Inventory Management Analysis of Chettinad Cement Corporation Ltd

1
STUDY ON INVENTORY MANAGEMENT

OF CHETTINAD CEMENT CORPORATION
LTD, AT PULIYUR.
PROJECT REPORT
Submitted by
M SABARINATHAN
Register. No: 088001201035

in partial fulfillment for the award of the degree
of
MASTER OF BUSINESS ADMINISTRATION
DEPARTMENT OF MANAGEMENT STUDIES

JAYAM COLLEGE OF ENGINEERING & TECHNOLOGY
NALLANUR DHARMAPURI - 636813
MAY -2010
2
JAYAM COLLEGE OF ENGINEERING & TECHNOLOGY
NALLANUR DHARMAPURI -636 813

Department of Management Studies
PROJECT WORK
MAY 2010
This is to certify that the project entitled

A STUDY ON INVENTORY MANAGEMENT OF
CHETTINAD CEMENT CORPORATION LIMITED, AT
PULIYUR
is the bonafide record of project work done by

M SABARINATHAN
Register No: 088001201035
of M.B.A (Master of Business Administration)
during the year 2008-2010.
--------------------- ----------------------------------
Project Guide Head of the Department
Submitted for the Project Viva-Voce examination held on _________
----------------------------- ---------------------------
Internal Examiner External Examiner
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DECLARATION
I affirm that the project work titled A STUDY ON INVENTORY

MANAGEMENT OF CHETTINAD CEMENT CORPORATION LIMITED, AT
PULIYUR being submitted in partial fulfillment for the award of Master of Business
Administration is the original work carried out by me. It has not formed the part of any
other project work submitted for award of any degree or diploma, either in this or any
other University.
(Signature of the Candidate)

M SABARINATHAN
(Register No. 088001201035)
I certify that the declaration made above by the candidate is true
Signature of the Guide,

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ACKNOWLEDGEMENT
The ultimate result of any research work depends upon the help and guidance of
many persons. The help and guidance of such people cannot be left unnoticed.
I take this opportunity to thank them for providing the relevant and necessary
inputs for successful completion of this project
I thank ANNA UNIVERSITY, COIMBATORE for this academic vision in

integrating the class room learning with real life’s situational experience, by making the
project work, a part of curriculum.
I would like to express my deepest gratitude to Dr. R. PARTHIBAN. Our
principal and Mr.B.ADHINARAYANAN.M.B.A. M.Phil. (Ph.D.,) our head of the
department of management studies for bring the inspiration and motivation force which
encourage to work towards excellence in the challenging task.
I words cannot adequately express my gratitude to my guide Mr. RD SURESH.
M.B.A. for valuable guidance, constant encouragement and supervision, motivation
especially in times of difficulty and stress.
My special thanks Mrs. PERIYAKARUPPAN, personal manager. HRD dept
Chettinad Cement Corporation Ltd, Puliyur, Karur. For his consent and permission to
undertake a project in the organization concerned and FINANCE department Chettinad
Cement Corporation Ltd,Puliyur, for his valuable guidance and direction through out
the project.
I extended my thanks to my beloved parents, friends, who gave us

encouragement and helped us at different stages of this project with warm gestures.
(M SABARINATHAN)
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ABSTRACT
This is an attempt to understands the relationships and trends to determine

whether or not financial power of the industries and is personal efficiency have
been satisfactory the concept of inventory management is typically devoted to
evaluate past current and prosecuted performance of the industry firm generally it
is the analysis.
The study period was annual one month is the finance department of the
industries. The main sources of the industries data were some industries with
executives and other several any data like periodically, company magazines,
annual reports. Data was mainly collected from general accounts sector of the
financial departments.
Inventory Management is mainly carried out tools like ratio analysis ABC
analysis and comparative balance sheet working capital of the previous year
inference are made of these tools and based on these inference finding and
recommendation are recommended.
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CONTENTS
DESCRIPTION Page No.

List of Tables
List of Figures
Abstract
1. Introduction
1.1.About the study 1
1.2.About the Industry 11
1.3.About the Company 15
2. Main theme of the project

2.1 Objectives of the study 24
2.2 Scope and Limitations 25
2.3 Methodology 27
2.4 Review of literature 28
3. Analysis and Interpretation 31
4.Findings, Recommendations and Conclusion
4.1.Findings 65
4.2.Recommendations 66
4.3.Conclusion 67
Bibliography 68
LIST OF TABLES
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TABLE.
CONTENTS PAGE. NO
NO
CURRENT RATIO
3.1 31
LIQUID RATIO
3.2 33
DEBT EQUITY RATIO
3.3 35
PROPRIETARY RATIO
3.4 37
INVENTORY TURNOVER RATIO
3.5 39
WORKING CAPITAL TURNOVER RATIO
3.6 41
3.7 DEBTORS TURNOVER RATIO 43
3.8 AVERAGE COLLECTION PERIOD 45
CREDITORS TURNOVER RATIO
3.9 47
AVERAGE PAYMENT PERIOD
3.10 49
GROSS PROFIT RATIO
3.11 51
3.12 NET PROFIT RATIO 53
COMPARATIVE BALANCE SHEET FOR THE

3.13 YEAR 2004-2005 55

3.14 YEAR 2005-2006 57

3.15 YEAR 2006-2007 59

3.16 YEAR 2007-2008 61

3.17 63
YEAR 2008-2009
LIST OF CHARTS
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S. NO. CHART TITLE PAGE NO.
1 CURRENT RATIO 32
2 LIQUID RATIO 34
3 DEBT EQUITY RATIO 36
4 PROPRIETARY RATIO 38
5 INVENTORY TURNOVER RATIO 40
6 WORKING CAPITAL TURNOVER RATIO 42
7 DEBTORS TURNOVER RATIO 44
8 AVERAGE COLLECTION PERIOD 46
9 CREDITORS TURNOVER RATIO 48
10 AVERAGE PAYMENT PERIOD 50
11 GROSS PROFIT RATIO 52
12 NET PROFIT RATIO 54
CHAPTER -1
INTRODUCTION
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1.1 INTRODUCTION ABOUT THE STUDY
The term inventory refers to the stock pile of the products a firm offering for
sale and the components that makes up the product. In other words inventory is
composed of assets that will be sold in future in the normal course of business
operations. The assets which turns store as inventory in anticipation of need are raw-
materials, work-in-progress and finished products. The raw material inventory removes
dependency between suppliers and plants. The work in progress inventory removes
dependency between various machines of a product line. The finished goods inventory
removes between plants and its customers or market.
Inventory, as a current asset, differs from other current assets because only
financial manager are not involved. Rather, all the functional areas, finance, marketing,
production and purchasing are involved. The views concerning the appropriate level of
inventory would differ among the different functional areas .The job of the finance
manager is to reconcile the conflicting viewpoints of the various functional areas
regarding the appropriate inventory levels in order to fulfill the overall objective of
maximizing the owners wealth. An optimum level of inventory should be determined
on the basis of the trade-off between costs and benefits associated with the level of
inventory.
Today the efficiency and state of Industrialization of a country is known by the

method of inventory management because poor or mismanagement of inventory is
harmful not only to the industry, but to the country as a whole as it affects the
economic, social and political environment of the country .Inventory is stock of goods
required by an organization for its successful operation. Inventory is classically defined
as an idle resource of any kind having an economic value. Inventory makes a significant
contribution to the operational efficiency and profitability of the enterprises, and so, it is
very essential to reduce the amount of capital locked up in inventories .
Some terms used in the inventory management.

