The major objective of the study is to examine the effectiveness of inventory management system adopted by Akash industry; the study mainly focuses on the . A Project report submitted to Jawaharlal Nehru Technological University, I hereby declare that the project entitled “A study on Inventory management at. I here by declare that the information I have gathered during the period of field work report I have collected all these information is correctly in this particular.
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Download as DOCX, PDF, TXT or read online from Scribd. Flag for . (7) Designing poorer organization for inventory management:c: c c c c c c c. PDF | Inventory management is a challenging problem area in supply chain management. Companies need to have inventories in warehouses. PDF | Introduction to inventory management | ResearchGate, the construction o f mathematical models that attempt to describe the system.
To say that they have a key role to play is an understatement. Finance is connected to most, if not all, of the key business processes within the organization. It should be steering the stewardship and accountability systems that ensure that the organization is conducting its business in an appropriate, ethical manner. It is critical that these foundations are firmly laid. So often they are the litmus test by which public confidence in the institution is either won or lost.
This goes beyond the traditional preoccupation with budgets — how much have we spent so far, how much do we have left to spend? It is about helping the organization to better understand its own performance. That means making the connections and understanding the relationships between given inputs — the resources brought to bear — and the outputs and outcomes that they achieve.
It is also about understanding and actively managing risks within the organization and its activities. FIFO vs. This is simple where the cost has not varied across those held in stock; but where it has, then an agreed method must be derived to evaluate it. For commodity items that one cannot track individually, accountants must choose a method that fits the nature of the sale. FIFO treats the first unit that arrived in inventory as the first one sold.
LIFO considers the last unit arriving in inventory as the first one sold. Which method an accountant selects can have a significant effect on net income and book value and, in turn, on taxation. Using LIFO accounting for inventory, a company generally reports lower net income and lower book value, due to the effects of inflation.
This generally results in lower taxation. As long as actual and standard conditions are similar, few problems arise. Unfortunately, standard cost accounting methods developed about years ago, when labor comprised the most important cost in manufactured goods. Standard methods continue to emphasize labor efficiency even though that resource now constitutes a very small part of cost in most cases.
Standard cost accounting can hurt managers, workers, and firms in several ways.
For example, a policy decision to increase inventory can harm a manufacturing manager's performance evaluation. Increasing inventory requires increased production, which means that processes must operate at higher rates. When not if something goes wrong, the process takes longer and uses more than the standard labor time.
In adverse economic times, firms use the same efficiencies to downsize, rightsize, or otherwise reduce their labor force. Workers laid off under those circumstances have even less control over excess inventory and cost efficiencies than their managers. Many financial and cost accountants have agreed for many years on the desirability of replacing standard cost accounting. They have not, however, found a successor. Theory of constraints cost accounting[ edit ] Eliyahu M.
Goldratt developed the Theory of Constraints in part to address the cost-accounting problems in what he calls the "cost world. He defines inventory simply as everything the organization owns that it plans to sell, including buildings, machinery, and many other things in addition to the categories listed here.
Throughput accounting recognizes only one class of variable costs: the truly variable costs, like materials and components, which vary directly with the quantity produced Finished goods inventories remain balance-sheet assets, but labor-efficiency ratios no longer evaluate managers and workers. Instead of an incentive to reduce labor cost, throughput accounting focuses attention on the relationships between throughput revenue or income on one hand and controllable operating expenses and changes in inventory on the other.
National accounts[ edit ] Inventories also play an important role in national accounts and the analysis of the business cycle. Some short-term macroeconomic fluctuations are attributed to the inventory cycle. Firstly they set the programs to the robot for welding the components.
Every component has is its own welding program according to the standard drawing of the components, after installation of the Ex — 70 program the welding process of EX- 70 boom starts, Mig welding wire is been used by the robot to weld the component. In machining process they have two type of jobs one is milling and the other is boring, in this process they are using two type of machines one SHW that means hidden control machine and the other is Fanuc control machine.
