m - 5
5.1 INTRODUCTION
5.2 MATERIALS PLANNING AND BUDGETING
5.3 SOURCES AND SELECTION OF RAW MATERIALS
5.4 NEGOTIATING AND ORDERING PROCEDURE
5.5 CREDIT DAYS AND LIMITS EXTENDED BY SUPPLIERS TO THE SOCIETIES
5.6 RAW MATERIALS PURCHASED BY THE SOCIETIES
5.7 SOURCES OF FINANCE FOR PURCHASE OF RAW MATERIALS
5.8 SYSTEM OF REORDERING OF RAW MATERIALS
m
148
5.1 INTRODUCTION
Purchasing has come to stay as most important function of materials management.
The moment a buyer places an order he commits a substantial portion of the finance
of the firm, which affects the working capital and cash flow position. The basic
objective of the purchasing function is to ensure continuous supply of quality raw
materials, at the lowest price. For ensuring this, there is large number of well-known
parameters such as right price, hght quality, right contractual terms, right time, right
source, right materials at right place, right mode of transportation, right quantity and
right attitude. All these have to be considered jointly. A diagram indicating these is
shown in exhibit-17.
EXHIBIT-17 OBJECTIVES OF PURCHASE FUNCTION
RIGHT PLACE OF DELIVERY
PRICE COMMUNICATION
RIGHT SOURCE VENDOR RATING
PURCHASE RESEARCH
RIGHT CONTRACTS
LEGAL ASPECTS
RIGHT TRANSPORTATION COST ANALYSIS OF TRANSPORTATION
AND LOGISTICS
RIGHT MATERIAL VALUE ANALYSIS
STANDARDISATION
1 RIGHT ATTITUDE
TRAINING SWOT ANALYSIS
MATERIALS INTELLIGENCE
' 'RIGHTTIME RE-ORDER POINT'
LEAD TIME ANALYSIS
RIGHT QUALITY " REJECTIONS AND SPECIFICATIONS
. ^ - v ^ - - f,^ •?»;•<'/-; ~ r
RIGHT QUALITY EOQ & INVENTORY
MODELS
RIGHT PRICE NEGOTIATION
LEARNING CURVE
Source: Gopalakrishnan P, and Sundaresan M, Materials Management an integrated approach, New Delhi, Prentice-Hall of India Private Limited, 1996, 56-
' Gopalkrishnan P. and Sundaresan M. Materials Management an Integrated Approach. New Delhi. Prentice-Hall of India Private Limited, 1996, 55.
149
Every firm engaged in production of one or more type of goods aims at profit-
optimisation. To accomplish this objective, it tries to procure the desired material for
the operation of its activities at a low cost. In some cases, a firm can buy some raw
materials and process it in their own premises in the desired quantity at a relatively
low cost. However, in some other cases, the procurement of these materials done
from outsiders is more advantageous. In this connection, some societies may
process on own and/or they may buy the raw materials from outsiders.
The basic raw materials used by the handloom weavers' co-operative societies in the
study are cotton yarn, zari, silk, art silk, dyes, chemicals, packaging materials etc.
These materials come from various places of our country.
5.1.1 Cotton Yarn
It is the main raw material, which is in use from the time of primitive weaving. The
supply of cotton yarn is mainly from Coimbatore, and other places like Bangalore,
Gokak, Bijapur, Hulkoti and Sholapur. Cotton and mercerised cotton yarns are sold
in a bundle of 5 kilograms called muthe. This muthe consists of number of hanks.
To weave 9 yards sari it requires nearly 3-4 hanks. Un-dyed cotton hanks after
purchasing are dyed locally with direct, naphtol, vat or reactive colours.
150
5.1.2 Silk Yarn
The silk yarn is purdiased from Bangalore and it is only natural silk, which is in use.
Each packet of silk weighs about 30 kilograms and during every visit, 2-3 such
packets are purchased from Bangalore. Nearly 3-4 saris can be woven with 1
kilogram of silk. The de-gummed, bleached and dyed silk yarn is available in the
market for the use of the weavers.
