INDUSTRY PROFILE

PROJECT ON INVENTORY MANAGEMENT IN SUJALA PIPES PVT. LTD.,

TOWARDS PROJECT

PVC pipes polyvinyl chloride pipes have become synonyms with modern living. It is undoubtedly a product which has deeply penetrated into common mans life. No wonder the industry has achieved remarkable goal. The Government of India recognized the importance of plastics in agriculture appointed on March 7th, 1981. Plastics are perceived as just simple colorful household products in the minds of common person. A dominant part of plastics present and future improved their utilization in the following areas are agriculture, forestry and water management, automobile and transportation, electronics and Tele communications, building. construction and furniture especially food substitutes, food processing and packaging and power and gas distribution. Sujala Pipes Pvt Ltd.,Nandyal was incorporated in the year 1979 in the industrial estate Nandyal and this was promoted by MD. Mr.S.Y.Reddy. BE(Mechanical), who has decades of experience in manufacturing industry. The brand name is Nandi Pipes.

The Company Sujala Pipes Pvt Ltd has been supplying variety of pipes through out India. Even though it has a good Net work. The company faces different problems like lack of dealer satisfaction, differences in customers perceptions, lack of financial appraisal techniques, ineffective inventory management techniques and the like. Though the Company has several departments the under researched area is finance and less number of studies have been conducted on inventory management in the company. The company does not follow any scientific inventory management system and there araised a need to device a system which could reduce costs aconstitutingowar profitability and also provides to maintain a proper system in inventory of the organization. The main objectives of the study are to analyse the present practices adopted in inventory management and inventory of raw materials, to elicit the maximum utilization level of raw material and inventory in the company and to ensure effective inventory management techniques for the company for smooth survival.

There are nine branches located in India, three are located in Karnataka, one in Tamil Nadu, one in Kerala, one in Maharastra, one in Pondicheri, one in Orissa and one in Andhra Pradesh, which is the Head Office located in Nandyal. Among all these branches, the selected branch of Sujala Pipes pvt Ltd was incorporated at Nandyal in Andhra Pradesh. The executives and Finance department officials are enquired for the purpose of the study.A study is mainly based on the descriptive research design. This design largely interprets the already available information. It makes up of secondary data. The data for the present study is collected through primary and secondary sources.

The present study is confined to only Sujala Pipes Pvt Ltd., located in Nandyal. The study is limited to raw material, finished stock of goods only. The study has been analysed by taking the information related to both the present and past data with reference to the performance of the company. The present study is confined to five years from 2003-04 to 2007-08. The financial tools used in the present study are Economic Order Quantity, Inventory turnover ratio, Ordering cost, Carrying cost, Holding period, ABC analysis and the like.CHAPTER LAYOUT

The study confines to Six chapters :Chapter - 1 Plastic Industry A Profile.

Chapter 2Sujala Pipes Pvt Ltd.,- A Profile

Chapter 3Research Methodology and DesignChapter 4Inventory management A Review

Chapter 5Data Analysis and Interpretation

Chapter 6Conclusions, Findings and Suggestions

ABOUT INDUSTRY

PVC Poly Vinyl Chloride pipes have become synonymous. With modern living. It is undoubtedly a product with has deeply penetrated in to common mans life. No wonder the industry has achieved remarkable progress in terms of supply of raw materials, and diversification of processing capabilities. In addition, manufacturing of processing machinery and ancillary equipment sophistication.

This versatile material with superior qualities such as light weight, easy processing, corrosion resistance, energy conservative, non-taxis etc. May substitute to large estimate of many conventional and costly industrial materials like wood, glass metal etc. in the future the manifold applications of plastics in the filed of automobiles, electronic, electrical packaging and agriculture give its immense utility in PVC plastics.

At present as percent of total requirement of raw material and almost all types of plastic machines required for the industry or not adequately available. The present investment in all the three segments namely, production of raw materials, expansion and diversification of raw materials, expansion and diversification of processing capacities, manufacturing of processing machinery. Equipment is 1250 crores and it provided employment at more than 8 lakhs people.

Plastic have been subjected to levies not at the central level but also at the state local governments. These levels have affected the price of the plastic products adversely. The per-capita consumption of plastic is very low at 0.5kg. As against the world average of 11 Kgs. The per-capita consumption is 687 Kgs in FRANCE, 33 Kgs in U.K. and even in Asian countries likes SOUTH KOREA it is 8.5 Kgs.

On account of their inherent advantage in properties and versatile in adaption and use, plastics have come to play a vital role in a variety of applications the world over. In our country plastics are used in marketing essentials consumer goods which are of daily use for common man. Such as baskets carry bags, bottles, piles, pens, chairs etc. They also have applications in agriculture, building constructions, water management resources, engineering and electronics.

The government of India recognized the importance of plastics in agriculture appointed on March 7th 1981 a national committee on the use of plastics in agriculture under chairmanship of Dr. G.V.K. Rao. The committee has forecast a treatment as fright of drip irrigation through a net work of plastic tubes and pipes. In its origin large scale adoption of irrigation would lead to support in demand of P.V.C. pipes LDPE tubes and play proper by lane emitter. The committee maintains a number number of recommendations of promoting the use of plastics. The implementation of the recommendations would so a long way is increasing the consumption of plastics, which at present is very low.

The committee has highlighted the importance of use of PVC resin is the manufacture of rigid piped, flexible pipes and sheets which are being used for agricultural to carry water from place to place and living of panels and reservoirs to reduce sweepers and most important in drip irrigation sequence.

A break through had already taken lace in the filed of channel lining iwht poly urethane in the state of Gujarat, Madhya Pradesh, Punjab and Haryana. The irrigation departments in these states have taken concrete steps to incorporate canal living within LDPE (Low density) pipes on priority basis. Another verity of plastic that requires artificial manufacturing relates to true engineering which is used as a alternative to (or) replacement of metals in load needing applications.

Modified P.P.O. Nylon, Polyhedral, Polycarbonates, polyester (PBT/PET) phonic are same of the plastics are being increasingly used for various applications in automatic, telecommunications and other industries. Te plastics are plastics are classified into two classes.

Thermo plastics

Thermostats

The thermo plastics become sufficiently soft as the application of heat. The thermostats are the initial application of heat and pressure subjected for fire, but upon further application of heat and pressure they are cured to heat and pressure. They are cured to hard molded piece which cannot be resifted by reheating.

LDPE: Low Density Poly EthlineProduction of LOFE was started in the year in 1995. At present there are 3 units manufacturing LOPE with a total capacity of 1.15 lakh tones. Products targeted of LOPE by the end of 1999 are placed at 1.86 lakh tones.

HDPE: High Density Poly EthyleneProduction of HOPE in India commended in 1968, at present there is a unit(play Offices industries Ltd.) in India, producing HOPF by the end of 1989-90 was producing 1.25 Lakh tones.

PVC: Poly Vinyl ChlorideProduction of PVC stated in 1961, against first production of PVC in the world, 1927. At present there are 6 units manufacturers PVC resins. The totals installed capacity comes to 1.7 lakh tones. The production target of PVC by the end of 1989-90 is placed is lakh tones.

P0lystyrenePolystyrene was first manufactured in India in May 1987. The production target of polystyrene by the end of 1989-90 is set out to 29,000 tones. Poly PropyleneThe first production of poly propylene in India commenced in 1978. A production target of 36,000 tones is achieved by the end of 1993-94.

ADS (Acrvlonitril Butadiene styrene)

The production of P.BS in India started in 1978. The present total installed capacity is 5000 tones.

Problems

Raw material is always been a problem to be recorded with the plastic industry. The situation was slightly and is expected to change considerably by commissioning the major petrol chemical project in the pipe line by the year 1990.

The Maharastra Gas cracker. Complex, Haldia petrol chemicals and Reliance petrol chemicals together with the expansion of existing giants will go a long way to mitigate this long, study problem. By the terminal year of the plan, the installed capacity targeted in almost 8 lakh tones.

The steep rice in the raw materials as a result of imposition of duties and taxes poses another problem to the public industry. On account of this domestic price'of finished goods are higher than the rest of world. Apart from this, The administered pieces for basic raw materials have not been implemented with a balanced view to accommodation the interests of both consumers and manufactures. The feed stocks for pertro chemical industries are naphtha feeds stocks. Hence the pricing naphtha by the government has cascading effect.

Export of the plastic goodsPlastics have been excellent potentialities. Our country equipped with all kinds of processing machines and skilled labor and undoubtedly, an extra effort to boost export finished plastic goods will yield rich divided.

Today, India exports plastics product to as many 80 countries all over the world. The reports, which were stagnated at around Rs:60-70 crore per annum doubled to 129 crore in early 1990's. in 1991-92 plastic industry has taken up a challenged of achieve export target of 250 cores. Major export markets for plastic products and usage are Australia, Bangladesh, Canada, Egypt, France, Holland, Italy, Hong, SriLanka, Sweden, Taiwan, Taiwan, U.K, U.A.S and Russia.

With a view to boosting the exports, the plastics and Iinoleums, export promotion council has requested the government to reduce import duty on plastic raw materials supply of raw materials at international prices, fix duty free backs on weighty base interested of volume basis.

