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INTRODUCTION

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Introduction

Good planning is good inventory management and good inventory management is

good financial management. S.K. Kuchal. Inventory comprises stock of raw materials,

work-in-process, finished products, stores and components. "John Hampton" treats

inventory as "locked up capital". Inventory measured by rupee value constitutes, the major

element in the "Working Capital" (approximately 60 percent of current assets) of many

business undertaking in India.

Definition of Inventory

"John J. Hampton" defined inventory as "The goods for eventual resale by the firm".

Inventory, measured by rupee value constitute the major element in the working Capital ofmany business undertakings. Inventory is the value of raw materials, Consumables, and

spares, work-in-process, finished goods and scraps are called as locked up capital. The major

determinants of investment in inventory are:

Level of sales. Length and technical nature of the production process. Durability vs. Perish ability or styling obsolescence of the product.

Inventory involves two types of costs. The first is "Direct Costs", which is connected

to buying and holding of goods and the second is "Indirect Costs" or "Financial Costs". The

direct costs includes firstly ordering costs. These costs include cost of placing order,

Shipping, handling and quality discount etc., If the firm places few orders frequently, the

ordering cost will be higher. Secondly, carrying cost are the costs which are incurred for

storing the goods. These costs include the space insurance, obsolescence, spoilage and

damages or thefts. The indirect costs include interest paid on the capital tied up in the

inventory and the inadequacy of materials involves the cost.

Efficient inventory management reduces levels of inventories to a considerable degree

without effect on production and sales by using simple inventory planning and control

techniques. An understanding neglecting the management of inventories will be jeopardizing

its long run profitability and survival.

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Inventory is an idle resource which is usable and has value.

It may be men, money, materials, plant acquisition, spares other stocked to meetfuture demand.

A physical resource that a firm holds in stock with the intent of selling it ortransforming it into a more valuable state.

Raw Materials Works-in-Process Finished Goods Maintenance, Repair and Operating (MRO)

Inventory Management means safeguarding the company's property in the form of

inventories and maintaining it at the optimum level, considering the operating requirements

and financial resources of the business. Inventory Management emphasizes control over

purchases, storage, consumption of materials and determining the optimum level for each

item of inventory. The reduction in "an excessive inventory i.e., excesses above the optimum

level carries a favorable impact on company's profitability, likewise maintaining inventory

below optimum level negatively affects the company's profitability. Hence, inventory

management should be comprehensive enough to cover the flow of materials starting from

the point when some one makes a request for the purchase, up to the stage when the finished

products are sold.

1.2 Back Ground of Study

Meaning of Inventory Control

Inventory comprises stock of raw materials, work-in-process, finished goods, stores

and components. The aim of inventory control is to achieve maximum efficiency in the

management of inventory. "Inventory Control" may be defined as "Safe-guarding of

company's property in the form of inventory and maintaining it at the optimum level,

considering the operating requirements and financial resources of the business". The

definition embraces control over purchases, storage and consumption of materials and

determining the optimum level for each item of inventory. The system of control should be

comprehensive enough to cover the flow of materials starting from the point when some one

makes a request for the purchases up to stage when materials are consumed and their costscompiled and assembled in cost sheet.

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Objectives of inventory control

The following purpose should be kept in mind in developing and maintaining a

system of control.

Effective use of financial resources available to business i.e. to maintain theinvestment in inventory at the lowest level consistent with operating requirements.

Avoidance of the "out-of-stock" danger i.e., to provide a supply of required materialswith out any delay for efficient and uninterrupted operations.

Reduction to a minimum of the risk through obsolescence. Economy in purchasing as affected by quantity buying and favorable raw material

market.

Storage of inventory with a minimum of handling time and cost and to protect themfrom losses by theft, fire and damage.

Service to customers i.e., maintaining sufficient stock of finished products to meetreasonable expectations of customers for prompt delivery of their order.

Accurate and regular material reports to management by keeping perpetual inventoryand other up to date records.

1.3 Need for the Study

In todays competitive scenario especially in the manufacturing sector, the

management of inventory is given the highest importance. Organizations are in the process of

implementing various techniques in order to maintain inventory at an optimum level.

The choice of area of the study for the project work was given after initial study ofcompany's operations and the system of working.

Hence this study is undertaken to look into various aspects of inventory management

of coromandel.,

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1.4 Scope of the Study

The study involves that the classification of raw materials, certainty in calculation of

economic order quantity (EOQ), turnover ratios and safety stock. The study of raw materials

contributes to total 85%

1.5 Statement of the Problem

To manage inventories efficiency, answers should be sought to the following two

questions:

How much should be ordered? When should it be ordered?

The first question, how much to order, relates to the problem of determining

Economic Order Quantity (EOQ), and is answered with an analysis of costs of certain level of

inventories. The second question, when to order, arises because. Of uncertainty and as a

problem of determining the re-order point.

