INTRODUCTION

INVENTORY MANAGEMENT
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.

DEFINITION OF INVENTORY
John J. Hampton defined inventory as the goods for eventual resale by the firm inventories, measured by rupee value constitute the major element in the working capital of many business undertakings. Inventory is the value of raw materials, consumables, spares, work- in - progress, finished goods and scraps and called as locked up capital. The major determinant of investment in inventory is 1. 2. 3. Level of scales Length and technical nature of production process. Durability vs. Perish ability or styling obsolescence of the product.

MEANING OF INVENTORY MANAGEMENT

Raw materials inventory- it removes dependency suppliers and plants. Work- in- progress - it removes dependency between machines of a product line. Finished goods inventory it removes dependency between plant and its

customers/market.

IMPORTANCE OF INVENTORY MANAGEMENT

Inventory management refers to the process of managing the stock of finished product, semifinished products and raw materials by a firm. Inventory management, if done properly, can bring down costs and increase the revenue of a firm. How much one should invest in inventory management? The answer to this question depends on the volume and value of inventory as a percentage of total assets of a firm. The importance of inventory management varies according to industries. For example, an automobile dealer has very high inventories sometime as high 50 per cent of the total assets, where in the hotel industry it may be as low as 2 to 5 per cent. The process of inventory management is a continuous one and there are various kinds of solutions available. It is advisable to employ specialized staff for inventory management. The inventory management process begins as soon as one has started production and ordered raw material, semi-finished product or any other thing from a supplier. If you are a retailer, then this process begins as soon you have placed your first order with the wholesalers.

THE FUNCTION OF INVENTORY

Some function of the firm, such as the purchase of raw materials, processing and having finished goods available for sale, have a sequential, physical dependency. Maintenance of inventories allows the firm to decouple these functions so that each can be planned, scheduled, and operated independently. For retail firm, inventory provides customer with selection choices and decouples the purchasing function from the selling function. Smoothing out irregularities in supply Minimising the production cost. Allowing organizations to cope with perishable materials

COMPANY PROFILE
Started in 1952, the Integral Coach Factory (ICF) is located in Chennai, India. Its primary products are rail coaches. Most of the coaches manufactured are supplied to the Indian Railways, but it has also manufactured coaches for railway companies in other countries,including Thailand, Burma, Taiwan, Zambia, Philippines, Tanzania, Uganda, Vietn am, Nigeria, Mozambique and Bangladesh. Recently, ICF exported coaches to Angola. It also has got orders worth of Rs. 102 crores from Sri Lanka. However, due to quality issues of the coaches, Sri Lanka suspended the order. The metro rakes manufactured by ICF for Kolkata Metro have also had serious quality issues with the new ac rakes regularly breaking down from the time they have been introduced which has resulted in frequent disruption of services .According to newspaper reports the ac rakes have been sent to Kolkata without conducting dry runs because the Integral Coach Factory does not have third rail testing facilities. This is a cause for serious concern because it places the lives of several passengers at grave risk. The coach factory provides primarily for the Indian Railways, a number of different coaches first and second class coaches, pantry and kitchen cars, luggage and brake vans, self propelled coaches, electric, diesel and mainline electric multiple units (EMU, DMU, MEMU), metro coaches and Diesel Electric Tower Cars (DETC), Accident Relief Medical Vans (ARMV), Inspection Cars (RA), Fuel Test Cars, Track Recording Cars, the latest coaches are for the Deccan Odyssey (a luxury train of the Indian Railways), and coaches for MRVC (world class coaches). The business started in 2 October 1955, the first items produced being seven third class shells. Today the coach factory produces more than 170 varieties of coach. It employs about 13,000 people and produces around six coaches a day. A total of 43,551 coaches had been produced till July 2011 by ICF since its inception. ICF had turned out 1,503 coaches in 2010, which was an all time record production. The Integral Coach Factory consists of two main divisions - Shell division and Furnishing division. The Shell division manufactures the skeleton of the rail coach, while the Furnishing division is concerned with the coach interiors and amenities. In the financial year 2010-11, ICF had generated 20 million units of electricity and met 80 per cent of its electrical energy requirements from green energy. A total of 46 million units of electricity had been generated through the windmills installed by ICF in Tirunelveli district till the end of May 2011.

