Teena C

Nalco 1
INVENTORY MANAGEMENT
CONTENT
1. EXECUTIVE SUMMARY…………………………………………………………….pg…1
2. INTRODUCTION………………………………………………………………….......pg…4
2.1. INVENTORY CONTROL……………………………………...……………pg…4
2.2. INVENTORY CONTROL TECHNIQUES…………………………….……pg…7
3. COMPANY PROFILE……………………………………………………………......pg…20
3.1. ALUMINIUM INDUSTRY…………………………………………….…..pg…20
3.2. NALCO OVERVIEW……………………………………………………....pg…24
4. RESEARCH PROBLEM………………………………………………………….….pg…30
5. RESEARCH OBJECTIVES……………………………………………………….…pg…33
6. RESEARCH METHODOLOGY………………………………………………….….pg…34
6.1. TYPES OF RESEARCH DESIGN……………………………………....…pg…34
6.2. DATA COLLECTION TECHNIQUES……………………………...….….pg…35
Xavier Institute of Social Service, Ranchi

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7. ANALYSIS & INTREPRETATIONOFDATA……………………………..…….….pg…36
7.1. INVENTORY OF MATERIALS………………………………..…….……pg…36
7.2. SELECTIVE CONTROL TECHNIQUES……………………………….....pg…42
7.3. ECONOMIC ORDER QUANTITY OF RAW MATERIALS……………...pg…46
8. CONCLUSION & RECOMMENDATIONS………………………………………....pg…67
9. BIBLIOGRAPHY……………………………………………………………………..

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CHAPTER 1 : EXECUITVE SUMMARY
Inventory is the most excessive assets of a manufacturing company like Nalco and also the idle
resource. There are various inventory control techniques such as Economic order quantity,
Reorder point, safety stock, ABC analysis, XYZ analysis, FSN analysis, HML analysis, VED
analysis, Just in Time inventory control, perpetual inventory control and many more. Out of
all these, there are some techniques which are applied for inventory control in Nalco Smelter
Plant, Angul.
Aluminium industry market shows that CY 2007 was the phenomenal year with 37.8 million
tonnes aluminium consumption against 38.1 million tonnes production, with china leading the
market. But FY 2008 faced significant fluctuation in aluminium prices mainly due to
depreciating dollar and import duty reduction.
Aluminium industry consist of primary producers and secondary fabricators. The majority users
of aluminium are sectors such as electrical, transportation, building and construction and packing
industries.
Indian aluminium industry is dominated by only five companies. One public sector unit: Nalco
and two private groups: Aditya Birla Group – Hindalco and Sterlite Industries – Balco and
Malco. Hindalco is the largest producer of aluminium and Nalco is the low cost aluminium
producer. The strength of Indian aluminium industry is the vast bauxite reserves through out the
country. Though these industry are energy intensive, every Plant has each of its captive power
plant for continuous supply of power. Growing economy provides good and better opportunities
for these industries.

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Now coming to the overview of Nalco, it was incorporated in 1981 with technical collaboration
of aluminium Pechiney of France. It is the first Aluminium company to achieve ISI 9002
certification for all the four production units: mines, alumina refinery, smelter and power plant.
With Nalco joining the aluminium industry brigade, the country’s production has risen from a
level of 357347 tonnes aluminium in 1985 89 tonnes to 38.1 million MT in 2007 08.The
present capacity of its bauxite mines is 4800000 MT, of alumina plant is 1575000 MT, of
aluminium plant is 345000 MT and captive power plant is 960 MW.
Going through financial performance of the company it can be found that it is a constant profit
generating company. The company achieved a turnover of Rs 5576 crores against the turnover of
Rs 6354 crores during the previous year the profit after tax stands at Rs 1632 crore as against Rs
2381 crore in the previous year. The decline in sales realization and net profit during the year,
compared to previous year is mainly due to lower\sales realization from export of alumina,
substantial appreciation of rupee against US dollar.
Nalco has finished the first phase of expansion and is working for the 2 nd phase of expansion
after which the capacity of bauxite mines would be 6300000 MT, alumina Refinery would be
2100000 MT, aluminium smelter would be 460000 MT and captive power plant would be 1200
MW.
The research conducted in about the inventory control techniques applied in Nalco Smelter Plant,
Angul and its effectiveness. The inventory of this plant increased from Rs 111.32 crores in FY:05
06 to Rs 121.82 crores in FY:06 07 and it further increased to Rs 138.51 crores in FY:07 08.
The increase in inventory is due to expansion projects, increase in production, bulk purchase of
raw materials and steel and cement, duplicate indent of AP Item, change in man power and

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increase due to spares. The research objective is to study and understand the inventory of all
materials, and analyzing the effectiveness of various techniques used in Nalco. Finally
recommending methods and strategies to control the inventory.

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CHAPTER 2: INTRODUCTION
2.1 INVENTORY CONTROL / INVENTORY MANAGEMENT
2.1.1 NEED FOR INVENTORY
Inventory is very vital to every Company is that without inventory no company would
survive. Inventory is meant for ‘protection’ and for‘ economy’ in cost. Keeping inventory of
sufficient stocks will help to face lead times component, demand and supply fluctuations and any
unforeseen circumstances in the procurement of materials. Though to have inventory is must,
inventory is such a thing that will pile up and creep into the area of profits to turn them as losses
and can put the company in red. It is therefore, necessary to have control over inventory to save
the company from piling up of inventories and to avoid losses. Better said than done is the world
that suits the inventory control.
2.1.2 DEFINITATIONS
Inventory control can be defined as “Determining and maintaining optimum investment in
inventory given the significance of benefits and cost association with holding inventory ”.
Inventory Control relates to “ a set of policies and procedure by which an industries
determines which materials it will hold in stock and the quality of each that it will
carry in stock “. Therefore inventory control is otherwise known as STOCK CONTROL.
2.1.3 OBJECTIVES OF INVENTORY CONTROL

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Inventories constitutes second largest category of all manufacturing operation exceeded
only by plant and equipment and followed by receivables. The objectives of inventory
control are:
a) To keep required stock of materials so that production and maintenance actitives do not suffer.
b) Minimum blockage of funds in inventory. Optimization can be achieved and efforts need to be
made to improve input output ratio of materials by scientific methods of determining.
2.1.4 TYPES OF INVENTORIES
Depending upon the types of business, generally the Inventories Varies. But in a
manufacturing industry the inventory can be classified into four broad categories:
1. Production Inventory: It contains materials purchased from market like raw
materials; Ready made parts, component, spares and also special parts and
components manufactured in their own industry and kept in stock for self
consumption for use in manufacture.
2. Maintenance, Repair & Operating Inventory: Contains materials purchased
from vendors to maintain the production process and these maintenance,
repair and operating inventory do not form part of the finished products.
3. Work in progress Inventory: This contains manufactured good kept in
stores, warehouse or retail outlets, Stock Yard for sales to consumers.
To put this into a diagram, the Constituent of Inventory is as follows:

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2.1.5 FACTORS INFLUENCING INVENTORY
“How much to buy at onetime” and “When to buy this quality “. These are two
fundamental things on which inventory control depends. Many factors govern these
fundamental things. The prime factors that govern these two fundamental things are:
1. Requirements
2. Quality in stock or on order
3. Lead time
4. Obsolesce.
2.1.6 CONTROL, MAINTENANCE AND MANAGEMENT
The essence of inventory control, broadly speaking consists of revolving the following
three factors:
1. Necessity for stocking an items
2. Time for reordering the items
3. Quality per order to be order.
Continuous and periodical review is required in the evaluation of inventory management
and treats it as a continuous process as costs, source of supply, availability of materials;
consumption will vary in the course of time making the previous assessment invalid.
This process also helps in standardization of materials for procurement by using near
equivalents and eliminating material, which are discontinued as a regulation, which will
remove obsolescence.

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2.2.INVENTORY CONTROL TECHNIQUES
Inventory is being maintained as a cushion in supply of materials for continuous
production without causing stock out situation. This cushion should not be suicidal to
any organization. The following scientific techniques and methods are being used in
control of inventory.
1. Inventory Management Techniques
2. Standardization
3. Selective Inventory Control
4. Just In Time
5. Perpetual inventory system
6. Inventory turnover ratio
2.1.7.1 INVENTORY MANAGEMENT TECHNIQUES
1. Economic Order Quantity
If the firm is buying raw materials, it has to decide lots in which it has to be
purchased on replenishment. If the firm is planning a production run, the issue is
how much production to schedule. These problems are called order quantity problems,
and the task of the firm is to determine the optimum or economic order quantity.
(a) Ordering cost:
The term ordering cost is used in case of raw materials and includes
the entire costs of acquiring raw materials.

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(b) Carrying cost:
Cost incurred for maintaining a given level of inventory is called
carrying cost.
Economic Order Quantity is given by the formula:
EOQ =
And the total cost of inventory is given by the formula:
Total cost of inventory = (A×P) + (A×O) + (EOQ×C)

EOQ 2
Where A = Annual consumption (in units)
O = Ordering cost per order (in Rs)
C = Carrying cost per unit (in Rs)
P = Price per unit (in Rs)
2. Reorder Point
The reorder point is that inventory level at which an order should be placed to
replenish the inventory. To determine reorder point:
(a) Lead time is the time normally taken in replenishing inventory after the
order has been placed.
(b) Average usage

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(c) Economic order quantity
3. Safety stock
The demand for material may fluctuate from day to day. The actual delivery time
may be different from the normal lead time. If the actual usage increases or the
delivery of inventory is delayed the firm can face problem of stock out, which can
be costly. So, in order to guard against the stock out the firm may maintain a safety
stock.
2.1.7.2 STANDARDIZATION
Standardization is very essential to control the inventory, as by standardization
reduction in variety of material is possible. And because of the reduction in variety the
advantages are low order cost, low inventory, less storage stocks, conservation of
materials, variety reduction, less paper work, easy follow up with suppliers, less number
of orders.
The importance of this field has been recognized since the days of F.W. Taylor,
who first drew attention to this fundamental need in any organization. Just as work study
is necessary preliminary to work simplification, and a basic technique for production
control, quality control, materials handling, estimated cost control, etc., “Standardization “
are preliminary necessity to design a basic technique on build control and standardization
procedure.

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2.1.7.3 SELECTIVE INVENTORY CONTROL MANAGEMENT
Any manufacturing organization consumes few thousand items of stores. A high
degree of control on inventories of each item would, therefore neither be practical
considering the work involved, nor worthwhile since all items are not of equal
importance. Hence, it is desirable to classify or group items to control, commensurate
with importance. This is the principle of selective control as applied to inventories and
the technique of grouping is termed as selective technique.
Selective inventory means variation in the methods of inventory control from
items to item and this differentiation should be on selective basis by classification. A
company has to stock thousands of items of raw materials, standard parts, stores and
spares, sub contract items, tools, stationery etc. To have better control over the inventory/
stock on hand, selective inventory control technique should be used in isolation/ or in
conjunction.
Thus selective control means selecting the area of control so that required objective is
achieved as early as possible without any lost of time due to taking care of full area –
 Minimum lost of energy and efforts.

 At minimum cost without loss of time.
There are following selective control techniques:
* ABC Analysis
* FSN Analysis

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* XYZ Analysis
* VED Analysis
* HML Analysis
A) ABC ANALYSIS
ABC analysis is a selective control technique which is required to be applied when we
want to control value of consumption of the item in rupees obviously when we want to
control value of the consumption of the material we must select those materials where
consumption is very high.
In any company manufacturing, there are number of items which are consumed or traded
it may run into thousands. It is found after number of studies for different companies
that –
Value of consumption of No. Of items Grade
items (value in Rs).

70% of consumption 10% of no. Of items A
20% of consumption 15% of no. Of items B
10% of consumption 75% of no. Of items C
A items these are those items which are found hardly 5% 10% but their consumption
may amount 70% 75% of the total money spend on materials.
B items these are those items which are generally 10% 15% of he total items and their
consumption amounts to 10% 15% of the money spend on the materials.