1.6 Objectives of the Study

To find out how much quantity should be ordered (EOQ) To classify the raw materials for the better control. To know the inventory turnover of the company. To know the inventory holding period and safety stock.

1.7 Limitations of the Study

Only important materials would take into the consideration because of there is no timefor getting the full fledged materials list while in the limited period.

For present study only two techniques are used for inventory analysis.

The findings and conclusions drawn for the present study can not applied to any othergroups in coromandel.

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COMPANY PROFILE

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One of the largest companies within the Murugappa Group, Coromandel International, has been vitalising the

gricultural sector since its inception in 1964 under the name Coromandel Fertilizers. Today, Coromandel International

s a leading manufacturer and markets a wide range of Fertilisers, Speciality Nutrients, Crop Protection and Retail.

Coromandel manufactures and markets around 2.9 million tonnes of phosphatic fertilisers, making it a leader in its

ddressable markets and the second largest phosphatic fertiliser player in India. In its endeavour to be a complete plant

utrition solutions company, Coromandel has also introduced a range of Speciality Nutrient products including Organic

Fertilisers. The Crop Protection business produces insecticides, fungicides and herbicides and markets these products

n India and across the globe. Coromandel is the second largest manufacturer of Malathion and only the second

manufacturer of Phenthoate.

Coromandel has also ventured into the retail business setting up more than 420 rural retail centers in the agri segment

alled Mana Gromor out of which about 200 centres have lifestyle segment called Mitra.

The Company has strategic partnerships with leading companies across the globe. A Technical Assistance Agreement

was inked with Foskor (Pty) Ltd. of South Africa, one of the largest phosphoric acid producing companies, for

xtending Coromandels technical assistance. Coromandel and Gujarat State Fertiliser Corporation (GSFC) signed aoint venture agreement in November 2005 with Groupe Chimique Tunisien (GCT) and CPG of Tunisia to set up a

hosphoric acid plant at La Skhira, Tunisia, at an estimated cost of US$ 500 million.

Coromandel was voted one of the Top 10 Greenest Companies in India by Tata Energy Research Institute (TERI) -

Business Today, reflecting the Company`s commitment to the environment and society.

The organisation has come a long way since 1906 and owes its success to its engaged workforce and customers,

ommitted vendors, suppliers and supportive investors.

Coromandel Company is 5s Company and its aim is to improve the work place environment by using 5s

techniques which is :

A Systematic and rational approach to work place organization and methodical house keeping with a sense

of purpose, consisting of the following five elements.

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Seiri

The first step of the 5s process ,seiri ,refers to the act of throwing away all unwanted, unncessary,

and realed materials in the work place. People invovled in seiri must not feel sorry about having to

throw away things. The idea is to ensure that everything left in the workplace is related to work.Even the number of necesssary items in the workplace must be kept to its absolute minimum.

Because of seiri ,simplifications of tasks,effective use of space ,and careful purchase of items follow.

Seiton

Seiton ,or oredliness, is all about efficiency . this step consists of putting everthing in an assigned

place so that it can accessed or retrieved quickly ,as well as returned in that same place quickly. I

everyone has quick access to an item or materials, work flow becomes efficient ,and the worker

becomes productive. The correct place, pospyion, or holder for every tool , item or material must be

chosen carefully in relation to how the work will be performed and who will use them. Every single

item must be allocated its own place for safekeeping , and each location must be labeled for easy

identification of its for.

Seiso

Seiso, the third step in 5s , says that everyone is a jonitor. Seiso consists of cleaning up the

workplace and giving it a shine. Cleaning mest be done by everyone in the orgation, from

operators to managers. It would be a good idea to have every area of the workplace assigned to a

person or group of persons for cleaning. No area should be left uncleaned. Everytning should see the

workplace through the of a visitor always thinking if it is clean enough to make a good

impression.

Seiketsu

The fourth step of 5s , or seiketsu,more or less tranlates to standardized clean up. It consists o

defining the standards by which personnel must measure and maintain cleanliness. Seiketsu

encompasses both personal and environmental cleanliness. Personnel must therefore practice

seiketsu starting with their personal tidiness.visual management is an important ingredient o

seiketsu.color-coding and standardized coloration of surroundings are used.

Shitsuke

The last step of 5S, shitsuke , means Discipline. It denotes commitment to maintain orderliness

and to practice the first 4s as a way of life. The emphasis of shitsuke is elimination of bad habits and

constant practice of good ones. Once true shitsuke is achieved, personnel voluntarily observe

cleanliness an d orderliness at all times, without having to be reminded by management .

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BOARD OF DIRECTORS

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A Vellayan

Chairman

Mr A Vellayan holds a Diploma in Industrial Administration from Aston University,

Birmingham, UK and Masters in Business Studies from the University of Warwick, Business

School, UK.