In August 2011, ICF has been sanctioned a project for manufacturing stainless steel coaches for the first time in the country. The 2,500 million projects is for manufacturing technologically upgraded coaches of stainless steel shells and high speed bogies and an increase in capacity from 1,500 to 1,700 coaches. The new bogie facilities and shell manufacturing facilities are likely to be completed by March and August 2013, respectively. INAUGURATION Integral Coach Factory, Chennai, is a premier Production Unit of Indian Railways manufacturing railway passenger coaches. ICF is the first of its kind to be established after Independence for the manufacture of light weight, all steel and all welded Integral railway passenger coaches. The factory was set up in 1955 with Swiss collaboration. PRODUCTION ICFs initial plan was to produce 350 Broad Gauge Third Class shells (unfurnished body of the Railway Coaches) only, which were to be furnished by the Zonal Railways workshops. Later, in view of the severe limitation of capacity of the Railway workshops and also to take advantage of mass production, a separate Furnishing Division was added on 2nd October, 1962. The capacity was progressively expanded from the initial 350 shells to 750 fully furnished coaches per annum by 1973-74 with additional inputs. This was enhanced progressively from 850 coaches during 1986-87 to 1000 coaches in 1990-91. The modernization project is under last stage of execution to augment capacity to 1250 coaches and will be over by 2010-11. Capacity is further being enhanced to 1500 coaches per annum through infrastructure additions and modernization of machines. DESIGN FEATURES The design concept of the coach stipulates that the roof, side wall, end wall and the under frame are joined together by welding, to form a fully integral coach shell. The end-wall construction has been made specially strong to make it anti-telescopic to ensure maximum safety to passengers. Further, crashworthy features are provided with CBC design to minimize impact on passengers during accidents/derailments. From the basic design handed down by the collaborators, ICF has diversified having established its expertise and skill in this field, to design and manufacture more than 350 different types of coaches for Indian Railways and export market. Every time a new type of coach is launched, emphasis is laid on improving passenger comfort, passenger safety and higher speeds. ICF follows standard inspection procedures to ensure quality from raw material stage to the finished coach.

PRODUCT RANGE ICF has been meeting the needs of the Indian Railways for varied types of coaches, however sophisticated the type may be. Some of the important types are: 1. SELF PROPELLED COACHES Electric Multiple Units for suburban services in Metropolitan cities; Diesel Rail Cars; Metro Coaches for Kolkata Metro Railways; Diesel Electric Multiple Units & Diesel Hydraulic Multiple Units for non-electrified

routes and Mainline Electric Multiple Units for long distance inter-city commutership. Accident Relief Trains / Medical Vans

OHE Inspection Cars 2. AIR-CONDITIONED & NON-AIRCONDITIONED PASSENGER COACHES Air-conditioned Sleeper Coaches of first & second class; Air-conditioned Chair Cars of first and second class; Double Decker Coaches with seating capacity for 148 passengers as against the

conventional 90 passengers. 3. SPECIAL COACHES Air-conditioned & Non-air-conditioned Pantry Cars High Capacity Power Cars for Shatabdi & Rajdhani Express Trains Air-conditioned Military Ward and Saloon Cars for Indian Army. Air-conditioned Saloon Cars, Dining Cars, Bar & Restaurant Cars, luxury suites for

luxury tourist trains like Palace on Wheels (WR), Deccan Odyssey (CR), The Golden Chariot (SWR), Royal Rajasthan on Wheels (NWR) and Maharajas Express of IRCTC Lifeline Express for operation of hospital on wheels Jet Deflector Crane Cars, Inter Communication Coaches for DRDO

EXPORT ICFs achievement on the export front has been enviable since its inception. Against stiff international competition from more advanced countries like Japan, etc., ICF secured several export orders, most of which are repeat orders. So far, 359 bogies, 11 stainless steel coach shells and 481 coaches including air-conditioned coaches have been exported to 13 AfroAsian countries. ICF has bagged a number of awards for Export Excellence also.

