CHAPTER 1

INTRODUCTION
The management and control of inventory is a problem common to all organizations in
any of the economy. The problems of inventory do not confine themselves to profit making
business firms. The same type of problems is encountered by social and non-profit
organization too.
Inventory control is of great significance in almost all types of business organizations. The
literary meaning of the inventory is “stock of goods”. Inventory refers to the stockpile of the
products a firm is offering for sale and the components that make up the product. In other
words, inventory is composed of assets that will be sold in the future in the normal course of
business operation. The assets which firms store a inventory in need are
 Raw Material
 Work-in-process
 Finished goods
The Raw material inventory contains items that are purchased by the firm from others and
are converted into finished goods through the manufacturing process. The are important input
of the final product.
The Work-in-process inventory consists of items currently being used in the production
process. They are normally semi-finished goods.Finished goods represent final or completed
products, which are available for sale.
The management of inventory from the view point of financial managers is different from
the management of other current assets in that practically all functional areas interested. The
job of the finance manager is to reconcile the conflict in view points of various functional
areas regarding the appropriate inventory level.

Stock control systems - keeping track manually

Stocktaking involves making an inventory, or list, of stock, and noting its location and value.
It's often an annual exercise - a kind of audit to work out the value of the stock as part of the
accounting process.

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Codes, including barcodes, can make the whole process much easier but it can still be quite
time-consuming. Checking stock more frequently - a rolling stock take - avoids a massive
annual exercise, but demands constant attention throughout the year. Radio Frequency
Identification (RFID) tagging using hand-held readers can offer a simple and efficient way to
maintain a continuous check on inventory. See the page in this guide on using RFID for
inventory control, stock security and quality management.

Any stock control system must enable you to:

• track stock levels

• make orders
• issue stock

The simplest manual system is the stock book, which suits small businesses with few stock
items. It enables you to keep a log of stock received and stock issued.

It can be used alongside a simple re-order system. For example, the two-bin system works by
having two containers of stock items. When one is empty, it's time to start using the second
bin and order more stock to fill up the empty one.

Stock cards are used for more complex systems. Each type of stock has an associated card,
with information such as:

• description
• value
• location
• re-order levels, quantities and lead times (if this method is used)
• supplier details
• information about past stock history

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More sophisticated manual systems incorporate coding to classify items. Codes might indicate
the value of the stock, its location and which batch it is from, which is useful for quality
control.

Stock control systems - keeping track using computer software

Computerised stock control systems run on similar principles to manual ones, but are more
flexible and information is easier to retrieve. You can quickly get a stock valuation or find out
how well a particular item of stock is moving.

A computerised system is a good option for businesses dealing with many different types of
stock. Other useful features include:

• Stock and pricing data integrating with accounting and invoicing systems. All the
systems draw on the same set of data, so you only have to input the data once. Sales
Order Processing and Purchase Order Processing can be integrated in the system so
that stock balances and statistics are automatically updated as orders are processed.
• Automatic stock monitoring, triggering orders when the re-order level is reached.
• Automatic batch control if you produce goods in batches.
• Identifying the cheapest and fastest suppliers.
• Bar coding systems which speed up processing and recording. The software will print
and read bar codes from your computer.
• Radio Frequency Identification (RFID) which enables individual products or
components to be tracked throughout the supply chain. See the page in this guide on
using RFID for inventory control, stock security and quality management.

The system will only be as good as the data put into it. Run a thorough stocktake before it
goes "live" to ensure accurate figures. It's a good idea to run the previous system alongside the
new one for a while, giving you a back-up and enabling you to check the new system and sort
out any problems.

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Choose a system

There are many software systems available. Talk to others in your line of business about the
software they use, or contact your trade association for advice.

Make a checklist of your requirements. For example, your needs might include:

• multiple prices for items

• prices in different currencies
• automatic updating, selecting groups of items to update, single-item updating
• using more than one warehouse
• ability to adapt to your changing needs
• quality control and batch tracking
• integration with other packages
• multiple users at the same time

Avoid choosing software that's too complicated for your needs as it will be a waste of time
and money.

Using RFID for inventory control, stock security and quality management

Radio Frequency Identification (RFID) allows a business to identify individual products and
components, and to track them throughout the supply chain from production to point-of-sale.

An RFID tag is a tiny microchip, plus a small aerial, which can contain a range of digital
information about a particular item. Tags are encapsulated in plastic, paper or similar material,
and fixed to the product or its packaging, to a pallet or container, or even to a van or delivery
truck.

The tag is interrogated by an RFID reader which transmits and receives radio signals to and
from the tag. Readers can range in size from a hand-held device to a "portal" through which
several tagged devices can be passed at once, eg on a pallet. The information that the reader
collects is collated and processed using special computer software. Readers can be placed at

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different positions within a factory or warehouse to show when goods are moved, providing
continuous inventory control.

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Using RFID tagging for stock control offers several advantages over other methods such as
barcodes:

• tags can be read remotely, often at a distance of several metres

• several tags can be read at once, enabling an entire pallet-load of products to be
checked simultaneously
• tags can be given unique identification codes, so that individual products can be
tracked
• certain types of tag can be overwritten, enabling information about items to be
updated, eg when they are moved from one part of a factory to another

RFID tagging can be used:

• to prevent over-stocking or under-stocking a product or component

• for stock security, by positioning tag-readers at points of high risk, such as exits, and
causing them to trigger alarms
• for quality control, particularly if you make or stock items with a limited shelf life

The costs associated with RFID tagging have fallen over recent years, and continue to do so,
to bring the process within the reach of more and more businesses. The benefits of more
efficient stock control and improved security make it particularly attractive to retailers,
wholesalers or distributors who stock a wide range of items, and to manufacturers who
produce volume runs of products for different customers.

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1.1 COMPANY PROFILE

BYD Electronic India pvt Ltd

BYD Auto simplified Chinese: 比 亚 迪 汽 车 ; Pinyin: Bǐyàdí Qìchē) is a Chinese

automobile manufacturer based in Shenzhen, Guangdong Province, People's Republic of
China. The firm was founded in 2003 and it is a part of the BYD Company Limited. The BYD
Company, established in 1995, makes 65% of the world’s nickel-cadmium batteries and 30%
of the world's lithium-ion mobile phone batteries. Based on this background, BYD Auto has
ambitious plans for hybrid and electric automobiles. In December 1998, BYD passed
ISO9001 authentication.
•In 1999, BYD USA Branch set up.
•In 2000, BYD becomes Motorola’s first Chinese Li-ion battery supplier.
•In 2000, BYD Japan Branch established.
•In 2001, BYD Korea Branch established.
•In 2002, BYD became Nokia’s first Chinese Li-ion battery supplier; in May 2002, BYD
passed QS-9000 authentication.
•On January 22, 2003, BYD acquired Shaanxi Qinchuan Auto Company Limited and
established BYD Auto Company Limited and set up its Xi’an production base after building a
new plant of 1 million m2 in the Xi’an Hi-tech Development Zone.
•On April 16, 2005, BYD Auto announced the formal offline of its first new car, F3, in Xi’an.
At the same time, a new production base with a capacity of 200,000 units per year was
formally established.
•From April 2005 to February 2006, BYD F3 won 68 various awards within 10 months,
including “New Car Award,” “Best Popularity Award,” and “Most Expectable Car” in the
Shanghai International Auto Show, as well as the most valued “Best Price-Performance Car
Award” in the 2005 China cars Annual Billboard.
•In 2006, Ukraine started to import BYD car products in large quantities. The first batch of
200 F3 cars represented the first time Chinese cars have ever been imported to the Ukrainian
market.

