INTRODUCTION

Inventory management is the process of efficiently overseeing the constant flow of units into and
out of an existing inventory. This process usually involves controlling the transfer in of units in
order to prevent the inventory from becoming too high, or dwindling to levels that could put the
operation of the company into jeopardy. Competent inventory management also seeks to control
the costs associated with the inventory, both from the perspective of the total value of the goods
included and the tax burden generated by the cumulative value of the inventory.
Balancing the various tasks of inventory management means paying attention to three key
aspects of any inventory. The first aspect has to do with time. In terms of materials acquired for
inclusion in the total inventory, this means understanding how long it takes for a supplier to
process an order and execute a delivery. Inventory management also demands that a solid
understanding of how long it will take for those materials to transfer out of the inventory be
established. Knowing these two important lead times makes it possible to know when to place an
order and how many units must be ordered to keep production running smoothly.
Calculating what is known as buffer stock is also key to effective inventory management.
Essentially, buffer stock is additional units above and beyond the minimum number required to
maintain production levels. For example, the manager may determine that it would be a good
idea to keep one or two extra units of a given machine part on hand, just in case an emergency
situation arises or one of the units proves to be defective once installed. Creating this cushion or
buffer helps to minimize the chance for production to be interrupted due to a lack of essential
parts in the operation supply inventory.
Inventory management is not limited to documenting the delivery of raw materials and the
movement of those materials into operational process. The movement of those materials as they
go through the various stages of the operation is also important. Typically known as a goods or
work in progress inventory, tracking materials as they are used to create finished goods also
helps to identify the need to adjust ordering amounts before the raw materials inventory gets
dangerously low or is inflated to an unfavorable level.

Finally, inventory management has to do with keeping accurate records of finished goods that are
ready for shipment. This often means posting the production of newly completed goods to the
inventory totals as well as subtracting the most recent shipments of finished goods to buyers.
When the company has a return policy in place, there is usually a sub-category contained in the
finished goods inventory to account for any returned goods that are reclassified as refurbished or
second grade quality. Accurately maintaining figures on the finished goods inventory makes it
possible to quickly convey information to sales personnel as to what is available and ready for
shipment at any given time.
In addition to maintaining control of the volume and movement of various inventories, inventory
management also makes it possible to prepare accurate records that are used for accessing any
taxes due on each inventory type. Without precise data regarding unit volumes within each phase
of the overall operation, the company cannot accurately calculate the tax amounts. This could
lead to underpaying the taxes due and possibly incurring stiff penalties in the event of an
independent audit.

INVENTORY MANAGEMENT must tie together the following objectives ,to ensure that there
is continuity between functions :
Companys Strategic Goals
Sales Forecasting
Sales & Operations Planning
Production & Materials Requirement Planning.
Inventory Management must be designed to meet the dictates of market place and support the
companys Strategic Plan . The many changes in the market demand , new opportunities due to
worldwide marketing , global sourcing of materials and new manufacturing technology means
many companies need to change their Inventory Management approach and change the process
for Inventory Control .
Inventory Management system provides information to efficiently manage the flow of materials ,
effectively utilize people and equipment , coordinate internal activities and communicate with
customers . Inventory Management does not make decisions or manage operations, they provide
the information to managers who make more accurate and timely decisions to manage their
operations.
Inventory is defined as the blocked Working Capital of an organization in the form of materials.
As this is the blocked Working Capital of organization, ideally it should be zero. But we are
maintaining Inventory . This Inventory is maintained to take care of fluctuations in demand and
lead time. In some cases it is maintained to take care of increasing price tendency of
commodities or rebate in bulk buying.
Traditional Supply Chain solutions such as Materials Requirement Planning, Inventory Control,
typically focuses on implementing more rapid and efficient systems to reduce the cost of
communicating information between and across the Inventory links in the SCM.COM focuses in
optimizing the total investment of materials cost and workload for every Inventory item
throughout the chain from procurement of raw materials to finished goods Inventory .

Optimization means providing a balance of supply to meet the demand at a minimum total cost ,
Inventory level and workload to meet customers service goal for each items in the link of
Inventory Chain .
It is strategic in the sense that top management sets goals. These include deployment strategies
(Push versus Pull), control policies, the determination of the optimal levels of order quantities
and reorder points and setting safety stock levels . These levels are critical, since they are
primary determinants of customer service levels.
Keeping in view all concerns, the latest concept of Vendor Managed Inventory is used to
optimize the Inventory. We are entering into Vendor Managed Inventory, Annual Rate Contracts
with manufacturers or their authorized dealers, who maintain Inventory on our behalf and supply
the items as and when required.
VMI reduces stock-outs and optimize inventory in supply chain. Some features of VMI include:
Shortening of Supply Chain
Centralized Forecasting
Frequent communication of inventory, stock-outs and planned promotions
Trucks are filled in a prioritized order , e.g. items that are expected to stock out have top
priority then items that are furthest below targeted stock levels then advance shipments of
promotional items
Despite the many changes that companies go through, the basic principles of Inventory
Management and Inventory Control remain the same. Some of the new approaches and
techniques are wrapped in new terminology, but the underlying principles for accomplishing
good Inventory Management and Inventory activities have not changed.
The Inventory Management system and the Inventory Control Process provides information to
efficiently manage the flow of materials, effectively utilize people and equipment, coordinate
internal activities, and communicate with customers. Inventory Management and the activities of

Inventory Control do not make decisions or manage operations; they provide the information to
Managers who make more accurate and timely decisions to manage their operations.
The basic building blocks for the Inventory Management system and Inventory Control activities
are:

Sales Forecasting or Demand Management

Sales and Operations Planning

Production Planning

Material Requirements Planning

Inventory Reduction

The emphases on each area will vary depending on the company and how it operates, and what
requirements are placed on it due to market demands. Each of the areas above will need to be
addressed in some form or another to have a successful program of Inventory Management and
Inventory Control.
Inventory is usually a distributors largest asset. But many distributors arent satisfied with the
contribution inventory makes towards the overall success of their business:

The wrong quantities of the wrong items are often found on warehouse shelves. Even
though there may be a lot of surplus inventory and dead stock in their warehouse(s),
backorders and customer lost sales are common. The material a distributor has committed
to stock isnt available when customers request it.

Computer inventory records are not accurate. Inventory balance information in the
distributors expensive computer system does not accurately reflect what is available for
sale in the warehouse.

The return on investment is not satisfactory. The companys profits, considering its
substantial investment in inventory, is far less than what could be earned if the money
were invested elsewhere.

Meaning Of Inventory Management:

Inventory management means safeguarding the company property in the form of
inventories and maintaining it at the optimum level, considering the operating requirements and
financial resources of the business. Inventory management emphasizes control over purchases,
storage, consumption of materials and determining the optimum level for each item of
investments.

Importance of Inventory Management:

Inventory management is concerned with keeping enough products on hand to avoid
running out while at the same time maintaining a small enough inventory balance to allow for a
reasonable return on investment. Proper inventory management is important to the financial
health of the corporation; being out of stock forces customers turn to competitors or results in a
loss of sales. Excessive level of inventory however, results in large carrying costs, including the
cost of capital tied up in inventory warehouse fees, insurance etc.
A major problem with managing inventory is that the demand for a corporations product
is to a degree uncertain. The supply of the raw materials used in its production process is also
somewhat uncertain. In addition the corporations own production contains some degree of
uncertainty due to possible equipment breakdowns and labor difficulties.
Because of these possibilities, inventory acts as a shock absorber between product
demand and product supply. If product demand is greater than expected, inventory can be
depleted without losing sales until production can be stepped up enough to select the unexpected
demand.
However inventory is difficult to manage because it crosses so many lines of responsibility. The
purchasing manager is responsible for supplies of raw material and would like to avoid shortages
and to purchases in bulk order take advantages of quantity discounts.
The production manager is responsible for uninterrupted production and wants to have
enough raw materials and work in process, inventory on hand to avoid disruption in the
production process. The marketing manager is responsible for selling the product and wants to
minimize the chances of running out of inventory. The financial manager is concerned about
achieving an appropriate overall rate of return. Funds invested in an inventory are idle and do
not earn a return.
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Nature of Inventories
Inventories are stock of the product a company is manufacturing for sale and
components that make up the product. The various forms in which inventories that exist in
manufacturing company are
Raw materials
Work-in-process
Finished goods

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

Work-in-process
These inventories are semi-manufacture products. They represent products that need more
work before they became finished for sale.

Finished goods
These inventories are those completely manufactured products which are ready for sale.
Stocks of raw materials and work-in-process facilitate production while stock of finished goods
is required for smooth marketing operations.

Thus, inventories serve as link between the

production and consumption of goods.

Need to hold inventories
Maintaining of inventories involves trying up the companies and incurrence of storage
and handling cost. There are three general motives for holding inventories.
Transaction motive
It emphasizes the need to maintaining inventories to facilitate smooth production and
sales operation.

Precautionary motive
It necessitates the holding of inventories to guard against risk of unpredictable changes in
demand and supply force and other factors.

Speculative inventories
It influences the decision to increase or reduce inventory level to take advantage of price
fluctuations.
The firm should always avoid a situation of over investment or under investment in
inventories.
The major dangers of over investment in inventories are
i. Unnecessary tie up of the funds and loss of profits.
ii. Excessive carrying cost.
iii. The risk of liquidity.
The consequences of under investment in inventories are
i. Production hold-ups
ii. Failure to meet delivery commitments. Inadequate raw materials.
iii. 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 transportation cost on time.
Control investment in inventories and keep it at an optimum level

Cost of holding inventories

The determination of inventory cost is essentially an income measurement problem, a
means whereby there is rational orderly, systematic interpretation of the effect on the economic
progress of the company of expenditures involved acquiring goods or in maintaining and
operating productive facilities.

Ability to quantify and develop rigorous models of most

managerial problems is dependent on the determination behavior of relevant costs. The practical

application of such models is also dependent on ability to obtain the cost data. Relevant
inventory costs which change with level of inventory are listed below.