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C items these are large number of items which are cheap and inexpensive and hence
insignificant. They are large in number s running into hardly 5% 10% of the total
money spends on materials.
'A' Class Items ‘B’ Class Items 'C Class Items

(High consumption value) (Moderate consumption (Low consumption value)
value)
1. Very strict control 1. Moderate control 1. Loose control.
2. No safety stocks or very 2. Low safety stocks. 2. High safety stocks

Low safety stocks.
3. Maximum follow up and 3. Periodic follow up 3. Follow up and expediting

Expediting in exceptional cases
4. Rigorous value analysis 4. Moderate value analysis 4. Minimum value analysis
5. Must be handled by senior 5. Can be handled by 5. Can be fully delegated

officers management
B) FSN ANALYSIS
This type of analysis is more concerned from the point of view of movement of the
item or issue of the item or issue of the item under this type of analysis.
‘F’ items are those items, which are fast moving i.e. in a given period of
time, say a month or a year they have been issued up till number of items. Although
fast moving does not necessarily mean that these items are consumed in large quantities.
‘S’ items are those items which are slow moving in the sense that in the
given period of time they have been issued in a very limited number of time

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‘N’ non moving items are those, which are not at all issued for a considerable
period of time.
Thus, stores department whose concerned with the moving of items would like to
know and classify that the items are storing in the categories FSN. So that they can
manage operate and plan stores activity accordingly.
For example, for efficient operations it would be necessary that fast moving items as
far as possible should be stored as near as possible to the point of issue. So that it can
be issued with minimum of handling. Also such items must be stored at the floor level
avoiding storing them at high heights.
Similarly, if the items are slow moving or issued once in a while in a given
period of time they can be stored in the interior of the stores and even at the higher
heights because handling of these items becomes very rare.
Further it is necessary for stores in charge to know about non moving items for
various reasons:
1. They mean unnecessary blockage of money and affecting the rate of returns of
the company.
2. Further they also occupy valuable space in the stores without any usefulness and
therefore it becomes necessary to identify these items and go into details and find
reasons for their non moving and if justified to recommend to top management
for their speedy disposal so that company operations are performed efficiently.

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Also inventory control to some extent can also be exercised on the basis of FSN
analysis.
For example, fast moving items can be controlled more severely, particularly when their
value is also high. Similarly, slow moving items may not be controlled and reviewed
very frequently since their consumption may not be frequent and their value may not be
high.
C) XYZ Analysis
This type of analysis is carried out from the point of view of value of balance stocks
lying in the stores from time to time and classifies all the items as given below.
‘X ‘items are those items whose value of balance stocks lying in the stock are very
high.
‘Y’ items are those items whose value of balance stock is moderate.
‘Z’ items are those items whose value of balance stock lying in the stocks is very low.
After knowing this type of classifications and their items can be taken to control the
situation as shown below:
1] From security point of view high value items must be stored and kept under lock
and key or if not possible they should be kept in such a way that they are always
under supervision. Similarly arrangement can be made for y and z items accordingly.

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2] From inventory control point of view we must know why there is high inventory for
‘X’ items. We should review inventory control procedure for each and every high item
because stock should be maintained to take care of lead time consumption and also to
provide safety stocks. For high value items lying in stores we should review the reasons
for long lead time as well as demand variations and see whether lead time consumption
and safety stocks can be reduced. Thus proper inventory control procedures can be
developed on the basis of XYZ analysis.
Thus proper selective control methods should be selected to control the materials and
prevent from facing loss, taking advantage and knowing what exactly is to be done.
D) VED ANALYSIS
VED analysis is carried out to control situation, which are critical. When applied to
material in VED analysis we try to identify material according to their criticality to the
production, which means the material, without which the production will come to stop
and so on from this point of view material classified into three categories.
V vital,
E essential,
D desirable.
Vital categories of the items are those items for the want of which the production will
come to stop. For e.g. Power in the factory.

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Essential group of items are those items because of non availability of which the stock
out cost is very high.
Desirable group of items are those items because of non availability of which there is
no immediate loss of production and stock cost is very less and it may cause minor
disruption in the production for a short time.
E) HML ANALYSIS
This analysis, analysis the material according to their prices and then classifies them as
H items or M items or L items.
H stands for high price,
L stands for low price and
M stands for medium price.
Since price is more concerned of purchase department mostly purchase department
people analyses the material according to HML analysis.
HML analysis must be carried out from any one of the following objectives or some of
the objective as the case may be.
 When it is desire that purchasing responsibility should be delegated to right level
of people.
 When it is desired to evolve purchasing policies then also HML analysis is
carried out i.e. whether to purchase in exact quantities as required or to purchase
in EOQ or purchase only when absolutely necessary.

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 When the objective is to keep control over consumption at the department level
then authorization to draw materials from the stores will be given to high level H
item, low level for L items and medium level for M item.
 When it is desired to decide frequency of stock taking then very frequently H
category, very rarely L category and averagely M category.

 When it is desired to arrange security arrangements for the items, then H item
under lock and key, L items keep open on the shop floor and under supervision
for M items
2.1.7.3 JUST IN TIME INVENTORY SYSTEM
Keeping in view the enormous carrying cost of inventory in the stores and go downs,
manufacturers and merchandisers are asking for more frequent deliveries with shorter
purchase order lead times from their suppliers. Now days organizations are becoming
more and more interested in getting potential gains from making smaller and more
frequent purchase orders. In other words, they are becoming interested in just in time
purchasing system. Just in time purchasing (JIT) purchasing is the purchase of material
or goods in such a way that delivery of purchased items is assured before their use or
demand.
Just in time purchasing recognizes too much carrying costs associated with holding high
inventory levels. Therefore, it advocates developing good relations with suppliers and
making timely purchases from proven suppliers who can make ready delivery of goods
available as and when need arises. EOQ model assumes a constant order quantity

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whereas JIT purchasing policy advocates a different quantity for each order if demand
fluctuates. EOQ lays emphasis on ordering and carrying costs but inventory management
extends beyond carrying and ordering costs to include purchase costs quality costs and
stock out. Just in time purchasing takes into consideration all these costs and move—
outside the assumptions of the EOQ model.
Advantages of JIT purchasing
1. Investment in inventory is reduced because more frequent purchase orders of small
quantities are made.
2. Carrying cost is reduced as a result of low investment in inventory.
3. A reduction in the number of suppliers to be dealt with is possible. Only proven
suppliers who can give quick delivery of quality goods are given purchase orders . As a
result of this reduction in negotiation time is possible. The use of long—run contracts
with some suppliers with minimal paper work involved is possible.
4. Quality costs such as inspection cost of incoming materials or goods , scraps and
rework costs are reduced because JIT purchasing assures quick and frequent delivers of
small size orders which results in low level of inventories causing minimum possible
wastage. Therefore, JIT purchasing is frequently applied by organizations dealing in
perishable goods.
2.1.7.4 PERPETUAL INVENTORY SYSTEM