7
•In September 2006, BYD Micro electronics passed Nokia MOSFET supplier authentication.
•In January 2007, BYD F3 sales quantity exceeded 10,000 units per month, representing the
first time a Chinese car brand has ever entered the “10,000 club” with a single car model.
Also, the F3 became one of the “four giants” in the medium-class car market (together with
Elantra, Excelle, and Family brands).
•In April 2007, BYD F6 won “Best (China) New Car Award,” “Best Shanghai Vogue Award,”
and “Best Car Design Award”..
•On June 18, 2007, the 100,000th F3 was produced in Xi’an, marking an aggregated
production quantity of 100,000 units of the medium-class model within just 20 months of
starting in September, 2005.This also marked a
Milestones of BYD, IN 2002
Listed on Hong Kong Stock Exchange Stock Code:1211.HK
The Best Capital Management Medium Company by Capital
The Best Listing Company
•IN 2003
Asia Star by Business Weekly
China Future Economy Leader by World Economic Forum
Chinese Company HS Index
•IN 2004
Placed on Morgan Stanley Chinese Index
Most Creative Leader in the Asia-Pacific region
Outstanding Manager 2004 by International Manager Association
Top 10 among private listed companies
Chinese Famous Brand by Domestic Quality Inspection Bureau
•IN 2005
“New Car Award,” “Best Popularity Award”and“ Most Expectable Car Award” in Shanghai
International Auto Show
“Best Popularity New Car Award” in Changchun International Auto Show
“2005 Independent Brand New Car Award” in China (Guangzhou) International Automatic
Exhibition

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“Best Price-Performance Car Award” in 2005 China cars Billboard
2005 “Chinese Top 100 Technology Enterprises” (Ranked 4th) by Digital Business Times

•IN 2006
“Integrated Innovation Award” (F3) in “Ceremony for Awarding Chinese Cars with
Independent Innovation Achievements” organized by Chinese Car Newspaper
“Top 50 Most Globally Competitive Chinese Companies” by Global Entrepreneurs magazine
•IN 2007
“2006 Social Commonweal Contribution Award” by Shenzhen General Chamber of
Commerce
“Best (China) New Car” (F6) in the 12th Shanghai International Car Show
President and Chairman Wang Chuan named “Most Predictive CEO” by Chinese Car
Newspaper
“Chinese Industrial Design Gold Award” by Chinese Association of Industrial Design“2007
World’s Top 500 Chinese Enterprises” by WECBA and Chinese Convention Committee
“2007 World’s Top 500 Chinese Hi-Tech Enterprises”“2007 Top 500 Enterprises in China” by
Chinese Enterprise Association and Chinese Entrepreneur Association“2007 Top 500
Manufacturing Enterprises in China “Forbes “Top 100 Chinese Companies” (81st position)
While being dedicated to constructing an enterprise with international competitiveness, BYD
considers concern for social progress and participation in public welfare as important
reflections of its social responsibility. BYD pays close attention to and supports social welfare
and actively takes part in various public welfare efforts such as disaster relief, donation to
education, contributions to social peace, support of culture and sports, and so on. For
example, consider BYD’s support of local education, efforts to fight SARS, and donations to
the Southeast Asian tsunami, South China flood, and We chuan earthquake relief and rescue
efforts. These examples fully reflect BYD’s strong sense of love and social responsibility.
BYD is very clear about the social responsibilities that companies should carry out, and this is
seen in BYD’s own example—BYD has been well recognized by the social public for its
efforts to better the surrounding community and nation.

9
In 2007, under the direction and leadership of President Wang Chuan, BYD decided to spend
80 million RMB to establish the BYD Children Welfare Institute, including organizing a
special team in charge of the entire project. The BYD Children Welfare Institute’s aim is “all
for children, for children’s all,” and always adheres to the principle “love others as you love
yourself; serve the society.” The establishment of the BYD Children Welfare Institute fully
represents BYD’s attitude and determination towards social public welfare, reflects its
respectable enterprise civilization and spirit, and shows President Wang’s noble character and
charm.
In 2008, after the destructive Sichuan We chuan earthquake, the company paid close
attention to the disaster and people’s living condition in the disaster-hit areas. BYD’s initial
step was to donate 10 million RMB and immediately dismantle 1000 hoisting jacks from new
cars—which were quickly delivered by air through the army—to be used to save as many
lives as possible at the rescue sites. Later, President Wang Chuan led the top team of the
company to personally donate 3 million RMB to help rebuild schools after disaster. The
company also organized donation activities many times among its staff and properly arranged
the job of helping and comforting staff affected by the disaster, insisting they spend their time
overcoming difficulties and reconstructing their homes. The company considerately admitted
5 students from the disaster-afflicted areas into the Shenzhen Yandi School. In addition, via
contacts obtained during relief efforts, BYD also arranged for over 40 graduates to work in
the company. Emerging from the big disaster, as the independent brand of China and bearing
the dream of revitalizing the national industry, BYD’s selfless contribution to earthquake
relief received praise and appreciation from all sectors of society.
A sense of love and charity is part of great enterprise spirit and also a noble human feeling.
BYD has taken on social responsibility as an important part of enterprise spirit, insisting on
contributing back to society, being dedicated to social public welfare, advocating an enterprise
with a sense of love, and trying its best to contribute to China’s harmonious development.

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CHAPTER 2
2.1 OBJECTIVES OF THE STUDY

PRIMARY OBJECTIVE:

• To study on material control techniques to ensure the standardization and control over
materials to reduce the cost of production

SECONDARY OBJECTIVE:

• To help the management in exercising effective material control and to appropriate

decisions
- Controlling usage of material and elimination of excessive wastage, scarp,
spoilage and defectives.
• To analyze the price movement
• To control the purchase during demand fluctuation

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2.2 SCOPE OF THE STUDY

Material is a very important factor of production. It includes physical commodities use

to manufacturing the final product. A study on material control and its techniques have wide
scope in manufacturing sector. Nearly material cost in manufacturing consumes 50-55% of
total cost. Particularly BYD electronics has broad scope in material control. Techniques
related to material control help the concern in reducing the cost and increase the profitability.

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2.3 NEEDS OF THE STUDY

o Availability of materials
o No excessive investment in materials
o Reasonable price
o Minimum wastage
o Risks of spoilage and obsolescence
o Information about availability of materials

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2.4 LIMITATION OT THE STUDY

 The study is fully based on the secondary data.

 The practices and procedure relates to those that are followed by the management
during the years when the study was conducted. It does not indicate any period or
practices that might be followed in the future.

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2.5 REVIEW OF LITERATURE

Meaning of Inventory:

The term “Inventory” and “Stock” are used interchangeably in general usage However the
term ‘stock’ is more relevant in trading firms where goods are purchased for resale. It includes
finished goods purchased for resale, either as they are or after repacking.

Inventory is ‘a schedule of items held at a particular point in time’.- ICMA, London.

The term inventory is more relevant in manufacturing and production organizations where
raw materials and other supplies are purchased and used to manufacture finished products or
sale. In such organizations, ‘Inventory’ includes raw materials, store, supplies, spare parts,
tools, components, assemblies, partly finished goods (work-in-process) and finished goods
ready for sale. It includes stocks of primary and secondary packing materials also.