Mr Vellayan is also the Chairman of the Muruagappa Group. He is a Director on the board of

Governors, Doon School, Dehra Dun. He has held position such as Vice President,

Federation of Indian Export Organisation (FIECO) and member of National Export

Committee - Confederation of Indian Industry (CII). He was the Managing Director of Tube

Investments of India Limited and TI Diamond Chain Limited. He is presently the Chairman

of Coromandel International Limited and EID Parry (India) Limited. He has got work

experience of about 25 years.

V Ravichandran

Director

Mr V Ravichandran is basically an Engineering Graduate and holds Post Graduate Diploma

in Management from IIM, Ahmedabad. He is also a Cost Accountant and a Company

Secretary. After having served Ashok Leyland Limited initially for a short period, joined the

Murugappa Group and had served Parry Group of Companies mainly in the fields of finance

and marketing. He also headed the Crop Protection Products businesses. He was the

Managing Director of Coromandel International Limited.

Kapil Mehan

Managing Director

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Mr Kapil Mehan is a graduate in Veterinary Science and Animal Health. He also holds a PG

Diploma in Management from IIM, Ahmedabad with specialization in Agriculture. He brings

with him rich experience and background in varied leadership roles. He started his career

with Rallis India and later moved on to Tata Chemicals Limited. He had held various

positions in Sales and Marketing function in Rallis and Tata Chemicals Limited before

moving into the position of Chief Operating Officer for its fertilisers business in 2003 and

took over as the Executive Director in 2008.

M M Venkatachalam

Director

Mr M M Venkatachalam graduated from the University of Agricultural Sciences in

Bangalore and holds a Masters Degree in Business Administration from George Washington

University, USA. He has held senior positions in the Murugappa Group of Companies

spanning over period of two and a half decades. Mr Venkatachalam is presently the Chairman

of Parry Enterprises Limited and Parry Agro Industries Limited, he also serves on the boards

of Laser Words Limited, Parry Murray Limited and Ramco Systems Ltd.

M.K. Tandon

Director

Mr M K Tandon has been associated with the Indian Insurance Industry for more than 35

years. He had, after completing his Masters Degree in Commerce and Degree in Law both

from Lucknow University, started his career with LIC of India. Thereafter, he had held

various senior positions and became Managing Director of General Insurance Company Ltd

and retired as Chairman & Managing Director ofK Balasubramanian National Insurance

Company Limited, Kolkata. Mr Tandon is an Independent Director on the Board of Directors

of some reputed companies.

Mr K Balasubramanian

Director

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Mr K Balasubramanian is a Graduate in Commerce from the University of Madras and has

done Advanced Management programme from the Harvard Business School. He has 40 years

of experience in International Banking. Presently, he is a Member GMR Holding Board. He

is also on the Board of some of the GMR Group of Companies and DQ Entertainments

Limited.

B V R Mohan Reddy

Director

Dr B V R Mohan Reddy is a Graduate in Mechanical Engineering and holds a Master's

degree in Management Engineering from University of Michigan, Ann Arbor, USA; and a

Master's Degree in Industrial Engineering from Indian Institute of Technology (IIT), Kanpur.

Dr Mohan Reddy is the Founder Chairman and Managing Director of Infotech Enterprises

Limited. He is also on the Boards of Vizag IT Park Limited, Ocimum Bio Solutions Limited

and Tele Atlas (India) P Limited.

R A Savoor

Director

Mr R A Savoor is a B.Sc. Tech. He retired as Managing Director of Castrol India Ltd. with

effect from April 24, 2002. He was with Castrol India Ltd. for 34 years, of which 12 years as

Chief Executive and Managing Director. Under his leadership Castrol India had grown from

being a minor oil company to becoming the number two lubricant company in India and the

second largest Castrol Company worldwide. He is presently the Chairman of Foseco India

Ltd and Independent Director on the Boards of EID Parry (India) Limited and Automotive

Stampings and Assemblies Ltd.

Ranjana Kumar

Director

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Mrs Ranjana Kumar Bachelor of Arts, a Gold Medalist, had an illustrious career in the Indian

banking industry spanning over four decades. She had started her career with Bank of India in

the year 1966 as a probationary officer and held several senior positions in the Bank. She was

CEO of US operations of Bank of India based in New York. She moved to Canara Bank as its

Executive Director holding concurrent charge as Chairperson of Canara bank. Thereafter she

became the Chairperson of Indian Bank and continued for a period of three and half years.

She is also credited with turning around the ailing Indian Bank as its Chairperson within a

period of 3 years and has authored a book on the turnaround of Indian Bank. She also headed

the National Bank of Agriculture and Rural Development (NABARD). Mrs. Ranjana Kumar

retired as Vigilance Commissioner, Central Vigilance Commission, Government of India.

