method. Closing stock valuation is at cost as well as at the latest market prices. This method is quite simple to operate and easy to understand.

DISADVANTAGES Materials are not changed at the current market prices. Therefore, in times of rising prices, charge to production is unduly low. This method sometimes produces unfair results as between one job and another. For example, materials purchased @ Rs. 10 may be issued to job A, but materials issued t similar hog B may be from a later supply which is @ Rs. 12. This makes comparisons difficult because two similar jobs started at the same time may show different costs. When transactions are large in number and the price fluctuates very frequently, the method involves more calculations and increases the possibility of errors.2. LAST-IN-FIRST-OUT(LIFO)The method is just reverse of FIFO. It is based on the assumption that last purchases of materials are issued first and earlier receipts are issued in the last. LIFO method uses the price of the last batch received for all issues until all units from this batch have been issued. After that, price of the previous batch received is used.The students should note that in actual practices materials issued to production may not be from the latest lot purchase. This is only a book-keeping method and must not be confused with physical method of issue used by the storekeeper who always tries to issue the oldest stock first. Two important points of this method are: Issues are pieced at actual cost and latest prices paid. Closing stock is valued at the old prices and is completely out of line with current prices.ADVANTAGES This method has following advantages: The value of materials issued is closely related to current market prices. As materials are issued at actual cost, it does not result in any unrealized profit or loss. When prices are rising, the higher prices of the lost recent purchases are charged to production. This reduces profit figure and results in income- tax saving.

DISADVANTAGES Although stock is valued at cost, the price is that of the earliest purchased, so that stock value does not represent its current value. This method is not realistic as it does not conform to the physical flow of materials. Like FIFO, in this method also, the materials cost of similar jobs may differ simply because the prior job exhausted the supply of lower prices stock. This renders comparisons between jobs difficult. When prices fluctuate very often, the calculation complicates the stores account and increases the possibility of clerical errors.

3. AVERAGE COST METHODS These methods are based on the assumption that when materials purchased in different lots are stored together, their identity is lots, and therefore, these should be changed at an average price. Basically, average prices are of two types- simple average and weighted average.4. SIMPLE AVERAGE METHOD Simple average price is calculating by adding all the different prices and dividing by the number of such prices. It does not account quantities of materials while computing average price. For instance, when 100 units are purchase @ Rs. 9 per unit and 900 units are purchased @ Rs. 7 per unit, the simple average price will be = (9+7)/2 = Rs. 8.The only advantage of this method is that it is simple to understand and easy to operate.DISADVANTAGES Materials are not charged out at actual cost. Thus, unrealized profit or loss will usually arise out of pricing. This method is unscientific and usually produces unsatisfactory results. The value of closing stock may be a negative figure which is quite absurd.

5. WEIGHED AVERAGE METHODThis method gives due weight to the qualities held at each price when calculating the average price. The weighted average price is calculated by dividing the total cost of material in stock from which the material to be priced could have been drawn, by that total quantity of material in that stock. The simple formula is that weighted average price at any time is the balance value figure divided by the balance units figure.ADVANTAGES This method evens out the effect of widely varying prices of different purchases. The new issue price is calculated only at the time of each new purchase and not at the time of each. This reduces the work of making calculations. No unrealized profit or loss arises.DISADVANTAGESIts main disadvantages are: Where receipts are numerous, this method requires a good deal of calculations. Issue prices generally run to a number of decimal points. Materials are not issued at the current market prices.

1.31 STORES- KEEPINGIn manufacturing companies, a large part of money invested is represented by stocks. Therefore, a good store keeping is a noteworthy feature of a well run business. Suitably trained and experienced personnel should be in charge of store department. The stores function involves both safeguarding the materials as well as maintaining up-to-date stores records. 1.32 OBJECTIVES OF GOOD STORE KEEPING Economical use of storage space, Protection of materials against fire and theft, Immediate location of materials required, Up-to-date stores records, Facilitating perpetual inventory, Speedy receipts and issue of materials, Avoiding Over-stocking and under-stocking.1.32 STORES RECORDSThe stores are of two types: Perpetual Inventory records and Documents1. Perpetual Inventory Records: These records show the movement of stores, i.e. the receipt of materials, issues of materials to production departments and also current in stock. Bin card and store ledgers are the two basic perpetual inventory records.A. Bin Card (Stock Card): A bin is a container in which materials is kept. A bin card is a quantitative record of receipts, issues and closing balances of material items in store but it does not contain information about the prices of materials.