Inventory control:

Inventory control means control over materials lying in stores. Inventory control keeps
tracks of inventories. Inventory control aims at the following triple objectives.

On the other hand Inventory Control is a system which ensures the maintenance of required
quantity of inventories of the required quality at the required time with minimum amount of
investment. It aims at achieving maximum possible inventory turnover.

 Never run out of anything(out of stock)

 Never build up a very large inventory (unwanted stock)

 Never send out too many small costly orders for more.

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Effective inventory control can assure at least 10% savings in our total requirements.

Objective of inventory control:

 To reduce minimum idle time due to materials and spare parts.

 To offer maximum service and satisfaction with regards to fulfilling the due dates
strictly as per orders. The sole aim of a business is “to create and retain customers”.

 At the same time the organization is also interested in minimizing capital investment
and cost of shortage.

 Optimizing investment in inventory and reducing carrying cost

 Following the policy of M.B.E (Management by Exception) by relieving the top

management from involving in each and every decision relating to inventory.

IMPORTANCE OF EFFICIENT INVENTORY CONTROL SYSTEM:

 An efficient inventory control system minimizes the possibility of delay in production.

There is no danger of closure of plant, unemployment, lower dividend and
replacement of management.

 It helps a company to secure many economies. For instance, no duplication in

ordering, better use of available resources by inter department transfers, lower prices,
less clerical work etc.,

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  It is necessary for efficient accounting system, particularly for material aspect of cost
accounting.

 It discourages dishonesty. E.g. stealing material from the plant.

 It expedites preparation of financial statements.

 Losses, damages, deterioration of materials can be minimized.

FUNCTIONS OF INVENTORY CONTROL:

 Keeping the stock of goods at the most appropriate level at all times so that
requirements of sales department can be always fulfilled.

 Maintaining capital investment in stocks at a minimum desirable level, without

sacrificing the main interest of trading.

 Protecting the stocks from losses and damages due to improper handling, pilferage or
unauthorized removal from the store.

 Receiving and recording of all goods routed in the stores and keeping up-to-date trace
of every outgoing item.

 Indexing of all items of stock for their quick location. This is done through identifying
marks, labels and bin cards.

 Up-to-date inventory records must show the quantity and value of goods in the
warehouse, all receipts and deliveries made from the warehouse and the points at
which replenishment of stocks became necessary by ordering new stocks.

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 INVENTORY CONTROL TECHNIQUES:

Every Organization consumes several items of stores. All these items don’t need equal
importance. A high degree of control of inventories of each item is neither practical nor
worthwhile. Therefore it becomes necessary to classify item in- group depending upon their
degree of importance. Following are the some of the techniques.

• Economic Order Quantity(EOQ)

• Stock Control according to value-ABC Analysis

• Just-in-time Inventory(JIT)

• Vital Essential and Desirable(VED Analysis)

• Inventory Turnover Ratio

ABC ANALYSIS

ABC analysis is a basic analytical management tool, popularly known as “Always Better
Control”, has universal applications in many areas of human endeavor.

In most inventories a small proportion of items accounts for a very substantial usage (in
terms of the monetary value of annual consumption) and a large proportion of items accounts
for very small usage (items of the monetary value of annual consumption). ABC analysis,
based on this empirical reality, advocates in essence a selective approach to inventory control,
which calls for a greater concentration of effort on inventory items accounting for the bulk
usage value. This approach calls for classifying inventory into three broad categories A, B and
C analysis.

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 It is a basic analytical tool, which enables management to concentrate its efforts where
efforts will be greater.

“A” Class items- these items hardly constitute 5-10% of the total items and account
For 70-75% of the total money spend on inventories.

“B” Class items- These items are generally 10-15% of total items and represent
10-15% of the total expenditure on materials. These are intermediate items. These Control on
these items should be intermediate between A and C items.

“C” Class items- These are about 70-80% in number a constitute only 5-10% of total
expenditure on materials.

PROCEDURE

The following procedure may be used for determining the three categories:

 Rank the items of inventory, in a descending order, on the basis of their annual
consumption value and number them 1 through n.

 Record the running cumulative totals of annual consumption values and express them
as percentages of the total value of consumption.

 Express each number in the list, I through, as a percentage of n. (these percentages are
actually cumulative percentages).

 Prepare a table showing item no, annual units consumed and annual rupee value of
units used.

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  Look at the cumulative percentage of consumption value against the cumulative
percentage of numbers and classify items in to three broad categories A, B and C the
nature of these categories are likely to be somewhat arbitrary).

 The cumulative percentages are represented graphically.

ECONOMIC ORDER QUANTITY

Having determined the methods for finding the incremental ordering costs, carrying costs,
and the average inventory level, the next step is the development of an inventory model in
terms of economic order quantity. The key factor of this model is that the management is
conformed with a set of opposed costs, as the order size increases, the carrying charge will
increase while the ordering cost will decrease as the order size decrease, the carrying charge
will decrease. On the other hand, as the order sizes decreases, the carrying costs will decrease
and the ordering cost will increase. Economic Order Quantity (EOQ) is that size of order
which minimizes total annual costs of carrying inventory and cost of ordering. Here, we are
assuming conditions of certainty and that the annual demand is known.

ORDER QUANTITY-EOQ MODEL

These are two basic questions related to inventory management:-

What should be the size of the order?
At what level should the order be placed?
To answer the first question, the basic Economic Order Quantity (EOQ here after) model is
helpful. Before we discuss the EOQ model let us distinguish between three types of costing
the control of inventory management.
A. Ordering costs
B. Carrying cost
C. Shortage cost

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ORDERING COST

It is also known by the name procurement cost or replenishment cost or acquisition Cost.
Cost of ordering is the amount of money expended to get an item into inventory. This takes
into account all the costs incurred from calling quotations to the point at which the items are
taken into stock.

Ordering costs relating to purchase items would include expenses on the following
requesting, preparation of purchase order, Expediting, and Transport, Receiving and placing
in storage.

CARRYING COSTS

These are the costs associated with holding a given level of inventory on hand and this cost
vary in direct proportion to the amount of holding and period of holding the stock in stores.

Carrying costs includes

A. Storage costs.

B. Handling cost.

C. Depreciation, taxes, insurance.

D. Costs on record keeping.

E. Product deterioration and obsolescence.

F. Spoilage, Breakage, Pilferage and loss due to perishable nature.

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SHORTAGE COSTS

When there is a demand for the product and the item needed is not in stock, then we incur
a shortage cost or cost associated with stock out.
Shortage costs include

 Back order costs

 Loss of future sales

 Loss of customer goodwill

 Extra cost associated with urgent, small quantity ordering costs.

 Loss of profit contribution by lost sales revenue.

The unsatisfied demand can be satisfied at a later stage (by mean if back orders) or
unfulfilled demand is lost completely (no back ordering, the shortage costs become
proportional to only the shortage quantity).

ASSUMPTION OF THE EOQ MODEL

The basic EOQ Model is based on the following assumptions

 The forecast usage/demand or a given period usually one year is known.

 The usage/demand is even throughout the period.

 Inventory orders can be replenished immediately (there is no delay in placing and

receiving order).

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EOQ ANALYSIS

To determine the EOQ formula we shall use the following symbols.