Ordering costs
Every order is placed for stock replenishment, certain cost are involved. The ordering
cost may vary, dependent upon type item.
This cost of ordering includes
Paper work cost, typing and dispatching order.
Follow-up costs the follow-up required ensure timely supplies include the travel cost for
purchases follow-up, telephone telex and postal bills.
Cost involved in receiving the order inception, checking and handling to the stores.
Any set up cost of machines if charged by supplier, either directly indicated in quotations
or assessed thought quotations for various quantities.
The salaries and wages to the purchase department are relevant for consideration if the
purchasing function is carried out at the same level with existing staff.
There are certain costs that remain the same regardless of the size of the lot purchased
or requisitioned. This would be retailer ordering from the distributor, from the distributor
ordering from a factory warehouse, for the factory warehouse ordering a new production run
from the factory, and for the factory ordering raw materials from vendors. These kinds of
costs are called preparation or set up costs.
If we are ordering to replenish supplies at one stock point from another stock point, our
interest is in the incremental clerical costs of preparing orders, following these orders.
Expediting them when necessary, etc, a large segment of the total cost of the ordering
function is fixed, regardless of the number orders issued. Even then it may be difficult
determined satisfactorily the incremental cost, which results from one more order. Quantity
discounts and handling and transport cost are other factors, which vary lot sizes.
Preparation cost are the incremental costs of planning production, writing production
orders, setting machines and controlling the flow orders through the factory. Material handling
cost in the plant have an effect on production lot sizes in much the same way that freight costs
may effect purchase lot sizes.

Besides the preparation costs of production, there are some other production costs, which have a
direct bearing on inventory models, however. These are over time premiums and the incremental
cost of changing production levels, such as hiring, training, and separation costs.
Carrying costs
Carrying costs constitutes all the costs of holding items in inventory for a given period of time.
They are expressed either in rupees per period or as percentage of the inventory value per period.
Components of these costs include the following
Storage and handling cost.
Obsolescence and deterioration costs
Insurance
Taxes
The cost of the funds invested in inventories
Storage and handling costs include the cost of warehouse space.
Obsolescence costs represent the decline in inventory value caused by style changes that make
the existing product less salvable.
Deterioration costs represent the decline in value caused by changes in the physical
quality of the inventory such as spoilage and breakage.
Another element of carrying cost is the cost of insuring the inventory against losses due to
theft, fire and natural disaster. In addition, a company must pay any personal property taxes
required by local and state government on the value of its inventories.
Like ordering costs, inventory-carrying costs contain both fixed and variable components.
Most carrying costs vary with inventory level, but a certain portion of them-such as warehouse
rent and depreciation on inventory handling equipment- are relatively fixed over the short run,
inventory model such as EOQ model treat the entire carrying cost as variable.
Stock out costs
Stocks out costs are incurred when ever a business is unable to fill orders because the
demand for an item is greater than the amount currently available in inventory. When a stock out
in raw materials occur, for example, stock out costs include the expenses of placing special
orders (back ordering) and delays. A stock out in work in progress inventory results in additional
costs of rescheduling and speeding production with in the plant, and it also may result in reduce
10

production costs if work stoppages occur. Final, a stock out in finished goods inventory may
result in the immediate loss of profits of customers decide to purchase the product from the
competitor and in potential long-term losses if customers decide to order from other companies
in the future.

Other characteristics of inventory situations

Besides the various types of costs involved, there are other characteristics of the
situation that vary among types of inventory and must be captured if the decision model is to be
an accurate representation of the physical circumstances.
Lead times
Obtaining inventory usually requires a lag from the initiation of the process until the
inventory starts to arrive. This lead-time may be a few minutes or it may be many months, and
depends in part on whether the firm is producing goods for its inventory or is ordering these
goods from another firm. To produce goods for its own use, the firm must schedule, set up and
adjust manufacturing equipment.

Sources and levels of risk

Uncertainties play a significant role in inventory situations. Uncertainties usually involve lead
times and demand times and demand levels, but situations where other variables are uncertain
also occur. Where are substantial
uncertainties and where the costs of stock out are important Strategies for addressing risk must
be formulated?

Static versus dynamic problems

Inventory problems are usually divided into two types based on the characteristics of the
goods involved. In static inventory problems, the goods have one-period life; there can be
carrying over of goods from one period to the next. Inventory situations where decisions involve
the number of news papers to print, the number of greeting cards to purchase or the number of
calendars to produce are static inventory problems. In dynamic inventory problems, the goods
have value beyond the initial period; they do not lose their value completely over time.
Replenishment rate
Once goods start to be received from a vendor or from the firms own production
processes, there are differences among goods in the rate at which they are received. Small orders
11

from vendors are likely to by receive all at once. For example, assume that a firm has placed in
order for 10 cases of paper towels. For such a small order the rate of replenishment is infinite;
the firms inventories well go up 10 cases in a very short time as the goods are quickly unloaded.
For large order from vendors, or for inventory produced with in the firm, the
replenishment rate may be slower.
Types of inventory
Inventories can be classified into five basic types on the basis of their production. These various
types of inventories cannot be identified and segregated within the organization. These five
types are

1. Management inventory
They are needed because of the time required to move stocks from one place to another
place.

2. Lot size Inventories

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

3. Fluctuation Inventories
These are carried to ensure ready suppliers to consumer even when these are irregular
and unpredictable fluctuations in their demand.

4. Anticipation inventories
These are usually maintained to meet a predictable but changing pattern of future
demand.

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INDUSTRIAL PROFILE
Strategically located kanipakam patanam of Chittoor District in Andhra Pradesh, India,

Sai sanjana fruit products is totally Export based food processing unit to process wide
varieties of Tropical Fruit Purees, Concentrates, Fresh Fruits and so on.
At Sai sanjana fruit products , we support the local farming community to cultivate fruits /
vegetables and improve their economical condition. We firmly believe that this farming
community is the source of strength for our organization.
We emphasize on adopting the best practices, proven methodologies and world-class quality
food processing benchmarks. In a phased manner, we are poised to help the industry and
nation in general and farmers in particular.
We envisage extending our operations through a chain of food processing plants across India
with special emphasis on backward integration and making the farmers community as
partners in our progress.
Backward Integration
As part our Backward Integration model, we support the local farming community through:

Interacting with farmer community

Bringing large scale farming land into fruits / vegetable cultivation

Imparting technical training under the guidance of experts from research institutes

Encouraging to accomplish the best quality and higher fruit yields

Training them on advanced fruit / vegetable farming and harvesting techniques

13

Spreading the awareness among them on the latest horticultural techniques

Enabling them to mobilize and get the fruits directly to the factory

Minimizing the fruit transportation costs through direct purchases

Reducing the unnecessary involvement of middlemen like traders, wholesalers, agents,

etc.

Minimizing damages in handling fruits / vegetables

Enabling high returns on investment (ROI)

Sai sanjana fruit products has developed state-of-the-art fruit processing facility to process
and produce natural tropical fruit puree, fresh fruits and concentrates. Our plant is strategically
located within the vicinity of largest fruits / vegetables producing districts like Chittoor,
in Andhra Pradesh.
Sai sanjana fruit products

Processing (India) Private Limited is a fruit processing

company to provide the best-in-class Tropical Fresh Fruits, Vegetables, Pulp / Puree and
Concentrates. Our products are processed in world-class food processing plants which follow
international heath benchmarks.
compliance

Sai

sanjana fruit products

with

the

quality standards, are in

global

standards.

We firmly believe that local farming community is the source of strength for our organization.
With Backward Integration as the core model, we encourage the local farming community to
take up fruits / vegetable cultivation and enable sustainable economical growth.
We emphasize on adopting the best practices, proven methodologies and world-class quality food
processing benchmarks. In a phased manner, we are poised to help the industry and nation in
general and farmers' community in particular.

14

Our Processing Plant

At our fruit processing plant, we have the most modern, world-class and total export oriented
fruit processing facility. We have all operations from farm to finished product delivery is
computer controlled.
Fruit products provided by Sai sanjana fruit products are fully quality driven. We are indeed
proud

to

be

associated

with

them.

CEO of a Fruit Trading Company

Mango Puree and Concentrate
Our Mango Puree and Concentrates are produced in a more hygienic environment under the
surveillance of highest quality standards and food industry benchmarks. Mango Puree is
produced by processing fresh fruits specially selected. The fruit processing includes:

Cleaning

Washing

Draining

Sorting

Inspection

15

Mango Puree is then packed, stored and shipped according to the best manufacturing practices.
We have different breeds of Mango Puree from India and other countries. The Puree produced by
us is used mainly in juices, nectar, baby foods and jelly foods.
Mango Puree is produced from fully ripened Mango fruits both from India and imported from
other countries. We follow stringent guidelines and fruit processing practices without using any
additives or food preservatives.
Mango Concentrate is prepared using fresh and mature Mango fruits. The process includes:

Pulp Extraction

Enzymatic Deactivation

Evaporation

Enzyme Addition

Puree Concentration

Sterilization

The Mango Concentrates produced by Sai sanjana fruit products can be used in beverages,
ice-cream, fruit jams, jellies, sauces and cereal bars.
Fruit products provided by Sai sanjana fruit products are fully quality driven. We are indeed
proud to be associated with them.
CEO of a Fruit Trading Company

Mango Puree and Concentrate

Our Mango Puree and Concentrates are produced in a more hygienic environment under the
surveillance of highest quality standards and food industry benchmarks. Mango Puree is
produced by processing fresh fruits specially selected. The fruit processing includes:

Cleaning

Washing
16

Draining

Sorting

Inspection

Mango Puree is then packed, stored and shipped according to the best manufacturing practices.
We have different breeds of Mango Puree from India and other countries. The Puree produced by
us is used mainly in juices, nectar, baby foods and jelly foods.
Mango Puree is produced from fully ripened Mango fruits both from India and imported from
other countries. We follow stringent guidelines and fruit processing practices without using any
additives or food preservatives.
Mango Concentrate is prepared using fresh and mature Mango fruits. The process includes:

Pulp Extraction

Enzymatic Deactivation

Evaporation

Enzyme Addition

Puree Concentration

Sterilization

The Mango Concentrates produced by Sai sanjana fruit products can be used in beverages, icecream, fruit jams, jellies, sauces and cereal bars.
The lack of mango market development globally opens a large untapped opportunity for India to
make an organized entry in the fresh mango and mango pulp market. India is well positioned to
capitalize on this opportunity with a very large national production of mangos, including leading
varieties like Alphorns. India has the potential to create a longterm global market position and
to capitalize on the fast growth of mango as a preferred ingredient for the natural package food
industry.