ProspectsThe production of various plastics raw materials the country is expected to double by the end of the seventh five years plan. when the PCV's capacity expansion programmed is completed as well as the new plants by other manufactures programmed is completed as well as new plants by other manufactures like PIL, century Enka, Reliance are set up during the period, the consumption of commodity plastic including LDPE, HDPE, PP,PS, and PVC is expected to touch the one million tones mark by 1989-90. There is immense scope for the use of plastics in agriculture, electronics telecommunication, automobile, irrigation and thus, the plastic industry is on the threshold of an explosive growth.

Role of plastics in the Nations Economy:

Plastics are perceived as just simple colorful household products in the minds of common person. A dominant part of plastics of present and future improved their utilization in the following areas. Agriculture, Forestry and water management

Automobile and transportation

Electronics and Telecommunications, building.

ConstructionandFurnitureespeciallywoodsubstitutes

Food processing and packaging.

Power and Gas distribution.

Products & Services

Product/Services

Other plastic pipes

Other plastic profile shapes

Plastic drain, waste and vent pipes

Plastic industrial and mining pipes

Plastic pipe fittings and unions

Polyethylene rods, tubes and profile shapes

PVC water pressure pipes

Vinyl copolymer rods, tubes and profile shapes

MANUFACTURING PROCESSTubes are manufactured from mild steel strips slitted from Hot Rolled Low Carbon Steel coils conforming to IS: 10748-1995. The strip passes through a series of drive forming and fin rolls and takes the required circular shape and is welded continuously by passage of an electric current of high frequency i.e.4,50,000 cycles/second across the abutting edges. The tubes thus formed and welded pass through the sizing sections where dimensional deviations if any are corrected before the tubes are cut into required length by automatic cutting machines. The tubes are then end debarred and pressure tested. Thereafter protective surface finishing operations such as hot dip Galvanizing or varnishing is done as per specific requirement. The tubes are offered as plain, beveled, threaded ends or with flanges.

Flow Chart

Global demand to grow4.6% yearly through 2012

Worldwide demand for plastic pipe is forecast to increase 4.6 percent annually through 2012 to 8.2 billion meters, or 18.2 million metric tons. Gains will be based on continued strong prospects in developing nations, particularly in China. In fact, China will account for 30 percent of overall length demand gains for plastic pipe between 2007 and 2012.

PVC to remain leading plastic pipe resin

Polyvinyl chloride (PVC) is the leading plastic pipe resin, accounting for nearly two-thirds of plastic pipe demand by weight in 2007. PVC pipe is popular because of its low cost, durability, strength and ease of extrusion, allowing it to make inroads against non-plastic pipe materials. Demand for HDPE pipe will benefit from use as small-diameter pipe in natural gas transmission, as conduit for electrical and telecommunications applications, and as corrugated pipe for drains and sewers. While comparatively small, demand for fiberglass pipe will post well above average gains, reflecting growth in extreme environment uses.

Developed countries to continue accounting formost plastic pipe demandDespite below-average growth, developed countries will continue to account for the majority of total plastic pipe demand. These regions (Western Europe and North America, as well as certain nations in the Asia/Pacific region, such as Japan and Australia) have the highest levels of pipe use intensity. However, they are also comparatively mature markets, where growth in construction activity tends to be well below the global average inhibiting growth rates for plastic pipe.

In the developing countries of Eastern Europe, Asia (exclusive of Japan) and the Africa/Mideast region, gains will outpace the global average, benefitting from ongoing infrastructure development. Economic growth in these countries will create demand for plastic pipe in networks for telecommunications and in residential home building applications. In addition, ongoing efforts across these regions to upgrade water treatment systems will boost demand for plastic pipe used for potable water delivery and in drainage and sewage applications.

Finally, in many nations, demand will benefit from the expansion of natural gas distribution networks. A large number of these networks are currently under construction, in response to accelerating demand for natural gas in heating, industrial fuel and electricity generation applications. In particular, growth in these applications will benefit high density polyethylene (HDPE) pipe.

Product Description

Plastic flexible wash basin pipe.

Material: Pp Size: 11/2"*40mm or 11/4"*32mm. Length: 80-120cm as custom request. Draining in sink, flume, or wash basin... This hose can fit with other fitting like stainless bowl, or other fitting see the picture

Plastic Water Pipes Affect Odor and Taste Of Drinking WaterPlastic pipes, which are increasingly being used in place of copper water pipes, can significantly affect the odor and taste of drinking water, according to a pioneering study on the subject.

"Fruity plastic" may seem like a connoisseur's description of the bouquet of a bottle of Chardonnay or Merlot gone bad. However, that was among several uncomplimentary terms that a panel of water "sensory experts" used to describe the odor of drinking water from the plastic piping that is finding its way into an increasing number of homes these days.

The sampling was part of pioneering research on how plumbing materials affect the odor and taste of drinking water, which was reported at the 234th national meeting of the American Chemical Society (ACS).

Andrea Dietrich, Ph.D., who reported to the ACS, the world's largest scientific society, pointed out that a rash of costly pinhole leaks in recent years in commonly used copper water pipes has led to renewed interest in lower priced plastic pipes. Dietrich and colleagues at Virginia Tech are among those scientists leading the way in evaluating how plastic might affect water quality and odor.

"Although water is a complex mixture of organic and inorganic chemicals, most people expect their drinking water to have little or no flavor," Dietrich noted. With those expectations, any taste or odor in a glass of water can be "highly noticeable."

Dietrich's team is using two methods to evaluate odors associated with several types of plastic piping. First, sensory panelists smell and describe the odor of the water after it has sat in the pipes for several days. Then, the water undergoes chemical analyses for metals and organics and basic water quality parameters, such as pH.

Using specially prepared, neutral-smelling water as their control, panelists described the test water samples in terms that included "waxy plastic citrus," "fruity plastic" and "burning plastic." Fortunately, the odors are not long lasting, Dietrich said. "We find that after about two months, most of the odors and water quality effects have gone to background." How quickly the odors disappear depends on the amount of water usage, she added. When a household uses more water, the odors fade faster.

Dietrich told the ACS that her group evaluated several types of plastic piping: cPVC (chlorinated polyvinyl chloride), HDPE (high-density polyethylene), and PEX-aA and PEX-b, which are cross linked polyethylene. Each is approved and certified for use in drinking water applications by NSF International, an independent certification, standards and testing organization, and ANSI, the American National Standards Institute.

"We found that PVC has a low odor potential and it doesn't seem to release many organic chemicals," Dietrich said. "HPDE actually had the highest odor production, although it didn't release very many organic materials. The PEX-b pipe had a moderate amount of odors and also a moderate amount of organic chemicals that were released into the air. PEX-a had fewer odors and organics release than the PEX-b pipe."

Asked about her personal preference in plastic piping, Dietrich replied: "I would recommend people talk to their neighbors and find out what type of plumbing materials they have and if they are having problems. We do suspect that certain materials are going to be more compatible in certain areas," due to the differences in water quality from one part of the country to another.

For now, Dietrich's group is focused mainly on the odors imparted by plastic pipes and the analysis of any organic compounds that may leach into the water from the pipes. Asked if there may be any health effects from the leached compounds, Dietrich said that is still under investigation and she doesn't have any answers at this point.ABOUT SUJALA INDUSTRIES Sujala Pipes Pvt Ltd. Nandyal was incorporated in the year 1988 it is located in the industrial estate, Nandyal. The company has "Rain Plastic Pipes Industry" as its sister concern in the manufacture of PVC pipes. This company is promoted by the Managing Director Sri .S.P.Y.Reddy, B.E (Mech) who has decades of experience in the manufacturing industry.

The company has three main PVC pipes brands. They are "Nandi", "SUJALA", and "Rani". But the flagship brand is "NANDI PIPES". The name "NANDI" derives form the historical aspects of this town, Nandyal. The brand name "NANDI PIPES" as taken from the pilgrimage place called "MAHANANDI" which is 15 km from Nandyal. The company has diversified in to various fields in the recent past. Apart from manufacture of mineral water under the brand name "Name mineral water" dairy products "Nandi dairy" which supplies regular milk to the people of Nandyal and Villages in and around Nandyal?

The company rightly thinks there is an inseparable relation between education and business. Managing Director Mr. S.P.Y.Reddy encouraging women to educate by establishing women colleges in Nandyal. Sujala pipes also gone for expansion program. They have taken over "monarch pipes" Anantapur which was a main competitor.

The company is providing good source of employment to the people who are at both workmen level as well as administrative level. sujala Pipes which was once upon a time a sole manufacturer of plastic goods in to many companies. Their turnover touched a remarkable figure nearly Rs. 30 crores in the year 1999-2000.

The main objective in starting this industry was to cater to the needs of farmers to facilitate water flow in this area which lakhs rainfall and to use the water resources productively. This helps the farmers in lifting the ground water to the surface as well as free flow of the water as an and when necessary.

Initially the industry was producing polythene pipes and PVC(poly vinyl chloride) pipes were introduced under the same brand name later in 1984-85 the growth of PVC industry in Rayalaseema area of A.P. has seen rapid growth in the early 90's. The company also produce PVC fittings. In short it can be concluded that the company enjoys 95% of south Indian company does is free offer of transportation to the door steps of the customers when he purchases 100 or more pipes. The company also provides free medical facilities to the employees. SUjala pipes also involved in social activities by providing free water supply to the needy people. Company organize free medical camps to the poor people. It also gives loans to unemployed youth in fulfilling their career objective.