To reduce heat in the process they are using coolant oil because it helps to reduce the heat for insert ware and tear and it helps to smooth milling and boring of the component in machining they are having there stages 1.
Rough stage 2. Semi finish 3. Finish Stage In Ex- 70 boom components are having mainly four bores boss bore must have the size of 75mm and lug bore must have the size of 55mm and bracket must have 60mm. Bore dial gauge 2. Micrometer 3. Vernier 4. Measuring scale etc DRESSING Dressing is the very important stage in manufacturing process in this process they clean the components by using grinding machine and sander machine to remove spatters chips etc, here they also fit some items to prepare components to according to standard diagram.
Blow Holder area 2. Proper penetration 3. Porsity etc DISPATCH After completion of all this processes the quality assurance department checks the quality of the component and after checking they finally dispatch the product so this complete the manufacturing process of EX boom model.
A STUDY ON INVENTORY MANAGEMENT IN SMELTER PLANT,
Apex Auto Limited is in the service of gaints in the field of Excavator manufacturing Co. The term inventory refers to the stockpile of the products a firm is offering for sale and the components that make up the product.
The assets which firms store as inventory in anticipation of need are: These represent inputs downloadd and store to be converted into finished products in future by making certain manufacturing process on the same. These represent semi-manufactured products which need further processing before they can be treated as finished products. These represent the finished products ready for sale in the market.
They may be in the form of cotton waste, oil and lubricants, soaps, brooms, light bulbs etc. Normally, they form a very minor part of total inventory and do not involve significant investment. Let us have a look on Different Inventory Management Views.
Means emphasis role of Inventory Management in different Sectors. The reason behind of dividing these views is: Let us see the Meanings of each view one by one. Physical Inventory Management Meaning: Usually, the company is faced with the following conflicting objectives in the area of inventory management: To carry maximum inventory in order to facilitate efficient and smooth production and sales operations. To minimize investment in inventory for maximize the profitability.
Both over-investment and under investment in inventories is undesirable as both involve the consequences. The over-investment involves the consequences like: Risk of liquidity.
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The inventories once downloadd and stored are normally difficult to dispose off at the same value. The under-investment involves the consequences like: If sufficient stock of raw material and work in process is not available, it may result into frequent interruptions in production.
If sufficient stock of finished goods is not available it may not be possible for the company to serve the customers properly and they may shift to the competitors. Thus, it can be said that the objective of inventory management is to minimize the investment in inventory without affecting production or sales operations.
Inventory, as a current asset, differs from the other current assets because only financial managers are not involved. Two-Bin System: Under this system, the inventory items are grouped into two categories. In one group or bin, sufficient quantity is kept to meet the current requirements over a designated period of item. Financial Inventory Management Meaning: The selection of a suitable method assumes significance in view of the fact that it has a direct bearing on the cost of goods sold and consequently on profit.
Therefore, the method should be selected in the light of probable effects on profits over a period of years. It may not be out of place to mention that once a method is selected, it must be used consistently and cannot be changed from year to year.
The discussion here of the methods to value inventory should, therefore be viewed in this perspective. The merit of FIFO method is that the physical flow of materials matches the flow of cost. Under the LIFO method, the cost of goods sold and the value of closing inventory can be determined only after the final lot of the year has been received.
This is because of the assumption underlying the valuation of inventory, according to this method. As the name LIFO suggests, the use of inventory is valued on the basis of the inverse sequence of receipts. This matching of current costs with current revenues is the essence of the argument for the LIFO method. Average Cost Method: According to average cost method, each download is added to inventory and an average cost determined. Materials are charged into cost of sales at this average until another lot is received, when a new average unit inventory cost is calculated.
There are so many other than these above methods but most wide usefully methods are these three so here we discussed those three methods only. Excluding the cost of merchandise, the costs associated with inventory fall into two basic categories: These costs are an important element of the optimum level of inventory decisions.