5.1.3 Artificial Silk (Rayon) yarn
This is third type of yarn, which is used, in large quantity in the handloom textile
industry. This yarn is soft, pliable and have very good sheen and is used as a
substitute for pure silk. Rayon is usually supplied from Bombay and also from
Coimbatore, Kanpur and Ahmedabad. From each kilogram of this yarn nearly 3 saris
may be produced. It usually forms warp and extra warp used both in body and
border of the sari and khana. This artificial silk is manufactured at various places viz,
1. South Indian Viscose, Coimbatore,
2. National Rayon Corporation, Bombay,
3. Indian Rayon Century, Bombay,
4. Rayon from Trivancore, Cochin,
5. J.K. Rayons, Kanpur,
Rayon from different areas reaches the local market either in dyed or undyed state.
If undyed, dyeing is done locally. There are no wholesale dealers for these raw
materials. Therefore, much of the purchases are made from the market, outside the
state. However, a few whole sale dealers of some mills are in Guledgudda, where
some purchases can be made.
151
5.1.4 Zari
The other raw material required for sari is zari and is also called as brocade. It has
been in use for 15 to 20 years. This connes mainly from Surat and to some extent
from Bombay also. Zari is used in borders of rayon and silk saris. This zari is not a
pure gold or silver one but is an imitation of it.
5.1.5 Dyes and Chemicals
The attractive colours of the sari increase the value and fetch attractive prices. In
olden days only black, red and yellow colours were in use, and obtained from
vegetable ongin, namely indigo, maddar plant and turmeric roots respectively.
These dyes were used to colour the cotton yarns. Now Ciba Company dyes silk,
with acid colours, which is supplied to the nearby wholesale dealers. Cotton and
artificial silk (rayon) are dyed with naphthol, vat, procaine, direct, reactive aniline
colours supplied by Amar Dyes, Hoechst, Indokem, and AtuI company of Bombay.
These companies along with the dyestuffs they supply the necessary chemicals.
The wholesale dealers of dyes are at Bagalkot, Rabakavi, Banahatti and Sholapur
from where the retail dealers make their purchase.
In the study area raw materials like cotton yarn and art silk are used by all the
sample societies. But, materials like zari is used by 7 societies, silk by 6 societies,
dyes and chemicals by 7 societies and packing materials by 4 societies out of 15
sample societies.
152
The most important raw material for handloom is tlie yarn. It was observed that the
cost of the yarn constitutes 50 to 80 per cent of the total cost of the production
depending on the fabric woven.^ But, the handlooms consume hank yarn. There are
two kinds of hanks - Lee hank consisting of seven lees which is suitable for
bleaching, dyeing, finishing etc., and cross hank suitable for direct winding on to the
bobbins. Superior quality yarn is required for warp.
This yarn is produced both by the privately owned spinning mills, co-operative
spinning mills and composite mills. Almost entire production of yarn is in organised
mills and hence handloom sector is totally dependent on mills for their supply. The
cost of yarn has always been the cause for concern. The cost of yarn constitutes
major portion of fabric's cost.
Apart from spinning infrastructure, what needs is adequate up-gradation of dyeing
and finishing. Handlooms use about 80 per cent pre-dyed yarn. Individual weavers
dye the yarn themselves or that job will be undertaken by the society's dye-house or
sometimes that will be done from the outside jobbers also. Raw materials and other
inputs are not only made available but they must also be bought at the most
competitive prices as per the conditions in market. And they must be available when
they are needed in the right quantities and qualities.
^ Government of India, Report of the Fact-finding Committee (Handloom and Mills), Calcutta. 1942, 87.
153
The various topics deait in tills chapter are;
1. Material Planning and budgeting.
2. Sources and Selection of raw materials.
3. Negotiating and ordering procedure.
4. Credit days and limits extended by the suppliers to the societies.
5. Raw materials purchased by the societies
6. Sources of finance for purchase of raw materials.
7. Reordering system of raw materials.
5.2 MATERIALS PLANNING AND BUDGETING
The materials planning and budgeting function have a prominent place in the
integrated materials management set-up. This is so because, planning for materials
and working out a realistic budget not only helps to motivate people but also serves
as a control device. Material planning Is the way of determining the requirements of
raw materials that go Into meeting the production needs within the economic
investment policies. Factors which affect materials planning are price trends,
business cycles, credit policy, production capacity, lead times, inventory levels,
working capital, season, communication system etc. The material planning is based
on the forecast for the end products. Once the demand forecast Is made, it is
possible to go through the exercise of materials planning.