B. TWO BIN SYSYTEMS: In this system two bins are maintained for each item of store. One bin constitute the main or the regular bin from which materials are issued and the other bin contain the minimum stock from which issues are made when stock in the regular bin is exhausted. C. STORES LEDGER: This ledger is maintained in the cost accounting department. Like bin cards, the stores ledger records all receipt and issue transactions in respect of materials. But the difference is that stores ledger keeps records of the quantities as well as prices of materials. Separate ledger folios are maintained in the stores ledger for each items of material.The stores ledger is one of the basic records for material accounting in the cost system. There are mainly three sections in the ledger, i.e., receipts, issues and balance, each of these with appropriate sub-divisions showing Ref. No., Quantity, Unit price and Total Cost. The entries in the receipt and issues columns are made from the same documents which are used for posting in bincard, i.e., goods received Note and Stores Requisition Note, etc.Difference between bin card and stores ledger are: Bin Card is a record of quantity only where as Store ledger records both quantity and money value Bin Card is maintained by the store keeper where as stores ledger is kept in the cost office. Posting in BinCard normally takes place before the transaction takesplace while in stores ledger, it is posted after the transaction.

1.33 DOCUMENTS AUTHORISING MOMENTS OF MATERIALS1. Goods Received Note: A reference was made to this note in the purchase procedure discussed earlier. A copy of goods received note is send to the storekeeper along with the materials for his records. The storekeeper uses this document for posting on the receipt side of the bin card.2. Store Requisition Note (or materials Requisition Note): It is a document which is used to authorize and record the issue of materials from store. The storekeeper should issue materials on the presentation of duely authorized stores requisition note. It should be appreciated that this is a key document in virtually all costing systems and serves the dual purpose of:

Authorizing the storekeeper to issue material, and Providing a written record of usage of materials

3. Bill of Materials ( Specification of Materials)It is a mater requisition which lists all the materials required for the completion of job. So, a bill of materials is a special form of stores requisition note which is generally used by departments having standard material requirements are a comparatively fixed list of materials.The main advantages of using bill of materials are: It eliminates the need for preparing separate material requisition notes for various types of materials required for a particular job. This saves time and promotes efficiency. The storekeeper can be given advance warning of requirements of materials usually not available in store. It thus avoids delay in production. When pre-printed forms of bill of materials are used in standard type of output, it serves a lot for clerical labour and risk of errors is reduced.4. Material return Note When materials issued are in excess of requirements, the unused materials are returned to stores together with a Material Return Note. This note is similar to Material Requisition Note, but normally printed in a different colour for a easy identification. When materials are received back in the stores, these should be placed in an appropriate bins and entries made in the bincard.5. Materials Transfer note:Materials note have to be sometimes transferred from one job to another. This may be both because excess materials were issued to a job and surplus materials are directly transferred to another job or because materials issued to a less urgent job are transferred to a more urgent job. When such transfers are not permitted, the surplus materials are returned to the stores and then re-issued to another job. This results in extra transport costs. Thus, when materials are bulky, such transport costs may be heavy which can be avoided if direct transfers are permitted.6. Material Abstract ( Material Issue Analysis Sheet):Material abstract is defined by CIMA, UK as a document which is classified record of materials issues, returns and transfers. In other words, all Material Requisitions, Material Return Note and Material Transfer Notes are analyzed periodically by the Cost accounting department to ascertain the material cost of each job.

1.24 INVENTORY TURNOVER RATIOThis is the ratio of materials consumed during the year to the average stocks of raw materials. Its formula is as follows:

Stock Turnover Ratio = Cost of materials consumed during the period Average Stock of materials during the periodStock of turnover ratio is an indicator of the rate of consumption i.e., the fast moving and slow moving materials. A high stock turnover ratio indicates fast moving materials and a low ratio indicates slow moving materials. The turnover of different materials may be compared to detect those items which do not move regularly. This will enable the management to avoid keeping capital locked up in undesirable items of materials.

CHAPTER 2RESEARCH DESIGN2.1 INTRODUCTIONResearch is common parlance refers to a search for knowledge one can also define research as a scientific and systematic search for pertinent information on a specified topic. According to advanced learners dictionary of current English A careful investigation or inquiry especially through search of current facts in any branch of knowledge. In this chapter design of the study has been explained it gives an insight into the statement of the problem, objective of the study, the scope of the study, research methodology, and limitation of the study and overview of the chapter scheme.The inventory management and control system is been termed as a significant part of the current assets which is most essential for the profit planning and control function of the management of large majority of companies in India. It is proposed to study in detail and the entire process of Inventory management and Control with specific reference to the Karnataka Soaps and Detergent limited, Bangalore.2.2 TOPIC OF THE STUDY A STUDY ON MATERIAL MANAGEMENT AND CONTROL CONDUCTED AT Karnataka Soaps and Detergents Limited, Bangalore. 2.3 METHODOLOGY OF THE STUDYThe research design is preliminary design of work to be carried out is on agreement to the condition for collection and analysis of data in a manner that aim to combine prevalence of research design with respect to work carried on.