It is also called as setup cost. They are involved in maintaining or carrying inventory. The cost of holding inventory may be divided into two categories. Those that Arise Due to the Storing of Inventory: The main components of this category of carrying costs are i storage cost, that is, depreciation, insurance, maintenance of the building and utilities; ii insurance of inventory against fire and theft; iii deterioration in inventory because of pilferage, fire, technical obsolescence, style obsolescence and price decline; iv serving costs, such as labour for handling inventory, clerical and accounting costs.
The Opportunity Cost of Funds: This consists of expenses in raising funds interest on capital to finance the acquisition of inventory. If funds were not locked up in inventory, they would have earned a return. This is the opportunity cost of funds or the financial cost component of the cost. The carrying costs and the inventory size are positively related and move in the same direction. If the level of inventory increases, the carrying costs also increase and vice-versa.
Total Cost: The sum of inventory increases, the carrying costs represent the total cost of inventory. This is compared with the benefits arising out of inventory to determine the optimum level of inventory. How much inventory should be bought in a lot? Should the quantity to be downloadd be large or small? Such inventory problems are called Order quantity problems. The firm knows with certainty the annual usage consumption of a particular item of inventory.
The rate at which the firm uses inventory is steady over time. The orders placed to replenish inventory stocks are received at exactly that point in time when inventories reach zero. Order Point: Reorder Point: This is the point at which to order inventory-expressed equation-ally as: Lead Time in days X daily usage.
Lead Time: It is the time normally taken in receiving delivery after placing orders with suppliers. Safety Stock: Collateral Strength. Inventory Position 3. Agreement papers of all authorized persons like Debenture holders, Shareholders etc. All required documents. From this statement it can judge the financial strength of the Company. While analyzing of Financial Strength of the Company, Inventory is also having its own emphasis role.
Because if company is having less inventory than its requirement then company will get less finance from Banks and visa- versa.
So here high inventory means, high in the sense company should have sufficient inventory according to its order. Not more than its order. Let us have a look on some Inventory related Ratios and also some important financial ratios those, which are related to Inventory.
The financial statement provides a summarized view of the financial position and operations of a firm. The analysis of financial statement is, thus an important aid to financial analysis. Tasks of Financial analyst is to: In brief, financial analysis is the process of selection, relation and evaluation. Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationships between the items of the balance sheet and the profit and loss account.
Financial analysis can be under taken by management of the firm, or by parties out side the firm, viz. The nature of analysis will differ depending on the purpose of the analyst. Ratio Analysis related to Inventory Ratio analysis is a powerful tool of financial analysis. Ratios help to summarize large quantities of financial data and to make qualitative judgment about to form a qualitative judgment the focus of financial analysis is on the key figures in the financial statements and the significant relationships that exist between them.
Liquidity Ratios b. Activity Ratios c. Profitability Ratios A. Liquidity Ratios: Liquidity refers to the ability of the firm to meet its obligations in the Short run, usually one year. Liquidity ratios measure the ability of the firm to meet its current obligations.
Liquidity ratios by establishing a relationship between cash and other Current assets to Current obligations provide a quick measure of liquidity. A firm should ensure that it does not suffer from lack of liquidity, and also that it does not have excess liquidity. Therefore it is necessary to strike a proper balance between high liquidity and lack of liquidity. Following are some of the important liquidity ratios: Current Ratio 2. Quick Ratio 3. Net working Capital Ratio B.
Activity Ratios: Activity ratios are concerned with measuring the efficiency in asset management. Sometimes, these ratios are also called efficiency ratios or asset utilization ratios. The efficiency with which, assets are converted into sales.
For this reason, such ratios are also designated as turnover ratios. Turnover is the primary mode for measuring the extent of efficient employment of assets by relating the assets to sales.
An activity ratio may, therefore, be defined as a test of the relationship between sales and various assets of a firm. Several activity ratios can be calculated to judge the effectiveness of asset utilization. Inventory Turnover 2. Assets Turnover 3. FIFO Method: Under this method, as noted earlier, inventory is valued on the assumption of chronological cost flow.
The vale of inventory as show in the balance sheet would reflect the current cost, if FIFO method were used. LIFO Method: According to this method, obviously, the inventory figure would not appear in the balance sheet at the Current Cost. It will reflect rather the cost of raw materials downloadd in the past year.
Assuming rising prices, the inventory value based on the LIFO method would tend to be undervalued. For example inventory downloadd as early as six years or more. In that situation, the inventory figure included in the balance sheet would be actually the price paid on the download of inventory six years ago.
This would imply that the balance sheet would not reflect the current worth of the inventory. That the inventory value will not be correct is another way of saying that the balance sheet will present a distorted picture of the affairs of the firms.
Project On Inventory Management
The modified method will, thus, serve the needs of correct income determination as well as correct asset measurement. This increase in profit is termed as liquidation profit, which is equal to the difference between the current cost of inventory and the cost of inventory downloadd in the past. Logistics is the Organization of Services and Supplies. In fully export-oriented business this is one of the main department, where this department gets an approval to sell their goods in foreign countries.
And also their main intention is to maintain all documents of those that are related to the exporting of their products. Logistics Inventory Management: Yes, already we have observed about the meaning of Inventory Management in the Organization.
But in fully export oriented business; Inventory Management is a very important concept. Because every exporter or importer, they do not know about each other who are staying in other countries.
So every company, which are exporting or importing of materials, they should communicate each other through banks only.
These banks are listed by Central Bank of that Nation. This Working Capital can also financed by Banks. While in export oriented business it is slightly different task. For having an assistance by banks they should first evaluate followings: Some Financial Ratios 4. Agreement papers of all authorized persons like Debentures, Shareholders etc. Which are also parts of financing the working capital requirements of the Companies.
Commercial Papers CPs: In the recent past, Commercial Papers CPs have become one of the best methods for financing the working capital requirements of the companies. These guidelines apply to the companies trying to raise the funds by issuing the CPs. As per these guidelines, a a company means a company as defined in section I aa of Reserve Bank of India Act, Section I aa of Reserve Bank Act, defines a company as the company as the company as defined in section 3 of the companies Act, We will consider the bank as a source for financing the working capital requirement of the organizations under the following heads: Amount of Assistance To obtain the bank credit for financing the working capital requirements, the company is required to estimate the working capital requirement properly.
To estimate the requirement of working capital requirement properly, the company will be required to estimate its level of current assets and current liabilities properly, as working capital is the difference between current assets and current liabilities.
For this, the techniques like ratio analysis, trend analysis etc. More accurate the estimation of the level of current assets and current liabilities, more accurate the estimation of level of current capital.
Then, the company will have to approach the bank along with the necessary supporting data. On the basis of estimates submitted by the company, the bank may decide the amount of assistance that can be extended. While extending the working capital assistance, the bank may prescribe the margin money requirement.
The percentage of margin money stipulation may depend upon the credit standing of the borrowing company, fluctuations in the price of security and the directives of RBI from time to time. After deciding the amount of overall assistance to be extended to the company, the bank can disburse the amount in any of the following forms: Non-Fund Based Lending 2. Fund Based Lending. Non Fund Based Lending: In case of Non-Fund Based Lending, the lending bank does not commit any physical outflow of funds.
As such, the funds position of the lending bank remains intact. The Non-Fund Based Lending can be made by the banks in two forms: Bank Guarantees b.
Letter of Credit Fund Based Lending: In case of Non-Fund Based Lending, the lending bank commits the physical outflow of funds. As such, the funds position of the lending does not affected. The Fund Based Lending can be made by the banks in following forms: Loan b.
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Cash Credit d. Working Capital Term Loans f. Packing Credit Security for Assistance: The bank may provide the assistance in any of the modes as stated above. But normally no assistance will be available unless the company offers some security in any of the following forms. This inventory process is fully computerized and here paper work is very less.
