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STUDY OF INVENTORY MANAGEMENT

By S.BALAJI

A PROJECT REPORT Submitted to the FACULTY OF MANAGEMENT STUDIES

In partial fulfillment of the requirements for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

IN

(FINANCE / MARKETING)

(Emblem)

ANNA UNIVERSITY CHENNAI 600 025 MAY, 2004

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BONAFIDE CERTIFICATE Certified that this project report titled “A STUDY ON INVENTORY

MANAGEMENT” is a bonafide work of Mr. S.BALAJI who carried out the research under my supervision. Certified further, that to the best of my knowledge the work reported herein does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this on any other candidate. ABSTRACT In any organization the inventory of materials plays vital role in working capital management. A small saving in the inventory will reflect a vital margin in profit of the organization. Inventory control means the availability of right materials of right quantities coordinated with lead time. Each and every component of inventory is important and managing the inventories to keep in an optimum level is a must. Being an auto ancillary industry IPPL is facing a stiff competition in the market. Since inventory is the major part of their cost of production there is a need for inventory control by way of reducing cost and optimum utilization of materials. Though the company is having certain policies regarding this, still it requires through study of their policy and systems to some extent to understand the inventory management. v The import components are contributing nearly 25% of the total production

cost. The present order quantity is very high with some items which cause the problem of over stocking. Which leads to additional carrying cost v Holding of stock is very high level v Working capital blocked in the inventory for 133 days which is not a

healthy sign for an organization. Due to confidentiality of the data and year ending constraint IPPL ltd. the researcher could not able to collect the required data required for this study. As the company is a closely held one and its policy of disclosing data to the outsiders is restricted. Hence the collection of full fledged data could not be achieved

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ACKNOWLEDGEMENT I have great pleasure in expressing my sincere gratitude to MR. T.P. NAGESH faculty member S.R.M. INSTITUTE OF MANAGEMENT STUDIES, S.R.M. ENGINEERING COLLEGE for his support in conducting the study. I have an opportunity to express my sincere thanks to Dean DR. JAYASREE S.R.M. INSTITUTE OF MANAGEMENT STUDIES, S.R.M. ENGINEERING COLLEGE in conducting the study I have immense pleasure in expressing my gratitude to MR.P.SRIDHAR GENERAL MANAGER IPPL for his generosity in allowing me to do the project My sincere thanks to MR.BALARAMAN for getting me this opportunity and my sincere thanks to MR .ARUL KUMARAN for finding me with necessary details pertaining to my study. Finally I express my thanks to IPPL family, friends and well wishers for their help and support

S. BALAJI

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TABLE OF CONTENTS CHAPTER 1 Introduction 1.1 Need for inventory control 1.2 Concept of inventory 1.3 Objective of inventory control 1.4 Importance of inventory control

CHAPTER 2 2.1 Objective of the project 2.2 Company profile 2.3 Methodologies 2.4 Limitations to the study 2.5 Analysis and interpretation 2.5.1 Operating cycle analysis 2.5.2 Ratio analysis 2.5.3 Analysis of EOQ 2.5.4 Safety stock and reorder level 2.6 Selective inventory control system 2.7 ABC Analysis 2.8 Codification of material

CHAPTER 3 3.1 Findings 3.2 Suggestions 3.3 References

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LIST OF TABLES

2.1 Manufacturing cost at IPPL 2.2 Details of stock 2.3 Cost of goods sold 2.4 Average stock of inventory 2.5 Average stock of raw material inventory 2.6 Raw material consumption 2.7 Average work in process 2.8 Turn over ratio 2.9 Economic Order Quantity 2.10 Details of consumables at stock...
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