As the company caters to the needs of farmer and its main products is agricultural related product they enjoy maximum benefits given by the government. They are no unions in the organization as there an there is good relation and working climate exists in the organization between

Management and employees. It basically work on 2 shifts. Residences are also provided by the company to its workforce and employees at confessional rent.

Financially the company markets sounds very good. It gives a credit of 21 days to its customers. It has a wide distribution network both in A.P. as well as neighbor states in the south India. Industrial accidents are also nil in the company. The company markets products through telephone orders. It has a wide network of distributors all over south India.

BRANCHES OF NANDI PIPES

Monarch pipes, Anantapur.

ITL, Hyderabad

COMPETITIORS

Sudhakar pipes

Finolex in Karnataka & Maharastra.

MAN POWER

The personnel manager plan and provide for future openings, anticipating deaths, dismissals, resignations anticipating future promotion future transfer, estimating future positions

PRODUCT PROFILE The main products manufacture by the company is rigid PVC pipes NANDI RIGID PVC PIPES with their good quality, trouble free service durability and economical use are better choice than mild steel, galvanized steel, cast iron, plastic pipes. Kolsite compact Monolayer film plants.

Compact chiller.

Innovative Extrusion

Thin screw RPVC extruder.

Reprocess extruder plant.

Kolsite-Ballenfeld next generation pipe plant.

Trusted name in plastic machinery (President plastic machinery)

Payal industries Ahmadabad.

Micro Injection MouldING machines.

Net plant. MANUFACTURING PROCESSThe manufacturing process for NANDI pipes is as follows:

The power form out of the motor is transmitted to main gearbox through a No. of U-belts& pulleys to the input shaft of the gearbox.

The main gearbox is worm gear box having reduction ratios of 15:1 the gearbox is mounted on the top of base on a well-machined pad and held. Firmly by 4 NOs. of hexagonal headed screws,

The output shaft of gearbox is connected to the output shaft of the thrust assembly through ageavy-duty flexible coupling. The two output shafts are perfectly aligned by Checking the run of this coupling and gear box and hopper Block are dwelled to the base in correct position.

The splinted end of the extended screw engages with splinted bore of the screw. There will be two heating zones called barrel zone & die zones. Raw material will be passed from hopper to first barrel zone where source constant temperatur4e will be maintained to bring the raw materials in tb the form of paste. Raw materials will be passed from barrel zone to die zone. Where the raw material come to require conditions form the pie cool water will be supplied on the through out the length of pipe hard shape pipes will be separated by cutter in required length of 6mts.

Manufacturing process in sujala pipes pvt.ltd,

Firstly take 100kg PVC.

add Calcium Carbonate & one pack stablizers at 700 temparuture

Then mix at 1250 heat of that mixture

cool up to 450 This mix will transfer through Vaccum Tubes through feeder

take this mixture through vaccum tubes at any place in the feeder machine

transfer through 5 zones those are heat in tempature at 1250 to 1900 Feeder zone

Comparison zone

Melting zone

Degases zone

Dry zone

In this connecting lead is there which causes to pull the pipe then cool haul off: it is used to pull the pipes uniform ally.QUALITY CONTROL MEASURES Wall thickness is checked by Screwguage.

Outer Diameter is checked by Venire Calipers pipe Tape.

The above are heat at 1300 temperature & 90mm length to 98mm.

4985 TESTS ON SUJALA PIPES MEASURING FOR QUALITYWhile testing in lab after preparing pipes their weightage, temparuture, oiling bag tests. After these conducting these tests introduce in market for saleTHERE ARE THREE TYPES OF TESTS THOSE AREI. Impact Test

II. Hydrostatic Test

III. Reversion Test

I. Impact test In this test we have to measure pipe length with Weighting Machine

.In this we have to strike the pipe with 25 strokes on 3 lines measuring scale.

After doing this keep the pipe in cooling place.

In this we have to take 2 types of cooling measures those areI. De Fridge & the

II. Air Conditioners.

These can do with the help of Chillers.

II. Defreedge Processes In the defreedge we have to take 8.6mm below wall thickness of pipe & time duration is 2 hours & temperature upto 0 0 to +/- 10centigrade (c).

When the pipe piece 200mm we have to defreedge with +/- with 10mm. In this we have to cut the 200 pipe with 10mm & stay in cool with 1 hour.

III.Hydrostatic Test Processes1. Short term test

2. Long term test

1) In the first test we have to maintain temperature 250 c & water temperature duration is 1 hour.

2) In the second test we have to maintain temperature 600 c & water temperature duration is 100 hours or 42 days.IV.Testing In this test we have to cut the pipe piece in 750mm and fit the end gaps in water. One side redcap fill with water & the other side with white cap for closing the edges of pipe.

We have to forecaster this test with weather forecasting machine to know the water pressure while putting pipes in water formula for measuring this is as follows:

4.19*normal pressure

e.g.: 4.19*4 we have to get 16.73 approximately. 17Watts Pressure. V.Reversion Test Processes

In the above testing the pipes are coming outside with a heat of 1900temparuture to overcome that elasticity temperature we have to introduce this test. In this test we have to take 200mm piece of pipe. cut this pipe into 2 pieces & locate front side 10mm & opposite side 20mm put those pipes in reversion test oil bag. In this there is oil content name is Transformer oil /Glistering mineral oil. We have to test this with the temperature with 1500 to +/- 200.

In 8.6mm pipe piece we have to test temperature with below 500 c in oil bag above 8.6mm to 14mm,& the time duration is 1 hour above for 14.1mm to 17mm 1 hour time duration is necessary. After doing this cool those pipes in room temperature.

Sink age is lie below 5% & above 5% we have to put it in hydrostatic (i.e., water) pressure.

Ingredients of PVC pipes PVC (poly vinyl chloride)

Tri basic lead sulphate(TBCS)

Die basic lead sulphate (DBLS)

Calcium steric

Lead steric

Calcium carbonate(Ca Co3)

Titanic dioxide

Steric acid

Wax

The above material is mixed in fixed proportion in a big container and they get processed in to a solidified product. Immediately pipes of various diameters are manufactured by using various moulds. Once the pipes are manufactured they will be shifted to warehouse. As and when the requirement comes, they will be dispatched to the designated place.

NANDI RIGID PVC PIPES AT A GLANCE Color

- Light Grey

Length

-6 Mtrs

Pressure

-2.5Kg, 4Kg, 6Kg, 10Kg / Cm2 and 15Kg/Cm2

Manufactured with ISI mark - IS4958: 2000

Range available - 20mm to 400 O.D

NANDI GROUP OF PRODUCTS Nandi PVC Products

Nandi special Blue Casing Pipes

Nandi Electrical PVC Pipes

Nandi S.W.R. Pipes

Nandi Submersible Pipes

Srikanth water containers

Nandi Flex Pipes

Nandi Garden Tubes

Nandi Krishi Pipes

Nandi LDPE Pipes

Nandi HDPE Pieps

Nandi Drip Irrigation Pipe

Mahanandi SWR fitting

Nandi solvent cement.

Mahanandi Mineral Water Nandi milk dairy products

S.P.Y.REDDY Educational Institutions.

Nandi super market.

BENEFITS OF NANDI RIGID PVC PIPES

Economy

Being cheaper than conventional cement and steel pipes. NANDI RIGID PVC PIPES are very economical.

Light weightPVC pipes are 1/6th the weight of steel pipes. This makes them easy to carry and install doing away heavy material handling equipment. This reduces labor cost as well, as the process of installation is faster.

Rugged and DurableManufactured out of the best PVC material, NANDI RIGID PVC PIPES do not get rust and are not affected by most chemicals. Hence, they last longer, render trouble-free service and require less maintenance.

More flowFrictional losses in NANDI RIGID PVC PIPES are 40% lower than conventional pipes. Hence there is approximately 25% more flow than from pipes of the same size.

Raw materialThe important raw materials in manufacturing of PVC pipes Resin (Poly vinyl chloride)

TBLS (Tri Basic lead Sulphate)

DBLS (DI Basic Lead Sulphate)

CS (Calcium Steric)

LS (Lead Steric)Quality inspection

After manufacturing PVC pipes as per ISI standards following tests will be conducted to confirm the quality.

Reversion test

V.S.T

Impact test at OOC

Internal hydro- static test

Opacity test

Type test at 600C

Sulphated Ash Content

Effect on water test

WarrantiesWarranties are given to customers except an assurance that the product is reliable for 18 months.

Payment period For Nandi brand zero credit policy adopted by the company and goods are not delivered unless cash refinance are made. For monarch and sugar brands credit is entitled up to a week. The difference between these brands is due to brand image.

Transportation Transportation of SUHALA PIPES is very admirable. This unique strength of organization enables delivery to be efficient. This even helps the dealers to reduce inventory levels to the minimum. OperationsTo ensure optimum use of human resources currently employed.

To determine of forecast future skill requirements.

To provide control measures to ensure that necessary resources are available and when required.

To avoid unnecessary dismissals.