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MAXIMUM STOCK
Maximum stock is the stock level at which maximum quantity of an item of
material can be held in at any time. Stock should not exceed maximum level, if it
exceeds this level; it blocks the working capital of the business.
Maximum stock can be calculated as follows-
Re-ordering level + Re-ordering quantity – (minimum consumption x
minimum re-order period)
MINIMUM STOCK
Minimum stock level represents the stock level below which, inventory of any
item should not be allowed to fall. If it goes below this level, it will affect the
production. This level is fixed so that production may not be stopped due to shortage of
materials.
Minimum level can be calculated as follows:

Reordering level – (normal consumption x normal reorder period)
RE-ORDER LEVEL
It is the point at which material are ordered for replenishment of stock. It is the
key point and is the quantity where replenishment of stock is done. Reorder level is
fixed between minimum stock level and maximum stock level, in order to avoid time
lag between the materials ordered and receipt.
Reorder level = maximum consumption x maximum reorder period.
ORDERING COST
The category of cost is associated with the acquisition of or ordering of
inventory. Firms have to place orders with suppliers to replenish inventory of raw
materials. The expenses involved are referred to as ordering cost. The ordering cost
includes preparing a purchasing order or requisition form and receiving inspecting and
recording the goods received to ensure both quantity and quality. The cost of acquiring
material consists of clerical cost and cost of stationary. It is therefore, called set-up
cost. They are generally fixed per order placed, irrespective of the amount of order.
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Total ordering cost = Annual requirement / order quantity x cost of single order.
CARRYING COST
The second broad category of cost associated with inventory is the carrying cost.
They are involved in maintaining or carrying inventory. The cost of holding inventory
may be divided in to 2 categories.
a) Those that arise due to storing inventory.
The main components of this category of carrying cost are storage cost,
insurance of inventory and deterioration in inventory for serving cost.
b) The opportunity cost of funds

This consists of expense in raising funds to finance, the acquisition of inventory.
If funds were not locked up in inventory, they would have turned a return. This
is the opportunity cost of funds for the financial cost component of the cost.
The carrying cost and the inventory size are positively related and move in the
same direction. If the level of inventory increases, the carrying cost also increases and
vise versa.
Total carrying cost = average inventory X inventory carrying cost.
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ECONOMIC ORDER QUANTITY.
The quantity of materials to be ordered at one time is known as economic order

quantity (EOQ). This quantity is fixed in such a manner as to minimize the cost of
ordering and carrying the stock.
Economic order quantity is a tool of store control on the part of material

purchased. It refers to the size which gives maximum economy in purchasing any
material. This is also known as optimum ordering quantity or standard ordering
quantity. EOQ is based on ordering cost and carrying cost. EOQ is the point where in a
single purchase or number of unit should be manufactured in a single process, so that
the total cost i.e., ordering cost or set-up cost and inventory carrying cost are the
minimum level.
EOQ = √2 x A X O / C
Where, A = Annual usage. O = Ordering costC = Carrying cost
1.2 INTRODUCTION ABOUT CEMENT INDUSTRY

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Cement is one of the basic important and powerful raw material used in the
constructions of variety of structure like dams, rocks, bridges, storage tanks, fiyovers
towards, multistoried building ect., it has a variety of applications like hallow bricks,
precuts door and frames, pipes, asbestor, cement sheets, concerting, plastering and other
per-cast and other per-cast and prestressed elements ect., it is greenish gray powder,
which contains the following compounds.
MEANING AND DEFINTION OF CEMENT

The word cement denoted any kind of adhesive in building and civil
engineering. It denoted substance, which can be used to bind together sand and broken
stone, or other from of aggregated into a solid mass. The common reference to cement
is the Portland cement, has become almost an international nomenclature.
Technically, Portland cement is a greenish Gray chemically active, impalpable

power made by burning to a high temperature in a rotary in a rotary in a rotary killin a
pulverized mixture containing definite proportions of oxides of calcium silicon,
aluminium and iron and grinding proportions of clinker. Tow to six percent of gypsum
by weight is added with cement during grinding of clinker to control seating time.
In American heritage dictionary the term cement, is defined as “a building material

made by grinding calcite limestone and caly to a fine powder,which can be ixed with
water and poured to set as a solid mass or used an ingredient in making mortar or
concrete.
COMPONENTS OF CEMENTS
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1.C3 S tricalcium silicate 50%

2. C2 S Dicalcium Silicate 25%
3 C3 A Tricalcium Aluminate’s 10%
4 C4 AF Tetra calcium Alumina Farite 10%
5 Gypsum 2 – 5%
INDUSTRY PROFILE
INTRODUCTION
Cement industry is a core sector industry and forms the backbone of infrastructural
development of the country. Cement is a essential construction material and Cement
consumption has been as vital parameter. In a country’s economic growth of 7% to 8%
in the last ten years. The Cement industry gives direct and indirect downstream
employment.
GROWTH OF CEMENT INDUSTRY IN INDIA

The Landmark of the growth of the cement industry in this country is Chronologically
listed below:
1914 Foundation of a Cement industry. First Cement plant established at porbander,

Gujarat.
1936 11 Cement companies merged to form the Associated Cement Corporation

Limited.
1936 – 1945 Cement was declared as essential commodities under the defense of India
Rules and the same was brought under the government control.
1951 – 1956 5 years Cement units produced 4.6 million tones of Cements.
1956 Cement control order promulgated. System on fright pooling introduced for
equitable distribution of Cements at a uniform price throughout the country.
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1961 Cement manufacture was established
1962 Chettinad cements Corporation Limited was established 1969

Uniform retention price Rs 100 per tone allowed to cement producers replacing
3 hire pricing.
1977 Three tier pricing formula announced for low. Medium Cement producing units.
Levy quotas for sick and new weight are fixed 50%
1982 On the recommendation of gross committee, partial decontrol was announced on

February 28, and manufacturers were allowed to sell one third of output in open market.
1989 Cement Completed decontrolled on March 1.
1992-1993 Cement Capacity was 70.19 million tones and production was 54.08 million
tones.
1996 Cement industry has registered Whooping growth 11.4% as compared to 9.9%
during the same period previous year.
Single tired retention price was fixed at Rs. 320/- tones per port land puzzling
cement and Rs.335/- tones ordinary Portland cement.
The task force report that the per capital consumption was only about hundred Kgs. By
2002 and possible reach a level of 150 Kg by the year 2010, if the present GDP Growth
trend resists.
1.3 COMPANY PROFILE

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Chettinad Cement Corporation Ltd

Founder
Dr.Rajah Sri M.A.Muthiah Chettiars urge to contribute to the nation building
cause combined with his business acumen culminated in establishment of “ Chettinad
Cement Corporation ltd in 1962 to cater to the growing demands of cements in the
country.
The history of the “house of chettinad” is linked with the 9 decades old saga. In
1912 took birth the house of chettinad thought a visionary idea - list and born
entrepreneur Dr.Rajah Sri Annamalai Chettiar who believed in social transformation
through business. The founder of the house of Chettinad envisaged his company his
companies providing the stimulus for industrial growth and conceived business as a
means of improving the living standards of people.
Establishing company:
Following the footsteps of father Dr,Rajah Sri Annamalai Chettiar.

Dr.Rajah Sri M.A. Muthiah Chettiar continued to combined his business acumen to
establish the company “Chettinad Cement Corporation Limited” in 1962 to cater to
growing demand of cement in the country. The companies first manufacturing unit
located at Puliyur, Karur District. in Tamil Nadu common production in April 1968
today the group is being steered under versatile. dynamic and pragmatic leadership of
Dr.M.A. Ramasamy and his son Sri M.A.M.R. Muthiah based on the footsteps of
Dr.Rajah Sri M.A.Muthiah Chettiar.
Apart from cement. The Chttinad house in today engaged in activities