The methodology was used for wide and varied and the methods adopted were descriptive and analytical type of research. Personal Interviews were undertaken and there after the data have been analyzed and interpreted keeping in mind the Objective of the study. 2.4 STATEMENT OF THE PROBLEMThe problem selected to the analysis is to study the effectiveness of material management and control at KS&DL, Bangalore. The effectiveness of the prevailed inventory system is analyzing simultaneously efficiency of the manufacturing firm. It is concerned with the management of inventories as well as efficiency in cost reduction. The variation of prices of raw materials are also seems very difficult for the smooth functioning in to account for the analysis as these two aspects relates to material management.2.5 OBJECTIVES OF THE STUDY1. To study material management in general2. To study material control management3. To study the problems of material management at KS&DL4. To analyze the material control system at KS&DL5. To analyze the material control data2.6 SCOPE OF THE STUDYSince the topic has a wide scope in every manufacturing sector, the research was undertaken at Karnataka Soaps and Detergents Limited., Bangalore.2.7 NEED OF THE STUDYInventory management system provides information to efficiently manage the flow of material, effectively utilize and equipment, coordination, internal activities and communicative with customers. Inventory management does not make decisions or manage operations they provide the information to managers who make more accurate and timely decisions. The following can be stated as the need for the study. To determine the inventory the inventory position of the firm To know the progress and process of Inventory position of the firm To know how to maintain optimum level of inventory in an organization To find out different ratios of the firm related to Inventories and to check their effects The study is needed because the management must see that excessive investment in inventory should be minimized and at the same time it should protect the company from the problem of stock out.2.8 SOURCES OF DATA COLLECTIONAfter identifying the research problem we have to determine the specific information required to solve the problem. Now the task is to look for the type of sources of data which may yield desired results. The data can be classified into two types:Primary Data: The method which was adopted to collect the primary data is Personal Interview. In order to collect the information, direct personal interview, annual reports maintained by the firm and discussion was made with different personnel of purchase departments, stores department and other departments. So far information is collected through exploratory research design. There is no formal design pr structure questionnaire in the study.Secondary Data: For gathering secondary data various other sources were used. Different accounting records of the company Text books and other case studies The secondary data is obtained by referring to few books in relation to the inventory reports, annual reports etc. Gathering information from the past records and exhibits of products of KS&DL and from Internet

2.9 TOOL USED FOR DATA ANALYSISTo analyse the companys annual report which are relevant to inventory, the Ratio analysis has been undertaken as a tool in this study.Different ratios related to inventory management have been used, and the variations of the ratios are shown through the various graphs.2.10 PERIOD OF THE STUDYThe respected project has been conducted regularly for a period of four weeks from 15th Feb 2012 to 14th Mar 2012, at KS&DL,Banglore.2.11OPERATIONAL DEFINITIONS OF STUDY Stock turnover: Stock turnover is the ratio, which the cost of materials consumed per annum, bears to the average stock of raw materials. Inventory Tag: Inventory tag refers to the tag which is attached to the bin to indicate that the item has been verified. Scrap: This is defined as the incidental recidental residue from certain type of manufacture, usually of small amount and low value, recoverable without further processing. Stores ledger: This refers to records which fives the same information regarding stores as bin card in addition it gives the money value of materials. Bin card: A bin card is attached to the bin, drawer or any other container in which material is stored. An entry is made at the time of each receipt or issue and the new balance in stock is calculated. Stock audit: This implies the physical verification of stock with the inventory records. Lead time: Lead time refers to the gap between the placing of the order to procure material and control delivering of material from the supplies. Inventory control techniques: Inventory control techniques refers to the techniques employed by the inventory organization with in the frame of one of the basic inventory model. Inventory cost: Inventory cost refers to the cost connected directly with the procurement of the raw materials. Components: this refers to finished part entering in to a product. These may be classifying in to those which are manufactured by the firm and those which are purchase from outside. 2.12 LIMITATIONS OF THE STUDYThe study of material management and control at Karnataka Soaps and Detergents Limited, has some Limitations as every study has its own limitations. Time restriction is the limitation, the research conducted was for a short span of time. The information which was needed could not be made public by organization. Discussion with all related officials was not possible. The study is covered a wide concept hence wide collection and coverage of information was not easy. Financial statements are essential interim reports for a better analysis and inventory analysis are under selected approach only. This project is just a brief study of the firms inventory management.

2.13 CHAPTER SCHEME CHAPTER-01INTRODUCTIONThe chapter includes the subject background of the research topic. It covers the topics such as introduction of materials, types of materials, requisites for maintaining records for material control, introduction to material management, definition, scope, objectives, functions, organization chart of material management, products group, material control, meaning and definition, finance, importance of finance, concept of financial management, scope, aims, functions of finance, inventory valuation and its also through light on the inventory system and stock levels,it also concentrates on the inventory system existing at KS&DL.

CHAPTER-02 RESEARCH DESIGNThis chapter gives an insight into the introduction of research design, topic of the study and statement of the study and objectives framed for the study and it also contains the operational definitions with respect to KS&DL, tools used for the collect the data for the study types of data represented by the company for the study. It also includes the period of the study conducted in the company this chapter concluded by limitations of the study and chapter scheme. CHAPTER-03COMPANY PROFILEThis chapter presents the profile of the company. This chapter consists of history of the company, branches, personnel and industrial relation, range of products, policy of the company, its objectives, its competitors, and SWOT analysis. CHAPTER-04ANALYSIS AND INTERPRETATIONSThis chapter deals with tabulation of the collected data in the form of graphs, charts, and diagrams leading to the findings on the topics. CHAPTER-05SUMMARY OF FINDINGS AND SUGGESTIONSThis chapter presents a summary of all the findings made, conclusion drawn and the suggestions made. The suggestions include a revised cost model. It thus deals with the last two objectives stated under the research design chapter.