To ascertain future housing needs of employee

MODELS PIPES

1. Agricultural Pipes

Water, is indispensable for agriculture. However, only 15% of agricultural land, the world over, gets dependable water supply. In India too, only a fraction of cultivated land gets dependable supply of water. Pipes is an effective way of overcoming the problem caused by canal irrigation as they can be laid underground and moreover, water loss due to percolation and evaporation is eliminated. Lift irrigation is employed to draw water from a lower to a higher level. Here, various kinds of pipes are used. Nandi Rigid PVC Pipes with their good quality, trouble free service, durability and economical use are a better choice than mild steel, galvanized steel, cast iron and plastic pipes2. Electrical Pipes

Apart from manufacturing UPVC pipes M/s.Sujala Pipes Pvt Ltd, is specialized in the manufacture of entire gamut of other standard products including Electrical conduits, plumbing SWR pipes covering all applications in which PVC pipes can be used meeting the ISI requirements. or the past about three decades, Nandi Pipes(p) Ltd., Nandyal had been manufacturing UPVC Electrical Conduits under the brand names Nandi, Nandi Premium, Nandi Delux, Nandi Gold, Nandi Platinum and Nandi Diamond using cutting-edge technologies to keep pace with the modern technology and the choice of the customers. The company believes in total Quality Control measures and as a part of it each pipe is thoroughly checked at the manufacturing stage, so as to ensure that customer is supplied with good quality product. The company's Electrical Conduits are of ISI Standards and used for domestic & industrial purposes, the pipe sizes ranging from 16 mm to 63 mm to outer diameter.3. SWR PipesNandi Pipes Pvt Ltd.,Nandyal, a unit of Nandi Group of companies, has been manufacturing 'NANDI' brand Unplasticized Polyvinyl Chloride(UPVC) Plain and Socket end pipes with nominal outside diameter from 75.90 ,110 & 160mm. These pipes are used in soil and waste discharge system inside the building including ventilating and rain water applications. The pipe's surface colour is dark shade of gray. Pipes are made and supplied in nominal lengths of 4,6,8 and 10 feet either plain or with solvent typed socket/'O' ring typed grooved socke

The company's Nandi Gold brand SWR Pipe enjoys ISI recognition

(IS: 13592-1992). The Company also manufacturers SWR pipes under the brand names of Nandi Premium and Nandi Deluxe as per customer's choice and requirements. These pipes are manufactured with virgin material only.Ring fit Pipes An innovative new product Integrated Thermoplastics Ltd., a unit of Nandi Group of Companies had developed Ringfit pipes to overcome problems commonly experienced in solvent cement joining of higher diameter (above 160 mm) UPVC Pipes.

These Nandi Gold branded Ring fit pipes offers excel lent advantages over other UPVC pipes specially for undergoing applications. Pipelines Utilizing Ring fit pipes can be taken up for pressure testing immediately on completion of the section. Unlike for solvent cement joints, the waiting period required for solvent cement joining is entirely eliminated, resulting in short installation duration. Ring fit pipes are easy to install in the field. Ring fit pipes of diameters below 140 mm can be joined by hand pressure. For large sizes a pipe jack is available for the purpose.

5. Plumbing PipesThe Company also manufactures Grey Color plumbing pipes as per ISI standards IS:4985-2000

INTRODCTION

PVC pipes polyvinyl chloride pipes have become synonyms with modern living. It is undoubtedly a product which has deeply penetrated into common mans life. No wonder the industry has achieved remarkable goal. Plastics are perceived as just simple colorful household products in the minds of common person. A dominant part of plastics present and future improved their utilization in the following areas.

Agriculture, forestry and water management. Automobile and transportation, Electronics and Tele communications, building. Construction and furniture especially food substitutes. Food processing and packaging. Power and gas distribution.

Sujala Pipes PvtLtd.,Nandyal was incorporated in the year 1979 in the industrial estate Nandyal and this was promoted by MD. Mr.S.Y.Reddy. BE(Mechanical), who has decades of experience in manufacturing industry. The brand name is Nandi Pipes. The name Nandi derives from the historical aspects of this town Nandyal. The brand name as taken from the pilgrimages place called Mahanandi which is 15 km from Nandyal.

STATEMENT OF THE PROBLEM

The Company Sujala Pipes Pvt Ltd has been supplying variety of pipes through out India. Even though it has a good Net work. The company faces different problems like lack of dealer satisfaction, differences in customers perceptions, lack of financial appraisal techniques, ineffective inventory management techniques and the like.

Inventory is the main source of the pipes limited. There is no proper management in inventory, the company shall not meet the customers desires and does not satisfy the customers and their demands. Hence, the study concentrates on various techniques adopted in the management of inventory in the organization.

NEED FOR THE STUDY

Though the Company has several departments the under researched area is finance and less number of studies have been conducted on inventory management in the company. The company does not follow any scientific inventory management system and there raised a need to device a system which could reduce costs aconstitutingowar profitability and also provides to maintain a proper system in inventory of the organization.

REVIEW OF LITERATUREThe data has been collected for the study from various books and websites

BooksAccording to Khan M.Y &Jain P.K, Management accounting is concentrated on various financial management and Inventory management decisions elaborately.

According to Man Mohan & Goyal S.N, Principals of Management accounting is concentrated on various financial management and Inventory management decisions elaborately. According to V.K.Bhalla, working capital Management is concentrated on various financial management and Inventory management decisions elaborately. According to C.Vann home, financial Management is concentrated on various financial management and Inventory management decisions elaborately.

According to I.M.Pandy & Prasanna Chandra home, financial Management is concentrated on various financial management and Inventory management decisions elaborately.

Websiteswww.inventorymanagement.com gives about inventory concepts, status, and significance.www.inventorymanagementreview.com gives about inventory concepts, status, and significance.www.infliwinventory.com gives about inventory concepts, status, and significance. www.effective inventory.com gives about inventory concepts, status, and significance.OBJECTIVES OF THE STUDY

The main objectives of the study are : To analyze the present practices adopted in inventory management and inventory of raw materials.

To elicit the maximum utilization level of raw material and inventory in the company.

To ensure effective inventory management techniques for the company for smooth survival.

RESEARCH METHODOLOGY

There are nine branches located in India, three are located in Karnataka, one in Tamil Nadu, one in Kerala, one in Maharastra, one in Pondicheri, one in Orissa and one in Andhra Pradesh, which is the Head Office located in Nandyal. Among all these branches, the selected branch of Sujala Pipes pvt Ltd was incorporated at Nandyal in Andhra Pradesh. The executives and Finance department officials are enquired for the purpose of the study.A study is mainly based on the descriptive research design. This design largely interprets the already available information. It makes up of secondary data.DATA SOURCE

The data for the present study is collected through primary and secondary sources. Secondary data is obtained from the annual report of Sujala Pipes Pvt Ltd. Nandyal and also from internal reports of the company from time to time and primary data collected by interacting financial executives of the companyPRIMARY DATA

The primary data of this study was collected by consulting account officer of that company through oral interviews and queries

SECONDARY DATA

The study is mainly based on the source of secondary data. The secondary data forthis study was collected from the published sources i.e., annual reports, records of Sujala Pipes Pvt Ltd, and www.sujalapies.com.

SCOPE OF THE STUDY

The present study is confined to only Sujala Pipes Pvt Ltd., located in Nandyal. The study is limited to raw material, finished stock of goods only. The study has been analysed by taking the information related to both the present and past data with reference to the performance of the company.

PERIOD OF THE STUDY

The present study is confined to five years from 2003-04 to 2007-08TOOLS FOR THE STUDY

The data relating to the performance of the Sujala Pipes Pvt Ltd., from different activities that is operating, investing and financing activities have been carefully analysed by using the financial tools. The financial tools used in the present study are Economic Order Quantity, Inventory turnover ratio, Ordering cost, Carrying cost, Holding period, ABC analysis and the like.LIMITATIONS OF THE STUDY

The major limitations found in the study period are: Time and finance of the limiting fact for the study.

For ABC analysis consumption of raw material is only taken and EOQ main raw material are only considered.

Some of the information is kept confidential and has not been disclosed by the executives.

This study is further limited to Raw material and packing material only.

CHAPTER LAYOUT

The study confines to SIX Chapters : Chapter-1 Plastic Industry A Profile.

Chapter 2 Sujala Pipes Pvt Ltd.,- A Profile

Chapter 3 Research Methodology and Design

Chapter 4 Inventory management A Review

Chapter 5 Data Analysis and Interpretation

Chapter 6 Conclusions, Findings and Suggestions

INTRODUCTION

Inventory in wider sense, is defined as any idle resource of an enterprise. It is a physical stock of goods kept for the purpose of future affairs. a term is generally used to indicate raw materials in process, finished products, packing, spares and others stocked in order to meet expected demand or distribution in the future. Through inventory of materials is an idle resource it is not meant for immediate use it is almost essential to maintain some inventories for the smooth functioning of an enterprise.

For example, let us consider an enterprise that has no inventory of materials at all. When this enterprise receives a sales order, it will have to order out the raw material required to complete the order, wait till these arrive and then start production. This would kept the customers invariably to wait too long for the delivery of the goods ordered. Among other disadvantages of not maintaining the inventories, the enterprise may have to purchase the raw materials at very high prices because of piece-meal buying: the production costs would also be high because of not being able to take advantage of batching; the load on manufacturing shops would vary from period to period depending upon the orders on hand; the load on manufacturing shops would vary from period to period depending upon the orders on hand; the company may not be able to provide adequate customer service in the matter of completion, waiting and price.