DESIGN & DEVLOPMENT EFFORTS Complementing the existing design capacities and facilities, a fully computerised Design & Development Cell has been set up with sophisticated state-of-the-art computer designing facilities and testing equipment both for coach components and raw materials. D&D Centre uses 3-D modelling on Solid Works platform for generating 3-D drawings and IDEAS software for Finite Element Analysis. Strain gauge testing and squeeze test are done on prototypes before commencement of series production. PRODUCTION WITH INNOVATION ICF has carved a niche in the Indian Railway system by constantly improving the ?quality of travel through its passenger coach design which has undergone a sea- change from the days of bye-gone era of mere Transport of passengers There has been a steady growth both in the quality and quantity of its production. Over the years ICF has endeavoured to meet passengers expectations through innovations like Cushioned seats in General Second Class and SLR coaches Provision of Controlled Discharge Toilet Systems Anti-injury features in the passenger areas of A/C 2-tier and Sleeper coaches Enhanced carrying capacity in A/C 2-tier, First A/C and Garib Rath Chair Car Provision of forced ventilation, PIS/PAS in AC/DC EMUs for WR and CR UIC vestibules in mainline coaches Disabled friendly features in SLRD/SRD coaches Modular toilets in passenger coaches Stainless steel panelling, handholds in EMUs Provision of laptop and cell phone charging points in passenger coaches Use of stainless steel in Pantry Cars including interiors and the equipment

As milestones in this endless travel, ICF has obtained the ISO: 9001, ISO: 14001 and ISO: 18001 certificates for the QMS, EMS and OHSAS systems respectively. All this has been made possible through ICFs commitment to progress and improvement with its dedicated workforce functioning in a contented atmosphere in pleasant surroundings and working conditions. Several welfare schemes like staff quarters, adequate clean water supply, improved medical facilities, online information kiosks, issue of pass centrally, encouragement in sports activities, etc., are provided.

Industry profile Integral Coach Factory, a premier Rail Passenger Coach building unit of Indian Railways, started in the year 1955 with a capacity of 350 shells has grown into a unit with a capacity to roll out 1200 fully furnished coaches. So far, ICF has manufactured about 37,000 railway coaches of different designs to meet the increasing passenger requirements. The product range includes various types of air conditioned coaches, such as AC Chair Cars, AC Sleeper and First Class AC Coaches and Self propelled vehicles such as DMU (Diesel Multiple Units), EMU (Electric Multiple Units), Over Head Equipment inspection cars, Accident Relief Trains, AC/DC EMU train for Mumbai etc., to cater the varied needs of Indian Railways. ICF has also exported different types of coaches, coach shells and bogies to 12 Afro-Asian countries. In the journey towards global standards of quality and environment friendly, ICF passed milestones by accrediting ISO 9001 and 14001 Certificates. IMPORTANT EVENTS/MILESTONES IN THE HISTORY OF ICF Sl. Particulars Year 1960-1961 1962-1963 1967 1968 1971 1976 1980-1981 1980-1981 1981-1982 1982-1983 1984-1985 1986-1985 1995-96 1995-96 1996-97 1996-97 1997-98 1999

1. Manufacturing of 3 Tier Sleepers. 2. Manufacturing of EMUs for Calcutta Suburban Systems. 3. Export of Bogies to Thailand 4. I AC two-tier sleeper. 5. Export of coaches to Taiwan. 6. Manufacturing of Double Decker Coach. 7. Manufacturing of AC Chair Cars. 8. Manufacturing of Rajdhani Rake with air brakes. 9. Manufacturing of coaches for Calcutta Metro. 10. Export of 32 coaches to Nigeria. 11. Export of 9 MG III class coaches to Bangladesh. 12. 1st rake of MG Palace-on-Wheels was flagged off.

13. Manufacturing of Over Head Equipment Maintenance (OHE) Tower Car. 14. 21 BG Palace-on-Wheels turned out for RTDC. 15. ISO 9001 Certification. 16. Manufacturing of Air-conditioned Military Ward Car for Indian Army. 17. Export of 27 coaches to Tanzania. 18. Manufacturing of A/C Accident Relief Medical Van.

19. Manufacturing of All Stainless Steel A/C Coach 20. Manufacturing of Dual Voltage AC/DC EMU. 21. ISO 14000 Certification. 22. Export of 11 MG AC Shells to Malaysia. 23. Manufacturing of Jet Deflector Crane Car (JDCC). 24. Manufacturing of Garib Rath Coaches. 25. Export of 41 Coaches to Angola.

1999-2000 2000-2001 2002 2004-2005 2005-2006 2006-2007 2006-2007

2.1OBJECTIVES OF THE STUDY Primary Objectives To study about the inventory management in Integral Coach Factory.

Secondary Objectives To analysis the current status of the inventory. To evaluate the raw materials through ABC analysis. To analysis the stock level of the firm. To obtain various costs involved in inventory management. To categorise the stock into different group. To analyse the various inventory technique. To study the inventory control technique.