17

Additionally, mango is a preferred fresh fruit within the Indian domestic market, as well as
globally. Mango is in strong demand within the worldwide retail sector. The total market value of
Indian mango and mango pulp represents 25% of the value of agricultural and processed food
products exported by India. Moreover, the consumption growth for mangos in the United States
and Europe has average 1015% per year during the last 5 years. Collectively, these factors
indicate a strong opportunity to position Indian mango and mango products to meet a growing
international demand. India is the worlds largest supplier of mangos, having an annual
production of 10.5 million metric tons in 2003.
This accounts for 41% of the estimated worldwide mango production of 25.56 million metric
tons in 2003. Despite this large mango production, India is a minor exporter of mango and
mango products at this time. During the fiveyear period from 19982002, exports of fresh
mangos from India averaged approximately 42.4 thousand metric tons, or only about 0.4% of
mango production during this time frame. Data on exports of Indian mango pulp and juice
products are more limited. Data from 1995 indicated that India exported 37.7 thousand metric
tons of mango pulp.
Data from 2001 indicated that India exported 3.2 thousand metric tons of mango juice, but also
imported 2.2 thousand metric tons of mango juice. Collectively, these observations indicate that,
despite being by far the worlds largest mango producer, India exports less than 1% of its mango
crop as fresh mangos or processed mango products. These observations with mango are
consistent with aggregate data available on Indian fruit and vegetable exports.
One barrier to efficient development of the Indian mango industry is an exceedingly complex
supply chain. Within the value chain, a number of buyers and other aggregators operate at local
Minds and APMC to assemble larger lots from the many small producers in any given region.
Associated with this inefficient aggregation process is the application of numerous commissions
as fresh agricultural products trade hands. Numerous stakeholders in India have expressed
concern that this overly complex value chain is a hindrance to effective marketing of Indian
mangos and mango products.

18

A recent report from the Indian Ministry of Food Processing Industries further details the overly
complex supply chain and its contribution to costs and postharvest losses. This report concludes
that it is imperative to streamline the mango supply chain in order to reduce wastage and raw
material costs. (Sources: India Ministry of Food Processing Industries and Rambo bank Report).

INDIA MANGO & MANGO PULP INDUSTRY DEVELOPMENT:

Through partnerships with mango growers, processors, export organizations, and Indian
government organizations, among others, PFIDF&V is working to strengthen the small and
medium mango grower base by providing capacity building at all levels.
Education and training in Good Agricultural Practices and other sanitary standards, as well as
employment of certification systems, will lead to better yields, pesticide use in accordance with
regulations, and a more efficient supply chain. PFIDF&V partnerships will also help identify
and facilitate resources necessary for enhancing the mango supply chain such as cold storage
facilities, improved packing and grading facilities, testing facilities, and logistics management.
Furthermore,
A further approach will target reduction of waste in the fresh mango chain by developing high
value mango products and enhancing processing capacity for the domestic market. Ultimately,
these steps will help stabilize prices, increase farmer incomes, and development the farmer base
at commercial and social levels.

MANGO PULP INDUSTRY HOPES

Mango pulp production to reach 75,000 tons by 2010
Mango is raised in 36,000 hectares in Krishna Giri district
Mango pulp processed annually is 50,000 tones
Farmers have to go to Bangalore, as there is no testing facility in Krishnagiri

19

 Farmers are not getting fair price, even if there is a rise in prices in global market

MANGO MARKET DEVELOPMENT

PFID-F&V India has continued to forge and strengthen public and private partnerships to the
point that, now, just over one year from project start-up, notable results are beginning to show in
the form on increasing contributions from partnership members.
Dr. Thiagarajan, MSU/PFID-F&V, together with our two India-based coordinators, recently met
with the Agricultural Product Export Development Authority (APEDA) as well as the Federation
of Indian Chambers of Commerce (FICCI) and the National Institute of Marketing Boards
(NIAM) to follow up on each of their commitments to promote the Indian Mango Industry.
During this visit, both the Maharashtra State Horticulture Mission and the National Horticulture
Missions approvals were secured to begin the critical selection of 100 GAP demonstration
farms, identification of trainers to participate in train-the-trainer courses and program
implementation, as well as the initial survey and audits of the nucleus demonstration farms in
Maharashtra.

A PROPOSAL IS BEING PREPARED & SUBMITTED TO APEDA

Support employment of agric-officers to supervise, inspect and monitor the 100
demonstration farms
To support controlled atmosphere trials of mango for both domestic and export market
purposes
To support training of extension agents from four key mango growing states in India to
replicate mango demonstration model farms in these states
To support GAP certification costs for a sub-set of mango producers
To support the interface of project marketing activities with companies such as ITC,
Reliance, ShopRite, and Metro to provide market access for these demonstration farms.

20

The India team is also engaged in discussion with ITC to cosponsor a packaging conference on
innovations for both fresh and processed mango industries. The goals of this packaging
conference are to expose domestic producers, processors and retailers to modern food packaging
solutions, and to strength market linkages among mango producers and processors with Indiabased supermarkets as well as key players in the export market.
Other opportunities to explore with groups like ITC, ShopRite and similar partners are
establishment of a direct contract program which would include promotion, direct shipment from
packing houses to stores, proper packaging, and early contracting.

GOALS OF INDIA MANGO MARKET DEVELOPMENT

Currently, only 1% of the total mango production in India is exported. One reason contributing to
this poor export performance is that overseas buyers have stricter standards than are currently
accepted within the Indian domestic market. PFIDF&V will facilitate the development and
implementation of quality and safety standards which will meet the demands of the export
market.
PFIDF&V will partner with relevant Indian organizations in establishing a global
image for the Indian mango starting with the establishment of quality standards and Good
Agricultural Practices (GAPs) standards for India.
PFID partnerships in India can facilitate the development of a distribution network in
European and other countries where the value realizations for mango and mango pulp are
the highest.
PFID partnerships can assist mango growers and processors in developing an "India"
brand image for fresh mango and processed mango products that meet consumer
preferences. The predominant mango varieties grown in India make this product unique
in country and abroad.
After demonstrated success in developing a strengthening the market development of
mangoes, PFID India liaisons can easily adapt this approach to the further development of other
fruit and vegetable products in India

21

COMPANY PROFILE
History Of Saisanjana Fruit Products Processing (P) Ltd :
The division combines people with vast experience in agric-trading with the

saisanjana fruit

products processing (p) ltd Groups credibility to justify its premier standing in the trading arena.
The division was set up in 1967 and since then has handled a wide range of products - such as
Sesame Seeds, Processed Fruits, Food grains, Aqua etc.
Saisanjana fruit products

processing (p) ltd began its fruit processing operations in early

70s.However fruit processing operations have been given a special thrust since the last season
with an emphasis on developing strategic partnerships across the value chain especially fruit
procurement and processing. Saisanjana fruit products processing(p) ltd has established it's
presence as a reliable and competitive exporter to Coca Cola, USA, Western Europe, Far East,
Middle East etc.
BACKGROUND OF SAISANJANA FRUIT PRODUCTS PROCESSING(P) LTD
Situated at Chittoor in Andhra Pradesh, the mango belt in India

saisanjana fruit products

processing(p) ltd is a 100% Export Oriented Unit (EOU) processing Tropical Fruit Purees,
Concentrates and Fresh Fruits saisanjana fruit products

processing(p) ltd was started keeping

in mind the local farming community wealth. The farming community is an integral part and
forms the backbone of the organization. In its effort to be a forerunner in the chosen areas of
22

business in terms of best practices in quality and technology, FIL plans to benefit armors, the
industry and the nation in a phased manner.
saisanjana fruit products

Processing(P) Ltd believes in empowering farmers by providing

technical assistance from research institutes in the saisanjana fruit products industry to support
the farmers in achieving better quality and higher yields by developing the gardening and
harvesting techniques. Further to educating farmers with latest horticultural techniques,
Saisanjana fruit products Processing (P) Ltd is encouraging farmers to mobilize the fruits
directly to the factory, thereby minimizing the fruit handling damages and high value
realizations. The first phase has been completed, by setting up of state-of-the-art fruit processing
plant to produce natural tropical fruit puree and concentrates.
Generally speaking, countries export goods primarily to satisfy international demand for the
goods that are intensively produced within its boundary.
Countries may also export to dispose its surplus good that are not consumed domestically, in that
sense a country can import goods which cannot be produced domestically in exchange of
exported goods and reap the benefit of trade through comparative advantage.
The seller of such goods and services is referred to an "exporter" who is based in the country of
export.
Make Use this Exporter Directory to boost your Agro Business from India. Agri Exchange
provides the facility to the importers to track the presence of the exporters of the product of their
interest in the exporters Directory which is accessible by the Agri business houses round the
globe. Do register in this exporters Directory to boost your Business
Company details

Contact Person
Company Name
Year of Establishment
India MART Member Since
Company Profile

:Mrs. Dhanajaya Naidu Andulri

:Sai Sanjana Fruit Products
:2005
:2012
:Manufacturer of white guava pulp, alphonso mango pulp etc.

Contact Information
Address

23
:Door No. 16- 479, Old Employment Street
Chittoor - 517 002, Andhra Pradesh, India
:www.indiamart.com/company/5087884

Website

PRODUCT PROFILE
Mango Puree and Concentrate Our Mango Puree and Concentrates are produced in a more
hygienic environment under the surveillance of highest quality standards and food industry
benchmarks. Mango Puree is produced by processing fresh fruits specially selected. The fruit
processing includes:

Cleaning

Washing

Draining

Sorting

Inspection

Mango Puree is then packed, stored and shipped according to the best manufacturing practices.
We have different breeds of Mango Puree from India and other countries. The Puree produced by
us is used mainly in juices, nectar, baby foods and jelly foods.
Mango Puree is produced from fully ripened Mango fruits both from India and imported from
other countries. We follow stringent guidelines and fruit processing practices without using any
additives or food preservatives.
Mango Concentrate is prepared using fresh and mature Mango fruits. The process includes:

Pulp Extraction

Enzymatic Deactivation

Evaporation

Enzyme Addition

Puree Concentration

Sterilization

24

The Mango Concentrates produced by saisanjana fruit products can be used in beverages, icecream, fruit jams, jellies, sauces and cereal bars.

Guavas Puree and Concentrate

Guavas are grown in many tropical and subtropical regions. Guava pulp is available in sweet or
sour taste, off-white or pink color, with the seeds in the centre of the pulp or hard pulp. It all
depends on species. Guava is known to be low in calories and high in Vitamin C which is a
powerful antioxidant and anti-inflammatory agent.
Guava is also very delicious and is considered with high consumer acceptability because it is
having unique aroma and flavor. With rich vitamins A and C, and high levels of dietary fiber,
guava is considered as one of the Super Fruits by nutritionists.
At saisanjana fruit products processing plants, Guava Puree is aseptically processed,
manufactured from the best quality Guava fruits free of insects and diseases. Generally Guava
Puree is creamy in texture and confirms to highest industry food quality standards. We use
different Guava breeds from India and other countries. We have white as well as pink Guava
Puree. All the puree is free from stone cells. Our Guava Puree is extensively used in food
products juices, nectars, baby foods and jelly foods.
Our Guava Puree is aseptically processed which is creamy in texture with a pink color and
powerful flavor.
We manufacture Guava Concentrate using fresh, hygienic and mature Guava fruits. At our
processing plants, Guava fruits are processed aseptically as:

Cold Extractor Grinding

Enzymatic Deactivation

Evaporation

Enzyme Addition

Puree Concentration

Sterilization

25

At saisanjana fruit products, we produce pink guava concentrate as well as white guava
concentrate. These are mainly used in beverages, ice-creams, jams, jellies, sauces, cereal bars,
etc.
While processing tomato paste, skin and seeds are removed, then water content is removed
through evaporation. Our automated processes ensure to retain the flavor, color and richness of
the fruit. This process converts tomato paste / puree to concentrate. The processed Tomato
Puree

/Concentrate

are

then

packed

into

customized

Manufacturing Practices (GMP) to maintain good quality and consistency.