PRODUCTS &SERVICES

Coromandel has multi-locational production facilities and manufactures & markets a wide

range of Phosphatic Fertilisers, Crop Protection Products, Speciality Nutrients like Sulphur

Pastelles, Water Soluble Fertilisers, Micro Nutrients and Organic Fertilisers. The Company

exports its Crop Protection products to countries across the globe. Coromandel also provides

agri input solutions to the farmers and offers life-style products through its rural retail

centers. The Company is managed by competent and committed professionals and is known

for fostering a climate of high performance and continuous improvement.

INVESTORS RELATIONS

Coromandel places shareholders above all the stakeholders. The Company always strives to

create value for shareholders through continued sustained performance and increasing returns

to the shareholders year after year. The Company has put in place a robust system for solving

Investors' grievances/complaints promptly. Information dissemination on all the

developments relating to the Company through half yearly communications to all the

shareholders and also through various disclosures to the statutory authorities to help investors

in taking considered decisions is also done promptly. The Company adheres to the all the

statutes in the furtherance of Investors interest

VISION, MISSION & PHILOSOPHY

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VISION

To be the leader in the phosphatic fertilizer industry producing high quality fertilizers at

low cost and giving satisfaction to all stake holders.

MISSION

To enhance the prosperity of former through the supply of quality form inputs and related

services to ensure value for money.

PHILOSOPHY

The fundamental principal of economic activity is that no man you transact with will lose

then you shall not.

ABOUT COMPANY

Coromandel International Limited is in the business segments of Fertilisers, Speciality

Nutrients, Crop Protection and Retail.

Coromandel manufactures a wide range of fertilisers and markets around 2.9 million tons

making it a leader in its addressable markets and the second largest phosphatic fertiliser

player in India.

In its endeavour to be a complete plant nutrition solutions company, Coromandel has also

introduced a range of Speciality Nutrient products including Organic Fertilisers.

The Crop Protection business produces insecticides, fungicides and herbicides and markets

these products in India and across the globe. Coromandel is the second largest manufacturer

of Malathion and only the second manufacturer of Phenthoate.

Coromandel has also ventured into the retail business setting up more than 425 rural retail

centers in the agri and lifestyle segments.

The Company clocked a turnover of Rs.7,528 crore in 2010-11 (USD 1.68 billion as on

March 31, 2011).

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Coromandel was ranked among the top 20 best companies to work for by Business Today

and was also voted as one of the ten greenest companies in India by TERI, reflecting its

commitment to the environment and society.

Coromandel is a part of the Rs.13,617crores (USD 3.03 billion as on March 31, 2010)

Murugappa Group.

PARTNERS & SUBSIDIARES

Coromandel has strategic partnerships with leading companies across the globe including:

FOSKOR

A Technical Assistance Agreement with Fosker (Pty) Ltd. Of South Africa, one of the largest

phosphoric acid producing companies, for extending coromandels technical assistance.

Groupe Chimique Tunisian, Tunisia

A joint Venture agreement with Groupe Chimique Tunisia (GCT) and CPG of Tunisia to set

up a phosphoric acid plant at La Skhira , Tunisia, at an estimated cost of US$ 180 million .

Sociedad Quimicay Minera

A 50:50 joint venture with Sociedad Quimicay Minera to set up a Water Soluble Fertiliser

(WSP) plant for manufacturing WSF at coromandels Kakinada Plant.

Coromandels subsidiaries are :

Coromandel Mauritius

Coromandel GETAX Phosphates Pvt.Ltd

Coromandel Brasil Limitada

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LOCATIONS :

Coromandel's Corporate Office is located at Secunderabad in Andhra Pradesh. The

Company's manufacturing facilities and marketing branches are spread across India.

Fertiliser plants at:

Kakinada & Visakhapatnam in Andhra Pradesh

Ennore & Ranipet in Tamil Nadu.

Crop Protection plants at:

Ranipet in Tamil Nadu

Navi Mumbai in Maharashtra

Ankleshwar in Gujarat

Jammu in J&K.

Coromandels marketing branches servicing the farming community across India are

located at:

Hyderabad, Kurnool, Vijayawada and Visakhapatnam in Andhra Pradesh.

Bangalore and Raichur in Karnataka.

Trichy in Tamil Nadu

Aurangabad in Maharashtra

Ahmedabad in Gujarat

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Indore in Madhya Pradesh

Raipur in Chhattisgarh

Bhubaneswar in Orissa

Kolkata in West Bengal

Gaziabad in Uttar Pradesh

Bhatinda in Punjab

AWARDS & RECOGNITIONS

Over the years, Coromandel has received a number of awards and recognitions including the

British Council 'Five Star' rating for Safety Management Systems and being adjudged one of

the 'Ten Greenest Companies in India' by a joint survey of TERI and Business Today

magazine.