BIBLIOGRAPHY.In this source of information collected to conduct the research study like various journals and websites and text books which are related to the topic of the study. ANNEXURESIn the various statistical statement are presented which are provided by the company for research purpose.

CHAPTER 3COMPANY PROFILE BACKGROUND & INCEPTION OF THE COMPANY: India is a rich land of forest; ivory, silk, sandal; precious gems are magical charms of centuries. The most enchanting perfumes of the world got their exotic spell with a twist of sandal. The worlds richest sandalwood resource is from one isolated stretch of forests land in South India that is Karnataka. The origin of sandalwood and its oil in Karnataka, which is used in making of Mysore sandal soaps, is well known as Fragrant Ambassador of India & Sandalwood oil is in fact known as Liquid Gold. By the Inspiration of His Highness Maharaja of Mysore late Jayachamarajendra Wodeyar, the trading of sandalwood logs started which was exported to Europe and New destinations, but with commencement of First world War India faced Severe Crisis on the business of sandalwood. This situation gave rise to start of an industry, which produces value added products i.e., of Sandalwood oil. His Highness Maharaja of Mysore created this situation as an opportunity by sowing the seed of the Government Sandalwood Oil Factory, which is the present KS&DL. The project was shaped with the engineering skills and expertise of the top level. Late Sir M.Visvesvaraya, the great Engineer who was the man behind the project. Todays famous Mysore sandal soaps credit goes to late Sri Sosale Garalapuri Shastri who incorporated the process of soap making using Sandalwood oil. He was an eminent scientist in the field working at the Tata Institute, Bangalore. He was sent to England to master the fine aspects of soap manufacturing. The Maharaja of Mysore & Diwan Sir. M.Visvesvaraya established the Government Soap factory during the year 1918. The factory was started as a very small unit near K.R.Circle, Bangalore with the capacity of 100 tons P.A. In November 1918 the Mysore sandal soap was put into the market after sincere effort and experiments were undertaken to evolve a soap perfume blend using sandalwood oil as the main base to manufacture toilet soap. The factory shifted its operation to Rajajinagar industrial area, Bangalore in July 1957, where the present plant is located. The plant occupies an area of 39 acres (covering Soaps, Detergents and Fatty Acid divisions), on the Bangalore Pune Highway, easily accessible by transport services and communication. Another sandal wood oil division was established during the year 1944 at Shimoga, which stopped its operations in the year 2000 for want of Natural Sandalwood. This factory started at a moderate scale in year 1916. The first product was washing soap in addition to the toilet soap in the year 1918. The toilet soap of the company was made up of sandal wood oil.

In 1950 Government decided to expand the factory in two stages. The first stage of expansion was done to increase the output to 700 tons per year and was completed in the year 1952 in the old premises. The next stage of expansion was implemented in 1954 to meet growing demand for Mysore sandal soap and for this purpose Government of India sanctioned license to manufacture 1500 tons of Soaps and 75 tons of glycerin per year. The expansion project worth of Rs.21 lakhs includes the shifting of the factory to a newly laid industrial suburban of Bangalore. The factory started functioning in this new premise [i.e., present one] from 1st July 1957. From this year onwards till date the factory had never looked back, it has achieved growth and development in production scales and profits. The industry has 2 more divisions one at Shimoga and another at Mysore where sandal wood oil is extracted. The Mysore division started functioning from 1917 and only during 1984 manufacturing of perfumed and premiere quality Agarbathies at was started. Right from the first log of sandalwood that rolled into the boiler room in 1916, the company has been single minded pursuit of excellence. The project took shape with the engineering skills and expertise of top-level team under the leadership of Sir. M.Visvesvaraya, Prof. Watson and Dr.Sudbrough. Like this soap factory was started as a small unit and now it has grown up to a giant size.On 1st October 1980, the Government Soap Factory was renamed as Karnataka Soaps and Detergent Limited The Company was registered as a public limited company. Today Company produces varieties of products in the toilet soaps, detergent, Agarbathies and Cosmetics. BUSINESS: As of march 2006,the Mysore sandal soap held a 6500 tonne share among the 450 thousand tonnes of soap produced and marketed annually in India .The KSDLs soap factory in Bangalore that manufactures the Mysore sandal soap is one of the largest of its kind in India having an installed capacity to produce 26,000 tonnes of soap per annum.KSDL had sales od rs.1.15billon(about $28.75millon)in the year 2004 -2005 with Mysore Sandal Soap having an average monthly sale about re 75million($1.87million).Traditionally ,the soap has not been marketed in a high profile manner and only during the year 2006 M.S.dhoni, the Indian cricketer was selected as the first brand ambassador of them Mysore sandal soap. Other marketing strategies being employed to market this soap in to the scheme were the distributories who meet the targeted sales could enter a lucky draw were there could win silver or gold coins. About 85% of sales of this soap are from the south Indian states of Karnataka, Andhra Pradesh and Tamil nadu. Majority of the users of this soap are above forty years of age and it is yet to gain more acceptance by the youth in India. Apart from the regular, Mysore sandal soap, KSDL has also introduced the Mysore sandal baby soap to target this share of the market. However, KSDL is facing issues like shortage of sandal wood which has resulted in the company using only 25% of the manufacturing capacity of its factory leading to a lesser production of soaps. The main reason for this is the depletion of sandal wood reserves in the state of Karnataka. To overcome this, KSDL has also started producing sandalwood by bidding in the open market and is also considering importing the wood from other countries. The absence of a sustained sandal wood regeneration programme has a taken a big toll of sandal wood reserves in Karnataka. This is a great irony in a state that once set up factory to use up its excessive reserves and wears two GI tags on its sleeve on accounts of its historic association with the precious wood. RENAMING: On 1st October 1980, the Government Soap Factory was renamed as Karnataka Soaps and Detergent Limited The Company was registered as a public limited company. Today Company produces varieties of products in the toilet soaps, detergent, Agarbathis and Cosmetics.

