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Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 03 Issue 10
September 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 292
A Study on Analysis and Control of Inventory Levels in Business
Sector
Dr.I.Satyanarayana1
, N.B.C. Sidhu*2
, Maddhi Rajashekar 3 (15X31E0016)
Abstract:
Financial management is a service activity which is
concerned with providing quantitative information
which is of financial nature which may be needed for
making Economic decisions regarding the choice
among alternative course of actions. The financial
management is a process of identification
accumulation, analysis preparation interpretation
and communication of financial information to plan
evaluate and control a business firm.
Financial management is that specialized function of
general management which is related to the
procurement of finance and its effective utilization for
the achievement of the goals of an organization.
Finance may be defined as the provision of money at
the time where, it is required. Finance refers to the
management flews of money through an organization.
It concerns with the application of skills in the
manipulation, use and control of money. Different
authorities have interpreted the term “finance
“differently. However there are three main
approaches to finance.
The first approach views finance as to providing
of funds needed by a business on most suitable
terms this approach confines fiancés to the
raising of funds and to the study of financial
institutions & instruments from where funds can
be procured.
The second approach relates fiancé to cash.
The third approach views fiancé is being
concerned with raising funds & their effective
utilization.
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1.Principal, Sri Indu institute of Engineering & Technology, Sheriguda, Ibrahimpatnam,Telangana, India.
2.Assoc. Prof & HOD, Dept. of Master of Business Administration, Sri Indu Institute of Engineering &
Technology, Sheriguda, Ibrahimpatnam, Telangna, India.
3.Student, Dept. of Master of Business Administration, Sri Indu Institute of Engineering & Technology,
Sheriguda, Ibrahimpatnam, Telangna, India.
Key words: Financial Markets and functions, financial Asset Policy, Asset Control , etc...
Introduction:
Inventory can be referred to as sum of the value of
raw materials fuels and lubricants, spare parts,
maintenance consumables, semi processed materials
and finished goods, stock at any given point of time.
In large companies inventory place a most significant
part of the current assets. The business has about 15
to 30% of inventories in total assets. Inventory is
composed of assets that will be sold in feature in the
normal course of business operations. The assets
which firms stores as inventory is anticipation of
need are raw materials, work in progress and finished
goods. Inventory management consists of
maintaining for a given financial investment an
adequate of something in order to meet and accepted
pattern of demand. Inventory considers control over
costs of inventory on one hand an handle the size of
inventory on other hand. Controlling investments in
inventories constitute crucial part in current assets.
The main purpose of inventory management is to
ensure
Required quantity of availability of raw materials
Minimize the investments in inventories
Maintain reasonable stock levels not excess or not
under stocks.
Inventory control is the system devised an adopted
for controlling investments in inventory. It involves
inventory planning and decision making with regard
to the quantity and time of purchase, fixation of stock
levels, maintenance of stock records and continuous
stock – taking. Inventory control includes not only of
the physical stocks but also of the funds invested on
it.
That twin objectives of inventory control are,
To maintain a balanced inventory.
To keep the amount invested in inventory as low as
possible without hampering either flow of the
production or deliveries of finished goods.
To avoid both under stocking and over stocking of
inventory.
To eliminate duplication in ordering or replenishing
stocks. This is possible with the help of centralized
purchasing.
To ensure continues supply of materials, spares and
finished goods so that production should not suffer
and any time and customers demand should also be
met.
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Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 03 Issue 10
September 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 293
To design proper structure for inventory
management. A clear cut accountability should be
fixed at various levels of the organizations. To ensure
right quality goods at reasonable prices. Suitable
quality standards will ensure proper quality of stocks.
In this competitive business world each and every
business organization need inventory management
system for determining what to order, when to order,
where and how much to order so that purchasing and
storing costs are the lowest possible without affecting
production and sales. Thus, inventory management
control incorporates the determination of the
optimum size of the inventory-how much to be order
and when after taking into consideration the
minimum inventory cost. The overall inventory
management includes design and inventory control
organization with proper accountability establishing
procedure for inventory handling disposal of scrap,
simplification, standardization and codification of
inventories, determining the size of inventory
holdings, maintaining record points and safety stocks,
economic order quantity, ABC analysis and VALUE
analysis and finally framing an INVENTORY
MANUAL. By stating production in 1994 the story
of Indian cement is a stage of continuous growth.
Cement is derived from the Latin word “cement am”.
Egyptians and Romans found the process of
manufacturing cement. In England during the first
century the hydraulic cement has become more
versatile building material. Later on, Portland cement
was invented and the invention was usually attributed
to Joseph Aspdin of England. India is the world‟s 4th
largest cement produced after China, Japan and
U.S.A. the south industries have produced cement for
the first time in 1904. The company was setup in
Chennai with the installed capacity of 30 tones per
day. Since then the cement industry has progressing
leaps and founds and evolved into the most basic and
progressive leaps and 1950-51. The capacity of
production was only 3.3 million tones. So far annual
production and demand have been growing a pace at
roughly 78 million tones with an installed capacity of
87 millions tones.
In the remaining two year of 8th plan an additional
capacity of 23 million tones will actually come up.
India is will endowed with cement grade limestone
(90 billion tones) and coal (190 billion tones). During
the nineties it had a particularly impressive expansion
with growth rate of 10 percent. The strength and
vitality of Indian cement industry can be gauged by
the interest shown and supports give by World Bank.