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The Chartered Institute of Management Accountants, London, defines the perpetual
inventory as “a system of records maintained by the controlling department, which
reflects the physical movements of stocks and their current balance”. Bind cards and the
stores ledger help the movements of the stock on the receipts and in maintaining this
system as they make a record of to physical movements of the stocks on the receipts
and issues of the materials and also reflect the balance in the stores. Thus, it is a
system of ascertaining balance after every receipt and issue of materials through stock
record to facilitate regular checking and to avoid closing down the firm for stocktaking.
To ensure the accuracy of perpetual inventory records (i.e. Bin card and stores ledger),
physical verification of the stores is made by bin cards or stores ledger may differ from
the actual balance of stock as ascertained by physical verification. It may be done to the
following avoidable and unavoidable causes.
CHAPTER 4: RESEARCH PROBLEM
Inventory is defined as an idle resource which has an economic value. In an industry
inventory comprises of raw materials, process materials, general stores, consumables and
spares parts, and semi finished and finished goods. Inventory of input materials are

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carried to support production and maintenance activities so that the same is available in
right quantity, at right point of time. Carrying excessive inventory not only results in
blocking up of working capital but also adds inventory carrying cost to it. Inventory
carrying cost consists of interest on locked working capital cost of storage, obsolescence
and detoriation. On and average it works out to 20% to 25% per annum of the value of
the locked up inventory.
The objective of inventory control is to keep required stock of materials so that
production and maintenance activities do not suffer. Minimum blockage of funds in
inventory optimization can be achieved and efforts need to be improving input output
ratio of materials by scientific methods of determining.
Nalco smelter plant has the capacity of 345000 MT which is powered by captive power
plant of capacity 960 MW. Production in such plant is continuous and that is why
requires large amount of raw materials, steel and cement, general consumables, pot lining
and mechanical, electrical and instrumental spares are required.
On looking at the inventory status for last three years it can be seen that inventory is
increasing. Inventory in FY: 05 06 was Rs 111.32 crores which increased to Rs 121.82
crores in FY: 06 07. It further increased to Rs 138.51 in FY: 07 08.
Increase in inventory is due to following reasons
 Expansion projects

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First phase expansion completed in 2006 has lead to increase in capacity of the Smelter
Plant to 345000 MT and Captive Power Plant to 960 MW. Thus this expansion has
lead to increase in production and in turn increase in materials supply and increase in
inventory.
The work on 2nd phase expansion programme at an estimated cost of Rs 5003 crores (at
March 2007) is in full swing. The annual capacity of aluminium smelter plant and
captive power plant is going to increase to 460000 MT and 1200 MW respectively.
These expansion projects increase the capacity of production and requirement of materials
and thus increase inventory.
 Increase in production
As demand in the market for Aluminium strips, rods, billets, and our products from
automobile, electricity, packaging industry increases ,thus production also increase leading
to increase in materials and thus inventory.
 Bulk purchase of Raw materials and Steel and cement
Raw materials and steel and cement are continuously required for production process.
Therefore raw materials are ordered in bulk for 1 month, 2 months or 6 months
consumption. Thus the inventory increases t the time of reception of these materials.
 Duplicate indent

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General consumable goods are generally order as Automatic procurement items that are
these items are commonly required by all the departments in the organization, so all
departments give their required quantity in a year to stores department. Stores department
taking sum of all the requirements order various items. All these items have a specific
code. Even the items with same usage such pen of different company have different
code. This can create a duplicate indent. If a particular item is indented by a department
with a specific code and item with this code is not available in the stores but store
have the items with same usage of different code. The stores order the item even though
it has item with same utility. Thus through duplicate indent the inventory increases.
 Change In Man Power
Promotion or transfer of employees from one department to order or from one place to
other will require some time to or the employee to adjust with the working and
management of the department. This mismanagement can cause improper supply of
materials and thus can lead to increase in inventory.
 Increase in inventory due to spares
Requirement of spares is not certain as it is uncertain when the machine will breakdown.
Thus spares are ordered are kept as inventory and if it is not indented the number of
spare increases and thus inventory. Installing of new machine with better technology can
also cause increase in inventory as spares of old machines are left out as well as spares
of new machines are also ordered. Thus inventory is largely affected due to spares.
CHAPTER 5: RESEARCH OBJECTIVES

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 To study and understand the financial position of the company.

 To study , understand and analyze the inventory of various raw materials, fuel,
intermediatary and finished goods.

 To study the various inventory control techniques that are followed in Nalco and
analyze it
 To analyze the selective control techniques such as ABC, XYZ and FSN analysis
applied in the company

 To calculate the EOQ of various raw materials and analyze it.
 To evaluate the total cost of inventory for EOQ and analyze it..
 To recommend methods and strategies to control the inventory.
CHAPTER 6: RESEARCH METHODOLOGY

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The research conducted in inventory control techniques in Nalco Smelter plant , Angul
followed a well defined methodology. The procedure followed is explained thoroughly in
next titles.
6.1 TYPES OF RESEARCH DESIGN
Types of research design used in this research of inventory control techniques are
descriptive as well as analytical. It follows a descriptive research design it is used to
identify and classify the elements or characteristics of the subject. Quantitative techniques
are used to collect , analyze and summarize the data. In Nalco Smelter Plant, data and
information are collected to analyze the inventory control techniques.
Here analytical research is also used as descriptive approach is extended to suggest and
explain the causes of changes in inventory and factors effecting inventory and inventory
control techniques.
Applied research is also followed i.e. problem solving research is applied in this project.
The already known theories and knowledge of inventory control techniques are studied
and applied to practical situation like of Nalco’s inventory and understand the variation
in inventory level and finding out alternative methods and models for better inventory
control.

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6.2 DATA COLLECTION TECHNIQUES
Various data and information are collected to fulfill the research objectives of the
research. The data collected are both primary and secondary data.
Data collection techniques used for collection of primary data is interviews conducted
with executives and staff of finance and stores department.
Data collection techniques used for collection of secondary data are from stores record,
annual reports news report, news articles, journals, various web sties and professional
books as well as interview conducted with executives and staff of finance and stores
department.