EOQ=Squareroot2RS/CI
R=Annual requirement
S=Ordering cost
C=Unit purchase cost of the item
I=Inventory carrying cost expressed as a percentage of the value of average inventory

INVENTORY TURNOVER RATIO

It is also called a stock turnover or stock velocity ratio. This ratio is calculated to ascertain
the efficiency of inventory management in terms of capital investments. It shows the
relationship between the cost of goods and the amount of average inventory.

This ratio helps to evaluate and review the inventory policy of the firm. It indicates the
number of times the inventory is turned during a particulars accounting period.

Stock Turnover Ratio=cost of goods sold/average inventory

Where, Average inventory= (Opening stock+ closing stock)/2

Cost of goods sold =Opening stock + purchases – closing stock * Standard Rate.

Stock turnover ratio indicates whether the investment in inventory is optimimum. A high
inventory ratio indicates efficient inventory management and efficiency of business
operations. A low inventory turnover ratio implies excessive inventory levels than warranted
by production activities of a slow moving or obsolete inventory.

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FSN ANALYSIS

FSN analysis has been carried out in two parts. In first part theoretical explanation is given
for classification of fast slow and medium moving goods and their lay out.

In second part items in the warehouse which are not moved for more than one year has
been taken for analysis.

I. Fast moving items.

II. Medium moving items.

III. Slow moving items.

• FAST MOVING GOODS:

Fast moving items are frequently moved in the warehouse. Those items are kept in the
picking face of warehouse.

• SLOW MOVING GOODS:

The goods that are neither frequently moving nor slow moving are classified as
medium moving items and it is placed in between slow and fast moving items.

• NON-OVING GOODS
Non-moving goods not frequently moved in the warehouse. It has to be kept last in the
stores or at the receiving face of the warehouse.
This classification will ensure free flow off goods in the warehouse. The layout diagram is
given in the next page, which can provide a clear picture of layout for an ideal warehouse

That will also reduce the occurrence of items that are misplaced in the warehouse. The
classification ca be clearly understood by seeing the diagram which is given below.

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CONDITIONS FOLLOWED AFTER CLASSIFICATION:

 Fast moving goods must have strict control and the stocks must be checked on weekly
basis.

 Slow moving goods are checked on monthly basis and it can have moderate control.

 Non-moving goods are not frequently moved and hence lesser control required.

TREND ANALSIS

The procedure by which the time related factors that influence the values observed in the
series are identified and segregated is called TIME SERIES ANALYSIS.

The general long-term movement, which increases or decreases in the time series values
over an extended period of years, is called TREND OF SECULAR TREND.

It is a set of observation taken at specified time interval, usually at “equal intervals” from a
sufficiently long period of time. Hey help in making estimates of futures. The estimates made
for the future period are forecasts and are approximate.

METHODS OF LEAST SQUARES

This is the best method for obtaining the trend values. It provides a convenient basis for
obtaining the line fit in a series, Line of the best fit is a line from which the sum of the
deviations of various points on either side is zero.

Further the sum of the squares of these deviations would be the least as compared to the
sum of squares of the deviations obtained by using other lines. For this reason the sum of
squares of the deviations of various points from the line of best fit is the least.

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The straight line trend has an equation of the type

Y=a + bX Where

• Y Estimated value of the trend.

• X Deviation in the time period.

• a and b constraints.

RORDER LEVEL:

It is between maximum and minimum stock levels, once the stock level reaches reorder
level, the store keeper initiates purchases requisition to obtain fresh stocks. Reorder level
depends on economic ordering quantity, lead time and rate of consumption of material.

Various methods are used for calculating the levels of stock. A simple model is adopted
here to arrive at the levels of stock and average level.

Reorder level = maximum consumption * maximum reorder period

R.L = M.C * M.R.P

Time-Based Management

Time-based Management is an aspect of Lean Production. It is a general approach that

recognises the importance of time and seeks to reduce the level of unproductive time in an
organisation. Benefits include:

26
 • Quicker response times (reduced lead times) to meet changing market and customer
needs

• Faster new product development

• Reduction in waste, therefore greater efficiency

For a firm to operate time-based management effectively, it needs to have flexible production
facilities that enable it to make changes easily. For example, it may need to be able to switch
production quickly between different products and to alter the length of production runs as
needed.

As with other aspects of Lean Production, Time-based management also calls for flexible,
multi-skilled staff, and a culture of mutual trust between workers and managers.

Simultaneous Engineering

Simultaneous Engineering is part of the Time-based Management approach. It is a project

management approach that helps firms develop and launch new products more quickly.

All of the areas involved in a project are planned together. Everything is considered
simultaneously (together, in parallel) rather than separately (in series).

• Product teams are set up to include people in all areas that are relevant to the new
product – design, development, production, marketing etc.

• Suppliers are involved in the new product development so that potential delays in
resourcing of raw materials, components and services can be anticipated and avoided

• A teamwork approach is used, with all areas involved in the project working on the
project at the same time.

27
The end result is that:

• The new product is brought to the market much more quickly

• The firm may be able to charge a premium price that will give a better profit margin
and help recoup R&D costs

• There is less likelihood of a need to modify the product later due to unforeseen
problems

• A greater sense of involvement across business functions improves staff commitment

to the project.

This can therefore be a source of competitive advantage (‘first mover advantage’) for the
firm if it can get a reliable new product into the market and build brand loyalty before its
competitors.

Kaizen (Continuous Improvement) & Quality Circles

This forms part of the ‘Japanese’ approach to management, or ‘Lean Production’.

Kaizen , or ‘Continuous Improvement’ is a policy of constantly introducing small incremental

changes in a business in order to improve quality and/or efficiency. This approach assumes
that employees are the best people to identify room for improvement, since they see the
processes in action all the time. A firm that uses this approach therefore has to have a culture
that encourages and rewards employees for their contribution to the process.

Kaizen can operate at the level of an individual, or through Kaizen Groups or Quality Circles
which are groups specifically brought together to identify potential improvements. This
approach would also be compatible with Team working or Cell Production, as improvements
could form an important part of the team’s aims.

28
Key features of Kaizen:

• Improvements are based on many, small changes rather than the radical changes that
might arise from Research and Development
• As the ideas come from the workers themselves, they are less likely to be radically
different, and therefore easier to implement
• Small improvements are less likely to require major capital investment than major
process changes
• The ideas come from the talents of the existing workforce, as opposed to using R&D,
consultants or equipment – any of which could be very expensive
• All employees should continually be seeking ways to improve their own performance
• It helps encourage workers to take ownership for their work, and can help reinforce
team working, thereby improving worker motivation

As Kaizen is characterised by many, small improvements over time, it contrasts with the
major leaps seen in industry when radical new technology or production methods have been
introduced. Over the years, the sheer volume of Kaizen improvements can lead to major
advances for a firm, but managers cannot afford to overlook the need for radical change from
time to time. For example, many UK manufacturers and service companies have found it
necessary to outsource processes to cheaper centres such as India and China – these changes
would be unlikely to arise from Kaizen.

Whilst staff suggestions can help to enrich the work for many employees, Kaizen can be seen
as an unrelenting process. Some firms set targets for individuals or for teams to come up with
a minimum number of ideas in a period of time. Employees can find this to be an unwelcome
pressure, as it becomes increasingly difficult to find further scope for improvement. Some
firms, especially Japanese-owned, conduct quality improvement sessions in the workers’ own
time, which can lead to resentment unless there is appropriate recognition and reward for
suggestions.