Only maintaining of documents, which were sent by suppliers as like challans etc. Otherwise it is fully computerized. Through computers only Store Department receives download Order and by computer only they send documents of issuing of materials to manufacturing unit.
For easy to communicate and planning of production activity, Apex Auto Ltd Unit II has having only one Godown in Procedures involved in receiving and issuing of materials are as follows: download Order Number: This PO is comes from download Department.
This download Department gives a number for the each order made by download Department only. Before placing any order to suppliers they first checks the materials in inventory as to know about whether materials are available in Inventory or not. If not available in Inventory then only they will place an order according to the requirement.
So, normally it does not have any stocks in its inventory. For every order from customers they make a fresh download Order for downloading of materials. It means whatever the materials are requiring for present orders, those materials are only they kept as stocks in Inventory.
If these old stock is matches the requirements of product which has ordered now by its customers, then download Department will sent a notice to Inventory for issuing of those materials.
These old stock may be in form of Raw Material or in form of finished goods. Guard is not an employee of an organization. He is a contact-based employee. Are these received materials according to the download Order? Like i. Quantity ii. Date, etc. Is it having all required Challans or Invoices and also does it approved by authorized person? Is it having all required documents like Octroi etc. Is that Challan consisting the correct information of materials?
After completing of these processes, materials will send to inspection department. In this inspection department they inspect in-details of materials. According to that Card Inventory department should send the materials to manufacturing department. After receiving of materials by manufacturing department from inventory department they issue one document about received of materials, quantity, description of materials etc.
Manufacturing Department uses these materials for manufacturing purpose. In manufacturing process sometimes it may happens like some materials get damages and some are not fully matches with requirements.
Then those materials will be return to inventory. This report consists the information of Percentage of Utilized Materials for particular order and percentage of wastage of materials. This report will send to inventory and also to Merchandising Department. Return Back Materials from Manufacturing Units: Inventory takes those materials, which are return back from manufacturing units because of excess or surplus occurs while manufacturing of products.
Inventory issues these materials Buffer Stock only when it receives instruction from Merchandising and downloading Department. Rejected Materials: Inspection department make the rejection of materials, when materials are not as per requirements and not as per the order. These rejected materials are kept in separate section by Inventory Department.
Inventory department inform to download Department and also notice to Suppliers about rejection of materials. Or he may give some compensation for wrong supply and that is after paying of full payment of materials.
Inventory is again divided into 5 sections. Each is section handling by only one persons, with the help of 3 to 4 assistants, who helps in maintaining of materials at specific area. Five sections are as follows: Sections in Inventory D All bought out items are been stored here and processed to the manufacturing as when required D All consumables and tools and maintenance accessories are been stored in this section D All raw materials like direct, semi finished goods are stored in this section and processed to the manufacturing as when required and old stock and rejected items are also stored in this section.
D Gas tank and cylinders is stored in this section. There is a reason for download materials from multiple suppliers. The reason is if one supplier delays to fulfill the supply then there must be alternative supplier for it to fulfill the requirement. So there must me no stock outs in the production process Apex always downloads at bulk but by schedule wise. In other words they download materials at a time for specific order. They make the agreement of supplying materials only at once.
And they negotiate the price only at once that is before supplying of materials and once their agreement is over then they provide schedule to supplier to supply the materials at a specific time and at a specified quantity. So it reduces the spaces, which occupies in the Godown. So this method is suitable for this type of industry because of same orders from customers.Let us see the Meanings of each view one by one.
To study the inventory management based on the ratios 2. Material is a very important factor of production. At the end of every month the ledger will be closed and the closing balances will be struck. The inventories once downloadd and stored are normally difficult to dispose off at the same value. The solution provided by this system will be acceptable to ultimate solution for the stock management. Stores In Transit: This ratio indicates the relationship between inventory to working capital and it also indicates the amount to inventory tied up in the working capital and it also shows the efficiency of inventory management.
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