The relationship between materials planning and other major functions are shown in
exhibit-18.
154
EXHIBIT-18 MATERIAL PLANNING FUNCTIONS
PRODUCTION PROGRAM
(PER LOOM BASIS)
FEED BACK INFORMATION AND REVIEW
MATERIALS PLAN
(CONSUMPTON PER LOOM BASIS)
Source: Gopalakrishnan P, and Sundaresan M, Materials Management an integrated approach, New Delhi, Prentice-Hall of India Private Limited, 1996, 26.
Normally, material planning should be done on the basis of sales forecast and
production programme (per loom basis). It was found during field survey that, all the
weavers' co-operative societies in the study area are not planning their materials in a
scientific way. They estimate roughly not on sales forecast but on the basis of
working looms consumption and on the past experience, which is not an exact one.
They follow very rude and unscientific method of material planning.
Materials budget can be prepared based on the product requirements. Based on
that delivery schedules for materials are worked out. The process of preparing
material budget is shown in exhibit -19.
155
EXHIBIT-19 PROCESS OF PREPARING MATERIAL BUDGET
7ENT0RY
REQUIREMENTS^ OF MATFRIAI R J |
^
INVENTORY OF MATERIALS ON HAND
AMOUNT OF MATERIALS
TO BE PURCHASED
> H —
FORCAST OF PRICES &
RATES
PURCHASE RlinfiFT
ACTUAL PlIRCHASF
VARIANCE REPORTING
FOR CONTROL
Source; Gopalakrishnan P, and Sundaresan M, Materials Management an Integrated Approach, New Delhi, Prentice-Hall of India Private Limited, 1996, 31,
As shown in exhibit - 19, material procurement budget takes into account both
inventories on hand and orders on hand. Besides the budget, it may be formulated
to attain certain targeted inventory levels. This budget is formulated both in terms of
quantity and money. The materials department knows exactly its resource
availability so that they can plan its purchases in the most optimum way taking into
account price trends, market position etc. Further, material budget should be
prepared to help the financial management of materials by taking into consideration
the yearly, the quarterly and the monthly cash requirements. It was noticed during
field survey that, none of the handloom weavers' co-operative societies in the study
area were preparing the matenals budget.
156
In addition, periodic statements should be prepared and this budget should be
compared with actuals so that major variances can be highlighted for action. In the
field survey, it was found that majority of the handloom weavers' co-operative
societies do not prepare budgeted inventory report for their reference. But, societies
'A', 'B', 'F', 'G', 'H', ' I ' , 'K', 1", prepare the review of inventory report monthly,
societies 'C, 'D', 'E', 'O', quarterly, societies 'J', 'N' yearly and society 'M' was
preparing the inventory review report only on as and when necessary basis. It was
also found that, review of inventory report is prepared only by those societies who
have borrowed over draft or cash credit from District Central Co-operative Bank
(DCCB) because, they have to submit a copy of the same to them.
5.3 SELECTION OF SOURCES OF RAW MATERIALS
The process involved in selection of sources of raw materials are searching and
selection. Society should identify the possible sources and select such sources,
which will meet the delivery and quality requirements in the long run at competitive
price levels.
The source from which the raw material is procured should be dependable and
capable of supplying items of uniform quality. The buyer has to decide which item
should be procured from whom. Aspects such as source selection, source
development, buyer-seller relationship and vendor selection purchase decisions will
be made in weavers' co-operative societies by either secretary, Managing/Controlling
Committee or sometimes both.
157
In 3 (20 per cent) sample societies selection of sources of raw materials Secretary
takes decision alone. In these societies Managing Committee members are not
active. Further, in 7 (46.67 per cent) out of total sample, Managing Committee or
Controlling Committee take decisions. In 2 (13.33 per cent) societies, selection of
suppliers will be made jointly by both Secretary and the Chairman of the society. In
remaining 3 (20 per cent) societies. Secretary and Managing Committee members
jointly take the decision of purchasing the raw materials.