as diverse as granite. engineering. silica. Garnet information technology, plantations,
shipping transportation. stevedoring. clearing and forwarding and logistics having a
combined turnover of about Rs.8,500 million. From a modes beginning of 2 lack tones
capacity per annum. it has gradually increased to 15 lak tones today. presently the plant
employs the modern dry process technology. it has the most advanced. Sophisticated
computer controlled state-the-art loaches mill for grinding raw meal. Loaches lignite
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mill for grinding raw meal. Loaches lignite mill (first of its king in India) a few stage
pre-heated kiln & electronic packing plant. Equipped with centralised control room for
process control the advanced instrumentation and elaborate display screens give up to
the minute information on the production process so corrected.
The company, which has always been striving for total quality.
Possesses international certificates an ISO 9002 and ISO 14001 and takes pride in being
acclaimed as one of the major player in a highly competitive cement industry in India
the company added another features to in cap by installing and commissioning a giant
sophisticated. High-tech and power efficient O&K cement mill resulting in a quantum
leap in production to touch one million tones mark. The company has achieved many
laurels through award for “ best performance” in the cement industry issued by national
productivity council” besides it has been customers to receive national safety awards.
chettinad cements have attached great importance to social responsibility and
environmental values. This is manifest in the installation of the latest pollution control
equipment in the plant.
The company, new state of the art green field cement plant in
Karikal Village. Dinducal district, Tamil Nadu commenced commercial production in
act 2001 with a capacity of 0.9 million tonnes per annum. It is equipped with abb’s
latest knowledge based solution package right form the treatment of raw material to the
packing of cement. making it one of the India’s most modern and efficient plants. With
the large infrastructure projects of the governments for concretising the National
Highways and rural roads. Like the golden quadrilated and the pm’s grams SADAK
YOJANA. In the pipeline the cement industry as well as your company looks forward to
a bright future and hopes to achieve more, milestones in the years to come.
COMPANY PROFILE
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Name of the company : Chettinad cement corporation Ltd.
Type : Public.
Founded : 1962
Managing Director : M.A.M.R.Muthiah.
Chairman : M.A.M.Ramaswamy.
Head quarters : T.Nagar.Chennai.
Production plant : Puliyur. Karikkali.
Revenue : 4.5(crores)
Employees : Above 1000.
Turnover : Granite.Garnet.Engineering.Silica.
Information Technology,Plantations,
Shippin,Transpiration,Stevedoring,
Associated companies
Website : WWW.Chttinad.com
HISTORY OF THE CHETTINAD CEMENT CORPORATION LIMITED

Dr. Rajah Sir. M.A. Muthiah chettiar of chettinad promoted the Chettinad
Cement Corporation Limited. It commenced production in April 1968. The factory is
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located at kumarajah muthiah Nagar in the Puiliyur village of Karur taluk in Karur
district, Tamil nadu and is about 10 km away from Karur. The factory compound
occupies an area of limestone quarry of the factory is located near Palayam at the
distance of 28 km away from Karur. It is one of the best developed and mechanized
mines in the country.
The dynamic and dedicated services of the promoter to the Chettinad Cement
Corporation Limited as the chairman of the factory are continued till 1984. Then the
elected chairman Dr.S. Narayana Swamy successfully led the company from 1985 to
1990. Today the company continuous to uphold its illustration tradition under the
dynamic leadership of Dr.M.A.M.R. Muthiah, the chairman and managing director.
A part from cement, the Chettinad house is engaged in activities as diverse as

granite engineering, silica, garnet, information technology steel and textile trading,
horse breeding, plantation, shipping, transportation, stevedoring, clearing and
forwarding and logistics having a combined turnover of Rs.8,500 Million.
PRODUCTS:
Chettinad Royal Grade 53
Chettinad Grade 43
Chettinad Super Grade
Sulphate Resistant Portland cement
Portland slag cement
Chettinad super steel
PRODUCTION CAPACITY:
The cement plant is designed for a normal capacity is 6 lakhs tones of cement
p.a. it achieves higher capacity every year. Last year it has achieved the target of
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2335605metric tones of cement. From a modest beginning of 2 lakhs tones capacity p.a.
it was gradually increased production capacity to 15 lakhs tones today.
Presently, the plant employees the modern Dry process technology. It has the
most advanced sophisticated, computer controlled state of the art loesche mill for
grinding raw meal. Loesche lignite mill (First of its kind in India). A five stage
preheated kiln and electronic packing plant.
Equipped with centralized control room for process control, the advanced
instrumentation and elaborate display screens give up to the minute information on the
production process. So that any deviation can be promptly corrected.
The company added another feather to its capacity by installing and
commissioning a giant, sophisticated, high-technology and power efficient cement mill
resulting in a quantum leap in production to touch one million tones mark. Chettinad
cement has attached great importance to social responsibility and environmental values.
This is manifest in the installation of the latest pollution control equipment in the plant.
PROGRESS OF NEW CEMENT PLANT:

The company’s state of the Art Green field cement plant in Karikkali village,
Dindigul District, Tamilnadu commenced commercial production in October 2001 with
the capacity of 0.9 million tones p.a. it from the treatment of Raw material to the
packing of cement, making it one of India’s most modern and efficient plant.
The companies commissioned a 15mw captive thermal power plant at its unit
karikkali in October 2004 to cater to the entire power requirement of the karikkali plant
there by reduce the power cost. The company is also in the process of installing a new
cement grinding unit at karrikkalik with a capacity of 0.5 million tones.
BANKERS
State Bank of patiala
Canara Bank
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State Bank of Mysore and

Indian Bank.
PROGRESS OF READY MIX CONCRETS PLANT

The company has proposed to install a Ready Mix concrete plant (RMC) with a
capacity of 30 cu.M per hour at coimbatore to cater the needs of consumers in areas of
southern parts of Coimbatore, Pallakad and Pollachi. The approximate cost of the cost
of RMC installation would be around Rs.275 Lakhs which will be met out of the
internal accruals of the company. Now it is giving profit to the company.
OPPORTUNITIES:
The fact that India being second Largest cement producer in the world and still
having the lowest per capital consumption of cement itself speaks for the vast potential
for growth available in this sector.
TOTAL STRENGTH:
Work men - 112
Staff - 56
Executive - 106
Contract workers - 131
Total - 405
LIST OF AWARDS RECEIVED BY THE CHETTINAD CEMENT

CORPORTATION LIMITED.
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Year
S. No. Awards
National safety Award 1976 & 1977

1.
Merit Award from Regional 1982

2.
Directorate of worker Education
Tamil Nadu Film Arts Association, 1978
3.
Chennai
National productivity Award (Best
productivity performance in cement
4. industry issued by NPC)
Second Best 1985-1986
Best 1986-1987
Best Productivity Award 1994-1995
5. National safety Award

a. Longest Accident free period 1986
b. Best performance of the year 1989
Conservationist of the year (progress

1987
6. in the field of conservation of energy
metal components and machinery)
NCBM National Awards
7. (Improvement in Energy
performances)
Best 1995-1996
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Best (Manufacturer of Blended 1998-1999

cement)
cement)
cement)
TNBM Energy conservation Award 1998-1999
8.

9. ( improvement in Electrical energy 1989-1999
performance) second best
10. ( improvement in Electrical energy 2000-2001
performance)
Ministry of Energy (National Energy
11. 2000-2001
conservation Award)
(National Energy conservation Award
2002
for the cement sector)
Tamil Nadu Government awards state
12. 1998
safety awards Ist and 3rd prize
WELFARE FACILITIES IN THE COMPANY

STATUTORY WELFARE MEASURES:
Canteen Facilities: (Ref.sec.46, Factories act 1948)
The workers are provided with facility of canteen. This is functioning on co-
operative basis. The company has provided utensils, furniture, electric fans, lights,
water and other facilities. Modernized electrical and other equipments have also been
installed for the preparation of food stuff. Full meals, refreshments, coffee and tea are
supplied from the canteen to the employees.
Rest rooms: (Ref. sec. 43, Factories act 1948)

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Rest rooms and Lunch rooms with electric lights, fan and water taps are provided for
the benefit of the working community.
First aid facilities: (Ref. sec. 45, Factories Act 1948)

In all departments first aid boxes are provided at various work spot for the
benefit of workers. After the month they used to replace the box with new medicines.
Uniform and shoes: (Ref. sec. 43, Factories Act 1948)

The uniforms and shoes are given in the company are same to all in the company
it shows there is no differentiation between the employees in the organization.
Gratuity:
Every employee in the organization has gratuity as a retirement benefit.
Insurance scheme:
Every employee in the organization must have personal accident policy. It is
adopting compulsory one of the Organization.
Death relief fund:

The employee has death relief fund in the organization to the benefit of the
employee family.
NON-STATUTORY WELFARE MEASURES:
Housing:
Housing facilities are provided to employees for the workers who don’t find
place in the housing colony certain amount is paid as housing rent allowances.
Recreation:
Employees are also provided with temples and parks for their children inside the
housing colony. A cable T.V. Network is there for housing colony, people which shows
various channels.
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Education:
The Chettinad Cement Corporation limited educational society running higher
secondary schools where education facilities with concession as per Tamilnadu
educational rules are being provided to the children of the employees.
Community Centre:
There is a community centre which has the facilities to conduct marriage and
other such programmes. Water facilities, vessels, electricity, etc., also provided by the
company. All the employees are eligible to get this by remitting a nominal amount as
rent.
Other facilities:
They are also having co-operative stores, ICICI limited, post office facilities for
the employees.
Vehicle stand:
For the benefit of workers the management has provided a vehicle stand to park
their vehicles.
Hospital:
The hospital which provided for the benefit of employees is common for
Chettinad Cement Corporation. It contains medical treatment including supply of
specialist medicines are given to the employees and to their families. E.C.G facilities
are also provided to the employees. The expenditure costs shared by the management.
Rest shed: (Ref. sec. 47, Factories Act, 1948)

Rest shed and Tiffin rooms with electric light, fan and water taps are provided
for the benefit of the working community.
Sanitary Flush out: (Ref. Sec. 19, Factories Act, 1948)
Lavatory, wash basin and spittoon are provided inside the factory for the use of
workers.
Drinking Water: (Ref. Sec. 18, Factories Act, 1948)

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Drinking water facility is also provided to the workers with in their working spot
itself
First Aid facilities: (Ref. Sec. 45 Factories Act 1945)
In all departments first aid boxes are provided at various work spot for the
benefit of workers. After the month they used to replace the ox with new medicines.
LEAVE HOLIDAY
Chettinad Cement Corporation Limited allows the following holiday
such as National Holidays, festival Holidays
National Holidays
The company provides some of the important national holidays they are as
follows:
Republic Day
May Day
Independence Day
Gandhi Jayanthi
Festival holidays
The company provides holidays to the employees for important festivals like
Pongal
Tamil New Year
Ayudha Pooja
Christmas
Deepavali
NUMBER OF LEAVE PERMITTED PER YEAR
SL.NO. CATEGORY CASUAL SICK LEAVE EARN OR

OF LEAVE (SL) PRILVILEGE
EMPLOYEE (CL) LEAVE (EL/PL)
MAXIMUM
ACCUMULATION
1. Workers 7 12 18
2. Staff 7 12 30
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3. Executive 7 12 30
4. Contract 7 12 18
workers
Time office is controlled by accounting department. The duty of the time office
is to maintain the attendance and leave record of all the employees. They follow
punching card system in Chettinad Cement Corporation limited. The company gives
each employee an attendance card. The employees while entering or exit the office have
to insert their attendance card into a computerized machine which makes the entry
permission for late coming (hour) will be allowed to all the employee of reasonable
aspect.
Apart from this time office gives details regarding
LOPC (loss on payment)
NSA (Night shift allowance)
OT (Over time)
HW (Holiday work)
RECORDS MAINTAINED BY TIME OFFICE

The importance records maintained by the office are as follows:
Attendance Register
Leave Record
Absenteeism
Loss on payment
Gate pass
On Duty Record
Shift change register leave register
Overtime slips.
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HEALTH AND SAFETY DEPARTMENTS:

In Chettinad Cement Corporation Limited safety is watch word and it has given
prime importance and a safety committee is also constituted monitor the safety
measures.
Safety is a statutory procedure. The following are the members of safety
committee.
Organization chart (linked to Health and Safety departments)

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ORGANISATION STRUCTURE OF CHETTINAD CEMENT CORPORATION

LIMITED.
Organization structure is the pattern in which various part or components are

interrelate or inter connected. It prescribes the relationship among various positions and
activities.
According to March and Simon “Organization structure consists simply of
those aspects or pattern of behavior in the Organization that is relatively stable and
change only slowly”
In a large and complex Organization, structure is set forth initially by the
design of the major components or sub systems and then establishment of relationships
among these sub systems. It is the patterning of these relationships among these sub
system. It is the patterning of these relationships with some degree of permanency is
referred top as Organization structure. The Organization structure is frame work with in
which an enterprise grows and develops.
The role of sound organization structure can be assessed by one statement of

Andrew Carnegie, a great industrialist of U.S.A, “Take our factories, our Trade. Our
avenues of transportation our money but leave me without organs and in four years I
will have re-established myself”. This speaks of the Organization.
Lounsbury Fish, while emphasizing the role of good Organization structure

Lansbury out that, “Organization is more than a chart. It is the mechanism through
which management directs co-ordinates controls the business. If the organization plan is
ill-designed, if it is merely makes shift arrangement. Then management is rendered
difficult and intellective. In short, the sound Organization facilities management process
encourages growth and diversification provides for optimum use of technological
improvements and encourages human use of human being and stimulated creativity.
The Organization administration of Chettinad Cement Corporation Limited,

have strong foundations. The company is now being managed by a Board consisting of
thirteen Directors, of these three or two whole time Directors. In this composition of
30
Board, one Director is the General Manager is the Chief Executive of the unit. The
management structure has been classified as Executive Directors, Managers, Staff,
Workers and Contract workers.
ADMINISTRATION SET UP:

The Chettinad Cement Corporation Limited is administered by a whole time
Director. He led the company through the managing Director. The managing director
with the help of Chief General Manager. The chief General Manager manages the
departments through Managers and Executives. Under the departments such as
Engineering, Technical, Marketing, Civil, Personnel, Accounts etc. the General
Manager (Engineering) controls the Deputy and Assistant manager (Mech.). The
General Manager (Accounts) control all Accountants, The General Manager (Technical)
controls Electrical and Instrumentation Department. The personnel manager controls the
Time Keepers, Canteen, Clerks, Executive Assistants and security Department.
ORGANISATION CHART
31
32
33
CHAPTER-2
2.1 OBJECTIVES OF THE STUDY
 To study and identify the inventory level exiting in the company.

 To identify the Total Inventory and Inventory Turnover Ratio.
 To identify the Growth of Inventory and Net sales.
 To identify the Material Consumption and Raw Material Turnover Ratio.
 To minimize idling of men and machine this may arise due to shortage of
raw materials, suppliers and spares and,
 To provide efficient and smooth service to the customers.
 To keep to minimum
• Capital (cash) lock up or investment on inventories and
• Inventory carrying cost, i.e., expenses involved in storing and handling
inventories.
2.2 SCOPE OF THE STUDY

34
The inventory manager must anticipate the company’s need at every stage of
production. Inventories protect the inventory manager against unforeseen failures in
supply or a sudden increase demand. Materials are transported thousands of miles
before the arrive at a plant, and while in transit they are someone’s inventory – the legal
owner of that material. Even a flat tire on the carrier’s truck could interrupt the
manufacturing process with a late delivery.
For these reasons every manufacturing enterprise carries a certain minimum
amount of inventory. In practice, almost every manufacturer carries an inventory that is
substantially greater than the minimum amount because:
 The marketing, sales, and production departments all find it more
convenient to have a supply on hand that it more than ample.
 The market indicates a rise in price of the raw material and
therefore increases the inventory levels.
 There is a lack of skills necessary to control inventory levels,
and / or top management is unwilling to pay for controls and is willing to
carry extra inventory
35
LIMITATIONS OF THE STUDY

1. The study period covers only for four years which restricts to know more
about the Inventory management of the company.
2. Only quantitative analysis is possible through the statistical tools are used.
36
2.3 RESARCH METHODOLOGY