Some of the recent awards and recognitions received by Coromandel include:

Coromandel was awarded "Significant Achievement in HR Excellence" by theConfederation of Indian Industries (CII). This recognition was conferred at the CII

HR Conclave 2010 by Mr Hari S Bhartia, President of CII on 23rd July,2010 at New

Delhi. The process involved a rigorous assessment of Coromandel's HR processes and

practices including site visits by a team of CII assessors. Coromandel in the past has

achived "Strong Commitment to HR EXcelence".

CII EXIMBANK Business Excellence award for strong Commitment to Excel forVizag & Kakinada Plants.

CNBC Award for Most Engaged Workforce.

DMAErewpon National Award for Innovation in HR.

Public Rlations Society of India National Award (1st prize) for The VOICE ,Coromandels in house magazine ,received for the 4

th

time .

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International Award for The VOICE magazine .

FAI Best Production Performance Award for the Phosphoric Acid Plant at Vizagreceived for the 9th time.

o FAI Best Production Performance Award for Complex (P202)

o Fertilizers for Kakinada Plant.

FAI Environment Protection Award for Complex (P202) Plant ,vizag.

FAI Best Vedio Film Award received for the 6th time. National Energy Conservation Award ( Commendation Certificate) for efforts in

Energy Corservation from Ministry of Power, New Delhi for Kakinada Plant.

Ranked among the Top Best Employers to work for by Bussiness today.

OUR CULTURE

Coromandel is managed by competent and committed professionals using

advanced management practices. The Company is known for fostering a

climate of high performance and continuous improvement.

Coromandel's culture is based on the three tenents - knows | cares |

fulfills.

Knows

Building capability at individual level

Building capability at organizational level

Ability to solve problems

Cares

Customer | Prosperity improvement

Employee | Well being and engagement

Vendor | Improving capability and efficiency

Society | caring for environment and community development

FulfillsResult orientation

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Energetic and speed of action

Quality focus

Building a seamless working environment

COMPANY HISTORY

1959

PM Nehru invited Ford Foundation to study India agriculture and give their recommendations.

1961

The first Board of Directors was constituted on October 16, with H.V.R Iyengar as its Chairman .

1962

E.I.D parry was appointed Coramandels principal sales agent in India for GROMOR.

1963

Comissioned Indias first integrated complex fertilizer plant in the private sector.

1964

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Dr. Bharat Ram was elected Chairman of Coromandels Board of Directors.

1967

Mr. Morarji Desai dedicated the plant to the Nation.

1970

The GROMOR farmer was developed as a marketing symbol.

1971

Coromandel Lecture was instituted.The Borlaug Award was instituted.

1975

First in India to install a sulphur acid plant based on Double Conversion Double

Absorption(DCDA) technology to control sulphur dioxide emission at the

Visakhapatnam Plant.

1976

Our fertilizer retail outlet at Secunderabad got a boost with garden lovers fervently

seeking small quantities of fertilizers for biggers and richer blooms.

1977

Coromandel completed a decade participation in augmenting agriculture production

for the nation.

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Coromandel Fertilizers Ltd.

Primary Industry Fertilizers

Business Summary

Coromandel Fertilisers Limited (CFL) incorporated in 1964, now belonging to the

Rs 9582 crores (USD $ 2.4 Billion) Murugappa Group, is a leading company inIndia manufacturing a wide range of fertilisers and pesticides (technical and

formulations). CFL markets around 2.5 million tonnes of phosphatic fertilisers

making it a leader in its addressible markets and the second largest phosphatic

fertiliser player in India. The Company also markets phosphogypsum and sulphur

pastilles.

Coromandel Fertilisers Ltd has multi-locational production facilities and markets its

products all over India and exports pesticides to various countries across the

globe. It is managed by competent and committed professionals using advanced

management practices. The Company is known for fostering a climate of high

performance and continuous improvement. The Company also has strategic

partnerships with leading companies across the globe. Voted as one of the ten

greenest companies in India, reflects the Company`s commitment to theenvironment and society.

Products Summary

Phendal 50% EC is a broad-spectrum organophosphate insecticide

containing 50% w/w phenthoate a.i. in the form of emulsifiable concentrate.

Effective against hard-to-kill caterpillar pests on paddy, pulses, cotton,

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Cor

oma

ndel

Inter

national Limited.