Our Tomato Puree or Concentrate is widely used in:

Food Soups

Stews

Sauces

Curries

Chutneys

Ketchups

Casseroles

Vinaigrettes

Any other dish where the tomato flavor is required

Our Products images

Papaya Puree and Concentrate

26

aseptic

containers.

Papaya Puree and Concentrate are derived from fresh, full ripen and red / yellow papaya fruits
which are free from insects and bacteria. Our products are prepared by special thermal treatment
free from any food additives or food preserve.
Though Papaya fruits are majorly available in Central and South America, they are also
cultivated in other parts of the world. Papaya fruits are available with black seeds, yellow or red
color based on the variety. Papaya fruits are normally bell-shaped as one end is smaller compared
to other side. Their outer skin is smooth and leathery. It changes from green to yellow as it
ripens.
Fully ripened Papaya fruits are juicy, sweet in taste, resembles Cantaloupe Fruits in flavor. These
fruits contain valuable digestive properties for total diet. Papaya fruits are considered as one the
best nutritious fruits by dieticians.
Alphorns Mango Pulp:
The range of alphonsa mango pulp offered by us is extracted from the fresh, delicious and quality
mangoes that are hygienically processed and are stored at the required temperature to provide the
real taste of mango. The natural taste and the flavor are the key factors for the high demand for
our mango pulp. The frozen mango pulp that we offer provides juicy and sweet taste, which
makes it ideal to be served as, slices for dessert or as ice-creams, juice, and milkshakes and so
on.
Offering

Quality

Alphonsa

Mango

Pulp

The range of alphonsa mango pulp offered by us is extracted from the fresh, delicious and quality
mangoes that are hygienically processed and are stored at the required temperature to provide the
real taste of mango. The natural taste and the flavor are the key factors for the high demand for
our mango pulp. The frozen mango pulp that we offer provides juicy and sweet taste, which
makes it ideal to be served as, slices for dessert or as ice-creams, juice, milkshakes and so on.

offering Mango Pulp Kesar Alphorns.

The product is manufactured from ripe, sound, hand-picked, selected Kesar / Alphonso mangoes,
free from damage, soils and cuts. Ripe mango fruits are washed, inspected, sliced and carefully

27

pulped. The pulpy mass is pasteurized, hot filled in OTS cans and sealed hermetically. The filled
cans are then retorted and cooled immediately, The whole operation is carried out with great care
to retain maximum level of natural flavor and taste.
Refractometric Brix @ 20 C ( Brix ) : 24.0 to 26.0
Acidity : ( % as Anhydrous Citric Acid ) : 0.45 - 0.55
pH as Natural : 3.50 - 4.20
Consistency ( Sec) Ford cup no: 8 : 18.0 - 25.0
Brix- Acid Ratio : 50-70
Co lour : Orangish Yellow
Flavor & Taste : Characteristic of Natural Ripe Kesar/ Alphonso Mango, Free from Off- flavor.
Appearance : Smooth, Uniform, Homogenous, No Foreign matter.
Packing : Packed in cartons /Trays of 12 x A 2 1/2 Cans of 850 gms. net in each carton/ tray OR
Packed in trays of 6 x A 2/1/2 Cans of 850 gms. net in each tray OR Packed in Cartons of 24 x A
2 1/2 Cans of 850 gms. net in each carton.
Storage : Storage at dry Warehouse conditions at ambient temperature.

Mango Pulp
We are the leading exporter supplier and manufacture in India, We have our own Manufacturing
Unite for Spices in South India. We are exporting , supplying all varieties of Mango Pulp with
good

quality

and

bulk

quantity

Mango pulp is the inner fleshy yellow, sweet part of the mango. Pulp of mango can be easily
extracted by peeling any variety of mango and then crushing it. In order to extract mango pulp,
crush using your hands or put the pieces in a mixer or food processor and blend to a pulp.
Health

Benefits

Mango has high iron content, so pregnant women and people suffering from anemia are advised
to

consume

It

it

regularly.

combats

Thus,

fresh

acidity

mango
and

pulp

can

improves

be

consumed.

digestion.

Mango is rich source of Vitamin A and Vitamin E which helps hormonal system function
efficiently.
Selenium is also present in mangoes which provide protection against heart disease.

28

Mango Pulp
We offer aseptic kesar mango puree in 220 kgs. Aseptically packed drums, 850 gms. Tins and 3.
1 kgs. Tins.
The product is manufactured from ripe, sound, hand picked, selected kesar mangoes, free from
damage, soils and cuts. Ripe mango fruits are washed, inspected and sliced and carefully pulped.
The pulpy mass is heated, cooled and filled aseptically in pre-sterile aseptic bag. The whole
operation is carried out with great care to retain maximal level of natural flavor and taste.
Simultaneously ensuring "commercial sterility".
Item: aseptic kesar mango puree (16 brix)

Crop: 2011/2012 season

Packing: aseptically packed 220 kg net wt bag in drum
Please contact for specifications and price with your requirements

Mango Pulp
We at subasri are having nearly 1000 acres of alphonsoa mango plantation in karnataka and all
our farmers are doing organic farming since 2006 and certified for both npop and nop standards.
We are having good certified processing unit to meet the us and german requirements. As per the
spec more...
We at subasri are having nearly 1000 acres of alphonsoa mango plantation in karnataka and all
our farmers are doing organic farming since 2006 and certified for both npop and nop standards.
We are having good certified processing unit to meet the us and german requirements. As per the
spec required. (available in 215kg aseptic packing).
Mango Pulp
Offering Mango Pulp. All mango pulps conform to highest international standards. Every care is
taken to retain the natural characteristics of taste, colour, nutritional value and flavour of the
29

fruits. Mango Pulp is widely used in production of juices, drinks, nectars, fruit cheese, jams and
in more...

Offering

Mango

Pulp.

All mango pulps conform to highest international standards. Every care is taken to retain the
natural characteristics of taste, colour, nutritional value and flavour of the fruits.
Mango Pulp is widely used in production of juices, drinks, nectars, fruit cheese, jams and in
various

other

kinds

of

foods

&

beverages.

Totapuri mango-pulp is the most popular variety with the food and beverage industry worldwide,
for

its

sweet-tart

Product
Packing

taste.

:
:

Very

popular

Totapuri
OTS

in

the

Mango

cansX3.1Kgs

Middle-East
Pulp

18.6

Kgs

region.
(2011Crop)

per

carton

Quality : Export Material, De

Fresh Mango Pulp
We are the one of the best supplier of Mango pulp with good quality and more varieties, We able
to supply any bulk varieties all over the World Health Benefits Mango has high iron content, so
pregnant women and people suffering from anemia are advised to consume it regularly. Thus,

fresh mango pulp more...

We are the one of the best supplier of Mango pulp with good quality and more varieties, We able
to supply any bulk varieties all over the World

HEALTH BENEFITS:
30

 Mango has high iron content, so pregnant women and people suffering from anemia are advised
to consume it regularly. Thus, fresh mango pulp can be consumed.
It combats acidity and improves digestion.
Mango is rich source of Vitamin A and Vitamin E which helps hormonal system function
efficiently.
Selenium is also present in mangoes which provide protection against heart disease.

Totapuri Mango Pulp & Alphansa Mango Pulp

We Supplies Fruit concentrate of Mango and we have carefully tied up with Manufacturer in
Dharamapuri and Krishnagiri Belt which is the hub for Tamil Nadu mango Pulp Industry.
Apex has an edging system to select the processors from where the Products are sourced.
We evaluate their purchasing mechanism, Processing Capacity and strength.
We also work with certified manufacturers.
We have a strict evaluating mechanism which gives us the consistency in the output. We
exported to South Asian countries and Europe Markets. Specification:
T. S. S. ( Brix) : Min 18-24
Acidity (% as C/A) : Min 0. 5
PH : < 4. 00
Brix Acid Ratio : 32
Ascorbic Acid (ppm): Min 200
Additives : Nil
Pesticide residue : Absent
Color : Golden yellow
Flavor : Characteristic
Taste : Characteristic Our Packaging: 3. 1KGS Cans or 215 KGS Drums Loadability3. 1KGS> 1000 Cartons in 20 Feet Container->
Totapuri Mango Pulp
We produce fine quality of Totapuri mango Pulp in 3.1 K.G.s tins.

31

We are a leading exporter and supplier of fresh lemon from India. We offered range is considered
as prime source of citrus acid and comes under the house of citrus fruits. It is highly appreciated
by our clients for its sweet aroma, tempting colour and flavour. It is widely used by our
customers for cooking purposes and can also be consumed in the form of juice. Offered lemons
are tested on several quality parameters by our expert quality controllers so that only qualitative
range of fruits can be delivered to our clients and it can be availed at reasonable price range.

About Company
Contact Person
Company Name
Year of Establishment
IndiaMART Member Since
Company Profile

: Mrs. Dhanajaya Naidu Andulri

: Sai Sanjana Fruit Products
: 2005
: 2012
: Manufacturer of white guava pulp, alphonso mango pulp etc.

Need for the study

32

o
o
o
o
o

To avoiding wastage
To avoid shortage of material
To avoid lack of material
To manage inventory effectively
To meet unexpected demands of material

OBJECTIVE OF THE STUDY

33

o
o
o
o
o

To classify the raw material for the better control

To recommend proper inventory management
To suggest suitable measures to improve the inventory management system
To study the effective utilization of inventory
To maintained large size of inventory of raw materials and work in process for
efficient and smooth production and finished goods for uninterrupted sales

operation
o To maintain a minimum investment in inventory to maximize profitability
o To study which item is having the high percentage of usage in the processing of
finished goods.
o To study the major raw materials being used in chittoor co- operative sugar
limited

SCOPE OF THE STUDY

The present study aims at the following

Highlight the need for and nature of inventory.