The term research has been used in so contexts and with such a variety of
meanings that it is difficult for the student to sort it all out. Much of what has been
taught about research is based on misconceptions. Advertisements on television
proudly boast that research has revolutionized a product when in reality a marketing
department has simply made a small change in the product designed to increase its
appeal to consumers.
TYPE OF RESEARCH
There are a number of types of research and not all may be suitable for the
dissertation. Analytical research involves describing the characteristics, to analyze and
explain why or how something is happening. Thus, analytical research aims to
understand phenomena by discovering and measuring causal relations among them.
ACTUAL COLLECTION OF DATA
This study conducted at CHETTINAD CEMENTS was undertaken to
understand the inventory position of the company and to understand how inventory
levels of the company affect the profitability of the company. Data was collected over a
period by interviewing persons in departments like Purchase Department, Bill of
Materials Department, Planning Department and Stores Department. An effort has been
made to understand the workflow of these departments and how they function. During
the study an effort was made to understand how the inventory was stored in the stores
department. It was observed how the company receives inventory, processes the
incoming material, and stores it.
Data was also collected from Balance Sheets, Profit and Loss Accounts and
Journals. The primary data thus collected has been analyzed. Similarly secondary data
collected by interviewing concerned persons and also by observation has been analyzed.
The data from the company has been collected for four years i.e. for 2005, 2006, 2007
and 2008, 20
TOOLS USED FOR DATA ANALYSIS

37
Inventory represents one of the largest investments for any business unless
properly managed; the cost of inventory will strain the firm’s budget and cut into its
profitability. The goal of inventory control is to balance the cost of holding and
maintaining inventory with meeting customer demand.
 The tools adopted here are schedule of changes in working capital, Ratio
analysis, and ABC analysis.
 The visual inventory system is the most common method of controlling
merchandise in a small business.
 This system works best when shortages are not likely to cause major
problems.
 The ABC system is a partial system that divides a firm’s inventory into
three categories depending on each item’s rupee usage volume (cost per
unit multiplied by quantity used per time period).
 The purpose of classifying items according to their value is to establish
the proper degree of control over them.
2.4 REVIEW OF LITERATURE

38
Literature review heavily relied on published materials like journals, newspaper

articles; magazines and write ups of current issues on the internet concerning inventory
management were constantly reviewed. Details and journals were visited from time to
time as articles appeared in the newspapers and magazines. Methodology is the concept
of methods used in conducting the study. The methodology used for data collection is
mainly through primary and secondary data.
The primary data is collected by interviewing the concerned persons of financial

department, stores department, purchase department, bill of materials department and
other related departments. The data was collected from these persons by having
discussions with them and asking them questions related to the topic. The study at
CHETTINAD CEMENTS was undertaken for a period of three months wherein
information was collected from them regarding their policies, procedures, problems and
techniques adopted.
The secondary data is collected in the form of Balance sheets, Profit and Loss
Accounts and Financial Statements from the annual reports published by the company
and other records, documents, journals, facts and figures of the company.
ARTICLE BY JOHN SCHREIBFEDER
John Schreibfeder, President of Effective Inventory Management Inc, reminds
industrial distributors that purchased inventory is a “sunk” cost. It’s paid for, and no
matter what it’s worth now, the money’s still gone. Once surplus inventory exists,
distributors must find ways to recoup as much of the cost as possible.
One North America industrial distributor found a successful way to redirect
some of its surplus inventory within the own organization. The distributor launched an
internal surplus removal program, which used surplus inventory surplus inventory at
key locations to replenish the normal requirements of other internal locations. When
buyers reviewed their suggested orders, they provided information about surplus
quantities first so that stock was transferred rather than purchased. Although some
freight costs were incurred, interest charge reductions and restocking charge avoidance
successfully offset these costs.
CHAPTER-3
39
ANALYSIS AND INTERPRETATION
ABC ANALYSIS AT CHETTINAD CEMENTS

Chettinad Cements has to maintain several types of inventories. It is not
desirable to keep the same degree of control on all the items. The firm should pay
maximum attention to those items whose value is the highest. Therefore here the
inventories are classified to identify which items should receive the most effort in
controlling. ABC approach is adopted to measure the significance of each item of
inventories in terms of consumption value. The high value items are classified as ‘A’
items and they require the tightest control. ‘C’ items represent relatively least value and
would require sample control. ‘B’ items fall in between these two categories and require
reasonable attention of management. The ABC analysis is done here to concentrate on
important items and is also known as control by importance and exception.
The following steps have been undertaken to implement ABC analysis at

CHETTINAD CEMENTS.
 The price per unit for each purchased item is obtained (5 ITMS)
 The total consumption value is determined by multiplying consumption
quantity by its unit price.
 The consumption value is arrived by the above calculations for each of
the 5 items.
 The items are ranked in accordance with the total consumption value,
giving first rank to the item with highest total value. The items are arranged in
the order of decreasing annual-consumption-value.
 The ratio of total value of each item to total value of all items is
determined.
The list of values is divided into three groups, namely, A, high-value, B, Medium value,
and C, low-value, in marking that division, a graph with y-axis as “cumulative
percentages of value of inventory”, and x-axis as “percentage of inventory items” can be
used. The resulting graph makes it easier to divide
40
BENEFITS OF ABC ANALYSIS FOR INVENTORY REDUCTION

Inventory reduction has been a constant goal for all companies over the years.
The shorter the time from customer order to cash in the bank the better. The fewer
amount is tied up in inventory, the more money available for capital investment and
expansion. Once a company accepts inventory as waste and not a necessary evil of
business, inventory investment will be reduced to levels once thought impossible.
Using the “ABC” concept to analyze and control inventory investment and turns
is the simplest and most efficient method. Most inventories are made up of hundreds
and possibly thousands of individual items necessary to manufacture a company’s
products. By rank ordering the inventory items in dollar terms, A items being the most
expensive to C items being the last expensive, managing inventor investment can be
broken down to a manageable level. “A” items make up 70% of inventory amount;
however, they only account for 3.66% of inventoried items. “B” items make up 20% of
inventory amount and only for normally 12.33% of inventoried items at chttinad
cement corporation. “C” items make up 10% of inventory value and account for
normally 84% of inventoried items, By managing the “A” items, a positive impact can
be made in inventory investment reduction. Reducing one or two “A” items can and
will have a bigger impact on inventory reduction and increased inventory turns, greater
than a possible reduction in all “C” items.
Also, “ABC” classification can be used to design cycle counting schemes.
Count “A” items more often than “B” items and “C” items possibly not at all. The
“ABC” concept allows a manager to devote resources where it will have the biggest
positive impact
Five Main Contains of Cements are as Follows:
 C3S TRCALCIUM SILICATE - 50% A – CLASS ITEM.
 C2S DICALCIUM SILICATE - 25% B – CLASS ITEM.
 C3S TRICALCIUM ALUMINATE – 10% B – CLASS ITEM.
 C4S TETRA CALCIUM ALUMINIA FARITE – 10% - C –
CLASS ITEM.
 GYPSUM 5% - C –CLASS ITEM.
41
DATA ANALYSIS & INTERPRETION

TABLE NO: 1
ABC CLASSIFICATION FOR 2004-2005
% of total Type of
% of Units in
Classification Consumption inventory
Inventory
Value control
A 3.66 70 Strict
B 12.33 20 Moderate
C 84 10 Minimal
TABLE NO: 2
% of total Type of
% of Units in Consumption inventory
Classification Inventory Value control
A 3.81 70 Strict
B 11.19 20 Moderate
C 85 10 Minimal
42
TABLE NO: 3
% of total
% of Units in Consumption Type of inventory
A 3.62 70 Strict
B 12 20 Moderate
C 84.38 10 Minimal
TABLE NO: 4
% of total Type of
% of Units in Consumption inventory
A 3.77 70 Strict
B 11.7 20 Moderate
C 84.53 10 Minimal
TABLE NO: 5
43