29
Stock security

Keeping stock secure depends on knowing what you have, where it is located and how much
it is worth - so good records are essential. Stock that is portable, does not feature the business'
logo, or is easy to sell on, is at particular risk.

Thieves and shoplifters

A thief coming in from outside is an obvious threat. Check the security around your premises
to keep the risk to a minimum. In a shop, thieves may steal in groups - some providing a
distraction while others take goods. Teach your staff to be alert and to recognise behaviour
like this. Set up a clear policy and make sure staff are trained in dealing with thieves.

Offering to help a customer if you are suspicious will often prevent a theft. Avoid using
confrontational words like "steal" if you do have to approach a suspected thief, and avoid
getting into a dangerous situation.

Protect your stock

• Identify and mark expensive portable equipment (such as computers). If possible, fit
valuable stock with security tags - such as Radio Frequency Identification tags - which
will sound an alarm if they are moved.
• Don't leave equipment hanging around after delivery. Put it away in a secure place,
record it and clear up packaging. It is a good idea to dispose of packaging securely -
leaving boxes in view could be an advertisement to thieves.
• Have regular stocktakes.
• Put CCTV in car parks and other key locations.

30
Control the quality of your stock

Quality control is a vital aspect of stock control - especially as it may affect the safety of
customers or the quality of the finished product.

Efficient stock control should incorporate stock tracking and batch tracking. This means being
able to trace a particular item backwards or forwards from source to finished product, and
identifying the other items in the batch.

Goods should be checked systematically for quality, faults identified and the affected batch
weeded out. This will allow you to raise any problems with your supplier and at the same time
demonstrate the safety and quality of your product.

With a good computerised stock control system, this kind of tracking is relatively
straightforward. Manual stock control methods can also use codes to systematise tracking and
make it easier to trace particular batches.

Radio Frequency Identification (RFID) can be used to store information about a product or
component's manufacturing date, to ensure that it is sold or processed in time. The system can
also be used to trace faulty products quickly and efficiently. See the page in this guide on
using RFID for inventory control, stock security and quality management.

The British Standards Institution (BSI) has a scheme to certify businesses that have achieved
a certain standard of quality management. Achieving the standard is one way of showing
customers and regulators that you take quality control seriously.

The details vary according to the particular business sector. For some industries, it is a legal
requirement to be certified - view the guide to quality control on the BSI website - Opens in a
new window.

31
Stock control administration

There are many administrative tasks associated with stock control. Depending on the size and
complexity of your business, they may be done as part of an administrator's duties, or by a
dedicated stock controller.

For security reasons, it's good practice to have different staff responsible for finance than
those responsible for stock.

Typical paperwork to be processed includes:

• delivery and supplier notes for incoming goods

• purchase orders, receipts and credit notes
• returns notes
• requisitions and issue notes for outgoing goods

Stock can tie up a large slice of your business capital, so accurate information about stock
levels and values is essential for your company's accounting.

Figures should be checked systematically, either through a regular audit of stock - stocktaking
- or an ongoing programme of checking stock - rolling stocktake.

If the figures don't add up, you need to investigate as there could be stock security problems
or a failure in the system.

Health and safety

Health and safety aspects of stock control are related to the nature of the stock itself. Issues
such as where and how items are stored, how they are moved and who moves them might be
significant - depending on what they are.

You might have hazardous materials on your premises, goods that deteriorate with time or
items that are very heavy or awkward to move.

32
Here's how I control my stock

Andrea Jones is managing director of Liversedge-based Systems (Telecoms) Limited, a

business specialising in the next-day delivery of refurbished telecommunications equipment.

What I did

Invest in a computerised system

"We bought our computer system with its accounting software when we were turning over
£500,000 a year. It cost a lot of money but I got it on a five-year lease and I only paid £50 a
week. I couldn't have got anybody to do the stock work for £50 a week.

"I chose this system because I wanted something that integrated all my accounting functions -
my stock control, my buying … basically, to have everything under one roof, as it were. And,
importantly, I wanted barcoding. I did a lot of phoning around software companies before
making my choice.

"As an item comes in it gets barcoded and then it's logged on to the system under a purchase
order with the serial number, stock code and details of the product. The product then goes
down to our test room for refurbishing.

"The system can tell you whether any item has been tested or not and exactly where it's
located in the warehouse."

Hold enough equipment to fulfil customer orders

"For the refurbished products side of my business there's no such thing as having too much
stock. We can't ask people to wait a week if they want something so I buy anything that comes
up for sale if it's cheap enough and I know it will move. I wouldn't buy stuff if there was no
demand for it but that doesn't happen. I know my market very well.

"We sell new installation products too and we re-stock that on a demand-led basis. We set
minimum and maximum stock levels on the computerised accounting system and when the

33
stock hits the minimum level the screen lights up telling me to reorder. But I prefer to print a
report on stock levels every Friday. That tells me what we're low on and I always top up to the
maximum level."

Reorder consumables only when necessary

"We use lots of paper, lever arch files, pens and ink cartridges. Everything is kept on
bookshelves and I can see instantly what's in and what we're running low on. I do a stationery
order every couple of weeks or so - though I try to time it with when there are special offers in
the stationery catalogue I use."

What I'd do differently

Install a computer connection from work to my home earlier than I did

"When I get home I can click on two buttons and I'm basically sitting in my office. This
means I can keep an eye on my stock at all times and I do a lot of bidding for products from
home, for example on eBay. I can also complete purchase orders from home."

34
CHAPTER 3

3.1 RESEARCH METHODOLOGY

Research in common parlance refers to a search for knowledge. I can be
defined as scientific and systematic search for pertinent information on a specific topic.
Methodology denotes a specific method of collection and analysis of data. It is
a systematically solve the research problem. It is necessary for the researcher to know not
only the research methods/technique but also the methodology.

RESEARCH DESIGN

A Research Design is purely a frame work or plan for a study that guides the
collection and analysis of the data. It is blue print that is followed in completing a study.
Here, an analytical study would be conducted to known the existing inventory system
pertaining to spares stores department in the organization.

RESEARCH METHOD
DESCRIPTIVE RESEARCH

Descriptive research includes surveys and fact-finding enquires of different kinds.

The major purpose of descriptive research is description of the state of affairs, as it exists at
present, for business research we quite often use the term Ex. Post factor research studies. The
main characteristic of this method is that the researcher has no control over the variables; he
can only report what has happened or what is happening.