Reputed suppliers of raw materials are intangible assets to any organisation. For the
organisation they are not only suppliers of materials but they are also extremely
important sources of information with regard to market conditions, price trends and
business climate. The various sources of raw materials for handloom weavers' co
operative societies in the study area are co-operative and private spinning mills,
Cauvery handlooms (Karnataka Co-operative Handloom Weavers' Federation Ltd.,
Bangalore) and other private traders. The status of raw material suppliers has been
presented in table - 5.01.
158
TABLE - 5.01 VARIOUS SOURCES OF PURCHASE OF RAW MATERIALS
MADE BY THE SAMPLE SOCIEITIES
SL. NO.
SOCIETY CODE
SOURCES OF RAW MATERIALS IN PERCENTAGES
SL. NO.
SOCIETY CODE
CO-OP SPINNING
MILLS
PVT., SECTOR
SPINNING MILLS
CAUVERY HANDLOOMS
DIRECTLY FROM
RETAILERS TOTAL
1 A 10 10 10 70 100
2 B 0 0 10 90 100
3 C 0 0 0 100 100
4 D 30 0 0 70 100
5 E 0 0 0 100 100
6 F 0 0 10 90 100
7 G 0 0 10 90 100
8 H 0 0 10 90 100
9 1 0 0 10 90 100
10 J 0 0 10 90 100
11 K 0 0 0 100 100
12 L 0 0 10 90 100
13 M 0 0 0 100 100
14 N 0 0 5 95 100
15 0 0 0 10 90 100
Source: FIELD SURVEY.
159
EXHIBIT - 20 SOURCES OF RAW MATERIAL
< IT _, u. < O a:
o < on S Z) o CO
100% 90% 80% 70% 60% 50% 40% 30% 20% 10%
0% 1 A B C D E F G H I J K
SOCIETY CODES
L M N O
Q DIRECTLY FROM RETAILERS
DCAUVERY HANDLOOMS
• PVT., SECTOR SPINNING MILLS
• CO-OP SPINNING MILLS
Source: Table - 5.01.
It is clear from the table - 5.01 that, only 2 societies procures yam from co-operative
spinning mills. Of that, society 'A' procures 10 per cent and society 'D' procures 30
per cent of their total yarn requirement. It is so because, they do not supply yarn
regularly and they supply as per the quota allotted to the society.
160
Even though handlooms are spread all over the country, the bulk of the yarn is
produced In a few states i.e., about 65 per cent of the total installed capacity is in the
Tamil Nadu, Maharashtra and Gujarat.^ This has resulted in uneven supply of yarn to
the handloom sector. In the study area there are 3 co-operative spinning mills, out of
which only one spinning mill is active." Moreover, its yarn production is very less
when compared to the demand. Naturally, societies have to import the same from
other places. In the study area-spinning mill is located at Banahatti, local societies
get yarn on quota basis, but not for outstation societies. This source cannot be relied
on regular basis.
Further it was also found that, only society 'A' is obtaining yarn from private spinning
mills, which amounts to 10 per cent of the total procurement made by it. It is so
because, this society is running its activities successfully, its production and
consumption of material is more and it is possible for them to deal with private
spinning mills also. Moreover, they are economically sound but other societies
cannot make an attempt to deal independently or procure directly from the mills.
Third source of raw material is Cauvery handlooms, which distributes yarn and art-
silk to the weavers' co-operative societies. Its branch has been located at Ilka!
where majority of societies are concentrated. Ten societies out of 15 procure raw
material from this source that amounts to 5 to 10 per cent of their total purchase.
3 Jain L C, Handlooms Face Liquidation, Powerlooms mock at Yojana Bhavan, Economic and Political Weekly, 27 August 1983, 1521.
•• Weavers Guide, Department of Handloom and Textiles, Zilla Parishad, Bijapur, 8.
161
It is true that materials supplied through Cauvery handlooms are at subsidised rates
but they supply irregularly with limited quantity. They supply the materials against
advance demand draft, but they deliver the material 2 to 3 months later. These
societies cannot sustain this blockage of funds, since they have inadequate working
capital. Further, executives are of the opinion that, they prefer this source only when
their financial position is better. They complain that Cauvery handlooms do not
supply to the society the raw materials of required variety, in required quantity well in
time to the societies. They opt to buy the material as and when the quota is allotted
which is very rare.