KS&DL AT GLANCE:- Incorporated Name - Karnataka soaps and Detergents limited.Address -Karnataka soaps and detergents limited Bangalore Pune High Way Post Box No.5531Rajajinagar, Bangalore 560 055 Ph: 080-3377691/3370469/23371103 to 06 22376922 to 24Email Id : Mysoresandal @ vsnl.comWebsite : www.mysoresandal.com

Year of Establishment -1918 Constitution - Wholly owned by Govt. of Karnataka Management - Govt. of Karnataka nominates/appoints Board of directors, chairman & MDRename - 1980 Trademark - The trademark is SHARABHA. It is the Body of lion with the head of an elephant Means blending the majesty of lion with Strength of an elephant. Production range - Toilet soaps, bar soaps, Detergents Cakes Powders, Agarbathies, Cosmetics, Sandalwood oi Process know how - The facility is a pioneer in the manufactures Of various soaps and technology Imports from Italy. Capacity of the Unit- Licensed capacity is 26,000 metric tons Of Soaps & 10,000 M.Tons of Detergent Per annum . Plants - Bangalore

Soap Plant Detergent Plant Fatty Acid Plant - Mysore Sandal wood Oil Agarbathies

- Shimoga Sandal Wood Oil

TRADEMARK OF KS & DL:-The SHARABHAThe carving on the cover is the SHARABHA, the trademark of KS & DL.

The SHARABHA is a mythological creation from the Puranas which has a body of a lion and head of elephant, which embodies the combined virtues of wisdom and strength. It is adopted as an official emblem of KS& DL to symbolize the philosophy of the company.

The SHARABHA, thus symbolized a power that removes imperfections and impurities. The maharaja of Mysore as his official emblem adopted it. And soon took its pride of place as the symbol of the Government Soap Factory of quality that reflects a standard of excellence of Karnataka Soaps and Detergent Limited. SLOGAN:NATURAL PRODUCTS WITH EXOTIC FRAGRANCESKS & DL has a long tradition of maintaining the highest quality standard, right from the selection of raw materials to processing and packing of the end product. The reasons why its products are much in demand globally and are exported regularly to UAE, Beharen, Saudi-Arabia, Kuwait, Qatar, South America. The entire toilet soaps of KS & DL are made from raw materials of vegetable origin and are totally free from animal fats.POLICY OF KS&DL:- Seek purchase of goods and services from environment responsible suppliers. Communicate its environment policy and best practices to all its employees implications. Set targets and monitor progress through internal and external audits. Reuse and recycle materials wherever possible and minimize energy consumption and waste.