SOURCES OF DATA
SECONDARY DATA

Secondary data is the information obtained from the already existing ones where, the data
are collected from the various books of accounts. They are as follows

35
CHAPTER –4
ANALYSIS AND INTERPRETATION
EOQ ANALYSIS
TABLE NO1
Order carying No of
Total Annual
cost & order
Per Storing per
Material Std.Rate Issue Qties consumption EOQ
order cost annum
RESIN 125.6 11,337.25 1423958.977 12.35 0.12 1527.61 7.42
ABS+PC 53.25 4,820.19 256675.1175 2 0.12 400.84 12.03
TRAY 35 55,550 1944250 0.66 0.12 781.70 71.06
SIM LID 12.1 2,370.94 28688.374 0.48 0.12 137.72 17.22
ANTANE 5.2 168,701.15 877245.98 0.12 0.12 580.86 290.43
EAR PIECE 0.025 2,697.78 67.4444 10.2 0.12 677.22 3.98
DUST NET 1.12 1,831.78 2051.59584 7.5 0.12 478.51 3.83
JIG 4.5 529.9 2384.55 8.5 0.12 273.99 1.93
POLYETHENE 1.25 1,878.38 2347.97 0.1 0.12 55.95 33.57
FINGER COVER 0.25 9,579.44 2394.85875 0.1 0.12 126.36 75.81
JIG COVER 5 410,981.20 2054906 0.2 0.12 1170.44 351.13
BENTONITE 2.23 2,328.72 5193.0456 0.1 0.12 62.30 37.38
FE SI MG 5-7 5.8 209.925 1217.565 0.075 0.12 16.20 12.96
COAL DUST-LA 45 99,659.99 4484699.46 0.75 0.12 1116.13 89.29
RESEED 21.2 912.857 19352.5684 0.1 0.12 39.01 23.40
ACTIVATOR-CB 33.2 676.333 22454.2556 0.15 0.12 41.12 16.45
PIG IRON-SG 54 2,056.28 111038.85 0.9 0.12 175.62 11.71
COAL DUST/I 61 9,194.95 560891.828 0.5 0.12 276.81 33.22
RESIN SAND-
45 101.333 4559.985 0.25 0.12 20.55 4.93
HS
CORE SAND 32 490.21 15686.72 0.6 0.12 70.01 7.00
FE MN 16 211.333 3381.328 1 0.12 59.35 3.56
BORINGS-CI 36 433.384 15601.824 2.5 0.12 134.38 3.23
FE PH 59 97,699.85 5764291.032 6 0.12 3125.70 31.26
ANTHR COAL 82.2 382.1 31408.62 3 0.12 138.22 2.76

36
CHART NO:1

Material
EOQ ANALYSIS
RESIN
ABS+PC
3500 TRAY
3000 SIM LID
ANTANE
2500
EARPIECE
2000 DUSTNET
1500 JIG
POLYETHENE
1000
FINGERCOVER
500 JIG COVER

0 BENTONITE
FESI MG 5-7
COALDUST-LA
RESEED

37
4.2 FSN ANALYSIS
FAST MOVING ITEMS
TABLE NO 2
Total Issue Annual
Material description Std.Rate Qties consumption
FINGER COVER 82.42 410,981.20 33873070.5
FOSECO FILTERS 50X50X15MM 16.53 332,324 5493315.72
COPPER SCRAP 8.26 168,701.15 1393471.499
ACTIVATOR FOR COLD BOX CORE
MAKING 18.26 99,659.99 1819791.417
RESIN FOR COLD BOX CORE MAKING 4.48 97,699.85 437695.328
PLASTIC 4.33 86,880 376190.4
PROTECTIVE TAPE 2.07 58950 122026.5
AIR SHOWER 9.86 55,550 547723
ISOTEC OIL 10.87 47,800 519586
SLAX 30 1.07 43,050 46063.5
KENTOP-0210 9.97 41600 414752
CATALYST FOR COLD BOX CORE
MAKING 14.81 37,510.00 555523.1
GRAPHITE GRANULES 3.52 36,575 128744
BENTONITE FOR PMF 3 35,400 106200
RHEOTEC 204 P-CORE PAINT 4.85 31,712.18 153804.073
CARBON EQUIVALENT CUP 7.27 19,600 142492
ZIRCON CORE PAINT EP5431 3.9 19,375 75562.5
STL SCP-EDD/I 24.49 17,286.28 423340.9972
BRIX BLOCK - B 8.3 15,965 132509.5
IRON SULPHIDE -COMMERCIAL 6.15 15,500.00 95325
CO2 GAS 1.5 15,162 22743
OXYGEN GAS-COMMERCIAL GR 5.21 13,181.80 68677.178
HIGH SILICON PIG IRON 29.03 11,337.25 329120.3675
SILICA SAND WASHED & GRADED-SG 14.67 10,921.63 160220.3121
BENTONITE FOR SAND FOUNDRY 4.54 9,579.44 43490.6576
CORE SAND 13.79 9,194.95 126798.3605
INOCULIN 35M 8.59 9,125 78383.75
THERMOCOUPLE MINITIP-10% 31.96 7,550 241298
CORE FIX 8E 35.45 7,320 259494
INOCULIN 900S 8.59 7,043 60499.37
SEPAROL 80 SM 3.43 4,870 16704.1

38
Rheotec 310 Paint 5.07 4,820.19 24438.3633
MICRO PHONE 5.95 4,592.42 27324.899
YELLOW DEXTRINE POWDER 16 4,200 67200
STL SCP-EDD 33.38 3200 106816
SIM LID 51.3 2,900 148770
IOLAR 1 ARGON GAS 20 2,718.50 54370
LOW ASH COKE 21.54 2,697.78 58110.1812
MOULDCOAT 11 5.08 2,580 13106.4
ACTIKAST-COKE ACTIVISOR 45.63 2,550.25 116367.9075
DUCTILE IRON PIPE SCRAP 28.60 2,370.94 67808.884
COAL DUST LOW ASH-FOR OTHER
LINES 11.42 2,328.72 26593.9824
RESIN SAND HIGH STRENGTH 61.74 2,056.28 126954.7272

Table show among all fast moving goods finger cover shows high
annual consumption 33873070.5

CHART NO:2

39
 FINGERCOVER
FAST MOVING ITEMS

FOSECO FILTERS
35000000 50X50X15MM
30000000
COPPERSCRAP
25000000
20000000
ACTIVATORFOR
15000000
COLD BOXCORE
10000000 MAKING
5000000
RESINFORCOLD
BOXCORE
0 MAKING
Annual consumption PLASTIC

PROTECTIVE TAPE

AIRSHOWER

ISOTEC OIL

SLAX30

KENTOP-0210

CATALYST FOR
COLD BOXCORE
MAKING
40 GRAPHITE
GRANULES
SLOW MOVING ITEMS
TABLE NO 3

Std.Ra Total Issue Annual

Material description te Qties consumption
ALUMINIUM SCRAP 14.51 1,995 28947.45
CARBURISER 22.74 1,878.38 42714.3612
LOW SILICON PIG IRON 9.59 1,831.78 17566.7702
LIME STONE 9.17 1,775.57 16281.9769
IVALINOCURE PART A 2.27 1,730 3927.1
FERROGEN 1.93 1,500 2895
IOLAR2 OXYGEN GAS 0.6 1,420.20 852.12
CHROMIUM LADDLE ALLOY 1.72 1,400 2408
FESI 2-6 MM 1.43 1400 2002
GRAPHITE ROD - A&C 27.17 1,205 32739.85
RESIN COATED SAND 0.93 1,127.09 1048.1937
CHILCOTE 709 4.7 1,120 5264
SG GRADE PIG IRON 6.81 912.857 6216.55617
HIGH ASH COKE 4.18 782.656 3271.50208
ALUMINA POURING NOZZLE FOR A
LINE 310 775 240250
COAL DUST IMP FOR OTHER LINES 2.18 676.333 1474.40594
PET COKE-HS 5.5 589 3239.5
C I SCRAP 2.30 571.507 1314.4661
IVALINACURE PART C 21.75 549 11940.75
DYCOTE- 42Y 4.07 540 2197.8
FERRO SILICON MAGNESIUM 6 - 8% 9.24 529.9 4896.276
ALUMINA POURING NOZZLE FOR C
LINE 10.01 512 5125.12
CI BORINGS 10 490.21 4902.1
SILICA SAND PMF 3.51 453.873 1593.09423
PRESS POUR STOPPER ROD –DLINE 0.82 448 367.36
STEEL SHOTS-S460 0.53 445.78 236.2634
ANTHRACITE COAL 12.36 433.384 5356.62624
SILICA FLOUR 300 MESH 10.67 382.1 4077.007
FE SI 9.52 352.333 3354.21016
SIMO BORINGS 15.49 292.47 4530.3603
RHEOTEC 471 - CORE PAINT 9.56 292.312 2794.50272