Business Description:

Coromandel International Limited, formerly Coromandel Fertilisers Limited, is engaged in

the business of farm inputs consisting of fertilizers, pesticides and specialty nutrients. The

Company is also engaged in retail business in Andhra Pradesh, through its Mana Gromor

Centres (MGCs). It produces and sells phosphatic fertilizers of various grades, including di

ammonium phosphate, fertilizers with different composition of nutrients and single super

phosphate. The Company has eight manufacturing facilities located in the States of Andhra

Pradesh, Tamil Nadu, Maharashtra, Gujarat and Jammu and Kashmir. The Company's

products are marketed, through a network of dealers and MGCs. Its manufacturing facility at

Kakinada produces up to 1.5 million tons per annum of fertilizer. Its plants at Visakhapatnam

and Ennore have the backward integration facility to manufacture phosphoric acid from rock

phosphate. Its product brands include Gromor, Godavari, Paramfos, Parry Gold and Parry

Super.

groundnut etc. Phendal is a potent contact & stomach poison; broad-

spectrum insecticide and acaricide with long persistent action. It has quick

knock down effect.

Fantac Plus is a plant bio-stimulant, which represents a new and more

effective means of increasing crop yield and quality. It is a combination of

Amino Acids. It has the unique ability to help the plant perform all its

biochemical and physiological operations. Fantac Plus, when applied to the

plants, is absorbed by the plant cells and move within the plant and

stimulate the cells which are responsible for producing growth related

hormones and enzymes in the plant

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Stock Data: Recent Stock Data Performance:

Current Price (4/21/2011) 1 Week -5.7% 13 Weeks 12.4%

(Figures in Indian Rupees 4 Weeks 29.5% 52 Weeks 81.8%

Coromandel International Limited Key Data:

Ticker: 506395 Country: INDIA

Exchanges: BOM Major Industry: Chemicals

Sub Industry: Miscellaneous

Chemicals

2011 Sales 75,279,500,000 Employees: N/A

(Year Ending Jan 2011)

Currency Indian Rupees Market Cap: 89,552,816,415

Fisal Yr ends March Shares O/s: 281,384,198

Share type Ordinary Closely Held

shares: 180,490,638

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INDUSTRY PROFILE

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This chapter deals with industry profile which gives about the information regarding

the Distribution center and its related products.

Differentent Types Of the Categories in the Distribution center:

Totally 14 categories of Products are present in the industry :

1. CDIT (Consumer Durable Information Technology-Electronic Items)2. Steel3. Plastic4. Apparel5. Tableware6. Footware

Coromandel Fertilisers Limited (CFL) incorporated in 1964, now belonging to the

Rs 9582 crores (USD $ 2.4 Billion) Murugappa Group, is a leading company in

India manufacturing a wide range of fertilisers and pesticides (technical and

formulations). CFL markets around 2.5 million tonnes of phosphatic fertilisers

making it a leader in its addressible markets and the second largest phosphatic

fertiliser player in India. The Company also markets phosphogypsum and sulphur

pastilles.

Coromandel Fertilisers Ltd has multi-locational production facilities and markets its

products all over India and exports pesticides to various countries across the

globe. It is managed by competent and committed professionals using advanced

management practices. The Company is known for fostering a climate of high

performance and continuous improvement. The Company also has strategic

partnerships with leading companies across the globe. Voted as one of the ten

greenest companies in India, reflects the Company`s commitment to the

environment and society.

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7. Implements8. Safety9. Accessories10.Services11.Services12.Home Furishing13.FMCG (Fast Moving Consumable Goods)14.Telecommunications

Organization Structure of the Distribution Center (DC) at Warangal

DC Officer

(Currently the is Vacant)

Workers

DC Trainee

DC Manger

(MR. Eswar)

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Theoretical Framework

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Inventory managementis primarily about specifying the size and placement of stocked goods.

Inventory management is required at different locations within a facility or within multiple

locations of a supply network to protect the regular and planned course of production against

the random disturbance of running out of materials or goods. The scope of inventory

management also concerns the fine lines between replenishment lead time, carrying costs of

inventory, asset management, inventory forecasting, inventory valuation, inventory visibility,

future inventory price forecasting, physical inventory, available physical space for inventory,

quality management, replenishment, returns and defective goods and demand forecasting.

Balancing these competing requirements leads to optimal inventory levels,

which is an on-going process as the business needs shift and react to the wider environment.

Inventory management involves a retailer seeking to acquire and maintain a proper

merchandise assortment while ordering, shipping, handling, and related costs are kept in

check. Systems and processes that identify inventory requirements, set targets, provide

replenishment techniques and report actual and projected inventory status. Handles all

functions related to the tracking and management of material.

This would include the monitoring of material moved into and out of stockroom

locations and the reconciling of the inventory balances. Also may include ABC Analysis, lot

tracking, cycle counting support etc. Management of the inventories, with the primary

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objective of determining/controlling stock levels within the physical distribution function to

balance the need for product availability against the need for minimizing stock holding and

handling costs.

1.6 Objectives of the Study

To find out how much quantity should be ordered (EOQ) To classify the raw materials for the better control. To know the inventory turnover of the company. To know the inventory holding period and safety stock.