AREA OF OPERATION:GLOBAL FAVOURITES FOR THEIR NATURAL GOODNESS KS&DL has a long tradition of maintaining the highest quality standards, right from the selection of raw materials to processing and packaging of the end product. The reason why its products are much in demand globally & are exported regularly to UAE, Bahrain, /Saudi Arabia, Kuwait, Qatar, South East Asian countries as well as North America & South America. The sandalwood oil, of course, is much sought after by the leading perfume houses of the world. All the toilet soaps of KS&DL are made from oils & fats of vegetable origin & totally free from animal fat. OWNERSHIP PATTERN: Wholly owned by Government of Karnataka BIRDS EYE VIEW OF KS&DL:-1918 Government Soap Factory was started by Maharaja of Mysore And the Mysore Sandal Soap was introduced into the market For the first time.1950 - The factory output rose to 500 M.Tons with the following Modifications. 1. Renovating the whole premises. 2. Installing new boiler soap building plant and drying Chamber.1954 Received license from Government to manufacture 1500 tons Of soap and 75 tons of glycerine per year. 1957 Factory shifted its operation to Rajajinagar industrial area. 1974 Mysore sales international limited was appointed as the sole Selling agent, for marketing its products.1975 Rs.4 Crores synthetic detergent plant was installed Based on Italian technology by Ballestra SPA. 1980 - On 1st October 1980 the Government Soap Factory was converted into a public sector enterprise and renamed as Karnataka Soaps & Detergents Limited. 1981 a) Production capacity increased to 6000 tons, b) Rs.5 Crores Fatty Acid Plant was installed.1984 Manufacturing of premium quality of Agarbathies at Mysore Division1985 Production capacity was raised to 26,000 M.Tons Per Annum. A large variety of toilet soaps at attractive shapes, colors and Fragrances introduced to meet the varieties & tastes of Consumers1992 The company was registered with the Board for Industries and Financial Reconstruction (BIFR), New Delhi in December for rehabilitation, as the company suffered losses continuously since 1980 at its net worth fully eroded. 1996 The BIFR approved the rehabilitation scheme in September & the Company stated making Profits. 1999 ISO-9002 Certificate for quality assurance in production, Installation and Servicing. 2000 ISO-14001 certificate pertaining to environmental Management system. 2003 The entire carried forward loss of Rs.98 Crores wiped out and in May BIFR, declared the company to be out of its Purview. The Company is making profit continuously, It is only State Public Sector unit that has come out of BIFR.2004 The ISO-9002 was upgraded to ISO-9001-2004, Quality Systems. 2005 a)Launched new herbal care soap of 100gm contain 19 herbs and leaves extracted perfumes. b) Geographical indication registry for 1) Mysore sandal soap 2) Mysore sandal wood oil 2007 ICWAI national award for excellence 2008 - KSDL prime products, Mysore Sandal Wood Soap and Oil are Accredited with Geographical Indications as the Intellectual Property of India as per the Geographical Indication of goods Act 1999.2008 The ISO-9001 was upgraded to ISO-9001-2008 Quality Accreditations & ISO 14001 2004, EMS accreditation.2009 KSDL upgraded the ISO 9001-2008 policy for Quality Management System and ISO-14001-2004 Environmental Management System.2010 Won Karnataka Chief Ministry Ratna Award for profited govt company.PRESENT STATUS OF THE COMPANYThe company is mainly dependent on southern market. The product availability in retail outlets particularly for Mysore sandal soap is almost comparable to any other similar industries products in the premium segment in the south. Whereas in other parts like Eastern & Northern markets penetration of KSDL product is relatively poor, which depends on the companys distribution structure, stockiest and field personnel strength. With increased trust on distribution, the company does not foresee any problems to achieve the projected sales through the redistribution package. Further, the policy of Indian Government also sees the public sector enterprises enter the industry in a large way there by making the products available to the consumers at reasonable prices. Being located in the centre of southern part of India the Government Soap Factory claims preferential treatment for expansion programmed in view of availability of exotic natural Sandalwood oil. An ISO-9002- ISO-14001 Company:KS & DL with a tradition of excellence of over eight decades is committed to customer delight, through total quality management and continuous improvement through the involvement of all employees. KS&DL has got ISO 9002 certificate. To improve the quality management system and to facilitate TQM in the process of soap and detergent, the management took decision to obtain ISO-9002 by end of March 1999. Accordingly action plan was drawn and a committee was set up for the purpose during October 1998 with a mission statement. The company gives initial training including conducting employees awareness programme, document quality manual and quality system procurement. In this direction company obtained the guidance from Consultancies, Bangalore and Bureau of Indian Standards, Bangalore. Accordingly, company standards registered for ISO 9002 by the end of March to the Bureau of Indian Standards. Obtained the certificate by the end of March 1999 itself. This is to project in the national and international market and also to improve quality of products offered to the consumers with the assurance of quality in the message. The Company got itself upgraded to ISO-9001-2004, Quality Systems in the year 2004-05.The company is located in the heart of the Bangalore city. The management of the company took a decision to get the ISO-14001 and become model to other public sector for the techniques used and also to other Government units to spread the message of maintenance of environment. ISO-14001 and ISO-9001 will facilitate to improve the corporate brands in the global market and it will help the company to improve the profits, year after year on long-term basis. The environment management system adopted in the company through this motive as follows: Conservation of energy Conservation of Surrounding Conservation of resources.

VISION AND MISSION OF THE ORGANIZATIONVISION STATEMENT: Keeping pace with globalization, global trends & the states policy for using technology in every aspect of governance. Ensuring global presence of Mysore Sandal products while leveraging its unique strengths to take advantage of the current technology scenario by intelligent and selective diversification. Secure all assistance and prime states from government of India all technology alliances. Further, ensure Karnatakas pre-eminent status as a proponent and provider of technology services to the world, nation, other states public and private sectors. Making available technology product and services at the most affordable price to the people at large, in keeping with the policy of a welfare state. Making all out efforts to achieve unimaginable profits. Most importantly to earn the invaluable foreign exchange, both to the state and to the country.