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CHAPTER 7: ANALYSIS & INTERPRETATION OF DATA
7.1 INVENTORY OF MATERIALS
a) STOCK OF RAW MATERIALS (RS IN CRORES)
Materials 31.03.06 31.03.07 31.03.08

C. P. Coke 180.11 240.49 183.83
C. T. Pitch 47.67 24.15 24.90
C. T. Pitch (liquid) 13.87 7.95 17.10
Aluminium Fluoride 18.76 46.33 35.96
(indigenous)
Aluminium Fluoride 14.28 10.04
(imported)
Calcined Alumina 0.02 0.03 0.02
Pig Iron 3.04 3.17 3.29
Magnesium Metal 4.67 5.18 8.19
Ferro Silicon 0.08 0.67 3.11
Tiber Rod 3.32 3.17 3.29
Total 252.78 357.54 289.73
INTERPRETATION:

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Inventory of raw materials has increased from Rs 252.78 crores in 31.03.06 to Rs
357.54 crores in 31.03.07. Production decreased from 358954 MT in 31.03.06 to 358734
MT in 31.03.07 which caused the raw materials to accumulate.
Inventory of raw materials decreased from Rs 357.54 crores in 31.03.07 to Rs 289.73
crores. This is due to increase in production from 358734 MT in 31.03.07 to 360457
MT in 31.03.08 which leads to decrease in stock of raw materials. The decrease in stock
is also due to proper flow of raw materials from suppliers to stores and stores to
production houses. This shows improvement in planning of utilization of raw materials.
b) STOCK OF FUEL (RS IN CRORES)
Materials 31.03.06 31.03.07 31.03.08

H.F.O 17.92 16.27 30.12
L.D.O 2.73 1.73 0.91
Total 20.65 18 31.03

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INTERPRETATION:
Fuel is important material used for production process and it is very important to control
it otherwise it can lead to variation in inventory. Inventory of fuel decreased from Rs
20.65 crores in 31.03.06 to Rs 18 crores in 31.03.07. But inventory of fuel significantly
increased by almost 72.39% in 31.03.08. This increase is due increase in fuel prices and
also increase in production. But the increase is large and company should check on
utilization and storing of fuel.
c) STOCK OF STORES AND SPARES (RS IN CRORES)
Materials 31.03.06 31.03.07 31.03.08

Mechanical spares 44.15 45.00 48.29
Electrical spares 14.40 14.33 14.83
Instrumentation spares 3.91 4.65 5.6
Bearings 2.53 2.20 2.35
Gen. consumables 13.76 15.08 20.47
Pot lining 6.58 6.05 6.46
Steel and cement 4.14 4.35 3.86
Total 89.46 91.66 101.86

Nalco 31
INTERPRETATION:
The stock of stores and spares has been increasing from Rs 89.46 crores in 31.03.06 to
Rs 91.66 crores in 31.03.07 to Rs 101.86 crores in 31.03.08. The increase is mainly due
to increase in spares and general consumables. This shows lack of control of spares and
stores by the company.
d) STOCK OF FINISHED GOODS AND INTERMEDIATARY GOODS (RS IN
CRORES)
Materials 31.03.06 31.03.07 31.03.08

Calcined Alumina 46.98 43.93 46.51
Special Grade 1.02 0.11 1.44
Alumina
Aluminium Standard 19.00 8.82 9.92
and Sow ingots

Aluminium wire 2.29 2.33 1.05
rods

Nalco 32
Aluminium billets 3.68 1.08 3.23

Aluminium strips 5.80 1.58 1.93
Rolled products 10.20 14.02 10.59
Anodes 55.58 71.03 73.46
Anode butts 2.12 1.46 2.05
Aluminium scraps 6.51 0.84 7.90
WIP 70.33 71.70 81.48
Total 223.51 216.9 239.56
INTERPRETATION:
Inventory of finished and intermediatary goods has decreased from Rs 223.51 crores in
31.03.06 to Rs 216.90 in 31.03.07.This decrease is due to increase in sales in 2007
.Inventory increased from Rs 216.90 crores in 31.03.07 to Rs 239.56 crores in 31.03.08
because decrease in sales in FY: 07 08. The company should produce goods according to
demand and it should also decrease the cost of goods for greater sales.

Nalco 33
7.2 SELECTIVE INVENTORY CONTROL
 To identify items, which bring significant benefit by proper management from
among hundreds and thousands of items managed by an organization

 Determine the importance of items and thus allows different levels of control
based on the relative importance of items

a) ABC ANALYSIS
This selection is done on the basis of annual consumption value.
Nalco’s ABC classification for the year FY: 07 08 is tabulated below:
ABC Class Criteria No. of Materials Cumulative
Consumption Value
A 70%ofconsumptionvalue 219 75.25
B 20%ofconsumptionvalue 937 21.54
C 10%ofconsumptionvalue 9080 10.76
Total 10236 107.56
A class items having criteria 70% consumption value has 219 items with value Rs 75.25
crores. These items are required to be ordered frequently to reduce the capital locked up
in inventory. They also should have low safety stocks and follow strict control. These
items should be handled by senior officers.

Nalco 34
B class items having criteria items with 20% 0f consumption value include 937 items
with value Rs 21.54 crores. These items require only periodic follow up and have
moderate safety stock. They need moderate control and can be handled by manager men.
C class items having criteria 10% of consumption value and includes 9080 items with
value Rs 10.76 crores. These items require exceptional follow up and high safety stock
and require loose control thus can be handled by anyone.
b) XYZ ANALYSIS
XYZ classification is based on value of inventory kept in stores.
Nalco’s XYZ classification of inventory is tabulated below:
XYZ Class Criteria Total no. of Closing stock Cummulative

Materials value Consumption
value
X 70% of stock 1385 71.29 57.32
value
Y 20% of stock 3272 20.37 86.95
value
Z 10% of stock 38936 101.87 513.62
value
Total 43593 1018.60 1173.82
X class items having criteria 70% of the stock value consists of 1385 items with closing
stock value of Rs 71.29 crores and consumption value Rs 57.32 crores. These items are
high value items and should be taken special care.

Nalco 35
Y class items having criteria 20% of the stock value consists of 3272 items with closing
stock value of Rs 20.37 Crores and consumption value Rs 86.95 crores. These items are
moderate value items and require moderate care.
Z class items having criteria 10% of the stock value consists of 38936 items with
closing stock value of Rs 101.87 crores and consumption value Rs 513.62 crores. These
items are low value items and require low care.
c) FSN ANALYSIS
Fast moving, Slow moving and Non moving classification takes into account the pattern
of issue from stores. The classification is useful in identifying consumption patterns,
increased demand and obsolescence of materials. As the classification depends on
movement of materials as per consumption pattern, fixation of levels of inventory control
can be done in this classification.
Nalco’s FSN classification is tabulated below:
FSN Class No. of Materials Cummulative Consumption value

F 875 49.37
S 25512 89.02
N 11213 0.12
TOTAL 37600 138.51
Fast moving items issued at least once in a year consists of 875 items with consumption
value Rs 49.37 crores which includes mainly raw materials, fuel, general consumables
and steel and cement.
Slow moving items issued only once or twice in 3 years consist of 25512 items with Rs
89.02 crores which are some spares.