Underline need for investing in current assets and elaborate the concept of inventory
management.

34

Focus on the need for analyzing investment in inventory.

Discuss the process of managing inventory.

LIMITATIONS OF THE STUDY

o The information used primarily from historical annual reports available to the public and
same does not indicate the current situation of the firm.
o Detailed analysis could not be carried for the project work because of the limited time
span.
35

o Since financial matters are sensitive in nature the same could not be acquired easily
o The study is based on the data given by the finance department which has its own
limitations.
o The information is collected only the secondary data
o An extensive analysis was not possible is short of time
o The study may not be detailed in all respect

2. REVIEW OF LITERATURE
Inventory Management is concerned with keeping enough product on hand to avoid
running out while at the same time maintaining a small enough inventory balance to allow for a
reasonable return on investment. Proper inventory management is important to the financial
health of the corporation. Excessive level of inventory, results in large inventory carrying cost,
including the cost of capital tied up in inventory warehouse fees, insurance etc.
Inventory is needed for the definite consumption demand of materials, and to take care
of the uncertainty involved in the usage or availability of the materials. Some times other

36

authors described as the decoupling function of the inventory of materials is maintained at the
different stages of production.
The inventory taking care of the normal consumption requirements i.e., depending upon
the average consumption rates and average lead times for procurement/manufacture of the
material, inventories are kept at the appropriate times is called the normal inventory and the
inventory taking care of a production process, however continuous it maybe, is bound to have
some interruptions; it may also have imbalances in the consumption and production rates of the
materials at different stages.
These interruptions and imbalances make it necessary to keep stocks of inventory
between the different stages of the operations the aspect of this uncertainty is called the safety
stock or buffer stock of inventory

2.1 MEANING OF INVENTORY MANAGEMENT:

Inventory management means safeguarding the company property in the form of
inventories and maintaining it at the optimum level, considering the operating requirements and
financial resources of the business. Inventory management emphasizes control over purchases,
storage, consumption of materials and determining the optimum level for each item of
investments.

2.2 IMPORTANCE OF INVENTORY MANAGEMENT:

Inventory management is concerned with keeping enough products on hand to avoid
running out while at the same time maintaining a small enough inventory balance to allow for a
reasonable return on investment. Proper inventory management is important to the financial
health of the corporation; being out of stock forces customers turn to competitors or results in a
loss of sales. Excessive level of inventory however, results in large carrying costs, including the
cost of capital tied up in inventory warehouse fees, insurance etc.
A major problem with managing inventory is that the demand for a corporations product
is to a degree uncertain. The supply of the raw materials used in its production process is also
somewhat uncertain. In addition the corporations own production contains some degree of
uncertainty due to possible equipment breakdowns and labor difficulties.
Because of these possibilities, inventory acts as a shock absorber between product
demand and product supply. If product demand is greater than expected, inventory can be
37

depleted with out losing sales until production can be stepped up enough to select the unexpected
demand.
However inventory is difficult to manage because it crosses so many lines of responsibility. The
purchasing manager is responsible for supplies of raw material and would like to avoid shortages
and to purchases in bulk order take advantages of quantity discounts.
The production manager is responsible for uninterrupted production and wants to have
enough raw materials and work in process, inventory on hand to avoid disruption in the
production process. The marketing manager is responsible for selling the product and wants to
minimize the chances of running out of inventory. The financial manager is concerned about
achieving an appropriate overall rate of return. Funds invested in an inventory are idle and do
not earn a return.
Nature of Inventories
Inventories are stock of the product a company is manufacturing for sale and
components that make up the product. The various forms in which inventories that exist in
manufacturing company are
Raw materials
Work-in-process
Finished goods
Raw materials
These are those basic inputs that are converted into finished product through the
manufacturing process. Raw materials inventories are those units which have been purchased
and stored for future production.
Work-in-process
These inventories are semi-manufacture products. They represent products that need more
work before they became finished for sale.
Finished goods
These inventories are those completely manufactured products which are ready for sale.
Stocks of raw materials and work-in-process facilitate production while stock of finished goods
is required for smooth marketing operations.
production and consumption of goods.

38

Thus, inventories serve as link between the

Need to hold inventories

Maintaining of inventories involves trying up the companies and incurrence of storage
and handling cost. There are three general motives for holding inventories.
Transaction motive
It emphasizes the need to maintaining inventories to facilitate smooth production and
sales operation.
Precautionary motive
It necessitates the holding of inventories to guard against risk of unpredictable changes in
demand and supply force and other factors.
Speculative inventories
It influences the decision to increase or reduce inventory level to take advantage of price
fluctuations.
The firm should always avoid a situation of over investment or under investment in
inventories.
The major dangers of over investment in inventories are
iv. Unnecessary tie up of the funds and loss of profits.
v. Excessive carrying cost.
vi. The risk of liquidity.
The consequences of under investment in inventories are
iv. Production hold-ups
v. Failure to meet delivery commitments. Inadequate raw materials.
vi. 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.

39

 Minimize the transportation cost on time.

Control investment in inventories and keep it at an optimum level
Cost of holding inventories
The determination of inventory cost is essentially an income measurement problem, a
means where by there is rational orderly, systematic interpretation of the effect on the economic
progress of the company of expenditures involved acquiring goods or in maintaining and
operating productive facilities.

Ability to quantify and develop rigorous models of most

managerial problems is dependent on the determination behavior of relevant costs. The practical
application of such models is also dependent on ability to obtain the cost data. Relevant
inventory costs which change with level of inventory are listed below.
Ordering costs
Every order is placed for stock replenishment, certain cost are involved. The ordering
cost may vary, dependent upon type item.
This cost of ordering includes
Paper work cost, typing and dispatching order.
Follow-up costs the follow-up required ensure timely supplies include the travel cost for
purchases follow-up, telephone telex and postal bills.
Cost involved in receiving the order inception, checking and handling to the stores.
Any set up cost of machines if charged by supplier, either directly indicated in quotations
or assessed thought quotations for various quantities.
The salaries and wages to the purchase department are relevant for consideration if the
purchasing function is carried out at the same level with existing staff.
There are certain costs that remain the same regardless of the size of the lot purchased
or requisitioned. This would be retailer ordering from the distributor, from the distributor
ordering from a factory warehouse, for the factory warehouse ordering a new production run
from the factory, and for the factory ordering raw materials from vendors. These kinds of
costs are called preparation or set up costs.
If we are ordering to replenish supplies at one stock point from another stock point, our
interest is in the incremental clerical costs of preparing orders, following these orders.
Expediting them when necessary, etc, a large segment of the total cost of the ordering
40

function is fixed, regardless of the number orders issued. Even then it may be difficult
determined satisfactorily the incremental cost, which results from one more order. Quantity
discounts and handling and transport cost are other factors, which vary lot sizes.
Preparation cost are the incremental costs of planning production, writing production
orders, setting machines and controlling the flow orders through the factory. Material handling
cost in the plant have an effect on production lot sizes in much the same way that freight costs
may effect purchase lot sizes.
Besides the preparation costs of production, there are some other production costs, which have a
direct bearing on inventory models, however. These are over time premiums and the incremental
cost of changing production levels, such as hiring, training, and separation costs.
Carrying costs
Carrying costs constitutes all the costs of holding items in inventory for a given period of time.
They are expressed either in rupees per period or as percentage of the inventory value per period.
Components of these costs include the following
Storage and handling cost.
Obsolescence and deterioration costs
Insurance
Taxes
The cost of the funds invested in inventories
Storage and handling costs include the cost of warehouse space.
Obsolescence costs represent the decline in inventory value caused by style changes that make
the existing product less salvable.
Deterioration costs represent the decline in value caused by changes in the
physical quality of the inventory such as spoilage and breakage.
Another element of carrying cost is the cost of insuring the inventory against losses due to
theft, fire and natural disaster. In addition, a company must pay any personal property taxes
required by local and state government on the value of its inventories.
Like ordering costs, inventory-carrying costs contain both fixed and variable components.
Most carrying costs vary with inventory level, but a certain portion of them-such as warehouse
rent and depreciation on inventory handling equipment- are relatively fixed over the short run,
inventory model such as EOQ model treat the entire carrying cost as variable.
41

Stock out costs

Stocks out costs are incurred when ever a business is unable to fill orders because the
demand for an item is greater than the amount currently available in inventory. When a stock out
in raw materials occur, for example, stock out costs include the expenses of placing special
orders (back ordering) and delays. A stock out in work in progress inventory results in additional
costs of rescheduling and speeding production with in the plant, and it also may result in reduce
production costs if work stoppages occur. Final, a stock out in finished goods inventory may
result in the immediate loss of profits of customers decide to purchase the product from the
competitor and in potential long-term losses if customers decide to order from other companies
in the future.
Other characteristics of inventory situations
Besides the various types of costs involved, there are other characteristics of the
situation that vary among types of inventory and must be captured if the decision model is to be
an accurate representation of the physical circumstances.
Lead times
Obtaining inventory usually requires a lag from the initiation of the process until the
inventory starts to arrive. This lead-time may be a few minutes or it may be many months, and
depends in part on whether the firm is producing goods for its inventory or is ordering these
goods from another firm. To produce goods for its own use, the firm must schedule, set up and
adjust manufacturing equipment.
Sources and levels of risk
Uncertainties play a significant role in inventory situations. Uncertainties usually involve lead
times and demand times and demand levels, but situations where other variables are uncertain
also occur. Where are substantial
Uncertainties and where the costs of stock out are important Strategies for addressing risk must
be formulated.

Static versus dynamic problems

Inventory problems are usually divided into two types based on the characteristics of the
goods involved. In static inventory problems, the goods have one-period life; there can be
42

carrying over of goods from one period to the next. Inventory situations where decisions involve
the number of news papers to print, the number of greeting cards to purchase or the number of
calendars to produce are static inventory problems. In dynamic inventory problems, the goods
have value beyond the initial period; they do not lose their value completely over time.
Replenishment rate
Once goods start to be received from a vendor or from the firms own production
processes, there are differences among goods in the rate at which they are received. Small orders
from vendors are likely to by receive all at once. For example, assume that a firm has placed in
order for 10 cases of paper towels. For such a small order the rate of replenishment is infinite;
the firms inventories well go up 10 cases in a very short time as the goods are quickly unloaded.
For large order from vendors, or for inventory produced with in the firm, the
replenishment rate may be slower.
Types of inventory
Inventories can be classified into five basic types on the basis of their production. These various
types of inventories cannot be identified and segregated within the organization. These five
types are

1. Management inventory
They are needed because of the time required to move stocks from one place to another
place.

2. Lot size Inventories

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

3. Fluctuation Inventories
These are carried to ensure ready suppliers to consumer even when these are irregular
and unpredictable fluctuations in their demand.
43

4. Anticipation inventories
These are usually maintained to meet a predictable but changing pattern of future
demand.

5. Cycle Inventories
These result from managements attempt to minimize the total cost of carrying and ordering
inventory. They arise from ordering in batches or lots, rather from needed basis.
Inventories can be further classified into production inventories maintenance repair and
operation (MRO) inventories, in-process inventories and finished goods inventories.