2.2 SCOPE OF THE STUDY This study is mainly concerned on the inventory management in integral coach

factory. And it focused on the maintaining inventory of the firm. This study deals with the accounting policies and inventory valuation methods. It helps to develop the policies for the executives in inventory. It is useful for deciding operating policy& volume of inventory. It helps the company what items goods are categorised. This study of inventory management assists Integral Coach Factory. The analysis of

scope in terms of time period of SIX years between 2005 to 2011.

2.3LIMITATIONS OF THE STUDY The project duration is 3 months. Technology and process followed by the company do not go exactly with the theory

hence it was hard to correlate the both. There will be some marginal error because the analysis is made in crores. Some of the needed secondary data is not provided in the firm. The information is gathering secondary data. As the details of inventory is maintained confidently. ABC analyse is not one time exercise and items are to be reviewed and recategorised

periodically.

REVIEW OF LITERATURE
A literature review is a body of text that aims to review the critical points of current knowledge including substantive findings as well as theoretical and methodological contributions to a particular topic. Literature reviews are secondary sources, and as such, do not report any new or original experimental work.

Article 1:
Author: Krishnamurthy and Sastry
Krishnamurty and Sastrys study in 1970 was perhaps the most comprehensive study on manufacturers inventories. They used CMI data and the consolidated balance sheet data of public limited companies published by RBI, to analyze each of the major - 41 -components i.e. raw material, goods-in-process and finished goods for 21 industries over the period 1946-62. It was a time series study but some inter-industry cross section analysis had also been done. Accelerator represented by change in sales, bank finance and short-term interest rate were found to be important determinants. Utilization of productive capacity and price anticipations had been found toe of some relevance. Another study conducted by them in 1975 analyzed inventory investment in the context of flexible accelerator with financial variables. Both RBI and Stock Exchange Official Directory, Mumbai data for seven important industries had been taken for the period of 1956-69. Their study of pooled cross section was in current prices whereas time series analysis based on RBI data was a constant price. OLS results showed the important influence of accelerator, internal and external funds flow and fixed investment on inventory investment.

Article 2:
Author: Bansal G.D
Bansal G.D., in his study on Material Management, A Case Study of Bharat Heavy Electrical Limited, Bhopal unit, (BHEL), has evaluated the existing systems of inventory management. He emphasized the need for automatic replenishment system in the undertaking. He also studied the application of ABC analysis and EOQ technique of inventory control. He also pointed out the accumulation of surplus stores and non-moving items in the organization. He recommended that the surplus and obsolete stores, which are no longer required, should be disposed off as early as possible at the best available price. Further, he has suggested the preparation of monthly classwise statements on inventories for effective control over them. And he suggested the introduction of reconciliation of stores ledgers with account ledgers to avoid misappropriation of stores. The study also revealed that raw material, components and stores, and spares for production and operation are above their actual consumption - 43 -level. The inventories in general are found to be above their routine requirements.

The holdings of stores and spares generally are of the order of two to three years requirements and these are considered as excess.

Article 3:
Author: Rama Krishna Rao B
Rama Krishna Rao B., in his thesis Materials Management in Heavy Engineering Industry a case study of Bharat Heavy Plate & Vessels Limited (BHPV), Visakhapatnam in 1979, he has evaluated the performance of materials management in BHPV and identified some problems pertaining to materials management in BHPV in particular and heavy engineering industry in general. The method of investigation involves documentary evidence and survey of expert opinion. He has evaluated the existing purchase systems and lead-time involved in procurement of materials and suggested that the long lead-time should be reduced. His study pinpointed the excess inventory in terms of number of months cost of production in all the engineering units. He also highlighted some of the problems in the area of materials management such as delay on the part of customers in supplying their own materials, existence and disposal of surplus and non-moving items, excessive lead time and excessive dependence on imports. He also found that the administrative and procurement lead times of the company are on the higher side due to the peculiar nature of the industry. He suggested the liberalized purchase procedures, increasing financial powers to the personnel, opening up of liaison offices in various countries to reduce the lead-time. In comparison with the BPE norms, the inventory levels of various stores items in - 44 -BHPV and the overall inventory accumulation in Heavy Engineering Group was relatively higher and he suggested for drastic reduction in the inventory levels.