The last and foremost major source of raw material in the study area comes from the
private local dealers. This source ranges between 75 to 100 per cent of the total
procurement made by the sample society. These dealers' terms of sales are
favourable i.e., credit sales and customised as per the society requirements. The
society executives are of the opinion that these private local dealers supply required
quality and quantity of raw materials to the society. Majority of these local dealers
are Marawari's; who have made their base at Guledgudda, llkal, Bagalkot, Rabakavi
and Banahatti.
162
It was observed that powerlooms and mills consume lion's share of yarn produced in
the country. This has serious implications for handloom sector, in the form of
shortage of yarn and the consequent loss of employment to weavers.̂ The overall
shortage of yarn for the handloom sector is in fact, a multi-edged murderous
weapon. Shortage of yarn affects not only output and employment, but also the price
of yarn, the competitive capacity of the handloom sector and eventually wages and
earnings of the weavers.
It was found during field survey that sample societies in the study area make their
purchases on credit to the extent of 60 to 90 per cent of their total purchase made.
Because of credit purchases, it was found that there would be price difference of 5 to
10 per cent when compared to other sources of raw materials. Further, it was noted
that, when there is scarcity in the supply of raw materials and seasonal periods they
go for cash purchase even from the private local dealers. These dealers are
preferred because they meet the requirements of the society in terms of quality and
delivery. A personal follow-up is possible to ensure speedy delivery of raw materials.
sOp. cit. 1521.
163
5.4 NEGOTIATING AND ORDERING PROCEDURE
After the preliminary screening and selection, starts the process of negotiations with
the vendors for placing orders. Negotiation is a battle of wits and an art of
embodying sophisticated tactics and manoeuvres by both the buyer and the seller.
The parameters affecting the process of negotiations of an item are; availability,
number of sources, price, delivery, penalty, discounts, packing and the
transportation. But negotiator should not adopt a strategy of hard choices and soft
options. Care should, however, be taken to adopt negotiations on a selective basis.
Further, correct and cordial relations with the vendors are essential for mutual co
operation. The vendors should be provided with the same courtesies that an
organisation expects for its own salesmen or gives to its customers. Various
aspects, including terms of delivery, price and quality are finalised during
negotiations and then the purchase orders are released.
Majority of suppliers of raw material has concentrated at places like llkal, Guledgudd,
Amingad, Sulebhavi, Bagalkot, Banahatti, Rabakavl, Jamkhandi Mahalingapur, and
Rampur where they have made their base to operate the business. IVIajorlty of
handlooms are concentrated in and around these areas. It is the practice in the
study area that representative of suppliers of raw material visit the society once a
week on regular basis and book the orders for the same. Personal contacts between
the executives of the society and the supplier often help them in maintaining a
smooth relationship.
164
The executives of the society in the study area have rated the following factors high
on the basis of priority while selecting the suppliers of raw materials, same has been
presented in exhibit - 21.
EXHIBIT - 21 RATINGS OF THE INFLUENCING FACTORS ON SELECTION OF
SUPPLIERS OF RAW MATERIAL
Source: Field Survey.
Most of the societies have rated credit terms as most important criteria, which will
influence the decision while selecting the suppliers of raw materials. Because, as it
is stated earlier that, majority of the societies face problem of liquidity of funds and
secondly, they depend extensively on borrowed funds.
165
5.5 CREDIT DAYS AND LIMITS EXTENDED BY SUPPLIERS TO THE SOCIETIES
Credit days extended by the local vendors of raw materials to the society is
presented in the table - 5.02.
TABLE - 5.02 NO. OF CREDIT DAYS EXTENDED BY THE SUPPLIERS TO THE
SAMPLE WEAVERS' CO-OPERATIVE SOCIEITIES
SL. NO.
NO. OF CREDIT DAYS
NO. OF SUPPLERS
SL. NO.
NO. OF CREDIT DAYS
UPTO 3 BETWEEN 4 & 6 7 & ABOVE TOTAL SL. NO.