Production inventory consists of raw materials parts and components which are used in
the production process forming parts of the final product.

Maintenance, repair and operation supplies which are used in the production of goods or
services but do not become part of the product.

In-process inventories are semi-finished materials, parts and assemblies found at various
stages in the production operation.

Finished goods inventory consists of completed products ready for sale.

2.3 TECHNIQUES OF THE INVENTORY MANAGEMENT

1) ABC ANALYSES
The ABC method is an analytical method of stock control which aims at
concentrating efforts on those items where attention is needed most. It is based on the premise
that a small number of the items in inventory may typically represent the bulk money value of
the total materials used in production process. While a relatively large number of items may
represent a small portion of the money value of stores used and that small number of items
should be subject to the greatest degree of continuous control.
Under this system, the materials stocked may be classified into a number of categories
according to their importance i.e., their value and frequency of replenishment during a period.

44

The first category, we may call it the group of A items, may consist of only a small percentage
of total items handled but its combined value may be a large portion of the total stock value.
The second category, naming it as group of B items, may be relatively less important. In
the third category consisting of C items, all the remaining items of stock may be included
which are quite large in number but their value is not high.
Categories of ABC analysis
In ABC analysis the items are classified in three main categories based on their respective
consumption value.
1. Category A items:
The items, which are most costly and valuable, are classified as A nearly 10 percentage
of the total number of items stored will account for 70 percentage of total value of all
items stocked.
2. Category B items:
The items having average consumption value are classified as B nearly20 percentage of
total number of items will account for 20 percentage of total value. Statistical sampling
is general useful to control them.
3. Category C items:
The items having low consumption value are put in category C nearly 70 percentage of total
number as items will account for 10 percentage total values. Generally these items are slow and
non-moving items in the stores, which are frequently used for production process but with more
quality.
2) VED CLASSIFICATION
This analysis is based on criticality of inventory, it is used to determine the criticality of the
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 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 item have immediate effect on production more attention paid for
this item.
3) ECONOMIC ORDER QUANTITY

45

The economic order quantity is that inventory level, which minimizes the total of
ordering cost and carrying costs.
It is the question, how much to order the quantity when inventory is replenished. If the
firm is buying raw materials, the question is to purchase the quantity of; each replenishment and
if it has to plan for production run, it is how much production to schedule. It may be solved
through EOQ.
COST OF HOLDING INVENTORIES
The determination of inventory costs is essentially an income measurement problem, a
means whereby there is a rational, orderly, systematic interpretation of the effect on the
economic progress of the company of expenditures involved in acquiring goods or in
maintaining and operating productive facilitates. Ability to quantify and develop rigors models of
most managerial problems is dependent on the determination of the behavior of relevant costs.
The practical application of such models is also dependent on ability to obtain the cost data.
Relevant inventory costs which change with the level of inventory are listed below.
Ordering cost:
Every timer an order is placed for stock replenishment, certain costs are involved.
The ordering cost may vary, dependent upon the type of item. However, an estimate of ordering
cost can be obtained for a given range of items.

1. Paper work costs, typing and dispatching an order.

2. Follow up costs-the follow-up required to ensure timely to ensure timely supplies
include the travel cost for purchase followup, telephone, telex and postal bills.
3. Cost involved in receiving the order inspection, checking and handling to the stores.
4. Any set up cost of machines if charged by the supplier, either directly indicated in
quotations or assessed through quotations for various quantities.
5. The salaries wages to the purchase department are relevant for consideration if the
purchasing function is carried out at the same decreases significantly, obviously a
proportional amount of personnel will be transferred to other departments.

46

Carrying Costs:
Carrying costs constitute all the costs of holing items in inventory for a given period
of time. They are expressed either in rupees per unit per period or as a percentage of the
inventory value per period. Components of this cost include the following.
1.Storage and Handling costs: It includes the cost of warehouse space.
1. Obsolescence and deterioration costs:Obsolescence costs represent the decline in
inventory value caused by technological or style changes that make the existing product
less salable. Deterioration costs represent the decline in value caused by changes in the
physical quality of the inventory, such as spoilage and breakage.
2. Insurance: The inventory against losses due to the theft, fire, and natural disaster.
3. Taxes: A company must pay any personal property taxes and business taxes required
by local and state governments on the value of its inventory.
4. The cost of funds invested in inventories: It is measured by the required rate of return
on these funds. Because inventory investments are likely to be of average risk the
overall weighted cost of capital should be used to measure the cost of these funds.
5. Storage and Handling costs: It includes the cost of warehouse space.
EOQ for an item is arrived on the following assumptions
1. .Demand is continuous at a constant rate.
2. The process continues infinity.
3. No constraints are imposed on quantities ordered, storage capacity, budget etc.,
4. Replenishment is instantaneous.
5. All costs are time invariant.
6. Units are not available.
EOQ for an item is arrived by the following formula
EOQ=

2 * AD * Co
CH

Where
EOQ=economic order quantity
Co=cost of ordering an order
AD= annual consumption of an item
47

CH=cost of carrying one unit/year

4) HML CLASSIFICATION
The high and 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 item of inventory should be listed to the
descending order of unit value and it is up to the management to fix limits for the three
categories. For example, the the management may decided that all units with unit value of
Rs.2000 and above will be H items, Rs 1000 to 2000 M items and less than Rs. 1000, l items.
The HML analyses is useful for keeping control over consumption at department levels for
deciding the frequency of physical , and for controlling purchases.
5) SDE CLASSIFICATION
The SDE classification 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. D refers to difficult items, which are available indigenously but are
difficult items to procure. Items which have to come form distance places or for which reliable
suppliers are difficult to come by, fall in to D category. E refers to items which are easy to
acquire and which are available in the local strategies
The SDE classification. Based on problems faced in procurement, is vital to the lead-time
analyses and in deciding on purchases strategies.

6) MINIMUM-MAXIMUM TECHNIQUE
The minimum maximum system is often used in connection with manual
inventory control system. 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 reduce the stock the stock substantially below the minimum level, the order quantity
will be higher than the calculated EOQ. The effectiveness of a minimum system is determined by
the method and precision with which the minimum and maximum parameters are established

48

7) 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 in to two bins. One bin contained 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
although the system itself possesses a high degree of atomic, in practice, we need, for such a
system, 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 staff and there is
need to take physical count of inventory levels.

3. RESEARCH METHODOLOGY
3.1 NEED FOR THE STUDY
The choice of area of the study for the project work was given after initial study of
company's operations and the system of working. Though the company has several departments;
the prime area was finance. After scrutinizing various financial aspects, It is that inventories
which consists an integral part of Inventory Management System at Foods and Inns Ltd.,.

49

The company did not follow any scientific Inventory management system and hence
there raised a need to devise a system which could considerably reduce the cost and thus
constituting towards profitability. The store is maintained by storing raw materials in racks and is
replenished whenever it is necessary. The stock reviewed occasionally according to its
importance in the Production process. Orders placed according to the production requirements.

50

NEED FOR THE STUDY

o
o
o
o
o

To avoiding wastage
To avoid shortage of material
To avoid lack of material
To manage inventory effectively
To meet unexpected demands of material

51

OBJECTIVE OF THE STUDY

o
o
o
o
o

To classify the raw material for the better control

To recommend proper inventory management
To suggest suitable measures to improve the inventory management system
To study the effective utilization of inventory
To maintained large size of inventory of raw materials and work in process for
efficient and smooth production and finished goods for uninterrupted sales

operation
o To maintain a minimum investment in inventory to maximize profitability
o To study which item is having the high percentage of usage in the processing of
finished goods.
o To study the major raw materials being used in chittoor co- operative sugar
limited

SCOPE OF THE STUDY

52

The present study aims at the following

Highlight the need for and nature of inventory.

Underline need for investing in current assets and elaborate the concept of inventory
management.

Focus on the need for analyzing investment in inventory.

Discuss the process of managing inventory.

53

LIMITATIONS OF THE STUDY

o The information used primarily from historical annual reports available to the public and
same does not indicate the current situation of the firm.
o Detailed analysis could not be carried for the project work because of the limited time
span.
o Since financial matters are sensitive in nature the same could not be acquired easily
o The study is based on the data given by the finance department which has its own
limitations.
o The information is collected only the secondary data
o An extensive analysis was not possible is short of time
o The study may not be detailed in all respect

STATISTICAL TOOLS
Correlation method

54

Using the correlation analysis we can find whether there is any relationship between the
variables. Correlation and regression analysis show how to determine the nature and strength of the
relationship between variables. The correlation analysis is used to determine the degree of the
relationship between the variables.
Correlation formula:
XY - (X) (Y)
------------N
R=

----------------------------------------------- X 2 - (X) 2
--------------

Y 2 - (Y) 2
-----------

55

3.4 RESEARCH DESIGN:

Research Design is the arrangement of conditions for collections and analysis of data in a
manner that aims to combine relevance to research purpose with economy in procedure.
Research Design, stands for advanced planning of the methods to be adopted for
collecting the relevance data and the techniques to be used in the analysis.
RESEARCH METHODOY / TOOLS FOR DATA COLLECTION:
DATABASE:
The study is based on both primary and secondary data, which were obtained from the
following sources.
A) PRIMARY DATA:
The primary data was collected by preparing questionnaire and also by personnel
interviews with a few officials.
B) SECONDARY DATA:
Secondary data is the data obtained from the published sources such as organizational
literature, files, periodicals, brochures, manuals and textbooks.

56

FIELD WORK:
This was undertaken individually to collect the various information regarding the study
by visiting the following sections.

I- Machine/Work shops:
Information regarding the production process in wheel shop, Axle shop and Assembly
shop were obtained.
II- Stores Deport:
Information regarding the stocking of materials, receipt and issues to workshops,
inventory, and control procedures in various branches inside the Depot was obtained.
III- Accounts Department:
Rest of the information was obtained from accounts department through personnel
interviews with section officials.

57

3.5 LIMITATIONS OF THE STUDY

Time factor is the major limitation.