Nalco 36
Non moving items are not issued in 5 years consists of 11213 items with consumption
value Rs 0.12 crores. These items are mainly mechanical and instrumentation spares.
A B C AX
X AX BX CX F AXF
S AXS
Y AY BY CY
Z AZ BZ CZ N AXN
When all these selective analysis are taken together helps to take decision about all the
items in inventory. A class item that is with high consumption value and which is also X
class item that is high value and which is also non moving item is identified. Such
items are disposed off or sold as scrap immediately to decrease the inventory value.
7.3 ECONOMIC ORDER QUANTITY OFRAW MATERIALS AND FUEL
a) EOQ OF HFO
Annual consumption 29087 KL

Cost per unit Rs 20.14
Carrying cost per unit Rs 0.14
Ordering cost per order Rs 3500
Economic order quantity 1205.96 KL

Nalco 37
Units ordered(in KL) Carrying cost(in Rs) Ordering cost(in Rs) Total cost(in Rs)
500 35000 203609 586050789
600 42000 169674.1667 586023854.2
700 49000 145435 586006615
800 56000 127255.625 585995435.6
900 63000 113116.1111 585988296.1
1000 70000 101804.5 585983984.5
1100 77000 92549.54545 585981729.5
1200 84000 84837.08333 585981017.1
1300 91000 78311.15385 585981491.2
1400 98000 72717.5 585982897.5
1500 105000 67869.66667 585985049.7
INTERPRETATION:
Economic order quantity of heavy fuel oil is calculated to be 1205.96 KL.
If we vary the quantity to be ordered the total cost of inventory is greater than total
cost of inventory if economic order quantity is ordered i.e. Rs 585981017.1

Nalco 38
b) EOQ OF C.P.COKE
Annual consumption 140968 MT

Economic order quantity 1514.87 MT
Units ordered(in MT) Carrying cost(in Rs) Ordering cost(in Rs) Total cost(in Rs)
1100 236500 448534.5455 2040491995
1200 258000 411156.6667 2040476117
1300 279500 379529.2308 2040465989
1400 301000 352420 2040460380
1500 322500 328925.3333 2040458385
1600 344000 308367.5 2040459328
1700 365500 290228.2353 2040462688
1800 387000 274104.4444 2040468064
1900 408500 259677.8947 2040475138
INTERPRETATION:

Nalco 39
The economic order quantity of C.P.Coke is calculated to be 1514.87 MT.
The total cost of inventory at economic order quantity is calculated to be Rs.
2040458385 which is much less compared to total cost calculated at different order
quantity.
c)EOQ OF C.T.PITCH (HARD)
Annual consumption 4258.436 MT

100 71000 149045.26 74870428.34
110 78100 135495.6909 74863978.77
120 85200 124204.3833 74859787.46
130 92300 114650.2 74857333.28
140 99400 106460.9 74856243.98
150 106500 99363.50667 74856246.59
160 113600 93153.2875 74857136.37
170 120700 87673.68235 74858756.76
180 127800 82802.92222 74860986
190 134900 78444.87368 74863727.95
200 142000 74522.63 74866905.71
INTERPRETATION:
The economic order quantity of C.T.Pitch (Hard) is calculated to be 144.89 MT.

Nalco 40
74856243.98 which is much less compared to total cost calculated at different order
quantity.
d)EOQ OF C.T.PITCH (LIQUID)
Annual consumption 31237.564 KL

Nalco 41

1500 45000 72887.64933 659542863.7
1600 48000 68332.17125 659541308.2
1700 51000 64312.63176 659540288.7
1800 54000 60739.70778 659539715.7
1900 57000 57542.88105 659539518.9
2000 60000 54665.737 659539641.8
2100 63000 52062.60667 659540038.6
2200 66000 49696.12455 659540672.2
2300 69000 47535.42348 659541511.5
2400 72000 45554.78083 659542530.8
2500 75000 43732.5896 659543708.6
INTERPRETATION:
The economic order quantity of C.T.Pitch (liquid) is calculated to be 1909.026 KL.
quantity.

Nalco 42
e)EOQ OF ALUMINIUM FLUORIDE (INDIGENOUS)

140 135800 149452.5 367519935.5
141 136770 148392.5532 367519845.6
142 137740 147347.5352 367519770.5
143 138710 146317.1329 367519710.1

Nalco 43
144 139680 145301.0417 367519664

145 140650 144298.9655 367519632
146 141620 143310.6164 367519613.6
147 142590 142335.7143 367519608.7
148 143560 141373.9865 367519617
149 144530 140425.1678 367519638.2
150 145500 139489 367519672
INTERPRETATION:
The economic order quantity of Aluminium fluoride (indigenous) is calculated to be
146.87 MT.
quantity.

Nalco 44
f) EOQ OF ALUMINIUM FLUORIDE (IMPORTED)

115 75900 82067.3913 136789622.4
116 76560 81359.91379 136789574.9
117 77220 80664.52991 136789539.5
118 77880 79980.9322 136789515.9
119 78540 79308.82353 136789503.8
120 79200 78647.91667 136789502.9
121 79860 77997.93388 136789512.9
122 80520 77358.60656 136789533.6
123 81180 76729.6748 136789564.7
124 81840 76110.8871 136789605.9
125 82500 75502 136789657

Nalco 45
INTERPRETATION:
The economic order quantity of aluminium fluoride (imported) is calculated to be 119.58
MT.
quantity.

Nalco 46
g)EOQ OF LDO
Annual consumption 155.686 KL

15 20850 36326.73333 4780689.973
16 22240 34056.3125 4779809.553
17 23630 32053 4779196.24
18 25020 30272.27778 4778805.518
19 26410 28679 4778602.24
20 27800 27245.05 4778558.29
21 29190 25947.66667 4778650.907
22 30580 24768.22727 4778861.467
23 31970 23691.34783 4779174.588
24 33360 22704.20833 4779577.448
25 34750 21796.04 4780059.28
INTERPRETATION:
The economic order quantity of light diesel oil is calculated to be 19.80 KL.
quantity.

Nalco 47
g)EOQ OF PIG IRON


Nalco 48
90 33300 36015.38889 18813781.79
91 33670 35619.61538 18813756.02
92 34040 35232.44565 18813738.85
93 34410 34853.60215 18813730
94 34780 34482.81915 18813729.22
95 35150 34119.84211 18813736.24
96 35520 33764.42708 18813750.83
97 35890 33416.34021 18813772.74
98 36260 33075.35714 18813801.76
99 36630 32741.26263 18813837.66
100 37000 32413.85 18813880.25
INTERPRETATION:
The economic order quantity of Pig Iron is calculated to be 93.60 MT.
quantity.