Meaning of Inventory

The dictionary meaning of the word inventory is detailed list of movable goods, but in management inventory is used to designate the aggregated of those items of tangible property, which are held for sale ordinary course of business thus the inventory means stock of items kept in reserve for certain period of times, it includes raw materials, work in progress or semi finished goods, finished goods and spare parts for the maintenance of equipment, etc.,

Raw Materials

These are the basic inputs, which are converted into finished product through manufacturing process. Raw materials, inventories are those units, which have been purchased and stored for future production.

Work in Progress

Materials issued to the stop floor which have not yet become finished products, they are value added materials to the extent of labor cost incurred.

Finished Goods

Finished goods are those which are ready for sale.Definitions of Inventory

JOHN HAMPTON treats inventories, as Locked up capital. Inventory measured by rupee value constitutes the major element in the Working Capital (approximately 60% of current assets).

Good inventory management is nothing but good financial management according to S.C.KUCHAL.Types of Inventory Inventory can be classified in to five basic types on the basis of their production. These various types of inventories cannot be identified and segregated within the organization. As such types will not be represented in all organization. These five types areManagement inventory There are needed because of the time required to move stocks from one place to another.Lost Size inventory

These are result of buying materials in quantities larger than the immediately requirement, with a view to minimizing cost of transportation, buying, receipt and handling and to obtaining quantity discount

Fluctuation inventory

These are carried to ensure ready suppliers to consumer even when these are irregular and unpredictable fluctuation in their demand.Anticipation inventoryThese are usually maintained to meet a predictable but changing pattern of future demand.Cycle inventory

These result from management attempt to minimize the total cost of carrying and ordering inventory. They arise from ordinary in batches or lots, rather from needed basis.

PURPOSE OF INVENTORIES

The overall goal of inventory management is to feed the production with right quantity of raw materials with right quality at right time. The purpose of holding inventories is to allow the firm to separate the processes of purchasing, manufacturing and marketing of its primary products. The goal is to achieve efficiencies in areas where costs are involved and to achieve sales at competitive prices in the market place. With in this broad statement of purpose we can identify specific benefits that accure from holding inventories.

Avoiding Lost Sales

Without goods in hand which are ready to sold, most firms would lose business. In most cases, a firm must be prepared to deliver goods on demand.

Gaining Quantity Discounts

In return for making bulk purchases, many suppliers will reduce the price of supplies and component parts. The willingness to place large orders allow firm to achieve discounts on regular prices. These discounts will reduce the cost of goods sold and increase the profits earned on a sale.

Reducing Order Costs

Each time places on order, it incurs certain expenses. Forms have to be completed; approvals have to be obtained and goods that arrive must be accepted, inspected and counted. Later an invoice must be processed and payment made. Each of these costs will be very with the number of orders placed. By placing fewer orders, the firm will pay less to process each other. Achieving Efficient Production Runs

Each time a firm sets up workers and machines to produce on it, start up costs is incurred. This are then absorbed as production begins. The longer the runs the smaller the cost of begin producing the goods.

Reducing the risk of production shortages

Manufacturing firms frequently produce goods with hundreds even thousands of components. If any of these are missing the entire production operation can halted, with consequent expenses. To avoid starting a producing run and then discovering the shortage of a vital raw materials or other component, the firm can maintain larger than needed inventories.

These benefits arise because inventories provide a buffer between purchasing, producing and marketing of goods. Raw Materials and other inventory items can be purchased at appropriate times and in proper amounts manufacturing process can occur in sufficiently long production runs and with pre-planned schedules to achieve efficiency and economics. The sales force can respond to customer needs and demands based on existing finished goods. To allow each area to function effectively, inventory separates the area to function efficiency and economics. The sales force can respond to customer needs and demands based on existing finished goods, to allow each area to function effectively, inventory separates the areas to function effectively; inventory separates the three functional areas and facilitates the interaction among them.

REASONS FOR CARRYING INVENTORIES

The need of management to make decisions regarding inventory arises because of alternative courses of action (Strategies) available to any firm or organization. Thus a set of decision rules are sought which satisfy an objective function (such as available facilities, availability of finance etc.,) imposed by the firm policy. Hence it becomes essential for an enterprise (firm) to have inventory because of the following reasons.

It helps in smooth and efficient running of business.

It provides adequate service to customers.

It reduces the possibility of duplicating of orders.

It helps in maintain economy by absorbing some of fluctuations when the demand for an item fluctuates or is seasonal.

It helps in minimizing the loss due to deterioration, obsolescence, damage or pilferage etc.,

It acts as a buffer stock when raw materials are received late and shop rejections are too many.

Takes advantage of price discounts by bulk purchasing.

It reduces the cost of product because of an added advantage of batching and long, uninterrupted production runs.

It improves the manpower, equipment and facility utilization, by better planning and scheduling.

Though the inventories are essential and provide an alternative to production/purchase in future, they also mean locking up capital of an enterprise. Maintenance of inventories also costs money by way of expenses on stores, equipment, personnel, insurance etc., Thus excess inventories are undesirable. This calls for controlling the inventories in the most profitable way.

NEED FOR CARRYING INVENTORIES It helps in smooth and efficient running of business.

It provides adequate service to customers.

It reduces the possibility of duplicating of orders.

It helps in maintaining economy by absorbing some of fluctuations when the demand for an item fluctuates or is seasonal.

It helps in minimizing the loss due to deterioration, obsolescence, damage or pilferage etc.

It acts as a buffer stock when raw materials are received late (and shop rejections are too many.)

Takes advantage of price discounts by bulk purchasingNEED TO HOLD INVENTORY

Maintaining inventories involves tying up of the companys funds and in currency of storage and handling costs. There are three general motives for holding inventories.Transaction MotiveEmphasizes the need to maintain inventories to facilitate smooth the production and sales operations.

Precautionary MotiveIt necessitates holding of inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors.

Speculative MotiveIt influences the decision to increase or reduce inventory levels to take advantage of price fluctuations.

THE MAJOR DANGERS OF OVER INVESTMENT IN INVENTORIES ARE Unnecessary tie up of the funds and loss of profit.

Excessive carrying cost.

The risk of liquidity.

THE CONSEQUENCES OF UNDER INVESTMENT IN INVENTORIES ARE Production hold- ups

Failure to meet delivery commitments inadequate raw materials

Work-in-process will result in frequent in production interrupts.

AN EFFICIENT INVENTORY MANAGEMENT SHOULD Ensure a continuous supply of raw materials to facilitate uninterrupted production.

Maintain sufficient supply 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 on time.

Control investment in inventories and keep it at an optimum level.TOOLS OF THE INVENTORY MANAGEMENMT ABC analysis.

Economic Order Quantity

Materials Turn over Ratio

ABC Analysis

This analysis is based on the annual consumption value. It is based on Paretos law. Under this analysis all items of stores are classified into three main categories A, B and C.10% of the total number of items account for about 70% of the total consumption value. These items are called A items. 20% of the total number of items account for about 20% of the total consumption value these items are called B items. The remaining number of items account for the balance 10% of the total issue value, these items are called C items.

Procedure

The procedure of classifying the items into A, B and C categories is described in the following steps.

Calculate rupee annual issues for each item in inventory by multiplying the until cost by the number of units issued in a year. It is assumed that the issues and consumptions are the same.

Sort all items by rupee annual issues in descending sequence.

Prepare a list from these ranked items showing item number, unit cost, annual units issued and annual rupee value of units issued.

Starting at the top of the list, compute a running total, item issue value and the rupee consumption value.

Compute and print for each item the cumulative percentages for the item count and cumulative annual issues value.

10 percent of the top number of items account for about 70 percent of the total consumption value. These items are called A items. 20 percent of the number of items account for 20 percent of the total consumption value. These items are called B items. The remaining number of items account for the balance 10 percent of the total issue value. These items are called C items. Differences between A, B and C class itemsS. NoA ItemsB ItemsC Items

1.High Consumption Value Moderate

Consumption value Low consumption value

2.Very strict control Moderate Control Loose control

3.Very Low safety stocksLow safety stocksHigh safety stocks

4.Frequent ordering or weekly deliveries Once in three months Bulk ordering once in 6 months.

5.Accurate forecast in materials planningEstimates based past data on present plansRough estimates for planning

6.Minimization of waste and surplus(review every 15 days) Quarterly control over surplus and obsolete items Annual review over surplus and obsolete material

7.Maximum efforts to reduce lead timeModerate effortMinimum clerical efforts.

Economic Order Quantity (EOQ)

The inventory problems in which demand is assumed to be fixed and completed predetermined are usually referred to as the EOQ or lot size. It is also termed as re-order quantity. When the size of order increases, the ordering cost will decrease whereas the inventory.

Carrying costs will increase. Thus in the production process there are two opposite costs, one encourages the increase in the order size and the other discourages. EOQ is that size of order which minimizes total cost of carrying inventory and cost of ordering.