Article 4:
Author: Phaniswara Raju B
Phaniswara Raju B produced a research work entitled Materials Management in Andhra Pradesh State Road Transport Corporation (APSRTC) in the year 1986. In his study, he examined the materials management practices and purchasing systems in APSRTC on the basis of various parameters like material consumption per vehicle, material consumption per kilometer, inventory per vehicle, inventory in terms of number of months consumption etc. He highlighted some major problems in the procurement of materials. The study was primarily based on secondary data collected from published annual reports of APSRTC, the records of MIS, the reports on performance of Nationalized Road Transport Undertaking of CIRT, Pune etc., coupled with personal interview with various officials of the corporation. The study revealed the increasing levels of materials consumption in APSRTC as compared to other undertakings. He observed the absence of the use of important analytical techniques like value analysis and network techniques in the purchasing system of APSRTC.

Article 5:
Author: Bernt de William year 2007 This study tells that the focus of inventory management is on transportation and warehousing. The decision taken by management depends on the traditional method of inventory models. The traditional method of inventory management is now much useful in these days the author tells about it. He is also saying that the traditional method is not a cost reducing it is so much expensive. But the managing the inventory is most importance work for any manufacturing until.

Article 6:
Author: D. Hoopman March 2004 (inventory and planning optimization) In the article he said that inventory optimization recognize that different industry have different inventory profiles and requirement. Research has indicated that solutions are priced in large range from tens of thousands of dollars to millions of dollars. In this niche market sector price is definitely not an indicator of the quality of solution, ROI and usability are paramount.

RESEARCH METHODOLOGY RESEARCH:

Research can be defined as the search for knowledge, or as any systematic investigation, with an open mind, to establish novel facts, solve new or existing problems, prove new ideas, or develop new theories, usually using a scientific method. The primary

purpose is discovering, interpreting, and the development of methods and systems for the advancement of human knowledge on a wide variety of scientific matters of our world and the universe Research.

RESEARCH METHODOLOGY:
Research methodology is a method that can be used to solve the research problems. It helps in studying how research is done scientifically. It provides various steps that can be adopted by the researcher in studying his problems.

RESEARCH DESIGN:
Research designs are concerned with turning the research question into a testing project. The best design depends on your research questions. Every design has its positive and negative sides. The research design has been considered as a "blueprint" for research, dealing with at least four problems: what questions to study, what data are relevant, what data to collect, and how to analyze the results. Research design can be divided into fixed and flexible research designs (Robson, 1993). Others have referred to this distinction with quantitative research designs and qualitative research designs. However, fixed designs need not be quantitative, and flexible design need not be qualitative. In fixed designs the design of the study is fixed before the main stage of data collection takes place. Fixed designs are normally theory-driven; otherwise its impossible to know in advance which variables need to be controlled and measured. Often these variables are quantitative. Flexible designs allows for more freedom during the data collection. One reason for using a flexible research design can be that the variable of interest is not quantitatively measurable, such as culture. In other cases, theory might not be available before one starts the research.

Method of data collection PRIMARY DATA

Primary data is the data that is collected for the first time by the researcher. The primary data are collected with specific set of objective to assess the current status of any variable studied. Primary data is useful only for particular period.

SECONDARY DATA
Secondary data are collected with the help of last five year balance sheets, profit & loss account, annual general meeting report, purchase details from the stores dept for respective years and also informal talks with officers. The availability of computer systems also helps in collecting certain data for this purpose.

Tools used for data analysis

Ratio analysis ABC analysis Stock level analysis Economic order quantity

RATIO ANALYSIS It is the most important tools available for financial analyst for their work. An accounting ratio shows the relationship in mathematical term it will to inter related accounting figures. A financial analyst may calculate different accounting ratio for different purpose. In this study, the ratio analysis is used to study liquidity and different stock level ratio. IMPORTANCE OF RATIO ANALYSIS Ratio makes it easy to grasp the relationship between various items and helps in understanding financial statement Ratios are very helpful for measuring the performance and useful to cost control. Ratio may be used as measures of efficiency. Ratio helps in single assessment of liquidity, solvency, profitability and efficiency ABC ANALYSIS ABC analysis is a principle control of inventories and technique of grouping thousands of stock items handled by the company. ABC analysis always popularly known as always better control classifies stores in to 3 categories on the basis of this usage and value as A, B and c.

ECONOMIC ORDER QUANTITY Economic order quantity is that quantity of material to be ordered where it will have least or minimum order placing and carrying cost it is also called as the size of the material to be purchased most economically. Two important costs should be maintained at minimum to order for a special quantity of ordering cost and carrying cost. Both these costs should be maintained at minimum to order for a specific quantity of materials.