NO. OF CREDIT DAYS
NO. OF SOCIETIES
% T 0 TOTAL
NO. OF SOCIETIES
% T 0 TOTAL
NO. OF SOCIETIES
% T 0 TOTAL
TOTAL NO. OF
SOCIETIES
% T 0 TOTAL
1 UPT0 15 E = 1 20.00 D,G = 2 66.67 C,K = 2 28.56 5 33.33
2 UPTO 30 L,0 = 2 40.00 A = 1 33.33 F,H, N = 3
42.88 6 40.00
3 UPTO 45 l,J = 2 40.00 Nil = 0 00.00 B,M = 2 28.56 4 26.67
4 TOTAL 5 100.00 3 100.00 7 100.00 15 100.00
Source: FIELD SURVEY.
It is clear from the table - 5.02 that, suppliers of raw materials in the study area have
extended credit to 4 (26.67 per cent) societies upto 15 days, for 6 (40 per cent)
societies upto 30 days and remaining societies have received upto 45 days. The
overall credit granted by the suppliers of raw materials to the societies is between 15
to 45 days. But, the more the credit days extended by the suppliers the more the
price charged by them to the society. In subsequent table credit limit extended by the
suppliers to the society has been discussed.
166
As majority of the societies in ttie study area depend exclusively on credit purchase
from the private local dealers of raw materials, it was felt necessary to study the
credit worthiness of the society to evaluate the credit limits extended by the suppliers
of raw materials. The credit limit extension to the concerned society is on the basis
of repayment pattern within stipulated time, scale of production, attitude and
relationship of member executives of the society.
TABLE - 5.03 CREDIT LIMIT EXTENDED BY THE SUPPLIERS TO THE
SAMPLE WEAVERS' CO-OPERATIVE SOCIETIES
SL.NO. AMOUNT IN Rs. NO. OF SOCIETIES % TO TOTAL
1 UPTO 25,000 J,0 = 2 13.34
2 25,001 - 50,000 E,F,G,H,L,M = 6 40.00
3 50,000 - 75,000 C,K,N = 3 20.00
4 75,001 - 1,00,000 D,l = 2 13.33
5 1,00,000 & ABOVE A,B = 2 13.33
6 TOTAL 15 100.00
Source: FIELD SURVEY.
167
As per the table - 5.03, 6 (40 per cent) societies have received the credit limit upto
the extent of Rs. 50,000. It is encouraging to state that 2 (13.33 per cent) societies
in each range have received credit upto 25,000, upto Rs. 75,000 and one lakh.
Further, it shows that the extent of credit limit where these societies are getting is not
sufficient. Because, they have inadequate working capital and insufficient liquidity
position on account of seasonal sales and low sales turnover. These reasons have
made them to depend exclusively on private dealers, as they do not have any other
alternatives: However, it was learnt from the analysis that society 'A' and 'B' are
getting better credit limits because of their goodwill and high turnover capacity.
5.6 RAW MATERIALS PURCHASED BY THE SOCIETIES
It was found during the field survey that none of these weavers' co-operative
societies follow the centralised purchasing policy in the study area. The purchase of
raw materials made by the societies from 1991-92 to 1995-96 has been presented in
the table - 5.04.
168
TABLE - 5.04 RAW MATERIALS PURCHASED BY THE SAMPLE WEAVERS' CO-OPERATIVE
SOCIETIES DURING 1991-92 TO 1995-96 (Rupees In Lakhs)
SL. NO.
SOCIETY CODE 1991 -92 1992-93 1993-94 1994-95 1995-96 AVG.