MISSION STATEMENT To serve the National economy. To attain self-reliance. To promote purity & quality products To maintain the Brand loyalty of its customers. To build upon the reputation of Mysore sandal soap based on pure sandal oil.

OBJECTIVES OF KS & DL: To serve the national economy To promote purity and quality products and thus enhance age old charm of Sandalwood Oil To attain self reliance To promote and uphold its image as symbol of traditional products To build upon the reputation of Mysore Sandal soap based on pure sandal oil. To maintain the brand loyalty of its customer. To supply the products mentioned above at most reasonable and competitive rate. COMPETITORS OF KS&DL PRODUCTS AND SERVICES:KS&DL is facing competition from the big Corporates as well as MNCS. Some of its main competitors are:- M/s. Hindustan Uni Lever Ltd., M/s. Godrej Soaps Private Ltd., M/s. Proctor& Gamble M/s. ITC Limited M/s. Nirma Soaps Private Ltd., M/s. Jyothi Laboratories M/s.Wipro

ACHIEVEMENTS/AWARDS : Government of Karnataka Dept of Industries and commerce State Export Promotion Advisory Board. EXPORT AWARD 1974-75 Detergent Plant M/s Chemical Bombay have given 1st price for the year 1980-81 Geographical Indication GI-2005 ISO 9001-2000 in the year 1999 ISO 14001-2004 in the year 2000 FUTURE GROWTH AND PROSPECTUS: Introduction of anti-bacteria, herbal transparent soap, made out of 33 essential oil based perfume, Aloe Vera, Vitamin-E etc as additive and suitable for all types of skin and all seasons. Improvement in existing products Mysore Sandal classic improved moisturizers & skin conditions. Introduction of sandalwood powder in 50gms, 100gms to meet the growing demand for religious purpose. Introduction of new higher powered detergent powder for institutional sales in bulk packaging. To attain market leadership. Introduction of new trade schemes to increase sales. Aggressive advertisement and publicity as part of sales promotion. Reduction in distribution expenses. Cost-reduction in all areas. Instant decision making in certain procurement activities. Timely introduction and implementation of market driven decisions. Ensuring effective internal control.

PRODUCT PROFILEKS&DL is the true inheritor of golden legacy of India. It is continuing the tradition of excellence for over eight decades, using only the best East Indian grade Sandalwood oil & Sandalwood soaps in the world. The products produced at KS&DL are the Soaps, Detergents, Agarbathies and Sandalwood oil.

PRODUCTS MANUFACTURED BY KS&DLTOILET SOAPSNAME OF THE PRODUCTUNITS OF GRAMS

Mysore Sandal Soap75, 125

Mysore Sandal Classic Soap75

Mysore Sandal Gold Soap75, 125

Mysore Sandal Baby Soap75

Mysore Special Sandal Soap75

Mysore Rose Soap100

Mysore Sandal Herbal Care Soap100, 125

Mysore Jasmine Soap100

Wave Soap100

Mysore lavender Soap150

Mysore Sandal bath tablet150

Mysore Sandal classic bath tablet150

Mysore Jasmine bath tablet150

Mysore Special Sandal tablet150

Mysore Sandal rose tablet150

Mysore Sandal Guest tablet17

GIFT RANGE

SBT

SJR

06 IN 01

GOLD SIXER

DETERGENTSNAME OF THE PRODUCTUNITS IN GRAMS

Mysore detergent powder1000

Mysore detergent powder500

Mysore detergent Cake125

Mysore detergent cake250

TALCUM POWDERSNAME OF THE PRODUCTUNITS IN GRAMS

Mysore Sandal Talc20, 50, 100, 300

Mysore Sandal Baby Talc100, 200, 400

AGARBATHIESNAME OF THE PRODUCT

Mysore Sandal Premium

Mysore Sandal Regular

Mysore Rose

Nagachampa

Suprabhatha

Mysore Jasmine

Parijata

Sir M.V.100

Bodhisattva

Venkateshwara

Durga

Ayyappa

Alif Laila

Meditation

PRODUCT RANGE FROM THE HOUSE OF MYSORE SANDAL SOAPa. Mysore Sandal Soap (75gm,125gm & 150gm) b. Mysore Sandal Special Soap (75gm) c. Mysore Sandal Baby Soap (75gm)

Three-In-One Gift Pack (SJR) 3Tabs (150gm Each)

d. Mysore Sandal Gold Soap (125gm)

e. Mysore Rose Soap (100gm)

f. Six-In-One Gift Pack- 6Tabs (150gm Each)

g. Mysore Sandal Gold sixer 6 Tabs (125gm Each)

h. Mysore Sandal Soap Bath Tablet Trio 3nos. (150gm Each)

i. Mysore Sandal Classic Soap (75gm) j. Jasmine Bath Soap (75gm)k. Mysore Jasmine Soap (100gm)l. Mysore Herbal care