% of total
% of Units in Consumption Type of inventory
A 3.8 70 Strict
B 11.2 20 Moderate
C 85 10 Minimal
INTERPRETATION:
The table shows that item ‘A’ includes the highest value items, 70% of total
value. This class is least important in terms of number as they represent only 3.66% of
the total units. Item ‘B’ occupies the middle place with 20% items falling under this
category. These constitute about 12.33% of the total units. Nearly 84% of the items fall
under class ‘C’ and they constitute only 10% of the total value of items.
CHART NO: 1
44
CHART SHOWING ABC CLASSIFICATION
ABC CLASSIFICATION FOR 2005
90
80
70
PERCENTAGE
60
50
40
30
20
10
0
1 2 3
A B C
CHART NO: 2
CHART NO: 3
45
CHART NO: 4
CHART NO: 5
46
CURRENT RATIO:
It is computed with the help of the following equation.
Current Assets
47
Current Ratio =
Current Liabilities
TABLE –2
CURRENT RATIO
Current
Current Assets Liabilities
Years (Rs.in Lakhs) (Rs.in Lakhs) Current Ratio
2004 – 2005 11396 6934 1.6
2005 – 2006 16435 7928 2.1
2006 – 2007 17986 10768 1.7
2007 – 2008 21789 17296 1.3
2008 - 2009 40469 35837 1.1
INFERENCE:
48
From the above table shows that the current ratio for the year 2004-05 is
1.6.In the year 2005-06 it increase to 2.1. In the year 2006-07 it decrease to 1.7 and in
the year 2007-08 decreases in 1.3. In the year 2008-09 is 1.1.here current ratio has
average level so it should improve this position in future.
CHART NO -2
CURRENT RATIO
2.5
2.0
1.5
1.0
0.5
0.0
1 2 3 2008
4 2009
5
2005 2006 2007 2009

49
QUICK RATIO:
It is computed with the help of the following equation.
Quick Assets
Quick Ratio =
Current Liabilities
TABLE –3
QUICK RATIO
Quick
Quick assets liabilities
Years (Rs.in Lakhs) (Rs.in Lakhs) Quick ratio
2004 - 2005 5392 6934 0.78
2005 - 2006 6538 7928 0.82
2006 - 2007 7939 10768 0.74
2007 - 2008 13962 17296 0.81
2008 - 2009 23852 35839 0.67
INFERENCE:
From the above table shows that the quick ratio for the year 2004-05
is 0.78.In the year 2005-06 it increase to 0.82. In the year 2006-07 it
50
decrease to 0.74 and in the year 2007-08 increases in 0.81. In the year
2008-09 is 0.67.here quick ratio is decreased.
CHART NO – 3
QUICK RATIO
1 .0 0
0 .8 0
0 .6 0
RATIO IN %
0 .4 0
0 .2 0
0 .0 0
1 2 3 4 5
2005 2006 2007 2008 2009
51
INVENTORY TURNOVER
It is computed with the help of the following equation:
Cost of Goods sold

Inventory Turnover Ratio =
Average Stock
TABLE – 4
COST OF GOODS AVERAGE INVENTORY

YEARS SOLD STOCK TURNOVER RATIO
2004-05 40258 6004 6.71
2005-06 47853 9897 4.84
2006-07 58417 10017 5.83
2007-08 84647 7827 10.81
2008-09 110702 16617 6.66
INFERENCE:
From the above table shows that the r inventory turnover ratio for the year 2004-
05 is 6.71.In the year 2005-06 it decrease to 4.84. In the year 2006-07 it increase to 5.83
and in the year 2007-08 increases in 10.81. In the year 2008-09 is 6.66.here inventory
turnover ratio has average level so it should improve this position in future.
52
CHART NO -4
12.00
10.00
8.00
6.00
4.00
2.00
IN
%
O
R
A
T
I
0.00
1 2 3 4 5
2005 2006 2007 2008 2009
53
DEBTORS TURNOVER RATIO:

Its is computed with the help of following equation:
Net Credit Annual Sales
Debtors Turnover Ratio =
Average Trade Debtors
No. of working days in a year

Average Collection period =
Debtors Turnover Ratio
TABLE – 5
DEBITORS TURNOVER RATIO
NET CREDIT AVERAGE

YEARS SALES TRADE DEBTORS RATIO IN DAYS
2004-05 40258 1505 26.75
2005-06 47853 1907 25.09
2006-07 58417 1744 33.50
2007-08 84647 1699 49.82
2008-09 110702 1487 74.45
INFERENCE:
From the above table shows that the debtors turnover ratio for the year 2004-05 is
26.75.In the year 2005-06 it decrease to 25.09. In the year 2006-07 it increase to 33.50
and in the year 2007-08 increases in 49.82. In the year 2008-09 is 74.45.here debtor’s
turnover ratio.
54
CHART NO -5
DEBITORS TURNOVER RATIO
R s . 8 0 .0 0
R s . 7 0 .0 0
R s . 6 0 .0 0
R s . 5 0 .0 0
RATIO IN %
R s . 4 0 .0 0
R s . 3 0 .0 0
R s . 2 0 .0 0
R s . 1 0 .0 0
R s . 0 .0 0
1 2 3 4 5
2005 2006 2007 2008 2009
55
NET PROFIT RATIO:

It is computed with help of the following equation:
Net Profit
Net Profit Ratio = x 100
Net Sales
TABLE-6
NET PROFIT RATIO
NET CREDIT
YEARS NET PROFIT SALES RATIO
2004-05 3941 40258 9.79
2005-06 4691 47853 9.80
2006-07 5723 58417 9.80
2007-08 7397 84647 8.74
2008-09 14879 110702 13.44
INFERENCE:
From the above table shows that the net profit ratio for the year 2004-05 is
9.79.In the year 2005-06 increase to 9.80.and again same value for the year 2006-07 and
in the year 2007-08 decreases in 8.74 In the year 2008-09 is 13.44.here net profit ratio is
increased.
CHART NO –6
56
NET PROFIT RATIO
14.00
12.00
10.00
8.00 R
A
6.00 I
O
4.00 I
2.00 N
%
0.00
1
2 S1
3
4
5
2005 2006 2007 2008
2009
GROSS PROFIT RATIO:

It is computed with the help of the following equation:
57
Gross Profit
Gross Profit Ratio = x 100
Net sales
TABLE NO-7
GROSS PROFIT RATIO
NET CREDIT
YEARS GROSS PROFIT SALES RATIO
2004-05 15628 40258 38.82
2005-06 18060 47853 37.74
2006-07 26034 58417 44.57
2007-08 7397 84647 8.74
2008-09 14879 110702 13.44
INFERENCE:
From the above table shows that the gross profit ratio for the year 2004-05 is
38.82.In the year 2005-06 it decrease to 37.74. In the year 2006-07 it increase to 44.57
and in the year 2007-08 decreases in 8.74 In the year 2008-09 is 13.44.here gross profit
ratio has average level so it should improve this position in future.

58
CHART NO -7
GROSS PROFIT RATIO
50.00
40.00
RATIO IN %
30.00
20.00
10.00
0.00
1 2 3 4 5
2005 2006 2007 2008 2009
TABLE NO -8
Statement Of Changes In Working Capital 2004-05
rs.in lakhs
59
Particulars 31-03-2004 31-03-2005 Increase Decrease

CURRENT ASSETS:
Inventory 4076 4939 863 -
Sundry debtors 1304 2102 798 -
Cash And Bank balances 841 1092 251 -
Other current Assets 16 17 1 -
loans And advances 2545 2889 344 -
A- Total current assets 8782 11039 - -
LESS: CURRENT
LIABILITIES:
Liabilities 3779 4895 - 1116
Provisions 619 154 465 -
B- Total current
liabilities 4398 5049 - -
Net Working Capital (A -
B) 4384 5990 - -
Increase / Decrease in
W/C - - - 1606
4384 4384 2722 2722
INFERENCE:
From the above table shows that changes in working capital for the years
of 2004 -2005 was increase Rs, 1606.
CHART NO-8
60
TABLE NO -9
61
STATEMENTS OF CHANGES IN WORKING CAPITAL FOR THE YE2005
RS IN lakhs
CURRENT ASSETS:
Inventory 4939 5112 173 -
Sundry debtors 2102 1985 - 117
Cash And Bank balances 1092 1075 - 17
Other current Assets 17 16 - 1
loans And advances 2889 1475 - 1414
Less: CURRENT
LIABILITIES:
Liabilities 4895 5414 519
Provisions 154 70 84 -
B- Total current liabilities 5049 5484 - -
Net Working Capital (A –
B) 5990 4179 - -
Increase / Decrease in W/C 1811 -
5990 5990 2068 2068
INFERENCE:
of 2005 -2006 was decrease Rs, 1811.
CHART NO-9
62
T
ABLE NO -10
STATEMENT OF CHANGES IN WORKING CAPITAL
RS.IN LAKHS
Particulars 31-03-2006 31-03.2007 Increase Decrease
CURRENT ASSETS:
Inventory 5112 6004 892 -
Cash And Bank
balances 1075 1395 320 -
Other current Assets 16 30 14 -
Less: CURRENT
LIABILITIES:
Liabilities 5414 6083 - 669
Provisions 70 851 - 781
B- Total current
Net Working Capital (A
- B) 4179 - - -
W/C - - - 283
4179 4179 2213 2213
INFERENCE:
From the above table shows that changes in working capital for the
years of 2006 -2007 was increase Rs, 283.
63
CHART NO-10
64
TABLE NO-11
Statement of Changes in Working Capital Rs.In Lakhs