For ABC analysis consumption of raw materials is only taken and for EOQ main raw
materials 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 & Packing material only.

58

4. Data analysis and interpretation

TABLE 4.1 ABC ANALYSIS ON THE YEAR 2007-2008

ITEMS

QTY

QTY
VALUE

VALUE

CUMLATIVE%

ABC
ANALYSIS

Concentrate (in
units)

45800

1.6

73280

45.49

45.49

5906

35436

21.99

67.48

Preforms (Nos.)

165

74

12210

7.57

75.05

Closures(Nos.)

72

149

10728

5.65

81.7

Sugar(in kegs)

95

74

7030

4.36

86.06

Labels and
sleeves(nos.)

69

97

6693

4.15

90.21

42

130

5460

3.389

93.59

81

39

3159

1.96

95.55

Wt chemicals

150

21

3150

1.955

97.514

Syrup
chemicals(kegs)

378.75

3030

1.88

99.44

Co2 Gas
(in kegs)

Pulp
(in kgs)
Carton trays
(nos.)

59

TABLE 4.1.1 SHOWING THE ABC ANALYSIS FOR MATERIAL & COMPONENTS
S NO
1
2
3

ABC ANALYSIS
A
B
C

TOTAL
2
3
5

CHART 4.1 SHOWING THE ABC ANALYSIS

INFERENCE

60

Above table showing the details for stores differential that material are classified in A
B C. Above 21.99% material given A. than above the 4.36% to below 21.99% material value
is B. than below 4.36% material adding value is C.

TABLE 4.2 ABC ANALYSIS ON THE YEAR 2008-2009

ITEM

QTY

QTY
VALUE

VALUE

CUMLATIVE%

ABC
ANALYSIS

Concentrate (in
units)

55600

1.6

898960

41.7

41.7

10675

64050

30.1

71.8

Preforms (Nos.)

200

75

1500

7.04

78.84

Closures(Nos.)

80

150

12000

5.64

84.48

Sugar(in kegs)

105

75

7875

3.71

88.19

Labels and
sleeves(nos.)

75

97

7275

3.42

91.61

45

140

6300

2.96

94.57

10

380

3800

1.8

96.37

160

21

3360

1.6

97.97

Co2 Gas
(in kegs)

Pulp
(in kgs)
Carton trays
(nos.)
Wt chemicals

61

Syrup
chemicals(kegs)

83

39

3237

1.52

99.49

TABLE 4.2 .1 SHOWING THE ABC ANALYSIS FOR MATERIAL & COMPONENTS
S NO
1
2
3

ABC ANALYSIS
A
B
C

TOTAL
2
4
5

CHART 4.2 SHOWING THE ABC ANALYSIS

INFERENCE

62

Above table showing the details for stores differential that material are classified in A B
C. Above 30.1 % material given A. than above the 3.42% to below 30.1% material value is B.
than below 3.42% material adding value is C.

TABLE 4.3 ABC ANALYSIS ON THE YEAR 2009-2010

ITEM

QTY

QTY
VALUE

VALUE

CUMLATIVE%

ABC
ANALYSIS

Concentrate (in units)

4506

75

337950

48.06

48.06

85500

1.6

136822

19.5

67.56

Preforms (Nos.)

15675

6.2

97185

13.1

80.66

Closures(Nos.)

72

380

27360

3.9

84.56

Sugar(in kegs)

1600

150

24000

3.5

88.06

277

77.5

21467.5

3.15

91.21

490

39.5

19355

2.8

94.01

153

98

14994

2.5

96.51

96

150

12480

1.9

98.41

Co2 Gas
(in kegs)

Labels and
sleeves(nos.)
Pulp
(in kgs)
Carton trays
(nos.)
Wt chemicals

63

TABLE 4.3.1 SHOWING THE ABC ANALYSIS FOR MATERIAL & COMPONENTS
S NO
1
2
3

ABC ANALYSIS
A
B
C

TOTAL
2
3
5

CHART 4.3 SHOWING THE ABC ANALYSIS

64

INFERENCE
Above table showing the details for stores differential that material are classified in A B
C. Above 19.5% material given A. than above the 3.15% to below 19.5% material value is B.
than below 3.15% material adding value is C

TABLE 4.4 ABC ANALYSIS ON THE YEAR 2010-2011

65

VALUE

CUMULATIVE %

ABC
ANALYSI
S

ITEM

QTY

QTY
VALUE

Concentrate (in
units)

9904

77.9624

772139.6

28.1

28.1

Co2 Gas
(in kegs)

39105
0

1.6576

648204.5

23.57

51.5

Preforms (Nos.)

67150

6.543

439362.5

15.97

67.47

Closures(Nos.)

1850

98

181300

6.6

74.07

Sugar(in kegs)

1950

76.5

149175

5.42

79.49

Labels and
sleeves(nos.)

950

155

147250

5.35

84.84

5050

23

116150

4.22

89.06

280

386

108080

3.93

92.29

Wt chemicals

750

129

96750

3.52

96.51

Syrup
chemicals(kegs)

1310

40.0786

52502.9

1.91

98.42

Pulp
(in kgs)
Carton trays
(nos.)

TABLE 4.4.1 SHOWING THE ABC ANALYSIS FOR MATERIAL & COMPONENTS
S NO
1
2
3

ABC ANALYSIS
A
B
C

TOTAL
3
4
3

66

CHART 4.4 SHOWING THE ABC ANALYSIS

INFERENCE
Above table showing the details for stores differential that material are classified
in A B C. Above 15.97% material given A. than above the 3.93% to below 15.97% material value
is B. than below 3.93% material adding value is C.

67

TABLE 4.5 ABC ANALYSIS ON THE YEAR 2011-2012

ITEM

QTY

QTY
VALUE

VALUE

CUMULATIVE %

ABC
ANALYSIS

Concentrate (in
units)

18005

75

1350375

36.82

36.82

554520

1.6634

922388.
6

25.15

61.97

Preforms (Nos.)

69460

6.56

455657.
6

12.42

74.26

Closures(Nos.)

1900

152

288800

7.87

82.26

Sugar(in kegs)

1700

77.5

131750

3.59

85.85

Labels and
sleeves(nos.)

1325

99

131175

3.57

89.42

1400

67

93800

2.55

91.91

3565

24

85560

2.33

94.3

Wt chemicals

633

130

82290

2.24

96.54

Syrup
chemicals(kegs)

1829

39.7

72611.3

1.97

98.58

Co2 Gas
(in kegs)

Pulp
(in kgs)
Carton trays
(nos.)

68

TABLE 4.5.1 SHOWING THE ABC ANALYSIS FOR MATERIAL & COMPONENTS
S NO
1
2
3

ABC ANALYSIS
A
B
C

TOTAL
2
4
4

CHART 4.5 SHOWING THE ABC ANALYSIS

INFERENCE

69

Above table showing the details for stores differential that material are classified in A B
C. Above 25.15% material given A. than above the 3.57% to below25.15 % material value is b
B.than below 3.57% material adding value is C.
High and medium and low classification to classification on the raw material in the bases
of the quantity value above 100 Rs is high and 50 to 100 are medium and below 50 are low

70

TABLE 4.6 THE CLASSIFICATION HIGH AND MEDIUM AND LOW ON THE YEAR 20062007
ITEM

QTY

QTY VALUE

VALUE

CLASSIFICATION

Concentrate (in units)

4506

75

337950

85500

1.6

136822

Performs (Nos.)

15675

6.2

97185

Closures(Nos.)

72

380

27360

Sugar(in kegs)

1600

150

24000

Labels and
sleeves(nos.)

277

77.5

21467.5

490

39.5

19355

153

98

14994

Wt chemicals

96

150

12480

Syrup
chemicals(kegs)

320

22

7040

Co2 Gas
(in kegs)

Pulp
(in kgs)
Carton trays
(nos.)

71

TABLE 4.6.1 SHOWING MATERIALS &COMPONENTS

S NO
1
2
3

H M L CLASSIFICATION
H
M
L

TOTAL
3
4
3

CHART 4.6 SHOWING THE H M L CLASSIFICATION

INFERENCE
The above table showing the detailed for stores material differentiation the material
classified in high and medium and low the above quantity value is 100Rs is high classification
and above 50Rs to 100Rs is medium and below 50Rs is low her high classification of material is
low consumption and low classification of materials is high consumption and medium
classification of raw material is consumption is medium

72

TABLE 4.7 THE CLASSIFICATION HIGH AND MEDIUM AND LOW ON THE YEAR 20102011
ITEM

QTY

QTY VALUE

VALUE

CLASSIFICATION

Concentrate (in
units)

4506

75

337950

85500

1.6

136822

Preforms (Nos.)

15675

6.2

97185

Closures(Nos.)

72

380

27360

Sugar(in kegs)

1600

150

24000

Labels and
sleeves(nos.)

277

77.5

21467.5

490

39.5

19355

153

98

14994

Wt chemicals

96

150

12480

Syrup
chemicals(kegs)

320

22

7040

Co2 Gas
(in kegs)

Pulp
(in kgs)
Carton trays
(nos.)

73

TABLE 4.7.1 SHOWING MATERIALS &COMPONENTS

S NO
1
2
3

H M L CLASSIFICATION
H
M
L

TOTAL
4
3
3

CHART 4.7 SHOWING THE H ML CLASSIFICATION

74

INFERENCE
The above table showing the detailed for stores material differentiation the material
classified in high and medium and low the above quantity value is 100Rs is high classification
and above 50Rs to 100Rs is medium and below 50Rs is low her high classification of material is
low consumption and low classification of materials is high consumption and medium
classification of raw material is consumption is medium

75

TABLE 4.8 THE CLASSIFICATION HIGH AND MEDIUM AND LOW ON THE YEAR
2011-2012
ITEM

QTY

QTY VALUE

VALUE

CLASSIFICATION

Concentrate (in
units)

4506

75

337950

85500

1.6

136822

Preforms (Nos.)

15675

6.2

97185

Closures(Nos.)

72

380

27360

Sugar(in kegs)

1600

150

24000

Labels and
sleeves(nos.)

277

77.5

21467.5

490

39.5

19355

153

98

14994

Wt chemicals

96

150

12480

Syrup
chemicals(kegs)

320

22

7040

Co2 Gas
(in kegs)

Pulp
(in kgs)
Carton trays
(nos.)