Q = (2*D*S)/H

Where K= annual demand

C= carrying cost

H= holding cost

EOQ can be calculated with the help of a mathematical formula. Following assumptions are applied in the calculation

1 Demand for the product is constant and uniform through out the Period.

2 Lead time (time from ordering to receipt) is constant.

3 Price per unit of product is constant.

4 Inventory holding cost is based on average inventory.

5 Ordering cost is constant.

6 All demands for the product will be satisfied (no back orders are allowed).

T.C = DC + [(D/Q) *S] + [ ( Q/2)*H]

Where T.C = Total cost

D = Annual demand

C = Purchase cost per unit

Q= Quantity to be ordered

S= Cost of placing on order

H= Holding Cost per unit of average Inventory per Annum

From the figure we can say that total cost is minimum at the point where cost of ordering is equal to holding cost.

((D*S)/Q) = (Q/2)*H

D*S = ((Q*Q)/2)*H

Q^2 = (2*D*s)/H

Q =

The graph showing The Procurement & Consumption cycle

INVENTORY TURNOVER RATIO

It is a ratio of materials consumed during a period to the average stock of materials during the period. It indicates the efficiency of the firm in producing and selling its products. Inventory Turnover Ratio = Materials Consumed

Average InventoryThe reciprocal of inventory turnover gives average inventory holding in percentage term. When the number of days in a year (say 360) is divided by turnover, we obtain days of inventory holdings (DIH).

DIH= No. of days in a year Inventory Turn Over RatioCLASSIFICATION AND CODINGGood store keeping requires proper classification and codification of various items stores in stock.

Classification of Inventory

Classification of inventory is the first step to determine optimum inventory levels. As already seen one way to classify them as raw materials, machinery spares, semi finished, work in progress and finished goods. Another ways to classify each of the above as ABC, VED etc.

Codification of MaterialsCodification is the procedure of assigning distinctive symbols for each item of store. Such symbols may be numeric or alphabetic or a combination of the two. These symbols are known as codes. Thus each material is also known by a code in addition its own name.

[Advantages

Systematic grouping of similar items for correct identification of each and every item.

The usage of long description is simplified and possible confusion avoided.

Avoid duplicate stock of the same item being held under different names, description, brand names, part number and different stores.

Enable reduction in sizes and varieties.

Ensures accuracy in posting of receipts and issue in appropriate records.STOCK LEVELS

For efficient material control and to avoid overstocking and under stocking of materials, an important requirement is to decide upon various levels of materials, these levels are minimum level and re-order level. By making action on the basis of these levels, each item of material will automatically be held with in appropriate limits of control. These levels are not permanent but need revision according to the changes in the factors which determine these levels are not permanent but need revision according to the changes in the factors which determine these levels.

Factors

The Following factors help in the fixation of these levels.

Rate of consumption of materials.

Lead the time, i.e., time lag.

Storage capacity.

Availability of funds for investment in inventories.

Cost of storage.

Risk of loss due to deterioration theft fire etc.,

Seasonal factors certain materials are cheaply available during certain seasons.

Fluctuations in market prices.

Insurance costs.

Maximum Level

The maximum stock level is that quantity of material above which the stock of any item should not generally be allowed to go up. This maximum level may be exceeding certain special cases, For instance, if a particular lot is purchased at a reasonably low price, the maximum level may be crossed. This level is fixed after taking into account such factory as:

1 Rate of consumption of material.

2 Amount of capital needed and available.

3 Storage space available.

4 Incidence of insurance costs which may be important for some materials.

5 Costs of storing above normal stock.

6 Risk of obsolescence and deterioration and

7 Re-order quantity.

Danger Level

It is that level below which stock should not be allowed to except under emergency conditions. When stock reaches this level urgent action for purchases is initiated.

Danger Level= Average Consumption*Maximum Re-order Period

For Emergency period

Danger level is below the minimum level. But some firms prefer to fix the danger level above the minimum level and below the re-order level. However fixing danger level below the minimum level is meant for taking corrective action where as fixing it above the minimum level is for preventive action.

The Formula for computing maximum level is follows.

Maximum Level= Re-order Level + Re-order quantity Minimum Consumption * Minimum Re-order PeriodMinimum Level

The minimum level is that level of stock below which it should not normally be allowed to fall. This is essentially a safety stock and will not normally be touched. In case of any item falling below this level, there is danger of stoppage in production and, therefore, management should give top priority to the acquisition of new supplies. This level is fixed after the consideration if the following factors.

Rate of Consumption.

Minimum level.

Delivery Time.

Variation in delivery time.

Re-order Level= (Maximum Consumption * Maximum Re-order Period)Average Stock Level This is computed with the help of the following formula.

Average stock level = Minimum level+ (1/2 of Re-order quantity) or

Average stock level = (1/2)* (Minimum level+ Maximum level)

TYPES OF INVENTORY CONTROL

Classification of inventory is the first step to determine optimum inventory levels. As already seen one way to classify them as raw materials, machinery spares, semi finished, work in progress and finished goods. Another ways to classify each of the above as ABC, VED etc.

ABC

HML

VED

FSN

TWO-BIN

SDE

EOQ

MAXMIUM MINIMUMMEANING OF INVENTORY CONTROL

Inventory control is a system, which ensures the provisions of the required quality of inventories of required quality at the required time with the minimum amount investment. Thus the function of inventory control is to obtain the maximum inventory turn over with sufficient stock to meet all requirements.

NEED TO HOLD INVENTORY CONTROL

Demand inventories have a tendency to grow beyond economic limits, tie-up funds and increase the cost of maintenance or carrying cost.

Non-availability of inventory involves cost of stock outs, reordering costs and additional transit cost.

Central core idea for material management is inventory control.

To minimize the locking of funds or working capital commitments.

To determine the working capital operating cycle is essential.

Depending upon the operating cycle the company requirements for locked up funds will follow. The length of operating cycle depends upon the nature of business, production policies, manufacturing process, terms of purchase and conditions of sales and demand.

PURPOSE OF INVENTORY CONTROL The need of controlling inventory is expressed as below : To improve customer services.

Permits purchase and transaction economies.

Transportation economies.

Hedge against price fluctuations.

Production economies.

Hedge against demand uncertainties

Protects against demand and lead time uncertainties.

FACTORS INFLUENCING INVENTORY CONTROL To control the inventory

How much to buy at one time ?

When to buy this quantity ?

Following four fundamental factors govern for these questions.

Requirements break down time wise.

Quantity in stock or an order.

Procurement time or lead time.

Obsolescence.

FACTORS TO BE CONSIDERED WHEN ESTABLISHING THE CONTROL LEVELS

Average consumption or production requirements

Reordering periods-the time between raising an order and receiving delivery of goods

Storage space available

Market conditions

Economic order quantity

Likely life of stock-bearing in mind the possibility of loss through deterioration or obsolescence and

The cost of placing orders including generating and checking the necessary paper work as well as physical checking handling procedures.

The key issue for a business is to identify the fast and slow movers with the objectives of establishing optimum stock levels for each category and, thereby minimize the cash tied up in stocks. Control policies should include designating responsibility for raising and authorizing orders, signing delivery notes and authorizing orders, signing delivery notes and authorizing payment of invoices. INVENTORY ANALYSIS METHODS

ABC Analysis

This analysis is based on the annual consumption value. It is based on Paretos law. Under this analysis all items of stores are classified into three main categories A, B and C.

10% of the total number of items account for about 70% of the total consumption value. These items are called A items. 20% of the total number of items account for about 20% of the total consumption value these items are called B items. The remaining number of items account for the balance 10% of the total issue value, these items are called C items.

Economic Order Quantity

The inventory problems in which demand is assumed to be fixed and completed predetermined are usually referred to as the EOQ or lot size. It is also termed as re-order quantity. When the size of order increases, the ordering cost will decrease whereas the inventory.

Carrying costs will increase. Thus in the production process there are two opposite costs, one encourages the increase in the order size and the other discourages. EOQ is that size of order which minimizes total cost of carrying inventory and cost of ordering.

Q = (2*D*S)/H

Where K= annual demand

C= carrying cost

H= holding cost

VED Classification

This analysis is based on criticality of inventories. It is used to determine the criticality of an item and its effect on production and other services. It is specially used for classification of spare parts. If a part is vital, it is given V classification, if it is essential, then it is given E classification and if it is not essential, the part is given D classification. For V items, a large stock of inventory is generally maintained, these items have immediate effect on production and more attention paid for these items.

HML Classification

The High, Medium and Low (HML) classification follows the same procedure as is adopted in ABC classification. Only difference is that in HML, the classification unit value is the criterion and not the annual consumption value. The items of inventory should be listed in the descending order of unit value and it is up to the management to fix limits for three categories. For example, the management may decide that all units with unit value of Rs. 2000 and above will be H items, Rs. 1000 to Rs. 2000 M items and less than Rs. 1000, L items.

The HML analysis is useful for keeping control over consumption at departmental levels for deciding the frequency of physical verification, and for controlling purchases. SDE Classification

The SDE analysis is based upon the availability of items and is very useful in the context of scarcity of supply. In this analysis. s refers to scarce items, generally imported, and those which are in short supply. D refers to difficult items which are available indigenously but are difficult items to procure. Items which have to come from distant places or for which reliable suppliers are difficult to come by fall into D category. E refers to items which are easy to acquire and which are available in the local markets.

The SDE classification, based on problems faced in procurement, is vital to the lead time analysis and in deciding on purchasing strategies.