CONCEPT BACKGROUND

Techniques of inventory control

The various techniques used for inventory control are as follows:

1. ABC Analysis.2. Level Setting.3. Economic order quantity.4. Proper Purchase Procedure.5. Proper Storage.6. Perpetual Inventory Systems.7. Establishment of a system of Budgets.8. Review of slow and non-moving items.9. Use of radios, e.g. inventory turnover.

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Essential requirements of Inventory control

Essential to an adequate control of inventory are the following requirements.

there should be proper co-ordination and co-operation between various

Concerns, viz., purchasing, departments receiving, inspection, storage, Issues

and cost departments.

Purchasing should be centralized under the control of a competent Manager.

There should be proper planning of materials requirements.

There should be proper classification of materials with codes, materials

satisfactorily storage control procedures.

There should be planned storage control and issues so that there will be delivery

of materials upon requisition to departments in the right quantity at the time they

are needed.

Appropriate records should be maintained to control issues and utilization of

stores in production.

The system of perpetual inventory should be operated so that it is possible to

determine at any time the amount and value of each item of material in stock.

Maximum, minimum and re-ordering levels of stocks should be fixed.

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There should be a system of regular reporting to management regarding

materials purchase, storage and utilization.

There should be an efficient system of internal audit and internal checks.

ECONOMIC ORDER QUANTITY (EOQ)

The economic order quantity is that inventory level, which minimizes the total of

ordering costs and carrying costs.

It is the question, how much to order the quantity when inventory is replenished. If the

firm is buying raw materials, the question is to purchase the quantity of each replenishment

and if it has to plan for production run, it is how much production to schedule. It may be

solved through EOQ. It involves two types of costs:

a. Ordering Cost

b. Carrying Cost

a. Ordering Cost

Ordering cost is referred to as the cost of placing an order and securing the supplies.

Ordering cost depends upon the number of orders placed and a number of items ordered at a

time. Higher will be the ordering cost when frequent orders are placed. Similarly, lesser the

ordered quantity, higher the ordering cost.

b. Carrying Cost

Carrying cost or holding cost refers to the cost of keeping the materials which

includes capital cost, cost of storage and cost of deterioration and redundancy. Larger the

volume of inventory, higher the inventory carrying cost and vice versa.

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EOQ for an item is arrived on the following assumptions:

1. Demand is continuous at a constant rate.

2. The process continuous infinity.

3. No constraints are imposed on qty ordered, storage capacity, budget etc.,

4. Replenishment is instantaneous.

5. All costs are time invariant.

6. No shortages are allowed.

7. Quantity discounts are not available.

EOQ for an item is arrived by the following formula,

EOQ = CH

CO*AD*2

Where, EOQ = Economic Order Quantity

AC = Annual Consumption of an item

CO = Cost of Ordering an order

CH = Cost of Carrying one unit / year.

ABC ANALYSIS

The ABC method is an analytical method of stock control which aims at

concentrating efforts on those items where attention is needed most. It is based on the

Premise that a small number of the items in inventory may typically represent the bulk money

value of the total materials used in production process. While a relatively large number of

items may represent a small portion of the money value of stores used and that small number

of items should be subject to the greatest degree of continuous control under this system, the

materials stocked may be classified into a number of categories according to their importance

i.e., their value and frequency of replenishment during a period. The first category, we may

call it the group of 'A' items, which consists of only a small percentage of total items handled

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but its combined value may be a large portion of the total stock value. The second category,

naming it as group of 'B' items, which may berelatively less important. In the third categoryconsisting of 'C items, all the remaining items of stock may be included which are quite large

in number but their value is not high.

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Advantages of ABC Analysis

Closer and stricter control on those items which represent a major portion of totalstock value.

Investment in inventory can be regulated and funds can be utilized in the best possiblemanner.

Saving in stock carrying costs. Helps in maintaining enough safety stock for "C" category of items. Always Better Control This is based on cost criteria. It helps to exercise selective control when confronted with large number of items it

rationalizes the number of orders, number of items & reduce the inventory.

About 10 % of materials consume 70 % of resources About 20 % of materials consume 20 % of resources About 70 % of materials consume 10 % of resources

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A B C

Maintaining close control Maintains moderate control Maintains loose control

Size of order based oncalculated requirement

Size of order based onusage

Size of order based on levelof inventory

Procurement from many

sources

Procured from two or three

sources

Procured from two sources

Keeps records of receipt and

use

Keep records of receipt and

use

No records are kept

More effort to reduce lead

time

Moderated effort Minimum effort

Close checks on schedule

revision

Some checks on changes in

need

No checks against need

Frequent ordering Less frequent ordering Bulk ordering

Continual expediting Expediting for prospective

shortages

No expediting

Accurate forecasts Less accurate forecasts Approximate forecasts

Low safety stock for less

than two weeks

Large safety stock up to 2 to

3 months

Large safety stock for more

than 3 months

High consumption value Average consumption Value Low consumption value

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INVENTORY TURNOVER RATIO

Inventory Turnover Ratio indicates the efficiency of the firm in producing and selling

its product. It is calculated by dividing the cost of goods soled by the average inventory:

The Average Inventory is the average of opening and closing balances of inventory.