41
SILICA QUARTZ RAMMING 2.73 285.74 780.0702
RAMMING MASS - 0.1 - 0.5 3.89 254.071 988.33619
RAM MASS-300 12.39 245.695 3044.16105
ALUMINA POURING NOZZLE FOR D
LINE 1.96 234 458.64
SILICA RAMMING MASS - 1.2% BJ2 9.62 221 2126.02
FERRO PHOSPHOROUS 15-25% 9.81 211.333 2073.17673
RESEED MSI 0.2 TO 0.7 MM 12.54 209.925 2632.4595
WHYTHEAT A FOR LINING 5.20 206.75 1075.1
FIRE CLAY POWDER 1.86 189.14 351.8004
RESIN SAND-RECOSAN 8.06 177 1426.62
RAMMING MASS - 0.5 - 1.5 8.11 165.282 1340.43702
IVALINACURE PART B 7.55 139 1049.45
NITROGEN GAS 5.7 133 758.1
RAMMING MASS - 1.5 -3 7.25 120.204 871.479
SILICA RAMMING MASS BJ2 -1.5% 4.36 119.75 522.11
GRAPHITE POWDER FOR CUPOLA
LINING 4.01 119.187 477.93987
FERRO MANGANESE 1.88 101.333 190.50604
RAMMING MASS - 3 – 4 6.02 92.28 555.5256
SOREL METAL PIG IRON 3.66 72.53 265.4598
VEINSEAL 14000 7.13 68.2 486.266
FOUNDRY RETURNS – PMF 2.86 44.543 127.39298
SUPERSEED 14.81 42.65 631.6465

In slow moving goods table CARBURISER 42714.3612 high

annual consumption SLOW MOVING ITEMS
SUPERSEED
CHART NO:3
Annual consumption

FOUNDRY
RETURNS –
PMF

VEINSEAL
14000

SOREL
42 METAL PIG
0 100000 200000 300000 IRON
43
NON-MOVING ITEMS
TABLE NO 4

Total
Issue Annual
Material description Std.Rate Qties consumption
E A F RAMMING MASS 85.73 16.8 1440.264
SILICON CARBIDE CHIPS 2.34 9.6 22.464
FERRO SILICON MAGNESIUM FOR
CGI 8.50 0.2 1.7
FERRO TITANIUM 23.69 0.155 3.67195
FERRO NIOBIUM 25.55 0.155 3.96025

In this table E A F RAMMING MASS 1440.264 shows high annual consumption

CHART NO:4

NON-MOVING ITEMS
E A F RAMMING
MASS
consumption

SILICON
Annual

CARBIDE CHIPS

FERRO SILICON
MAGNESIUM
FOR CGI
FERRO TITANIUM
140 145 150
0 0 0 FERRO NIOBIUM

44
ABC ANALYSIS
TABLE NO 5

cu %
TOTAL
DESC VALUE total value cu.value of category
QTY
qty

ALUMINIUM 89.4 1,003,389 89,702,977 89,702,977 17% A

SCRAP
SIMLID 12.82 424,551 5,442,744 95,145,721 18% A
LOW SILICON PIG 148,165,03
35.64 1,487,635 53,019,311 28% A
IRON 2
190,513,09
TRAY 52.74 802,959 42,348,058 37% A
0
IVALINOCURE 41,335,55 231,848,64
52.82 782,574 45% A
PART A 9 9
29,433,64
FERROGEN 80.71 364,684 261,282,294 50% A
6
IOLAR2 OXYGEN 289,337,76
72.45 387,239 28,055,466 56% A
GAS 0
CHROMIUM 25,774,19
14.99 1,719,426 315,111,955 61% A
LADDLE ALLOY 6
23,860,40 338,972,35
FESI 2-6 MM 55.12 432,881 65% A
1 6
GRAPHITE ROD - 16,555,74
36.86 449,152 355,528,099 68% A
A&C 3
RESIN COATED 370,383,19
66.79 222,415 14,855,098 71% B
SAND 7
13,391,71 383,774,91
CHILCOTE 709 18.61 719,598 74% B
9 6
SG GRADE PIG 396,279,76
26.72 467,996 12,504,853 76% B
IRON 9
HIGH ASH COKE 31.49 325,800 10,259,442 406,539,211 78% B
ALUMINA 16.14 593,232 9,574,764 416,113,975 80% B

45
POURING
NOZZLE FOR A
LINE
COAL DUST IMP
424,480,61
FOR OTHER 7.19 1,163,650 8,366,644 82% B
9
LINES
431,824,01
PET COKE-HS 3.98 1,845,075 7,343,399 83% B
7
438,572,49
C I SCRAP 1.61 4,191,600 6,748,476 84% B
3
IVALINACURE 445,320,96
1.61 4,191,600 6,748,476 86% B
PART C 9
DYCOTE- 42Y 10.8 616,325 6,656,310 451,977,279 87% B
FERRO SILICON
MAGNESIUM 6 - 8.63 759,950 6,558,369 458,535,648 88% B
8%
ALUMINA
POURING 463,944,46
8.08 669,408 5,408,817 89% B
NOZZLE FOR C 4
LINE
469,178,18
CI BORINGS 1.74 3,007,886 5,233,722 90% C
6
473,300,59
SILICA SAND PMF 6.9 597,450 4,122,405 91% C
1
PRESS POUR
STOPPER ROD – 0.49 8,075,600 3,957,044 477,257,635 92% C
DLINE
STEEL SHOTS- 481,214,67
0.49 8,075,600 3,957,044 92% C
S460 9
ANTHRACITE 484,519,01
3.58 923,000 3,304,340 93% C
COAL 9
SILICA FLOUR 300 487,713,23
1.82 1,755,066 3,194,220 94% C
MESH 9
FE SI 0.42 7,342,000 3,083,640 490,796,87 94% C

46
 9
493,766,08
SIMO BORINGS 1.37 2,167,300 2,969,201 95% C
0
RHEOTEC 471 - 496,413,54
3.61 733,370 2,647,466 95% C
CORE PAINT 6
SILICA QUARTZ 498,980,04
1.45 1,770,000 2,566,500 96% C
RAMMING 6
503,437,70
RAM MASS-300 3.82 563,462 2,152,425 97% C
1
ALUMINA
POURING 505,033,70
0.14 11,400,000 1,596,000 97% C
NOZZLE FOR D 1
LINE
SILICA RAMMING 506,629,70
0.14 11,400,000 1,596,000 97% C
MASS - 1.2% BJ2 1
FERRO
508,109,99
PHOSPHOROUS 1.07 1,383,448 1,480,289 98% C
0
15-25%
RESEED MSI 0.2 509,416,61
0.84 1,555,500 1,306,620 98% C
TO 0.7 MM 0
WHYTHEAT A 510,624,61
3.02 400,000 1,208,000 98% C
FOR LINING 0
FIRE CLAY
1.12 947,500 1,061,200 511,685,810 98% C
POWDER
RESIN SAND- 512,666,09
0.68 1,441,600 980,288 99% C
RECOSAN 8
RAMMING MASS - 513,487,34
2.25 365,000 821,250 99% C
0.5 - 1.5 8
IVALINACURE
0.9 876,100 788,490 514,275,838 99% C
PART B
515,039,81
NITROGEN GAS 2.38 321,000 763,980 99% C
8
RAMMING MASS -
0.84 830,640 697,738 515,737,556 99% C
1.5 -3
SILICA RAMMING 0.91 739,800 673,218 516,410,77 99% C

47
MASS BJ2 -1.5% 4
FERRO 517,697,03
47.93 13,050 625,487 99% C
MANGANESE 2
RAMMING MASS -
0.41 666,080 273,093 517,970,125 100% C
3–4
SOREL METAL
0.19 1,410,000 267,900 518,238,025 100% C
PIG IRON
VEINSEAL 14000 0.19 1,410,000 267,900 518,505,925 100% C
FOUNDRY 518,767,16
1.68 155,500 261,240 100% C
RETURNS – PMF 5
SUPERSEED 3.16 73,363 231,827 518,998,992 100% C
FESIMG 6- 8 % -
0.68 330,000 224,400 519,223,392 100% C
W/O RE
FIRECRETE
SUPER FOR 0.68 330,000 224,400 519,447,792 100% C
LINING
519,642,19
FR-500/7 0.27 720,000 194,400 100% C
2
E A F RAMMING 519,805,91
0.09 1,819,131 163,722 100% C
MASS 4
SILICON
1.15 107,496 123,620 519,929,534 100% C
CARBIDE CHIPS
FERRO SILICON
MAGNESIUM FOR 0.25 440,000 110,000 520,039,534 100% C
CGI
FERRO TITANIUM 0.05 1,883,754 94,188 520,133,722 100% C
FERRO NIOBIUM 0.08 900,000 72,000 520,205,722 100% C
ALUMINIUM
0.57 107,496 61,273 520,266,995 100% C
SCRAP
CARBURISER-
COCONUT SHELL 0.08 770,000 61,600 520,328,595 100% C
CHARCOAL
LOW SILICON PIG 520,366,72
0.17 224,316 38,134 100% C
IRON 8
LIME STONE 3.92 7,535 29,537 520,396,265 100% C
IVALINOCURE 3.57 5,000 17,850 520,414,115 100% C

48
PART A
FERROGEN 0.2 60,417 12,083 520,426,199 100% C
IOLAR2 OXYGEN
0.18 8,498 1,530 520,427,729 100% C
GAS
CHROMIUM
0.1 7,794 779 520,428,508 100% C
LADDLE ALLOY

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 4.4 INVENTORY TURNOVER RATIO
Table no 6

Description 2007 2008

Opening stock(cr) 65.72 25.8

closing stock(cr) 25.8 27.04

Total (a) 91.52 52.84

Average(b)a/2 45.76 26.42

Cost of good sold(c) 96.64 184.5

Turnover Ratio(d=c/b) 2.11 6.98

Days 365/d 172.8 52.3

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CHART NO:5
Days 365/d
FOR THE 2007
Turnover
Ratio(d=c/b)
Cost of good
sold(c)
Average(b)a/2

Total (a)

closing stock(cr)

Opening
0 1000 2000 3000 stock(cr)
Description
CHART NO:6

FOR YEAR 2008 Days365/d

Turnover
Ratio(d=c/b)
Cost of good
sold(c)
Average(b)a/2

Total (a)

closingstock(cr)
0 1000 2000 3000

Opening
stock(cr)
Description

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4.5 FINDINGS

After the detailed analysis the researcher has the following findings:

 From the ABC analysis of inventory it was found that the A classification materials are
10 units to the extent of RS. 355,528,099
 From the ABC analysis of inventory it was found that the B classification materials are
12 units to the extent of RS. 108416365
 From the ABC analysis of inventory it was found that the C classification materials are
47 units to the extent of RS. 56484044
 ABC analysis can also provide better results, ABC analysis is useful for the
inventories being maintained by a firm.
 Through the EOQ analysis of inventory it was found that among 30 units two seems to
purchase as JIT method both cross 300 times.
 From the FSN analysis of inventory it was found that the fast materials totaled to 40
units with current month duration.
 From the FSN analysis of inventory it was found that the slow materials totaled to 53
units with last two month duration.
 From the FSN analysis of inventory it was found that the non-moving materials totaled
to 5 units with dead items.
 FSN analysis also provides a better result. The company does not maintain any deal
items.
 Inventories turn over ratio 2.11 & 6.98 for 2007 & 2008 respectively. It shows that
2008 year consumptions more 2007.

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 4.6 SUGGESTIONS

 The company can concentrate more on reducing further the level of stocks maintained
and thereby reduce the holding cost.
 The company should control the fluctuations inventory level and should increase the
cash reserve for sound liquidity
 The company has a good track record of suppliers so they can try just in time
inventory.
 The company need to concentrate on some part quantity of stock because being the
cost of the carrying and storing cost is more and when the goods are in stock for more
number of days it will affect the quality of goods produced.
 The company can choose either ABC analysis or FSN analysis to purchase and store
materials.
 The EOQ of the company suggests that the materials to be ordered is not that very
high, so the company can go in for JIT inventory system to reduce the storing cost.
 The company must maintain the inventory turnover ratio in the coming years as in the
case of the current years.
 The company is having more operating expenses, and so the company has to take steps
to reduce its expenses.
 It is easier for the person who maintains stock details; through this method they can
easily estimate the stock item.

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4.7 CONCLUSION

A study on inventory management in BYD ELECTRONICS showed that the

company was very sound in managing its inventory and capable of meeting the future needs
and demands of the customer’s requirement.
Based on the study conducted, the researcher concludes that even through the present
inventory system is implemented efficiently and effectively, the JIT systems Has also to be
implemented for further reduction of inventory cost.
The firms have to take more measures to minimize capital investment and they should
retain and maintain the customers.
The study gave a detailed picture of various inventories the company possessed and
techniques is used to manage the same.
The present system, which by it is efficient, can still make use of other advanced
techniques to have an effective inventory system. The company inventory management
system is not effective mainly because it is not production/ manufacturing based company, it
is a project-Based company, so the components required for production differ from job-to-job,
even through it can systemize its inventory management, as the major part of capital of the
company is in the form of inventory of high values.

At the time delivery of inventory from the stores it gives more important to less value stock
item and give lesser importance to high value stock items.

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BIBIOGRAPHY

TEXT BOOKS

 Pandey I.M. financial management, vikas publishing house Pvt ltd 8th Edition 1999.

 ARORA AND S. ARORA P.N statistics for management, first Edition, S. Chand,
2003.

 Khan and Jain – Basic Financial Management and Practice – Tata McGraw hill- 5th
Edition 2001.

 Kothari C.R., Research methodology, Wishva prakashan, New Delhi, 2001.

 T.S.Reddy and Hari Prasad Reddy., Financial and management accounting and
margham publishing company.

WEBSITES

 www.byd .com

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