FSN Analysis

FSN stands for fast moving slow moving and non-moving. Here, classification is based on the pattern of issue from stores and is useful in controlling obsolescence. To carry out an FSN analysis, the date of receipt or the last date of issue, whichever is later, is taken to determine the number of months, which have lapsed since the last transaction. The items are usually grouped in periods of 12 months. FSN analysis is helpful in identifying active items which need to be received regularly and surplus items which have to be examined further. Non-moving items may be examined further and their disposal can be considered. Minimum Maximum Technique

The Minimum Maximum system is often used in connection with manual inventory control systems. The minimum quantity is established in the same way as any re-order point. The maximum is the minimum quantity plus the optimum lot-size. In practice, a requisition is initiated when, a withdrawal reduces the inventory below the minimum level, and the order quantity is the maximum minus the inventory status after the withdrawal. If the final withdrawal reduces the stock level substantially below the minimum level, the order quantity will be higher than the calculated EOQ. The effectiveness of a minimum-maximum system is determined by the method and precision with which the minimum and maximum parameters are established.

Two-Bin System

One of the oldest systems of inventory control is the Two-bin system which is mainly adopted to control C group inventories. In the two-bin system, stock of each item is separated into two bins. One bin contains stock, just enough to last from the date a new order is placed until it is received in inventory. The other bin contains a quantity of stock, enough to satisfy probable demand during the period of replenishment. To start with, the stock is issued from the first bin. When the first bin is empty, an order for replenishment is placed, and the stock in the second bin is utilized until the ordered material is received.

Such a method is appropriate to ideal conditions in which the rate of consumption is fairly constant and for items, the lead time of which is fairly established and regular. Although the system itself possesses a high degree of automaker, in practice, we need to allow for variations in the rate of consumption as well as lead time. However, for such a systems. The most desirable quantity to re-order is the EOQ. Since the quantity to re-order is fixed in advance, initiation of replenishment action can be delegated to the lower level staff and there is need to take physical count of inventory levels.

Inventory in wider sense, is defined as any idle resource of an enterprise. It is a physical stock of goods kept for the purpose of future affairs. a term is generally used to indicate raw materials in process, finished products, packing, spares and others stocked in order to meet expected demand or distribution in the future. Through inventory of materials is an idle resource it is not meant for immediate use it is almost essential to maintain some inventories for the smooth functioning of an enterprise. The data has been analysed through various Inventory Turn Over Ratios, ABC Analysis, Ordering Cost, Carrying Cost, Holding Period, EOQ and the Like.

Table 5.1 gives the inventory turnover ratio of Sujala Pipes Pvt Ltd., for the years 2003-04 to 2007-08.It is the ratio between Cost of Goods Sold and Average Stock.

Inventory Turnover Ratio = Cost of Goods Sold Average Stock

Table 5.1INVENTORY TURNOVER RATIO OF SUJALA PIPES PVT LTD.,YEARCOST OF GOODS SOLDAVERAGE STOCKINVENTORY TURNOVER RATIO

2003-0425657425254321.54100.88

2004-0532456235532175.460.98

2005-06356588900243185.4281466.32

2006-07112629178.11026357910.97

2007-08716612780.220755354.1334.52

INTERPRETATION

In Year 2003-04,2005-06 Stocks are Converted into Liquid More Faster When Compared to the Below Years i.e.,2005,2006,2007&2008.In the Year 2006-07 Turn Over Ratio is Very Low When Compared to Other Ratios. In the Year 2007-08 Inventory has not been Sold Fast and Stayed On the Shelf for a Longer Period. It is also predicted in the Graph 5.1.Graph 5.1INVENTORY TURN OVER RATIO OF SUJALA PIPES PVT LTD.,

Table 5.2 gives the holding period of Sujala Pipes Private Limited. Inventory Turn Over Ratio = Cost Of Goods Sold Average Stock

Holding Period = Average Stock X 365

Cost Of Goods Sold Table 5.2

HOLDING PERIOD OF SUJALA PIPES PVT LTD.,YEARAVERAGE STOCKCOST OF GOODS SOLDHOLDING PERIOD

2003-04254321.54256574253.61

2004-05532175.4324562355.98

2005-06243185.4283565889000.24

2006-0710263579112629178.133.26

2007-0820755354.13716612780.29.80

INTERPRETATION

In The Year 2003-04, 2005-06 the Holding Period was Very Low When Compared to Other Period of Years.In the Year 2006-07 Period was Tremendously Increased When Compared to Other Periods. In The Year 2004-05, 2007-08 the Period was Decreased When Compared to the Above Year. It is also predicted in the Graph 5.2. Graph 5.2HOLDING PERIOD OF SUJALA PIPES PVT LTD.,

Table 5.3 depicts the ABC analysis for the year 2003-04.Table 5.3PERCENTAGE VALUE OF A, B, C ANALYSIS FOR THE YEAR 2003-04ITEMVALUE IN (Lacs)AMOUNT IN RS VALUE IN (%)

A494269.2

B393312.0

C23257.45

D4355.80

E2233.98

F1241.57

TOTAL11982100

INTERPRETATION

In the year 2003-04 the A class item has more value when compared to other classes of pipes. Its market value %are as follows: A class item print with red mark its % of sales are 49.02% & B class item print with blue mark its % of sales are 12.20% & C class item print with green mark its % of sales are 10.50% & D class item print with brown mark its % of sales are 18.18% & E class item print with yellow mark its % of sales are 5.01% & F class item print with black mark its % of sales are 5.00%.It is also Predicated in the Graph 5.3.Graph 5.3 PERCENTAGE VALUE OF A, B, C ANALYSIS FOR THE YEAR 2003-04

ITEMVALUE IN (LACS)AMOUNT IN RS VALUE IN(%)

A3942570.15

B294510.45

C14356.35

D6225.54

E5654.82

F2452.69

TOTAL54991100

Table 5.4 provides ABC analysis for the year 2004-05.Table 5.4

PERCENTAGE VALUE OF A, B, C ANALYSIS FOR THE YEAR 2004-05INTERPRETATION

In the year 2004-05 the A class item has more value when compared to other classes of pipes. Its market value %are as follows: A class item print with red mark its % of sales are 49.02% & B class item print with blue mark its % of sales are 12.20% & C class item print with green mark its % of sales are 10.50% & D class item print with brown mark its % of sales are 18.18% & E class item print with yellow mark its % of sales are 5.01% & F class item print with black mark its % of sales are 5.00%. It is also predicated in the Graph 5.4.Graph 5.4 PERCENTAGE VALUE OF A, B, C ANALYSIS FOR THE YEAR 2004-05

Table 5.5 gives percentage value of ABC analysis for the year 2005-06.Table 5.5 PERCENTAGE VALUE OF A, B, C ANALYSIS FOR THE YEAR 2005-06ITEMVALUE IN (LACS)AMOUNT IN RS VALUE IN (%)

A2820149.02

B944712.2

C904810.5

D533418.18

E16675.01

F15745

TOTAL55271100

INTERPRETATION

In the year 2005-06 the A class item has more value when compared to other classes of pipes. Its market value %are as follows: A class item print with red mark its % of sales are 49.02% & B class item print with blue mark its % of sales are 12.20% & C class item print with green mark its % of sales are 10.50% & D class item print with brown mark its % of sales are 18.18% & E class item print with yellow mark its % of sales are 5.01% & F class item print with black mark its % of sales are 5.00%. It is also predicated in the Graph 5.5.

Graph 5.5 PERCENTAGE VALUE OF A, B, C ANALYSIS FOR THE YEAR 2005-06

Table 5.6 analyse the Percentage of Value of A, B, C Analysis for the Year 2006-07

Table 5.6 PERCENTAGE VALUE OF A, B, C ANALYSIS FOR THE YEAR 2006-07ITEMVALUE IN (Lacs)AMOUNT IN Rs. Value in (%)

A2914838.61

B1965615.6

C1301722.3

D503812.22

E12866.15

F49635.12

TOTAL73108100

INTERPRETATION

In the year 2006-07 the A class item has more value when compared to other classes of pipes. Its market value %are as follows: A class item print with remark its % of sales are 38.6% & B class item print with blue mark its % of sales are 25.60% & C class item print with green mark its % of sales are 12.30% & D class item print with brown mark its % of sales are 12.22% & E class item print with yellow mark its % of sales are 6.15% & F class item print with black mark its % of sales are 5.12%. It is also predicated in the Graph 5.6.Graph 5.6 PERCENTAGE VALUE OF A, B, C ANALYSIS FOR THE YEAR 2006-07

Table 5.7 depicts the percentage value of ABC analysis for the year 2007-08.Table 5.7PERCENTAGE VALUE OF A, B, C ANALYSIS FOR THE YEAR 2007-08ITEMVALUE IN (Lacs)VALUE IN (%)

A2977949.63

B1206020.1

C1166916.68

D171314.18

E147014.26

F13714.15

TOTAL73480100

INTERPRETATION

In the year 2007-0 the A class item has more value when compared to other classes of pipes. Its market value %are as follows: A class item print with remark its % of sales are 38.6% & B class item print with blue mark its % of sales are 25.60% & C class item print with green mark its % of sales are 12.30% & D class item print with brown mark its % of sales are 12.22% & E class item print with yellow mark its % of sales are 6.15% & F class item print with black mark its % of sales are 5.12%. It is also predicated in the Graph 5.7.Graph 5.7PERCENTAGE VALUE OF A, B, C ANALYSIS FOR THE YEAR 2007-08