CURRENT ASSETS:
Inventory 6004 9897 3893 -
Sundry debtors 1505 1907 402 -
Cash And Bank
balances 1395 1709 314 -
Other current Assets 30 18 12
Less: CURRENT
LIABILITIES:
Liabilities 6083 6056 27 -
Provisions 851 1872 - 1021
B- Total current
Net Working Capital
(A - B) 4462 8507 - -
W/C - - - 4045
8507 8507 5078 5078
INFERENCE:
of 2007 -2008 was increase Rs, 4045.
65
CHART NO-11
statement of changes in woking capital 2007-2008
9000
8000
7000
Amount in Rupees
6000
5000
4000
3000
2000
1000
0
1 2
2007 2008
TABLE-12
STATEMENT IN CHANGES WORKING CAPITAL
66
RS IN LAKHS

CURRENT ASSETS:
Inventory 9897 10017 120 -
Cash And Bank
balances 1709 2149 440 -
Other current Assets 18 4 - 14
Less: CURRENT
LIABILITIES:
Liabilities 6056 7759 - 1703
Provisions 1872 3009 - 1137
B- Total current
Net Working Capital
(A - B) 8507 1289 - -
W/C - - 1289 -
8507 8570 3017 3017
INFERENCE:
of 2008 -2005 was decrease Rs, 1289.
CHART NO-12
67
TABLE NO -7
COMPARITIVE BALANCESHEET FOR THE YEARS OF 2004 – 2005
68
z 2004 2005 INCREASE/DECREASE PERCENTAGE

(A) SOURCES OF
FUNDS
Sharehoder;s fund
Capital 2950 2950 0 0.00
Reserve and surplus 9617 10345 728 7.57
Loan funds
Secured loan 29793 12428 -17365 -58.29

Unsecured loan 1875 16477 14602 778.77
Deferred tax 3667 4470 803 21.90
TOTAL 47902 46670 -1232 -2.57
(B)
APPLICATION
OF FUNDS:
Fixed assets
Block 43723 42208 -1515 -3.46
Investments
Current assets :
Inventories 5112 6004 892 17.45
Sundry debtors 1985 1505 -480 -24.18
Cash and bank
balances 1075 1395 320 29.77
Other current assets 16 30 14 87.50
Loans and advances 1475 2462 987 66.92
Less: current
liabilities:
Liabilities 5414 6083 669 12.36
Provisions 70 851 781 1115.71
Net current assets 4179 4462 283 6.77
TOTAL 47902 46670 -1232 -2.57
69
INFERENCE:
Above table shows in the year 2004-2005 share capital (0.00%) same the
amount of both year, reserve& surplus (7.5%), secured loan (-58.29%) decreased. and
unsecured loans (778.77%) increased, fixed assets (-3.46%) decreased,
inventories(17.45%) increased ,sundry debtors (-24.18) decreased, cash at bank (29.77)
increased loans and advances (66.92%) increase, liabilities (12.36%) increase.
TABLE-8
70
COMPARITIVE BALANCESHEET FOR THE YEARS OF 2005 - 2006

IN LAKHS
PARTICULARS 2005 2006 INCREASE/DECREASE PERCENTAGE
(A) SOURCES OF
FUNDS
Sharehoder;s fund
Capital 2950 2950 0 0.00
Loan funds
Secured loan 12428 5906 -6522 -52.48
Unsecured loan 16477 26762 10285 62.42
Deferred tax 4470 5604 1134 25.37
TOTAL 46670 53018 6348 13.60
(B) APPLICATION
OF FUNDS:
Fixed assets
Block 42208 44511 2303 5.46
Investments
Current assets :
Inventories 6004 9897 3893 64.84
Sundry debtors 1505 1907 402 26.71
Cash and bank
balances 1395 1709 314 22.51
Other current assets 30 18 -12 -40.00
Less: current liabilities:
Liabilities 6083 6056 -27 -0.44
Provisions 851 1875 1024 120.33
TOTAL 46670 53018 6348 13.60
INFERENCE:
71
unsecured loans (62.42%) increased, fixed assets (5.46%) increased,
inventories(64.84%) increased ,sundry debtors (26.71%) increased, cash at bank
(22.51%) increased loans and advances (17.95%) increase, liabilities (-0.44%)
decrease.
72
TABLE-9

IN LAKHS
(A) SOURCES OF
FUNDS
Sharehoder;s fund
Capital 2950 2950 0 0.00
Loan funds
Secured loan 5906 2404 -3502 -59.30
Unsecured loan 26762 28087 1325 4.95
Deferred tax 5604 7874 2270 40.51
TOTAL 53018 55807 2789 5.26
(B)
APPLICATION
OF FUNDS:
Fixed assets
Block 44511 48228 3717 8.35
Investments
Current assets :
Inventories 9897 10017 120 1.21
Sundry debtors 1907 1744 -163 -8.55
Cash and bank
balances 1709 2149 440 25.75
Less: current
liabilities:
Liabilities 6056 7759 1703 28.12
Provisions 1875 3009 1134 60.48
Net current assets 8507 7218 -1289 -15.15
TOTAL 53018 55807 2789 5.26
73
INFERENCE:
unsecured loans (4.95%) increased, fixed assets (8.35%) increased, inventories (1.21%)
increased ,sundry debtors (-8.55%) decreased, cash at bank (25.75%) increased loans
and advances (40.22%) increase, liabilities (28.12%) increase.
74
TABLE-10

IN LAKHS
INCREASE/DECREAS PERCENTAG
PARTICULARS 2007 2008 E E
(A) SOURCES
OF FUNDS
Sharehoder;s fund
Capital 2950 2950 0 0.00
Reserve and
surplus 14492 23374 8882 61.29
Loan funds 0
Secured loan 2404 903 -1501 -62.44
Unsecured loan 28087 22233 -5854 -20.84
Deferred tax 7874 7345 -529 -6.72
TOTAL 55807 56895 1088 1.95
(B)
APPLICATION
OF FUNDS:
Fixed assets
Block 48228 168695 120467 249.79
Investments
Current assets :
Inventories 10017 7827 -2190 -21.86
Sundry debtors 1744 1699 -45 -2.58
Cash and bank
balances 2149 2825 676 31.46
Other current
assets 4 4 0.00
Loans and
advances 4072 9435 5363 131.70
Less: current
liabilities:
Liabilities 7759 7457 -302 -3.89
Provisions 3009 9839 6830 226.99
Net current assets 7218 4493 -2725 -37.75
TOTAL 55807 56895 1088 1.95
INFERENCE:
75
amount of both year, reserve& surplus (61.29%), secured loan (-62.44.%) decreased.
and unsecured loans (-20.84%) decreased, fixed assets(249.79%) increased,
inventories(-21.86%) decreased ,sundry debtors (-21.86%) decreased, cash at bank
(31.46%) increased loans and advances (131.70%) increase, liabilities (-3.89%)
decrease.
76
TABLE-11