In a manufacturing company inventory of finished goods is used to calculate inventory

turnover.

Components of Inventory

The manufacturing inventory consists of two more components: (i) raw materials and

(ii) Work-in-Process. An analyst may also be interested in examining the efficiency with

which the firm converts raw materials into Work-in-Process and Work-in-Process into

finished goods. That is, the analyst would like to know the levels of raw materials inventory

and work-in-process inventory held by the firm on an average. The raw materials inventory

should be related to materials consumed and work-in-process to the cost of production. Thus:

Raw materials Material ConsumedInventory turnover = -----------------------------------------

Avera e Raw material inventor

Work in process Cost of productionInventory turnover = -------------------------------------

Avg.Work in process inventory

Cost of goods soldInventory Turnover = ---------------------------

Average Inventory

Inventory Average inventory

holding period = ------------------------- x 365Cost of goods sold

Finished goods Cost of goods soldTurnover Ratio = -------------------------------------

Avg. Finished goods

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Materials Consumed can be found as opening balance of raw material plus purchases

minus closing balances of raw material. Cost of Production is determined as material

consumed plus other manufacturing expenses plus opening balances of work-in-process. In

the absence of information of material consumed or cost production, raw material and work-

in-process inventories may be related to sales.

The inventory turnover shows how rapidly the inventory is turning into receivable

through sales. Generally, a high inventory turnover is indicative of goods inventory

management. A low inventory turnover implies excessive inventory levels than warranted by

production and sales activities or a slow-moving or obsolete inventory. A high level of

sluggish inventory amounts to unnecessary tie-up of funds reduced profit and increased cost.

If the obsolete inventory is written off, this will adversely affect the working capital and

liquidity position of the firm. However, a relatively high inventory turnover should be

carefully analyzed a high inventory turnover may be the result of a very low level of

inventory which results in frequent stock outs: the firm may be form hand-to-mouth. The

turnover will also be very high if the firm replenishes its inventory in too many small lot

sizes. The situation of frequent stock outs and too many small inventory replacements are

costly for the firm. Thus, too high and too low inventory turnover ratios should beinvestigated further. The computation of inventory turnovers for individual components of

inventory may help to detect the imbalanced investments in the various inventory

components.

Efficient inventory management reduces levels of inventories to a considerable degree

without effect on production and sales by using simple inventory planning and control

techniques. An understanding neglecting the management of inventories will be jeopardizing

its long run profitability and survival.

SAFETY STOCK

Safety stocks are held to protect against the uncertainties of demand and supply. An

organization generally knows the average demand for various items that it needs. However,

the actual demand may not exactly match the average and could well exceed it. To meet this

kind of a situation, inventories may be held in excess of the average for expected demand.

Similarly, the average delivery time (that is, the time elapsing between placing an order and

having the goods in stock ready for use, and technically called as the lead time) may be

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known. But unpredictable events could cause the actual delivery time to be more than the

average. Thus, excess stocks might be kept in order to meet the demand during the time for

which the delivery is delayed. These inventories which are in excess of those necessary just to

meet the average demand (during the average lead time period), held for protecting against the

fluctuations in demand and lead time.

Safety stocks should be as small as possible for A materials, since those materials havea high value, which means that even small stocks would generate a high inventory

value.

For C parts also, the safety stocks shouldnt be too high, but they can contain morebuffers than the A material stocks because the value of C materials is lower.

A class materials should be regularly procured in short order cycles. C class materials can be procured weekly or monthly in fixed lot sizes.

Lead time is the period that elapses between the recognition of a need and its

fulfillment. There is a direct relationship between lead time and inventories.

Lead time has two components:

(a)Administrative lead time(b)Delivery lead time

CONTINUOUS FLOW FOR OPTIMAL RESULTS

CASH

FLOW

INVEN-

TORY

INVEST-

MENT

FINISHED

PRODUCT

SALES

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RESEARCH METHODOLOGY

The study was conducted to know the position of inventory management. In every

enterprise needs inventory for smooth running of its activities. Its served as a like between

production and distribution process. There is generally a time lag between the recognition

of a need and its fulfillment. The greater the time lags the time lag, the higher the

requirements for inventory.

5.1 RESEARCHDESIGN

A research designing is an arrangement of conditions for collection and analysis of data in

a manner that aims to combine relevance to the research purpose with economy in procedure.

A research design is purely and simply the frame work and plan for the study thatguides the collection and analysis of data.

5.2 DATA COLLECTION METHOD

5.2.1 Secondary Data

The second hand information was collected from annual reports, text books, and

company website (www.amararaja.com), etc.