Nalco 49
h)EOQ OF MAGNESIUM METAL

1 8085 271460 8469881
2 16170 135730 8342236
3 24255 90486.66667 8305077.667
4 32340 67865 8290541
5 40425 54292 8285053
6 48510 45243.33333 8284089.333
7 56595 38780 8285711
8 64680 33932.5 8288948.5
9 72765 30162.22222 8293263.222
10 80850 27146 8298332

Nalco 50
INTERPRETATION:
The economic order quantity of Magnesium metal is calculated to be 5.7 MT.
quantity.

Nalco 51
i)EOQ OF FERRO SILICON

25 15500 19141.22 4036523.43
26 16120 18405.01923 4036407.229
27 16740 17723.35185 4036345.562
28 17360 17090.375 4036332.585
29 17980 16501.05172 4036363.262
30 18600 15951.01667 4036433.227
30 18600 15951.01667 4036433.227
31 19220 15436.46774 4036538.678
32 19840 14954.07813 4036676.288
33 20460 14500.92424 4036843.134
34 21080 14074.42647 4037036.636
INTERPRETATION:
The economic order quantity of Ferro Silicon is calculated to be 27.78 MT.

Nalco 52
quantity.
j)EOQ OF TIBER ROD

Nalco 53

Units ordered(in MT) Carrying cost(in Rs) Ordering cost(in Rs) Total cost(in RS)
1 5795 239690.5 14026319.59
2 11590 119845.25 13912269.34
3 17385 79896.83333 13878115.92
4 23180 59922.625 13863936.72
5 28975 47938.1 13857747.19
6 34770 39948.41667 13855552.51
7 40565 34241.5 13855640.59
8 46360 29961.3125 13857155.4
9 52155 26632.27778 13859621.37
10 57950 23969.05 13862753.14
INTERPRETATION:
The economic order quantity of Tiber Rod is calculated to be 6.43 MT.
quantity.

Nalco 54
CHAPTER 8: CONCLUSION & RECOMMENDATIONS
We can conclude from the detailed study of inventory control techniques conducted in Nalco
Smelter Plant, Angul, that a company which is one of the largest aluminium producers in India
have to maintain a large amount of inventory of raw materials, spares, general consumables as
well as intermediatary and finished goods should be we planned and controlled.
The FY:06 07 was a boom year and it gain high profits and had low inventory, but in FY:07 08,
there was depreciating dollar and import due reduction which resulted in decrease in sales and in

Nalco 55
turn increase in inventory. The macro economic factors are reason for significant fluctuations in
inventory level and value in Nalco Smelter Plant.
The inventory of raw materials increased in FY 07 by Rs 104.76 crores i.e. 41% and decreased in
FY:08 by RS 67.81 crores i.e. 18%.The inventory of fuel decreased little in FY:07 but increased
to Rs 31.03 Crores in FY:08.this was due to increase in fuel prices. The inventory of spares has
been increasing since 2006 from Rs 89.46 crores to Rs 101.86 crores o lack of in 2008.This is
due to lack of control in spares and stores. The inventory of finished goods has decreased
significantly in 07 due to high sales but it again increased in 08 due to low sales. Thus from the
analysis it can be drawn that the whole inventory of Nalco Smelter Plant increased in 08 due to
the macro economic factors and lack of control over some materials.
Selective inventory controls used in Nalco Smelter Plant are ABC analysis, XYZ analysis and
FSN analysis. ABC analysis showed that A class items are 219 having consumption value Rs
75.25 crores, B class items are 937 having consumption value Rs 21.54 crores and C class items
are 9080 having consumption value Rs 10.76 crores. This shows that it has less A class items that
have strict maintenance and more C class items have low maintenance which is almost ideal for a
company. The XYZ analysis showed that 1385 items come under X items with consumption
value Rs 57.32 and 3272 items come under Y items with consumption value Rs 86.95 crores and
38936 items come belong to Z items with consumption value Rs 513.62 crores. It is good that X
class have less items and Z class have more items. The last selective technique i.e. FSN analysis
showed that there are 875 fast moving items with consumption value Rs 49.37 crores and 25512
slow moving items with consumption value Rs 89.02 crores and 11213 non moving items with
consumption value Rs 0.12 crores. It is not a good sign for a company to keep such a large
number of slow moving and non moving items as slow moving items can become non moving

Nalco 56
thus increasing the inventory. The stores department of the company combines the whole
selection analysis by selecting a A class items which is also a X class and is also Non moving,
such items are discarded. This is a good techniques to reduce inventory developed by non
moving item.
As discussed earlier stores of Nalco for maintaining the inventory of raw materials, spares,
general consumables, fuel follow annual holding consumption norm where different are ordered
according to their annual holding norms and raw materials are ordered for 1 month consumption.
The EOQ model applied for raw materials showed that when EOQ of all the raw materials are
ordered, the total cost is minimum and if more or even less quantity is order than EOQ, the cost
of inventory is greater. Thus shows that EOQ model can be applied for procuring raw materials
with least cost.
Thus from studying the data and information collected from various sources (stock levels of raw
materials, fuel, stores and spares, finished and intermediatary goods) and analyzing various
inventory control techniques such as ABC, XYZ, FSN and EOQ model techniques it can be
concluded that inventory control techniques is important for a multi national company Nalco to
minimize inventory and maintain required stock of materials so that production do not suffer and
working capital is not block .Thus improving the performance of the company.

Nalco 57
RECOMMENDATIONS
Looking at the present world scenario and economy these are some of the suggestions:
1. Planning committee
As the number of competitors are increasing and even produce aluminium with cost
lower than Nalco. So for maintaining its prominence in the aluminium world as industry
producing lowest cost aluminium a committee making proper planning and different

Nalco 58
strategies should be formed only for procurement of materials keeping in mind the
inventory.
2. Proper planning
From the study we learned that inventory in FY 08 has increased due to various macro
economic factors discussed earlier. Precise and better forecasting should be done not only
about the aluminium industry but also about the world economy. Thus maintaining low
inventory and supplying right amount of materials for production.
3. Making better use of Selective Techniques

We have seen that through selective control techniques stores can dispose the non
moving items which are increasing inventory but this process does not eliminate all non
moving items. So, selective control techniques should be better used so that most of the
non moving items are disposed off immediately. Other selective control techniques such
as VED can also be used.
4. Improving the inventory control techniques for spares
Spares such as mechanical, electrical, instrumentation spares are the materials which are
one of the reasons for high inventory as these are either slow moving or non moving
items. Thus, inventory control techniques should be used for spares and better planning
for procurement and storing should be made.
5. Revision of AP items
Automatic procurement items are fast moving but duplicate indent may cause high
inventory. Thus, company should review the AP list from time to time and check the list
precisely for double indent.