IN LAKHS
(A) SOURCES OF
FUNDS
Sharehoder;s fund
Capital 2950 2950 0 0.00
Loan funds
Secured loan 903 3761 2858 316.50
Unsecured loan 22233 39858 17625 79.27
Deferred tax 7345 6430 -915 -12.46
TOTAL 56895 89298 32403 56.95
(B) APPLICATION
OF FUNDS:
Fixed assets
Block 168695 84608 -84087 -49.85
Investments
Current assets :
Inventories 7827 16617 8790 112.30
Sundry debtors 1699 1487 -212 -12.48
Cash and bank
balances 2825 2585 -240 -8.50
Less: current
liabilities:
Liabilities 7457 15640 8183 109.74
Provisions 9839 20197 10358 105.27
TOTAL 56895 89298 32403 56.95
INFERENCE:
77
amount of both year, reserve& surplus (55.30%), secured loan (316.0%) increased. and
unsecured loans (79.27%) increased, fixed assets(-49.85%) decreased,
inventories(112.30%) increased ,sundry debtors (-12.48) decreased, cash at bank (-
8.50%) decreased loans and advances (109.64%) increase, liabilities (109.74%)
increase.
78
CHAPTER – 4
4.1SUMMARY OF FINDINGS
 ABC analysis at Chettinad Cements, the percentage of unit in Inventory items A =
3.66%, B = 12.33% and C = 84%.
 The Inventory and net sales of the company has net sales was increased for based on
proper inventory management system.
 The Current asset of Inventories. Inventories decreased for the year 2007 – 08 at
29.78%.
 The Gross Working Capital for the Chettinad Cements is stable but fifth year it was
reduced.
 The Net working capital for the Chettinad Cements was increased consistently for
every year.
 The cash and bank balance of the Chettinad Cements are increase every year
consistently.
 Other current asset for the company had positive sign in past records.
 The current Ratio for the company maintaining nearest to standard ratio for the last
five years.
 The Quick Ratio of the Chettinad Cements are maintain stable manners in last five
79
4.2 SUGGESTION
 The company shouldn’t issue the new share capital. But they are increase the
cash balance, current assets and fixed assets.
 Increasing in inventories which will leads to the company can holding the
money to lock up.
 The current assets of the debtors will show the company in right trend.
 The company should maintain high level of opening Raw Material, which will
help the organization to fulfill sudden increase in demand.
 Reduction in loan and advance, current liabilities, scrap values and other
expenses will increase the cash balance which can used for purchasing materials
and other needs.
 Declaration of dividend amount to the share holders should be made to attract
the share holders and will also motivate them.
 Use new techniques for analyzing financial information by using various
techniques to more accuracy can be attained and more time can be saved.
80
4.3 CONCLUSION
Inventory management is part of the overall management strategy. The basic

objective of inventory management is to make sure that inventory is available as and
when required and should not be held in excess quantity. In the management of
inventories, it is well recognized that a small proportion of items account for most of the
critically, need and value. The costs of carrying too much inventory are opportunity cost
of foregone interest, warehousing costs, damage and pilferage, obsolescence, insurance.
The inventory management of Chettinad Cement Corporation Ltd shows an

increasing trend and the analysis of Current assets shows us that inventories
form a major component of current assets.
The inventories is had 60 to 80 percent of total current assets. By using various

ratios the inventory position of the company has been analyzed. The liquidly position
of the company is on the weaker side as shown by current and liquid ratio. The
inventory of Chettinad Cement Corporation Ltd. has been increasing when compared to
increase in sales. The conversion of inventory into sales is slow and too much of
inventory is being blocked.
APPENDIX
BALANCE SHEET
PARTICULARS 2004 2005 2006 2007 2008 2009
81
A SOURCES OF
FUNDS
Shareholders fund
Capital 2950 2950 2950 2950 2950 2950
Reserve and surplus 9617 10345 11796 14492 23374 36299
Loan funds
Secured loan 29793 12428 5906 2404 903 3761
Unsecured loan 1875 16477 26762 28087 22233 39858
Deferred tax 3667 4470 5604 7874 7345 6430
TOTAL 47902 46670 53018 55807 56895 89298
B APPLICATION
OF FUNDS:
Fixed assets
Block 43723 42208 44511 48228 168695 84608
Investments
Current assets :
Inventories 5112 6004 9897 10017 7827 16617
Sundry debtors 1985 1505 1907 1744 1699 1487
Cash and bank
balances 1075 1395 1709 2149 2825 2585
Other current assets 16 30 18 4 4 0
Loans and advances 1475 2462 2904 4072 9435 19780
LESS: CURRENT
LIABILITIES:
Liabilities 5414 6083 6056 7759 7457 15640
Provisions 70 851 1875 3009 9839 20197
Net current assets 4179 4462 8507 7218 4493 4632
TOTAL 47902 46670 53018 55807 56895 89298
BIBLIOGRAPHY:
 M.Y khan & p.k jain, Financial management (5th ed: Tata Mc Graw-Hill
publishing company limited) ch.16,p.16.1
 M.P pandikumar. Management accounting(1st ed: Excel books, New

Delhi)ch.12,p.271
 T.S. Reddy & Y Hariprasad reddy, Management accounting Margham

publication:7th edition 2006 (P. 3.26 to 3.75)
 S.N. Maheswari, Management accounting Sultan chand & sons,1995 6th edition (P.
81 to 120)
82
 C.R Kothari, Research methodology Methods and Techniques, (2nd ed ;

New Delhi: Viswa Prakasham, 1996)ch.1,p.30-38
WEBSITES:
www.chettinad.com

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1

STUDY ON INVENTORY MANAGEMENT

Register. No: 088001201035

DEPARTMENT OF MANAGEMENT STUDIES

JAYAM COLLEGE OF ENGINEERING & TECHNOLOGY

NALLANUR DHARMAPURI -636 813

This is to certify that the project entitled

is the bonafide record of project work done by

Submitted for the Project Viva-Voce examination held on _________

I affirm that the project work titled A STUDY ON INVENTORY

(Signature of the Candidate)

I certify that the declaration made above by the candidate is true

Signature of the Guide,

I thank ANNA UNIVERSITY, COIMBATORE for this academic vision in

I extended my thanks to my beloved parents, friends, who gave us

This is an attempt to understands the relationships and trends to determine

DESCRIPTION Page No.

2. Main theme of the project

3.12 NET PROFIT RATIO 53

COMPARATIVE BALANCE SHEET FOR THE

COMPARATIVE BALANCE SHEET FOR THE

COMPARATIVE BALANCE SHEET FOR THE

COMPARATIVE BALANCE SHEET FOR THE

COMPARATIVE BALANCE SHEET FOR THE

S. NO. CHART TITLE PAGE NO.

3 DEBT EQUITY RATIO 36

5 INVENTORY TURNOVER RATIO 40

6 WORKING CAPITAL TURNOVER RATIO 42

7 DEBTORS TURNOVER RATIO 44

8 AVERAGE COLLECTION PERIOD 46

9 CREDITORS TURNOVER RATIO 48

10 AVERAGE PAYMENT PERIOD 50

11 GROSS PROFIT RATIO 52

12 NET PROFIT RATIO 54

1.1 INTRODUCTION ABOUT THE STUDY

Today the efficiency and state of Industrialization of a country is known by the

Some terms used in the inventory management.

Minimum level can be calculated as follows:

b) The opportunity cost of funds

ECONOMIC ORDER QUANTITY.

The quantity of materials to be ordered at one time is known as economic order

Economic order quantity is a tool of store control on the part of material

1.2 INTRODUCTION ABOUT CEMENT INDUSTRY

MEANING AND DEFINTION OF CEMENT

Technically, Portland cement is a greenish Gray chemically active, impalpable

In American heritage dictionary the term cement, is defined as “a building material

1.C3 S tricalcium silicate 50%

GROWTH OF CEMENT INDUSTRY IN INDIA

1914 Foundation of a Cement industry. First Cement plant established at porbander,

1936 11 Cement companies merged to form the Associated Cement Corporation

1961 Cement manufacture was established

1962 Chettinad cements Corporation Limited was established 1969

1982 On the recommendation of gross committee, partial decontrol was announced on

1989 Cement Completed decontrolled on March 1.

1.3 COMPANY PROFILE

Chettinad Cement Corporation Ltd

Following the footsteps of father Dr,Rajah Sri Annamalai Chettiar.

Apart from cement. The Chttinad house in today engaged in activities

Name of the company : Chettinad cement corporation Ltd.

Managing Director : M.A.M.R.Muthiah.

Head quarters : T.Nagar.Chennai.

Production plant : Puliyur. Karikkali.