PURCHASES
1 A 35.34
(31 .32 ) 48.77
(36.01 ) 53.84
(32.58 ) 48.40
(29 .97 ) 41.67
(25.40 ) 45.60
(30.85 )
2 B 2.61
(2 .32 ) 5.98
( 4 . 4 2 ) 11.87
( 7 . 1 8 ) 8.50
( 5 . 2 7 ) 12.04
(7 .34 ) 8.20
(5.55 )
3 C 12.66
(11 .22 ) 13.98
(10 .32 ) 17.39
(10 .52 ) 22.53
(13 .95 ) 20.28
( 1 2 . 3 6 ) 17.37
(11 .75 )
4 D 13.97
(12 .38 ) 17.47
(12 .90 ) 21.37
(12 .93 ) 10.20
( 6 . 3 2 ) 18.11
( 1 1 . 0 4 ) 16.22
(10.97 )
5 E 12.31
(10.91 ) 10.94
( 8 . 0 8 ) 8.05
( 4 . 8 7 ) 13.74
( 8 . 5 1 ) 14.35
(8.75 ) 11.88
(8.03 )
6 F 2.88
( 2 . 5 5 ) 4.57
( 3 . 3 7 ) 4.40
( 2 . 6 6 ) 4.13
( 2 . 5 6 ) 4.41
( 2 . 6 9 ) 4.08
(2.76 )
7 G 3.94
( 3 . 4 9 ) 5.48
(4.04 ) 6.00
(3.63 ) 6.78
( 4 . 2 0 ) 7.49
( 4 . 5 7 ) 5.94
( 4 . 0 2 )
8 H 13.10
(11.61 ) 12.26
(9.05 ) 12.59
( 7 . 6 2 ) 13.11
( 8 . 1 2 ) 14.72
(8 .98 ) 13.16
(8.90 )
9 1 3.49
( 3 . 0 9 ) 3.54
( 2 . 6 1 ) 4.65
(2.81 ) 4.64
( 2 . 8 7 ) 4.25
( 2 . 5 9 ) 4.11
( 2 . 7 8 )
10 J 1.51
( 1 . 3 4 ) 1.60
( 1 . 1 8 ) 3.10
( 1 . 8 8 ) 2.90
( 1 . 8 0 ) 2.64
( 1 . 6 1 ) 2.35
( 1 . 5 9 )
11 K 2.66
( 2 . 3 5 ) 3.78
( 2 . 7 9 ) 5.77
(3.49 ) 11.38
(7.05 ) 8.09
( 4 . 9 3 ) 6.33
( 4 . 2 9 )
12 L 4.44
(3.94 ) 4.10
(3.03 ) 4.57
( 2 . 7 7 ) 5.55
( 3 . 4 4 ) 4.95
(3 .02 ) 4.72
(3.20 )
13 M 1.67
( 1 . 4 8 ) 1.05
(0.78 ) 7.04
( 4 . 2 6 ) 4.18
( 2 . 5 9 ) 4.48
( 2 . 7 3 ) 3.69
( 2 . 4 9 )
14 N 2.24
( 1 . 9 9 ) 1.85
( 1 . 3 6 ) 3.28
( 1 . 9 8 ) 3.61
( 2 . 2 3 ) 4<30
( 2 . 6 2 ) 3.06
( 2 . 0 7 )
15 0 0.02
(0.02 ) 0.08
(0.06 ) 1.35
(0.82 ) 1.85
( 1 . 1 4 ) 2.25
( 1 . 3 7 ) 1.11
(0.75 )
16 TOTAL 112.84
(100.00) 135.42
(100.00 ) 165.27
(100.00) 161.50
(100.00) 164.04
(100.00) 147.82
(100.00)
Note: Figures in parenthesis are percentages to total Source: FIELD SURVEY.
169
EXHIBIT • 22 AVERAGE PURCHASE OF RAW MATERIALS MADE BY THE
SAMPLE WEAVERS' CO-OPERATIVES
• A V E R A G E PURCHASES
Source: Table - 5.04.
The table - 5.04 reveals that average purchase of raw materials like cotton yarn,
art-silk, dyes, chemicals and packaging materials for the period of 1991-92 to 1995-
96 is Rs. 9.85 lakhs per society. For the year 1991-92 average purchase per
society was Rs. 7.52 lakhs and later by 1993-94 it has increased to Rs. 11.02 lakhs.
But, in subsequent years 1994-95, purchase of raw material has fallen down to Rs.
10.77 lakhs. The reasons for decrease in purchase is mainly due to increase in
prices and scarcity of raw materials, outdated designs and patterns, less
productivity and unfavourable market conditions.