Table 5.8 gives Percentage of Value of A, B, C Analysis for the Year 2003-08

Table 5.8PERCENTAGE VALUE OF A, B, C ANALYSIS FOR THE YEAR 2003-08ITEM2003-04 VALUE IN (%)2004-05 VALUE IN (%)2005-06 VALUE IN (%)2006-07 VALUE IN (%)2007-08 VALUE IN (%)

A69.270.1549.0238.6149.63

B12.010.4512.215.620.1

C7.456.3510.522.316.68

D5.805.5418.1812.224.18

E3.984.825.016.1514.26

F1.572.6955.124.15

TOTAL100100100100100

INTERPRETATION In the above 200308 classes of pipes shows that the % of sales are decreased, when compared to the quality items. The percentage of sales are decreasing /increasing as according to their consumer tastes & preferences in present market conditions. It is also predicated in the Graph 5.8Graph 5.8Percentage Value of A, B, C Analysis for the Year 2003-08

Table 5.9 gives annual consumption in quantity and in value from the year 2003-08.ItemParticulars2003-042004-052005-062006-072007-08

Raw materialsQtyValue QtyValue QtyValue QtyValue QtyValue

1Poly Vinal chloride64.2812.4245.4521.5524.7127.8427.2830.7335.6540.15

2Tri Basic Sulphate

12.4510.4026.2410.3411.4110.2712.8610.1511.6010.44

3Die Basic Lead Sulphate15.4642.05745.2538.4749.1732.9547.3431.7255.8437.41

4Calcium Steric

16.4284.6254.5674.6265.8098.7167.2210.0869.2710.39

5Calcium Carbonate 62.4574.3926.2455.6257.2480.1361.0985.5369.0196.62

6Lead Steric

52.4524.5823.4554.2612.4956.2116.8375.7417.9380.72

7Titanic Dioxide84.6256.2445.2364.5716.0256.0920.8172.8613.6547.77

8Steric Acid

64.2510.2462.4510.5621.7610.8823.8811.9426.7313.36

9Wax46.2518.4232.4515.6227.0921.6731.1524.9241.1132.88

10Lubricants32.6233.4814.2545.6258.5144.4642.5532.3444.6733.95

Total43.1953.0192.6898.7411.35

Table 5.9

ANNUAL CONSUMPTION IN QUANTITY AND VALUE FOR 2003-08 (Rs. in crores)

Table 5.10 gives annual consumption in quantity and in value from the year 2003-08.

Table 5.10Annual Consumption In Quantity And Value For 2003-08Item No.Particulars2003-042004-052005-062006-072007-08

1.Raw materials :

Poly VInal ChlorideValue percent28.45Value percent32.56Value percent

30.04Value percent

31.13Value percent

35.37

2.Tri Basic Sulphate

1.451.621.111.030.92

3.Die Basic Lead Sulphate40.2038.1535.5532.1332.96

4.Calcium Steric

9.6258.26010.6510.219.15

5.Calcium Carbonate

8.257.328.658.668.51

6.Lead Steric

4.324.026.067.677.11

7.Titanic Dioxide4.254.856.057.384.21

8.Steric Acid

2.251.691.171.211.18

9.Wax0.750.990.240.250.29

10Lubricants0.450.620.480.330.3

Total100100100100100

INTERPRETATION

The above table clearly shows that major role of raw materials, are PVC increase in its value percentage from 28.45 percentage in 2003-04, 32.56 percentage in 2004-05 & 30.04 percentage in 2005-06 to 31.13 percentage in 2006-07 and later increased to 35.37 percentage in 2007-08. Tri basic sulphate value percentage decreased from 1.45 percentage in 2003-04, 1.62 percentage in 2004-05 & 1.11 percentage in 2005-06 to 1.03 percentage in 2006-07 and later decreased to 0.92 percentage in 2007-08. The value percentage titanic dioxide increased from 4.25 percentage in 2003-04, 4.85 percentage in 2004-05 & 6.05 percentage in 2005-06 to 7.38 percentage in 2006-07 and later decreased to 4.21 percentage in 2007-08. It is also predicated in the Graph 5.9.Graph 5.9ANNUAL CONSUMPTION FOR THE PERIOD 2003-08

Table 5.11 analyses the ordering cost for the period 2003-08

Table 5.11ORDERING COST FOR THE PERIOD 2003-08Particulars2003-042004-052005-062006-072007-08

Transportation1532457816543256192256682467768426894172

Sales tax18487272257498242267277340-

Salaries4245674564546890983081349785814047769

Printing and stationary487684-477284382258547765

Insurance20472843848705257248495296753798589

Telephone bills25374562659846371771028451362976286

Total2649140330954773375141265100995148264581

Table 5.12 analyse ordering cost of transportation for the year 2003-08. Table 5.12ORDERING COST IN PERCENTAGES FOR THE PERIOD 2003-08 (Rs. In Crores)Particulars2003-042004-052005-062006-072007-08

Items

Ordering cost % of ordering cost

Ordering cost

% of ordering costOrdering cost % of ordering cost

Ordering cost % of ordering costOrdering cost

% of ordering cost

Transportation1.5384.581.6589.251.9291.102.4691.602.6890.76

Sales tax1.8411.522.257.000.246.67773406.32-6.69

Salaries4.240.455.640.650.900.121.340.111.400.18

Printing and strategy0.480.002-0.0050.470.0010.380.0050.540.007

Insurance2.043.000.382.542.572.090.951.953.792.33

Telephone bills2.530.4480.260.5550.370.020.280.022.900.03

Total2.641003.091003.751005.101004.82100

INTERPRETATION

In the year 2003-04, 2004-05, 2005-06 transportation increased from 84.58, 89.25, and 91.10 percent in 2005-06 to 91.60 percent in 2006-07 and later decreased to 90.76 percent in 2007-08. Sales tax and salaries decreased from 6.67 percent, 0.12 percent in 2005-06 to 6.32 percent, 0.11 percent in 2006-07 and later increased to 6.69, 0.18 in 2007-08. The printing expenses increased from 0.01, 0.002, and 0.005 percent in 2003-04, 2004-05, and 2006-07 to 0.005 percent in 2006-07 and later increased to 0.007 percent in 2007-08. The telephone bills inconstantly from 2005-06 to 2006-07 i.e., 0.02 percent and later increased to 0.03 in 2007-08.Graph 5.10 shows the results. Graph 5.10ORDERING COST FOR THE PERIOD 2003 - 08

Table 5.13 provides ordering cost per order for the year 2003-08 in Rupees for raw material.Table 5.13ORDERING COST PER ORDER FOR THE PERIOD 2003-08 (Amount in Rs.)

Raw materials2003-042004-052005-062006-072007-08

Poly VInal Chloride 184551564512,283105429732

Tri Basic Sulphate125409468837879525699

Die Basic Lead Sulphate1045512456187561522517102

Calcium Steric84625463736257226924

Calcium Carbonate (caco3)31202610525032612053

Lead Steric124606761793352613739

Titanic Dioxide845571505132488332637

Steric Acid1216154561021185626316

Wax51402450215636221152

Lubricants61524540317233252992

Table 5.14 gives ordering cost for the year 2003-08 in percentages.

Table 5.14ORDERING COST IN PERCENTAGE FOR THE PERIOD 2003-08 (Amount in Rs.)

Particulars2003-042004-052005-062006-072007-08

Raw materialsOrdering cost

% of ordering costOrdering cost

Percentage of ordering costOrdering cost

% of ordering costOrdering cost

% of ordering costOrdering cost

% of ordering cost

Poly VInal Chloride 1845518.91564521.721228323.261054214.77973216.68

Tri Basic Sulphate1254012.9946813.1583789.13795211.1456999.77

Die Basic Lead Sulphate1045510.731245617.30187566.511522521.341710229.31

Calcium Steric

84628.6854637.5873629.8457228.02692411.87

Calcium Carbonate (caco3)

31203.2026103.6252506.3632614.5720533.52

Lead Steric

1246012.0867619.40793312.6752617.3737396.41

Titanic Dioxide84558.6871509.9351322.67788311.0526374.52

Steric Acid

1216112.0554567.60102113.93856212631610.83

Wax51405.3024503.40215610036225.0811521.97

Lubricants61526.3145406.30317233254.6629925.12

Total9740010071999 100806337135510058346100

INTERPRETATION

The above table clearly shows that the major role of raw materials in ordering costs per order are caco3 decreased from 3.20 percent in 2003-04 to 3.62 percent in 2004-05 & 6.51 percent in 2005-06 to 4.57 percent in 2006-07 and later decreased to 3.52 percent in 2007-08.

Wax and Lubricants ordering cost per order are increased from 5.30 percent, 3.40 percent, 2.67 percent, 3.93 percent in 2003-04 to 2004-05 & 2005-06 to 5.08 percent, 4.66 percent in 2006-07 and later weight chemicals, ordering cost decreased to 1.97 percent in 2007-08 and Lubricants ordering cost increased to 5.12 percent in 2007-08.shows the results Graph 5.11.Graph 5.11ORDERING COST PER ORDER FOR THE PERIOD 2005-08 IN PERCENTAGES

table 5.15 gives the details of carrying cost for the year 2003-08Table 5.15CARRYING COST