"Indias Most Expensive Mysore Sandal Millennium Soap Launched on Jan 25 2012 : Mysore Sandal Millennium, a super premium soap, priced at Rs 720 per piece of 150 gram was launched by the State-owned Karnataka Soaps & Detergents Limited (KS&DL) by Chief Minister D V Sadananda Gowda on Wednesday. This will be Indias most expensive soap. Apart from the Chief Minister, Energy and Food and Civil Supplies Minister Shobha Karandlaje, Ports and Fisheries Minister Krishna Palemar and other senior officials were present at the function for the launch of the soap. KS&DL Chairman Shivananda Naik said ''Mysore Sandal Millennium is the first most expensive soap manufactured and sold in India. The Millennium soap is produced from exclusive vegetable oils mixed with special conditioners, moisturizers, Vitamin-E, Jojoba-Mimosa and natural sandalwood oil. The sandalwood oil in the soap improves complexion, moisturizes skin and retains the glow. Hydrolysed Milk Protein, which is high in amino acid helps the skin in hydration and maintaining elasticity. It also contains Glycerin, which helps to prevent skin dehydration and maintain even structure . The pure sandalwood oil is the essence of this product, which helps in relaxation and contains anti-ageing properties. KS&DL plans to sell the soap through five-star hotels, hyper malls, super bazaars , lifestyle stores and other major stores. The company is also planning to export the soap to the UK, US, Malaysia, West Asia among others, where there is a demand for super premium soaps.

DETERGENTS KS&DL also manufactures high quality detergents applying the latest spray drying technology with well balanced formulation of active matters & other builders; they provide the ultimate washing powder.1. Sensor Detergent Powder (1kg/2kg) 2. Mysore Detergent Powder (1kg/500gms) 3. Mysore Detergent bar (250gms) 4. Mysore Detergent Cake (125gms/250gms)

AGARBATHIS1. Mysore Sandal premium 8. Mysore sandal 2. Mysore Rose 9.Nagachampa3. Suprabath 10.Mysore Jasmine4. Parijata 11.Meditation5. Venkateshwar 12.Durga6. Ayyappa 7. Chandhana

SANDALWOOD OILIn 5ml, 10ml,20ml, 100ml,500ml,2kg,5kg,20kg,and 25kg packing.POWDERS1. Mysore Sandal Talc: Cooling & Healing, Fragrant freshness, Net. Wt 20gm, 60gm, 300gm and 1kg.2. Mysore Sandal Baby Powder: Tender loving care for baby& Mummy. Net wt 100-400gms.

COMPETITORS INFORMATION AND THEIR MARKET SHARE:Soaps Industry CompaniesMarket Share

1.HUL45%

2.GODREJ10.10%

3.WIPRO8.10%

4.ITC5%

5.NIRMA20%

6.OTHERS11.80%

Detergents IndustryCompaniesMarket Share

1.HUL30%

2.NIRMA38%

3.P&G12%

4.OTHERS20%

SWOT ANALYSIS STRENGTHS An ISO 14001 company, which commits to reserve the natural environment in the production of its quality products to the satisfaction of its customers. The factory is located in the heart of the city & has all infrastructure facilities. They have quick movement of raw materials & finished products. Due to its proximity, habitation movement of men and material are easy. A very good dealership network, which ensures that the products reach every loop and corner. A very little competition for its major products sandal soap. An ISO 9002 certified company has its own brand image. Diversified product range keeps the company stable. Abundant availability of raw materials. Two sandalwood oil factories in Shimoga and Mysore, which produce 75% of worlds sandalwood oil.WEAKNESS Slow growth rate 6.2 growths over 40 years against the product of 80%. High oriented cause due to excessive Labour force. Low turn over resulting in low profits. Defective marketing strategy lacks effective advertising and publicity. Needs updating with times in terms of plant and machinery. R&D is not effective in as much as it has not made any break through in new products. The large proportion of the target area is upper middle class and upper class people, it has very few offer to lower middle class. It has only 8% of the total detergent market share. Due to lack of direct sales, debts with many dealers turning bad. Unskilled labor coupled with excess labor hampers profitability.

OPPORTUNITIES1. The toilet soap and the detergents market is an over expanding industry and a major company likes KS& DL with its manufacturing expertise can call the shots if it reaches peak manufacturing capacity.2. Good export market should tap foreign market vigorously.3. At present it has Good raw material sources to enhance production.THREATS1. Competition from other global leaders like HUL.2. Government interference may reduce growth potential.3. As the company depends on forests for its main raw materials makes the company to find chemical alternative to sandalwood.4. To protect the financial interest of the company.

CHAPTER 04DATA ANALYSIS AND INTERPRETATIONThe analysis of financial statement is the process of evaluating relationships between component part of financial statement to obtain a better understanding of the firms position and performance. The financial analysis is one of key figures in the financial statements and the significant relationships that exist between them.The financial and interpretation of financial statement is to judge their meaning and significance. An opinion is formed in respect of the final statements are recognized and divided in to suitable forms.The interpretation involves the explanation of financial facts in a simplified ma