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5.7 SOURCES OF FINANCE FOR PURCHASE OF RAW MATERIALS
The moment society places an order it commits a substantial portion of finance of the
society, which affects the working capital and cash flow position. The secretary or
executive members are highly responsible to make payments as and when they fall
due. In order to appreciate various sources of finance for committing on purchase of
raw materials for smoothening the production process it was felt necessary to study
this.
The sales proceeds are the major source for making payments to the suppliers of
raw materials of the society. As the sales of handloom products are seasonal, they
have to depend extensively on external sources of finance for purchase of raw
materials. Those external sources of finance are Reserve Bank India (RBI) loans.
National Bank for Rural Development (NABARD) loans, members' deposits or hand
loans from the members and moneylenders who are the last resorts.
Since, the majority of the sample weavers' co-operative societies in the study area
face inadequate working capital position, this worst financial position do not permit
them to buy the raw materials on cash terms. The cash credit and/or overdraft
facility extended by the RBI or NABARD or DCC banks is not sufficient to meet their
working capital requirements. This reason has made them to rely on members'
deposits and moneylenders. The interest paid to moneylenders will be adjusted with
some other head. For making this adjustment they consult the experts, who will take
the job of manipulating and maintaining the accounts till the final accounts are
prepared and audited by the Government audit officials. They render mobile
services to various weavers' co-operative societies in surrounding areas of the study.
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Further, it was also noticed ttiat weavers' co-operative societies are not prompt in
payments, for tliis reason,'Local vendors' association is planning to charge penalty
interest from June, 1997 at the rate of 2 per cent per month on overdue balance of
the society.®
5.8 SYSTEM OF REORDERING OF RAW MATERIALS
it was found from the study that, weavers' co-operative societies reorder for required
goods as and when the need arises. Further, it was also noticed that all societies
depend exclusively on private traders for supply of raw materials. Dealers'
representatives visit personally every week to book the orders of raw materials. So,
societies will order for required raw materials as and when necessary. The minimum
level of inventory of raw materials will be decided per loom consumption on monthly
basis. Maximum level of inventory is determined on the basis of supply conditions of
raw materials, future plan for production and price fluctuations.
In two, society's Managing Committee will take decisions connected to reordering of
materials, safety and maximum inventory level, but in remaining societies; Secretary
will take decision in consultation with the concerned clerk. Concerned clerk and/or
Secretary will control the inventory. The Secretaries of respective societies are of
the opinion that, they have safe, efficient controlling and storage facilities for raw
materials. But, they are facing the problem for storing finished goods during off
season.
' Yam Merchant Association, Guledgudda.
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Most of the society respondents in tine study area were of the opinion that, they will
be able to get raw materials in required quantities, and qualities regularly if, the
society mal<es cash purchases and if they are in good bool<s with the suppliers. In
case, the raw materials are scarce, every dealer insists on cash terms. During such
times if society's financial condition is good they will procure raw materials by cash
otherwise they have to borrow from external sources with interest to make cash
purchase and to run the production uninterrupted. This problem was found with
every society in the study area. Further, they are of the opinion that, if the society is
making cash purchases, rates quoted by the dealers will be very competitive,
otherwise exorbitant. Moreover, if they purchase on cash terms, then they wouldn't
face the problem of inputs.
It is true that, quality of raw materials supplied and price quoted by the Cauvery
handlooms is comparatively very low. But, they supply the raw materials on piece
meal distribution, irregularly and that too against advance demand draft, which is a
big financial burden for the society. Because of these reasons, invariably weavers'
co-operative societies have to depend extensively on private suppliers. Of all the
sample weavers' co-operative societies, society 'A' is managing its purchases in
better way.
Further respondents of the societies were of the opinion that Cauvery handloom is
not reliable source of supply of raw materials. For the purpose of overcoming this
procurement of raw materials problem, all the weavers' co-operative societies in the
study area have formed Apex society at district level; which is yet to start functioning.
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Thus, it can be seen from the above analysis that, the private dealers meet a major
part of the materials required by the weavers' co-operative societies. Other sources
meet only marginally and invariably societies have relied upon private traders. The
raw materials have to pass through the hands of the producers, wholesalers, and
retail dealers before reaching the society and its member weavers.