76

TABLE 4.8.1SHOWING MATERIALS &COMPONENTS

S NO
1
2
3

H M L CLASSIFICATION
H
M
L

77

TOTAL
4
4
2

CHART 4.8 SHOWING THE H M L CLASSIFICATION

INFERENCE
The above table showing the detailed for stores material differentiation the material
classified in high and medium and low the above quantity value is 100Rs is high classification
and above 50Rs to 100Rs is medium and below 50Rs is low her high classification of material is
low consumption and low classification of materials is high consumption and medium
classification of raw material is consumption is medium

INVENTORY TURNOVER RATIOS:

78

It denotes the speed at which the inventory will be converted into sales, thereby
contributing for the profits of the concern. When all other factors remain constant, greater the
turnover of inventory more will be efficiency of its management. This ratio is calculated as
follows:

Inventory Turnover Ratio

Cost of GoodsSold
Average Stock heldduring thePeriod

TABLE 4.9
RATIO

YEAR

COST OF GOODS SOLD

AVERAGE STOCK

2006-2007

16,82,44,220

23,41,47,888

0.71

2007-2008

3,26,16,707

13,75,97,979

0.23

2008-2009

11,52,46,375

8,30,65,437

1.38

2009-2010

25,75,46,899

18,24,64,927

1.41

2010-2011

38,10,97,458

26,42,10,401

1.44

2011-2012

44,38,68,320

26,57,05,437

1.67

IN %

CHART 4.9 SHOWING THE INVENTORY TURN OVER RATIO

79

TURN OVER RATIO

1.8
1.6

Ratio

1.4
1.2
1
0.8
0.6
0.4
0.2
0

2006-2007

2007-2008

2008-2009

2009-2010

2010-201\1

2011-2012

Year

INFERNCE: The inventory turnover ratio indicates the efficiency of the firm in producing and selling
its products. A low inventory turnover implies excessive inventory levels than required for
production. The company have high ratio of inventory except in the 2006-07 i.e. 0.23 it is not
good. That is all stock stored in gowdons.

80

THE RAW MATERIAL TO INVENTORY TURNOVER RATIO

Raw material to inventory ratio = raw materials / inventory
TABLE 4.10
YEAR

RAW MATERIALS

INVENTORY

Ratio in %

2006-2007

20474.2

219662803.7

0.009320741

2007-2008

20474.2

96849740.27

0.02114017

2008-2009

20474.2

110043159.00

0.018605609

2009-2010

20474.2

304641449.5

0.006720753

2010-2011

20474.2

281582198.3

0.007271127

2011-2012

20474.2

332338380

0.006160649

81

CHART 4.10 SHOWING RAW MATERIAL IN TO INVENTORY RATIO

INFRENCE
From the analysis of above data it is infers that the raw material quantum is
constant is each and every year. But the % of raw material to inventory a little up and down
movements in each and every year. Due to changes in variable expenditure in production point

82

DAYS IN INVENTORY
The number of days inventory is also knows as average inventory period and
inventory holding period. A high number of days inventory indicates that there is a lach of
demand for the product being sold. A low day in inventory ratio may indicated that the company
is not keeping enough stock on hand to meet demands

Number of day inventory = 365days / inventory turnover ratio

Table showing the inventory turnover days
TABLE 4.11
COSTOF

AVERAGE

RATIO IN

TURNOVER

GOODS SOLD

INVENTORY

DAYS

2006-2007

168244220

234147888

0.71

53

2007-2008

32616707

137597979

0.23

68

2008-2009

115246375

83065437

1.38

79

2009-2010

257546899

182464927

1.41

112

2010-2011

381097458

264210401

1.44

150

2011-2012

443868320

265705437

1.67

135

YEAR

CHART 4.11 SHOWING THE INVENTORY IN DAY

83

INVERNTORY TURN OVER DAYS

1.8
1.6

Ratio

1.4
1.2
1
0.8
0.6
0.4
0.2
0

2006-2007

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

Year

INFERENCE
The inventory turnover ratio trend over a period for six years was analllyzed and it was
found the inventory turn over ratio has fluctuated every year. And has increased in the following
year from 2006to 2012 this shows that an idle turnover ratio was maintained and this is
considered as positive indicator of operating efficiency and good from the point of the view of
liquidity. The average inventory turnover days will come around days 99.5

84

THE INVENTORY TO CURREN ASSET TURNOVER RATIO

Inventory to current ratio = inventory / current assets

TABLE 4.12
YEAR

INVENORY

CURRENT ASSETS

RATIO IN %

2006-2007

219662803.70

226868511

96.82

2007-2008

96849740.27

114579993

84.53

2008-2009

110043159.00

131888616

83.4

2009-2010

304641449.50

313864100

97.1

2010-2011

281582198.30

301353353

93.44

2011-2012

314228729.9

332338380

94.6

85

CHART 4.12 SHOWING THE INVENTORY TO CURRENT RATIO

CURRENT TURN OVER RATIO

100

Ratio

95
90
85
80
75

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Year

INFERENCE
From the analysis of inventory to current assets ratio it is infers that the ratio of inventory to
current assets is 2010 is, 2011, and 2012. Respectively it is increased is inventory position in
current assets

86

SHOWING THE INVENTORY TO FIXED ASSETS TURNOVER RATIO

Inventory to fixed assets ratio = inventory / fixed assets
YEAR

INVENORY

FIXED ASSETS

RATIO IN %

2006-07

219662803.70

115561613

190.1

2007-08

96849740.27

115561613

84.49

2008-09

110043159.00

115955117

94.9

2009-10

304641449.50

118336877

257.4

2010-11

281582198.30

128679423

218.8

2011-12

314228729.9

130066672

241.5

87

TABLE 4.13
CHART 4.13 SHOWING THE INVENTOY TO FIXED ASSETS RATIO

FIXED ASSETS RATIO

300

Ratio

250
200
150
100
50
0
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Year

INFERENCE
From the analysis of above data it is infers that the ratio of inventory to fixed assets it is
decreasing from 2007 to 2009 in 2007 it increased to 257.4% in 2008 is decreased to 218.8%
and in 2012 it is increased to 241.5%

88

FINDING THE CO RELATIONSHIP BETWEN PURCHASES AND SALES

TABLE 4.14
YEAR

SALES

PURCHASES

2006-2007

201486573.36

117582913

2007-2008

130517436

118292431

2008-2009

96920394

109672342

2009-2010

124629656

147368921

2010-2011

369059519

345673267

2011-2012

359736526

290573567

AIM
To determine whether there is co- relationship between purchases of raw material and sales
TABLE 4.15
SALES IN

PURCHASES

CROSS

IN CROSS

2006-2007

20.148

2007-2008

X2

Y2

XY

11.75

405.6

138.06

236.64

13.05

11.82

170.30

139.71

154.25

2008-2009

09.92

10.96

98.40

120.12

10.08

2009-2010

12.46

14.73

155.25

216.97

183.53

2010-2011

36.90

34.65

1361.61

1200.65

1278.58

2011-2012

35.97

29.05

1293.84

843.90

1044.92

N=6

X=119.44

Y= 122.96

(X)2=3484.35

(Y)2=2659.66

XY=2908.008

YEAR

FORMULA
XY - (X) (Y)
------------N

89

R=

----------------------------------------------- X 2 - (X) 2

Y 2 - (Y) 2

--------------

-----------

2908.8 (119.4) (112.96)

--------------------6
R = ------------------------------------------------------------------- 3484.35 (119.44) 2

2659.41- (112.16) 2

-----------

----------

659.35
R = ----------------734.5
R = 0.89
CONCLUSION
There is high positive co- relation between sales and purchases of raw
material

5.1 FINDINGS
It is found that the inventory turnover ratio going on increasing from 2007-08 is 0.23% to
in 2008-09 is 1.67%, it leads to the gross profit ratio going on decreasing

90

 The inventory to current assets ratio is 2007,us 96.82% in 2008 is 84.53% , in 2009 is
83.4% ,in 2010 is 97.1%, in 2011 is 98.44% and is 2012 is 94.6%
It is found that the ratio of inventory to fixed assets in 2007 is 190.1% , in 2008 is
83.49%, in 2009 is 94.9% , in 2010 is 257.4% , in 2011 is 218.8% and in 2012 is 241.5%
From high and medium and low classification method mainly three raw material items
were classified high but it is utilization has is lees , remaining four materials were
classified

as both medium and low classification but low classification items are

consumption is very high.

The inventory turnover ratio indicates that conversion of the inventory of the cash is very
fast through the study. It is increasing trend.
The inventory turnover ratio has been increasing for the year 2007-08 to 2010-11
Show it is shows the effective and efficiency of the company inventory management
system

5.2. SUGGESTIONS

91

 It is suggested that , there is increasing in the inventory turnover ratio, so it

may has to

control its cost of production point for the enjoying of high Gross profit ratio
The organization should control cost, for increasing raw material to inventory ratio
The organization may have to increase gradually the ratio of inventory to fixed asset
The organization may have to maintain sufficient portion of cash in current assets, becos3e
is high ratio of inventory to current assets
From the study A B C analysis of raw material the company was good show the company
may be use these method for the their proper utilization and control of raw material
Inventory should be given in accordance the change of technology
Regular feedback should be taken from the inventory management
The finance department has to maintain the same procedure to develop inventory
management
The company has to concentrate on research and development so that it can use the inventory
efficiently and reduce wastages
Company it should strive for getting the right goods to the place at the right time for the
least cost.

5.3 CONCLUSION
Sai sanjana Industry needs inventory for smooth running of its activities. It serves
as a link between production and distribution processes. There is generally a time lag between

92

the recognition of a need and its fulfillment. The unforeseen fluctuations in demand and supply
of goods also necessitate the need for inventory. It also provides cushion for future poses
fluctuations.
The investment in inventories constitutes the cost of significant part of current
assets/working capital in most of the undertakings. Thus, it is very essential to have proper
control as and when required and to minimize investment in inventors.
The Sai sanjana maintain high closing balances of inventory it leads to over expenditure
so company should control over expenditure to maximize profits.

BIBLIOGRAPHY

I. M. PANDEY (2005), financial management, ninth edition vikas publishing house

pvt ltd.

93

S. N. MAHESWARI (2006), financial and management accounting, fifth edition,

sultan chand and sons, New Delhi.

C. R. KOTHARI, research methodology and techniques. Second edition, new

Agency international pvt ltd.

BAKER. R .P & HOW WELL. A.C, the preparation of reports, New York Ronald
press.

S.P. GUPTHA (1995), statistical methods, sultan chand and, co New Delhi.

P.RAMMURTY (2005), production and operation management, new agency

international pvt ltd

AHUJA H.L, economic environment of business, macroeconomic analysis,

chand&company ltd, New Delhi, 2005.

WEB SITES
www. Google.com
www. Sai sanjana fruit product ltd ..com

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