6. Transfer of stock

Nalco 59
There are some items which are required by different departments. If one department
finishes the items stock can be refilled by transfer from other department having surplus
items. Thus avoiding unnecessary procurement of those items.

7. Using EOQ model for procurement of raw materials
The company orders the raw materials every month. This can increase the total cost of
inventory. Thus company should use EOQ model for procurement of raw materials as this
provide right level of inventory with minimum cost.

8. Introducing SAP and ERP technology
SAP software and ERP technology provides better maintenance of data and records
through internal control. These technologies can provide easy accessibility to authorized
employee of the organization to go through the record of data, inventory etc to help
follow better inventory management.
CHAPTER 9: BIBLIOGRAPHY
BOOKS:
JAIN, S.P. & NARANG, K.L(2004), Cost & Management Accounting, Material Control,
chapter-3, p - 50-75.
PANDEY, I.M., Financial Management, Inventory Management, chapter-29.
WEBSITES:
http://download.microsoft.com/download/6/D/1/6D1D1250 D92B 4B8F 9AA3
596422D3F614/Inventory_FactSheet.pdf
http://www.azinventorymanagement.com/economic order quantity.htm
http://www.azinventorymanagement.com/inflation eoq.htm

Nalco 60
Vhttp://www.azinventorymanagement.com/safety stock.htm
Vhttp://www.azinventorymanagement.com/reorder point formula.htm
http://www.azinventorymanagement.com/stock level system.htm
http://www.azinventorymanagement.com/costs associated.htm
http://www.azinventorymanagement.com/cost to carry.htm
http://www.azinventorymanagement.com/cost run out.htm
vhttp://elearning.nic.in/student trainee report/preso doc.doc
http://download.microsoft.com/download/1/8/6/18645A04 E36D 40F4 9C7A
0ABECF73576B/Global_Energy_Forum_NALCO.pdf
http://business.mapsofindia.com/aluminium/
http://www.equitymaster.com/detail.asp?date=3/26/2009&story=2
http://www.indiabiznews.com/biznews/categoryNewsDesc.jsp?catId=16029
http://www.metalworld.co.in/grabglo.asp
http://www.hinduonnet.com/businessline/iw/2001/04/29/stories/0529e051.htm
http://www.metalworld.co.in/report0108.pdf
http://www.hindalco.com/about_us/
http://www.hindalco.com/about_us/business_index.htm#aluminium
http://economictimes.indiatimes.com/dirreport.cms?
companyID=13416&year=0http://www.energymanagertraining.com/aluminium/Aluminium.htm
http://www.economypoint.org/a/abcxyz analysis.html
http://www.managementparadise.com/projects/material/selectivecontrol.html

Nalco 61

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Nalco 1

2.1. INVENTORY CONTROL……………………………………...……………pg…4

2.2. INVENTORY CONTROL TECHNIQUES…………………………….……pg…7

3.1. ALUMINIUM INDUSTRY…………………………………………….…..pg…20

3.2. NALCO OVERVIEW……………………………………………………....pg…24

6.1. TYPES OF RESEARCH DESIGN……………………………………....…pg…34

6.2. DATA COLLECTION TECHNIQUES……………………………...….….pg…35

Xavier Institute of Social Service, Ranchi

7. ANALYSIS & INTREPRETATIONOFDATA……………………………..…….….pg…36

7.1. INVENTORY OF MATERIALS………………………………..…….……pg…36

7.2. SELECTIVE CONTROL TECHNIQUES……………………………….....pg…42

7.3. ECONOMIC ORDER QUANTITY OF RAW MATERIALS……………...pg…46

8. CONCLUSION & RECOMMENDATIONS………………………………………....pg…67

Xavier Institute of Social Service, Ranchi

CHAPTER 1 : EXECUITVE SUMMARY

depreciating dollar and import duty reduction.

for these industries.

Xavier Institute of Social Service, Ranchi

aluminium plant is 345000 MT and captive power plant is 960 MW.

substantial appreciation of rupee against US dollar.

Xavier Institute of Social Service, Ranchi

recommending methods and strategies to control the inventory.

Xavier Institute of Social Service, Ranchi

2.1 INVENTORY CONTROL / INVENTORY MANAGEMENT

2.1.1 NEED FOR INVENTORY

unforeseen circumstances in the procurement of materials. Though to have inventory is must,

that suits the inventory control.

Inventory control can be defined as “Determining and maintaining optimum investment in

Inventory Control relates to “ a set of policies and procedure by which an industries

carry in stock “. Therefore inventory control is otherwise known as STOCK CONTROL.

2.1.3 OBJECTIVES OF INVENTORY CONTROL

Xavier Institute of Social Service, Ranchi

Inventories constitutes second largest category of all manufacturing operation exceeded

made to improve input output ratio of materials by scientific methods of determining.

2.1.4 TYPES OF INVENTORIES

1. Production Inventory: It contains materials purchased from market like raw

consumption for use in manufacture.

2. Maintenance, Repair & Operating Inventory: Contains materials purchased

from vendors to maintain the production process and these maintenance,

3. Work in progress Inventory: This contains manufactured good kept in

stores, warehouse or retail outlets, Stock Yard for sales to consumers.

To put this into a diagram, the Constituent of Inventory is as follows:

Xavier Institute of Social Service, Ranchi

2.1.5 FACTORS INFLUENCING INVENTORY

2. Quality in stock or on order

2.1.6 CONTROL, MAINTENANCE AND MANAGEMENT

1. Necessity for stocking an items

2. Time for reordering the items

3. Quality per order to be order.

Continuous and periodical review is required in the evaluation of inventory management

and treats it as a continuous process as costs, source of supply, availability of materials;

Xavier Institute of Social Service, Ranchi

2.2.INVENTORY CONTROL TECHNIQUES

Inventory is being maintained as a cushion in supply of materials for continuous

1. Inventory Management Techniques

3. Selective Inventory Control

5. Perpetual inventory system

6. Inventory turnover ratio

2.1.7.1 INVENTORY MANAGEMENT TECHNIQUES

1. Economic Order Quantity

purchased on replenishment. If the firm is planning a production run, the issue is

(a) Ordering cost:

the entire costs of acquiring raw materials.