Considering the excellent performance of the
industry in utilizing the loans and achieving the
objectives and targets. The World Bank examining
the feasibility of providing a third line of credit for
further upgrading the industry in varying areas,
which will make it global. With liberalization
policies of Indian government. The industry is posed
for a high growth rates n nineties and the installed
capacity is expected to cross 100 million tones and
production 90 million tones by 2003 AD. The natural
cement is obtained by burning and crushing the
stones containing clayey, carbonate of time and some
amount of carbonate of magnesia. The natural cement
is brown in color and its best variety is known as
“ROMAN CEMENT”. It sets very quickly after
addition of water. It was in the eighteenth century
that the most important advances in the development
of cement were which finally led to the invention of
Portland cement in 1756. John Smeation showed that
hydraulic lime which can resist the action of water
can be obtained not only from hard like stone but
from a limestone which contain substantial
proportion of clayey. In1796, Joseph parker found
that module of argillaceous limestone made excellent
hydraulic cement when burned in the usual manner.
After burning the product was reduced to a powder.
This started the natural cement industry. The
common verity of artificial cement is known as
normal setting cement or ordinary cement. A mason
Joseph Aspdin of Leeds of England invented this
cement in 1824. he look out a patent for this cement
called it t” “Portland cement” because it had
resemblance in its color after setting to a variety of
sandstone, which is found a abundance in Portland
England. The manufacturing of Portland cement was
started in England around 1825. Belgium and
Germany started the same 1855. America started the
same in 1872 and India started in 1904. The first
cement factory installed in Tamilanadu in 1904 by
south India limited and then onwards a number of
factories manufacturing cement were started. At
present there are more than 150 factories different
types of cement. The ordinary cement contains two
basic ingredients, namely, argillaceous and
calcareous. In argillaceous materials the clayey
predominates and in calcareous materials the calcium
carbonate predominates. A good chemical analysis
of ordinary cement‟s along with the desired range of
ingredients. With a capacity of 115 million tones of
large cement plant, Indian cement industry is the
fourth largest in the world. How ever per capita
consumption in our country is still at only 100 Kgs
against 300 Kgs of developed countries and offers
significant potential for growth of cement
consumption as well as addition to cement capacity.
The recent economic policy announcement by the
government in respect of housing roads, power etc.,
will increase cement consumption. In view of low per
capita consumption in India, there is a considerable
Page 3 of 8
Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 03 Issue 10
September 2017
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 294
scope for growth in cement consumption and creation
f new capacities in coming years. The cement
industry does not appear to have adequately exploited
cement consumption in rural segment where
damaged growth possible. Landed cost of cement
(with import duty) continuous to be higher than home
market prices but with reduced import duty,
increasing imports, may pose a serious threat to the
domestic cement industry.
The recent change in the budget 2001-02, relating to
fiscal incentives for individual housing and reduction
in borrowing cost for this purpose and with the
Government reaffirmation to accelerate the reform
process. Infrastructure development should logically
get priority leading to increase in demand of cement
in coming years. The addition capacity of cement in
the pipeline is limited and therefore the demand and
supply situation is expected to be more favorable and
cement prices are likely to firm up.
RISK AND CONCERNS:
Slow down of Indian economy or drop in
growth rate of agriculture may adversely affect the
consumption. The recent increase in railway freight
coupled with diesel / petrol price like will increase
the cost of production and distribution, as being
bulky, cement is freight intensive increase in
Limestone royalty also adds to the cost of production,
which is considerably higher than corresponding
costs of many other developing countries. In our
country there is a need to under take a massive
programmed of house constructi0n activity into the
rural and urban areas? It is impossible to construct a
house without cement and steel, in other words,
cement is one of the basic construction materials and
therefore it is one of the vital elements for the
economic development of the nation. India in spite of
being the 4th biggest producer of cement in the world
has still a very low per capital consumption of
cement.Management Award of the Government of
Andhra Pradesh, Kesoram is also conscious of its
social responsibilities. Its rural and community
development programmes include adoption of two
nearby villages, running an Agricultural
Demonstration Farm, a Model Dairy Farm etc.,
impressed by these activities, FAPCCI chose
Kesoram to confer the Award for “Best efforts of an
industrial unit in the state to develop rural economy”
twice, in the year 1994 as well as in 1998. Kesoram
also has to its credit the National Award (Shri S.R.
Rangta Award for Social Awareness) for the year
1995-96, for the Best Rural Development Efforts
made by the company. In the same year Kesoram
also got the APCCI Award for “Best Workers
Welfare” Kesoram got the first Prize for Mine
Environment and Pollution Control for year 1999 too,
for the 3rd year in succession in July, 2001 Kesoram
annexed the “Vana Mithra” Award from the
Government of Andhra Pradesh.
A proper inventory control not only helps in
solving the acute problem of liquidity but also
increases profit and causes substantial reduction in
the working capital of the concern.
The following are the important tools and techniques
of inventory management and control.
1) Determination Of Stock Levels:
Carrying of too much and too little of
inventory is detrimental to the firm. If the inventory
level is too little, the firm will face frequent stock
outs involving heavy ordering cost and if the
inventory level is too high it will be unnecessary; tie
yup of capital.
An efficient inventory management requires
that a firm should maintain an optimum level of
inventory where inventory costs are the minimum
and at the same time there is no stock out which may
result in loss or storage of production.
a) Minimum stock level: It represents the
quantity below its stock of any item should not
be allowed to fall.
Lead Time: a purchasing firm requires
sometime to process the order and time is also
required by the supplying firm to execute the
order.
The time in processing the order and then
executing it is know as lead time.
Rate of consumption: it is the average consumption
of materials in; the factory. The rate of consumption
will be decided on the basis of past experience and
production plans.
Nature of materials: the mature of materials
also affects the minimum level. If a material is
required only against the special orders of the
customer then minimum stock will not be required
for such material.
Minimum stock level can be calculated with
the help of following formula.
Minimum stock level – Re – Ordering Level
(Normal consumption *Normal re – order period)
b) Re – Ordering Level:
