CHAPTER 1

INTRODUCTION

1.1 INTRODUCTION

Inventory management is the supervision of the supply, storage and

accessibility of items in order to ensure an adequate supply without excessive
oversupply. Inventory to many small business owners is one of the more visible and
tangible aspect of doing business. Raw materials, goods in process and finished goods
all represent various forms of inventory. Each type represents money tied up until the
inventory leaves the company as purchased products.

NEED FOR INVENTORY MANAGEMENT

Inventory management is a very important function that determines the

health of the supply chain as well as the impact of the financial health of the balance
sheet. Every organization constantly strives to maintain optimum inventory to be able
to meet its requirements and avoid over or under inventory that can impact the
financial figures.

Control of inventory, which typically represents 45% to 90% of all expenses

for business, is needed to ensure that the business has the right goods on hand
to avoid stock-outs, to prevent shrinkage(spoilage/theft), and to provide proper
accounting. Many businesses have too much of their limited resource, capital, tied up
in their major asset, inventory, worse, they may have their capital tied up in the wrong
kind of inventory. Inventory may be old, worn out, shopworn, obsolete, or the wrong
sizes or colors, or they may be an imbalance among different product lines that reduces
the customer appeal of the total operation.

Inventory control system range from eyeball system to reserve stock

system to perpetual computer-run systems. Valuation of inventory is normally stated at
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original cost, market value, or current replacement costs, whichever is lowest. This
practice is used because it minimizes the possibility of overstating assets. Inventory
valuation and appropriate accounting practices are worth a book alone and so are not
dealt with here in depth.

The ideal inventory and proper merchandise turnover will vary from one
market to another. Average industry figures serve as a guide for comparison. Too large
an inventory may not be justified because the turnover does not warrant investment.
On the other hand, because products are not available to meet demand, too small an
inventory may minimize sales and profits as customers go somewhere else to buy what
they want where it is immediately available. Minimum inventories based on recording
time need to become important aspects of buying activity. Carrying costs, material
purchases, and storage costs are all expensive. However, stock outs are expensive also.
All of those costs can be minimized by efficient inventory policies.

Different Types of Inventory

Inventory control involves the procurement, care and disposition of

materials. There are three kinds of inventory that are of concern to managers;
Raw materials,
In-process or semi-finished goods,
Finished goods

If a manager effectively controls these three types of inventory, capital can

be released that may be tied up in unnecessary inventory, production control can be
improved and can protect against obsolescence, deterioration and/or theft

Inventory of materials occurs at various stages and departments of an

organization. A manufacturing organization holds inventory of raw materials and
consumables required for production. It also holds inventory of semi-finished goods at
various stages in the plant with various departments.

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 Finished goods inventory is held at plant, FG stores, distribution centers etc.
further both raw materials and finished goods those that are in transit at various
locations also form a part of inventory depending upon who owns the inventory at the
particular juncture. Finished goods inventory is held by the organization at various
stocking points or with dealers and stockiest until it reaches the market and end
customers.

Besides raw materials and finished goods, organizations also hold inventories
of spare parts to service the product. Defective products, defective parts and scrap also
form a part of inventory as long as these items are inventoried in the books of the
company and have economic value.

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Types of Inventory by Function;

INPUT PROCESS OUTPUT

Raw Materials Work In process Finished goods

Consumables required for semi-finished production in Finished goods at

processing. E.g.: fuel, various stages, lying with distribution centers
stationary, bolts & nuts various departments like throughout supply chain
etc. required in production, WIP stores, QC,
manufacturing final assembly, paint shop,
packing, outbound stores etc.

Maintenance Production waste and scrap Finished goods in transit

items/consumables
Packing materials Rejections and defectives Finished goods with
stockiest and dealers
Local purchased items Spare parts stocks &
required for production bought out items
Defectives, rejects and
sales returns

Repaired stock and parts

sales promotion &

sample stocks

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Reasons for Inventory Management

Helps balance the stock as to value, size, color, style, and price line in
proportion to demand or sales trends.
Help plan the winners as well as move slow sellers
Helps secure the best rate of stock turnover for each item.
Helps reduce expenses and markdowns.
Helps maintain a business reputation for always having new, fresh merchandise
in wanted sizes and colors

Inventory Control Records

Inventory control records are essential to making buy-and-sell decisions.

Some companies control their stock by taking physical inventories at regular intervals,
monthly or quarterly. Others use a dollar inventory record that gives a rough idea of
what the inventory may be from day to day in term of dollars. If your stock is made up
of thousands of items, as it is for a convenience type store, dollar control may be more
practical than physical control. However, even with this method, an inventory count
must be taken periodically to verify the levels of inventory by item.

Perpetual inventory control records are most practical for big-ticket items. With such
items it is quite suitable to hand count the starting inventory, maintain a card for each
item or group of items, and reduce the item count each time a unit is sold or transferred
out of inventory. Periodic physical counts are taken to verify the accuracy of the
inventory card.

Out-of-stock sheets, sometimes called want sheets, notify the buyer that it is time to
reorder an item. Experience with the rate of turnover of an item will help indicate the
level of inventory at which the unit should be reordered to make sure that the new
merchandise arrives before the stock is totally exhausted.

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Open-to-buy records help to prevent ordering more than is needed to meet demand or
to say within a budget. These records adjust your order rate to the sales rate. They
provide a running account of the dollar amount that may be bought without departing
significantly from the pre-established inventory levels. An open-to-buy record is
related to the inventory budget. It is the different between what has been budgeted and
what has been spent. Each time a sale is made, open-to-buy is increased (inventory is
reduced). Each time merchandise is purchased;

Open-to-buy is reduced (inventory is increased). The net effect is to help

maintain a balance among product lies within the business, and to keep the business
from getting overloaded in one particular area.

Purchase order files keep track of what has been ordered and the status or expected
receipt date of materials. It is convenient to maintain these files by using a copy of
each purchase order that is written. Notations can be added or merchandise needs
updated directly on the copy of the purchase order with respect to changes in price of
delivery dates.

Supplier files are valuable references on suppliers can be very helpful in negotiating
price, delivery and items. Extra c copies of purchase orders can be used to create these
files, organized alphabetically by supplier, and can provide a fast way to determine
how much business is done with each vendor. Purchase order copies also serve to
document ordering habits and procedures and so may be used to help reveal and/or
resolve future potential problems.

Returned goods files provide a continuous record of merchandise that has been
returned to suppliers. They should indicate amounts, dates and reasons for the returns.
This information is useful in controlling debits, credits and quality issues.

Price books, maintain in alphabetical order according to supplier, provide a record of

purchase prices, selling prices, markdown, and markups. It is important to keep this

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record completely up to date in order to be able to access the latest price and profit
information on materials purchased for resale.

Controlling inventory

Controlling inventory does not have to be an onerous or complex proposition. It is a

process and thoughtful inventory management. There are no hard and fast rules to
abide by, but some extremely useful guidelines to help your thinking about the subject.
A five step process has been designed that will help any business bring this potential
problem under control think systematically through the process and allow the business
to make the most efficient use possible of the resources represented. The final
decisions, of course, must be the result of good judgment, and not the product of a
mechanical set of formulas.

STEP 1: Inventory planning

Inventory control requires inventory planning. Inventory refers to more than the goods
on hand in the retail operation, service business, or manufacturing facility. It also
represents goods that must be in transit for arrival after the goods in the store or plant
are sold or used. An ideal inventory control system would arrange for the arrival of
new goods at the same moment the last item has sold or used. The economic order
quantity, or base orders, depends upon the amount of cash (or credit) available to invest
in inventories, the number of units that qualify for a quantity discount from the
manufacturer, and the amount of time goods in shipment

STEP 2: Establish order cycles

If demand can be predicted for the product or if demand can be measured on

a regular basis, regular order quantities can be set up that takes in to consideration the
most economic relationship among the cost of preparing an order, the aggregate
shipping costs, and the economic order cost. When demand is regular, it is possible to
program regular ordering levels so that stock-outs will be avoided and costs will be

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minimized. If it is known that every so many weeks or months a certain quantity of
goods will be sold at a steady pace, then replacements should be scheduled to arrive
with equal regularity. Time should be spent developing a system tailored to the needs
of each business. It is useful to focus on items whose costs justify such control,
recognizing that in some cases control efforts may cost more the items worth. At the
same time, it is also necessary to include low return items that are critical to the overall
sales effort. If the business experiences seasonal cycles, it is important to recognize the
demands that will be placed on suppliers as well as other sellers.

A given firm must recognize that if it begins to run out of product in the
middle of a busy season, other sellers are also beginning to run out and are looking for
more goods. The problem is compounded in that the producer may have already
switched over to next seasons production and so is not interested in (or probably even
capable of filling any further order for the current selling season. Production resources
are likely to already be allocated to filling orders for the next selling season.
production resources are likely to already be allocated to filling orders for the next
selling season. Changes in the momentum would be extremely costly for both the
supplier and the customer.

On the other hand, because suppliers have problems with inventory control,
just as sellers do, they may be interested in making deals to induce customers to
purchase inventories off-season, usually at substantial savings. They want to shift the
carrying costs of purchase and storage from the seller to the buyer. Thus, there are
seasonal implications to inventory control as well, both positive and negative. The
point is that seasonable implications must be built into the planning process in order to
support an effective inventory management system.

STEP 3: Balance Inventory Levels

Efficient or inefficient management of merchandise inventory by a firm is a

major factor between healthy profits and operating at a loss. There are both market-

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related and budget-related issues that must be dealt with in terms of coming up with an
ideal inventory balance

Is the inventory correct for the market being served?

Does the inventory have the proper turnover?

What is the ideal inventory for a typical retailer or wholesaler n

this business?

To answer the last question first, the ideal inventory is the inventory that does
not lose profitable sales and can still justify the investment in each part of its whole.

An inventory that is not compatible with the firms market will lose profitable
sales. Customers who cannot find the items they desire in one store or from one
supplier are forced to go to a competitor. Customer will be especially irritated if the
item out of stock is one they would normally expect to find from such a supplier.
Repeated experiences of this type will motivate customers to become regular
customers of competitors.

STEP 4: Review stocks

Items sitting on the shelf as obsolete inventory are simply dead capital.
Keeping inventory up to date and devoid of obsolete merchandise is another critical
aspect of good inventory control. This is particularly important with style merchandise,
but it is important with any merchandise that is turning at a lower rate than the average
stock turns for that particular business. One of the important principles newer sellers
frequently find difficult is need to mark down merchandise that is not moving well.

Markups are usually highest when a new style first comes out. At the
style fades, efficient sellers gradually begin to mark it down to avoid being stuck with
large inventories, thus keeping inventory capital working. They will begin to mark
down their inventory, take less gross margin, and return the funds to working capital
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rather than have their investment stand on the shelves as obsolete merchandise. Mark
downs are important part of the working capital cycle. Even though the margins on
markdown sales are lower, turning this items in to cash allows you to purchase other,
more current goods, where you can make the margin you desire.

Keeping an inventory fresh and up to date requires constant attention by

any organization, large or small. Style merchandise should be disposed of before the
style fades. Fad merchandise must have its inventory levels kept in line with the
passing fancy. Obsolete merchandise usually must be sold at less than normal markup
or even as loss leaders where it is priced more competitively. Loss leader pricing
strategies can also serve to attract mores consumer traffic for the business thus
creating opportunities to all other merchandise as well as the obsolete items.
Technologically obsolete merchandise should normally be removed from inventory at
any cost.

Stock turnover is really the way businesses make money. it is not much
the profit per unit of sales that makes money for the business, but sales on a regular
basis over time that eventually results in profitability. the stock turnover is the rate at
which the average inventory is replaced or turned over, throughout a pre-defined
standard operating period, typically one year. It is generally seen as the multiple that
sales represent of the average inventory for a given period of time.

Turnover averages are available for virtually any industry or business

maintaining inventories and having sales. These figures act as an efficient and effective
benchmark with which to compare the business in question, in order to determine its
effectiveness relative to its capital investment. Too frequent inventory turns can be as
great potential problem as too few.

Too frequent inventory turns may indicate the business is trying to overwork a
limited capital base, and may carry with it the attendant costs of stock-outs and
unhappy and lost customers.

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 Stock turns or turnover is the number of times the average inventory of a
given product is sold annually. It is an important concept because it helps to determine
what the inventory level should be to achieve or support the sales levels predicted or
desired. Inventory turnover is computed by dividing the volume of goods sold by the
average inventory. Stock turns or inventory turnover can be calculated by the following
equations:

Cost of goods sold

Inventory Turnover Ratio=
Average inventory at cost

Sales
Inventory Turnover Ratio=
Average inventory

If the inventory is recorded at cost, stock turn equals cost of goods sold
divided by the average inventory. If the inventory is recorded at sales value, stock turn
is equal to sales divided by average inventory. Stock turns four times a year on the
average for the many businesses. Jewelry stores are slow, with two turns a year and
grocery stores may go up to 45 turns a year.

If the dollar value of a particular inventory compares favorably with the

industry average, but the turnover of the inventory is less than the industry average, a
further analysis of that inventory is needed. Is it too heavy in some areas? Are there
reasons that suggest more inventories are needed in certain categories? Are there
conditions to peculiar to that particular firm? The point is that all markets are not
uniform and circumstances may be found that will justify a variation from average
figures.

In the accumulation of comparative data for any particular type of firm,

a wide variation will be found for most significant statistical comparisons. Averages
are just that, and often most firms in the group are somewhat different from the result.
Nevertheless, they serve as very useful guides for the adequacy of industry turnover,
and for other ratios as well. The important thing for each firm is to know how the firm

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compares with the averages and to determine whether deviations from the averages are
to its benefit or disadvantage.

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STEP 5: Follow-up and control

Periodic reviews of the inventory to detect slow-moving or obsolete

stock and to identify fast sellers are essential for proper inventory management. Taking
regular and periodic inventories must be more than just totaling the costs. Any clerk
can do the work of recording an inventory. However, it is the responsibility of key
management to study the figures and review the items themselves in order to make
correct decisions about the disposal, replacement, or discontinuance of different
segments of the inventory base.

Just as airline cannot make money with its airplanes on the ground, a
firm cannot earn a profit in the absence of sales of goods. Keeping the inventory
attractive to customers is a prime prerequisite for healthy sales. Again, the sellers
inventory is usually his largest investment. It will earn profits in direct proportion to
the effort and skill applied in its management.

Inventory quantities must be organized and measured carefully.

Minimum stocks must be assured to prevent stock-outs or the lack of product. At the
same time, they must be balanced against excessive inventory because of carrying
costs. In larger retail organizations and in many manufacturing operations, purchasing
has evolved has a distinct new and separate phase of management to achieve the dual
objective of higher turnover and lower investment. If this type of strategy is to be
utilized, however, extremely careful attention and constant review must be built into
the management system in order to avoid getting caught short by unexpected changes
in the larger business environment.

Caution and periodic review of reorder points and quantities are must.
Individual market size of some product can change suddenly and corrections should be
made.

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 In part of Summer Placement Project, taken up my project at MALCO Ltd. And
collecting necessary data from the company for a period of 45 days on the topic A
Study on Inventory Management at MALCO Limited.

Structured questionnaire is used to collecting feedback from the respondents.

Tools which are used to analysis Ratio Analysis and Chi-square Test.

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 1.2. INDUSTRY PROFILE

COTTON TEXTILE INDUSTRY IN INDIA

A cotton mill is a factory housing powered spinning or weaving machinery for

the production of yarn or cloth from cotton, an important product during the Industrial
Revolution when the early mills were important in the development of the factory
system.

Although some were driven by animal power, most early mills were built in
rural locations near to fast-flowing rivers and streams and had water wheels to power
them, The development of viable rotative steam engines by Boulton and Watt led from
1781 to the growth of larger steam-powered mills and allowed them to be concentrated
in urban mill towns, most notably Manchester, which with neighboring Salford had
more than 50 mills by 1802.

The mechanization of the spinning process in the early factories was

instrumental in the growth of the machine tool industry, enabling the construction of
larger cotton mills. Limited companies were developed to construct mills, and the
trading floors of the cotton exchange in Manchester, created a vast commercial city.
Mills generated employment drawing workers from largely rural areas and expanding
urban populations. They provided incomes for girls and women. Child labor was used
in the mills, and the factory system led to organized labor. Poor conditions became the
subject of exposs, and in England, the Factory Acts were written to regulate them.

The mechanization of the spinning process in the early factories was

instrumental in the growth of the machine tool industry, enabling the construction of
larger cotton mills. Limited companies were developed to construct mills, and the
trading floors of the cotton exchange in Manchester, created a vast commercial city.
Mills generated employment drawing workers from largely rural areas and expanding
urban populations. They provided incomes for girls and women. Child labour was used

15
in the mills, and the factory system led disorganized. Poor conditions became the
subject of exposs, and in England, the Factory Acts were written to regulate them.

The archaeological surveys and studies have found that the people of Harrapan
Civilization] knew weaving and the spinning of cotton four thousand years ago.
Reference to weaving and spinning materials is found in the Vedic Literature also.

There was textile trade in India during the early centuries. A block printed and
resist-dyed fabrics, whose origin is from Gujarat is found in tombs of Fostat,
Egypt. This proves that Indian export of cotton textiles to the Egypt or the Nile
Civilization in medieval times were to a large extent. Large quantity of north Indian
silk was traded through the silk route in China . to the western countries. The Indian silk
were often exchanged with the western countries for their spices in the barter system.
During the late 17th and 18th century there were large export of the Indian cotton to
the western countries to meet the need of the European industries during industrial
revolution. Consequently, there was development of nationalist movement like the
famous Swadeshi movement which was headed by the Aurobindo Ghosh.

There was also export of Indian silk, Muslin cloth of Bengal, Bihar and Orissa
to other countries by the East Indian company. Bhilwara is known as textile city.

India is the second largest producer of textiles and garments in the world. The
Indian textiles and apparel industry is expected to grow to a size of US$ 223 billion by
2021, according to a report by Technopak Advisors. This industry accounts for almost
24% of the worlds spindle capacity and 8% of global rotor capacity. Abundant
availability of raw materials such as cotton, wool, silk and jute as well as skilled
workforce have made the country a sourcing hub

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 The textiles industry has made a major contribution to the national economy in
terms of direct and indirect employment generation and net foreign exchange earnings.
The sector contributes about 14 per cent to industrial production, 4 per cent to the gross
domestic product (GDP), and 27 per cent to the country's foreign exchange inflows. It
provides direct employment to over 45 million people. The textiles sector is the second
largest provider of employment after agriculture. Thus, growth and all round
development of this industry has a direct bearing on the improvement of the Indias
economy.GROWTH
The Indian textiles industry is set for strong growth, buoyed by strong domestic
consumption as well as export demand.
The most significant change in the Indian textiles industry has been the advent
of man-made fibres (MMF). India has successfully placed its innovative range of
MMF textiles in almost all the countries across the globe. MMF production recorded
an increase of 10 per cent and filament yarn production grew by 6 per cent in the
month of February 2014. MMF production increased by about 4 per cent during the
period April 2013February 2014.
Cotton yarn production increased by about 10 per cent during February 2014
and by about 10 per cent during April 2013February 2014. Blended and 100 per cent
non-cotton yarn production increased by 6 per cent during February 2014 and by 8 per
cent during the period April 2013February 2014.
Cloth production by mill sector registered a growth of 9 per cent in the month
of February 2014 and of 6 per cent during April 2013February 2014.
Cloth production by power loom and hosiery increased by 2 per cent and 9 per
cent, respectively, during February 2014. The total cloth production grew by 4 per cent
during February 2014 and by 3 per cent during the period April 2013February 2014.
Textiles exports stood at US$ 28.53 billion during April 2013January 2014 as
compared to US$ 24.90 billion during the corresponding period of the previous year,
registering a growth of 14.58 per cent. Garment exports from India is expected to touch

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US$ 60 billion over the next three years, with the help of government support, said Dr
A Sakthivel, Chairman, Apparel Export Promotion Council (AEPC).
The textiles sector has witnessed a spurt in investment during the last five
years. The industry (including dyed and printed) attracted foreign direct investment
(FDI) worth Rs 6,710.94crore (US$ 1.11 billion) during April 2000 to February 2014.

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1.3 COMPANY PROFILE

The Malappuram Co-operative Spinning Mill was established in the year 1979
and started the commercial production on 1980. Though the mill was started under the
co-operative act the mill is now managed by Government of Kerala, Industries
Department and it comes under the umbrella of Texfed, where all the co-operative
spinning mills are functioning. The units of Texfed and KSTC are coming under the
Textile sector of Government of Kerala, Industries department.

The Malappuram Co-Operative spinning mill has got a spindle age of 25000
and is on the way of modernization through NCDC/Government of Kerala
Modernization project

PRODUCTS

The Malappuram co-operative spinning mill is a specialized mill in P/C

blended yarn and also a market leader for more than three decades in P/C blended
Yarn. The product of the mills is very well accepted in the upcountry market earning
goodwill for the same.

The mill currently producing counts from 45s to 66s P/C both in carded and
combed, besides 100% Polyester Yarn in 62s count.

The mill is now planning to switchover to completely blends in all counts to

70/30(70% Polyster,30% Cotton) with immediate effect as against various blends in
the mill producing presently ie,65/35 and 80/20 The mill is producing all above counts
in single yarn for weaving applications.

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1.4 NEED FOR STUDY

The Textile industry in India traditionally, after agriculture, is the only industry
that has generated huge employment for both skilled and unskilled labor in textiles.
The textile industry continues to be the second largest employment generating sector in
India. It offers direct employment to over 35 million in the country.

There is very much need for the inventory management in any type of industry
and also which will be helpful in proper management of the raw materials.

1.5 SCOPE OF THE STUDY

Inventory management is one of the important concept and practice that is

followed in many manufacturing industries involved in supply chain management. The
main reason is inventory holding is a capital lock and also it helps the process flow of
production. In this project inventory control and distribution management is
concentrated because of its future demand. The main scope of study in this project is to
create an effective inventory process which in turn helps to reduce the product returns
and inventory costs. Through this over-stock age can be controlled which in turn
controls the inventory flow.

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1.6 OBJECTIVES OF THE STUDY

1.6.1 PRIMARY OBJECTIVES

To study the inventory management system followed in MALCO, LTD.

1.6.2 SECONDARY OBJECTIVES

To study about the status of the present inventory system.

To study about inventory turnover.
To study about material handling facilities.
To study whether there is any alternative solution to be implemented to

overcome the difficulties and problems in the current information.

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 CHAPTER 2

REVIEW OF LITERATURE

2.1 REVIEW OF LITERATURE

MULTI-ECHELON INVENTORY MANAGEMENT IN SUPPLY CHAINS

WITH UNCERTAIN DEMAND AND LEAD TIMES: LITERATURE REVIEW
FROM AN OPERATIONAL RESERCH PERSPECTIVE.

Gumus et al., (2007) talks about Proceeding of the Institution of Mechanical

Engineers--part B Engineering Manufacture (Professional Engineering Publishing),
oct2007, vol. 221 issue 10, p1553-1570, the increasing competitive pressures and
market globalization are forcing firms to develop supply chains that can quickly
respond to customer needs. To remain competitive and decrease inventory, these firms
must use multi-echelon inventory management interactively, while reducing
operating costs and improving customer service.

TWO WAREHOUSE INVENTORY MODELS FOR SINGLE VENDOR

MULTIPLE RETAILERS WITH PRICE AND STOCK DEPENDENT
DEMAND.

Panda et al., (2010) Applied Mathematical Modeling, Nov2010, vol.34 issue

11, p3571-3585, 15p; this paper talk about a single vendor multiple retailer inventory
model of an item is developed where demand of the item at every retailer is linearly
dependent on stock and inversely on some powers of selling price. Item is produced by
the vendor and is distributed to the retailers following basic period policy. According to
this policy item is replenished to the retailers at a regular time interval called basic
period (BP) and replenishment quantity is sufficient to last for the period. Due to the
scarcity of storage space at market places, every retailor uses a showroom at the
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market place and a warehouse to store the item, little away from the market place.
Item is sold from the showroom and is filled up from the warehouse in a bulk release
pattern. Some of the inventory parameters are considered as fuzzy in nature and model
is formulated to maximize the average profit from the whole system. Imprecise
objective is transformed to equivalent deterministic ones using possibility/necessity
measure of fuzzy events with some degree of optimism/pessimism. A genetic algorithm
(GA) is developed with roulette wheel selection, arithmetic crossover and random
mutation and is used to solve the model. In some complex cases, with the help of
above GA, fuzzy simulation process is used to derive the optimal decision. The model
is illustrated through numerical examples and some sensitivity analyses are presented.
[copyright &y& Elsevier]; DOI: 10.1016/j.apm.2010.03.007; (AN50971656)

THE INVENTORY MANAGEMENT SYSTEM FOR AUTOMOBILE

SPAREPARTS IN A CENTRAL WAREHOUSE.

Li and Kuo (2008) Expert System Applications, feb2008, vol. 34 issue 2,

p1144-1153, 10p; Because of the complex structure of spare parts supply chain, the
conventional approaches, which do not consider the relationship between decision
factors globally, cannot achieve the optimal performance. Therefore, this paper aims to
develop an enhanced fuzzy neural network (EFNN) based decision support system for
managing automobile spares inventory in a central warehouse. In this system, the
EFNN is utilized for forecasting the demand for spare parts, however, without
considering relevant domain knowledge, traditional neural networks are found to be
suffered from the problem of low accuracy of forecasting unseen examples. Therefore,
in our EFNN, the following improvement is made: First, it assigns connection weights
based on the fuzzy analytic hierarchy process (AHP) method without painstakingly
turning them. Second, by generating and refining activation functions according to
genetic algorithm, our EFNN can provide comprehensive and accurate activation

23
functions and fit a wider range of nonlinear models. Last, but not least, an adaptive
input variable is introduced to decrease the impact of the bullwhip effect on the
forecasting accuracy. The proposed system is evaluated with the real word data and
experimental that our EFNN results indicate that our EFNN outperformance other five
models in fill rate and stock cost measures.

A LONGITUDIAL STUDY OF PRIVATE WAREHOUSE INVESTMENT

STRATEGIES.

Kohn et al., (2009) Journal of transportation management, Fall2009, vol.20 issue 2,

p71-86,16p; this article revisits private warehouse investment decision making, a topic
previously examined in 1989 by McGinnis, kohn, and myers (1990). Since then there
has been a substantial amount of discussion regarding the scope and nature of logistics/
supply chain management. In particular the roles of private, contract, and public
warehousing, has been discussed, increased emphasis on financial performance and
strategic decision making may have altered the criteria for investment decisions in
private warehousing, increased coordination of supply chains may have altered the
relative importance of private, contract, and private warehousing, and increasing
emphasis on controlling inventory investment may have shifted inventory
responsibilities onto suppliers and customers. Empirical data was collected in 1999 and
2008 regarding warehouse investment decisions, in large United State manufacturing
firms. This research focused on private warehouse investment decisions, topics that
might affect those decisions, and the mix of private, contract, public, and other
warehouse options. The result of the 1999 and 2008 data were compared to the earlier
findings reported by McGinnis, Kohn, and Myers. Changes in private warehouse
investment strategies, the roles of market/product mix uncertainties and availability of
for-hire warehouse providers, and changes in warehouse mix were examined.
Implications for practitioners, teachers, and researchers of transportation, supply chain
management, logistics, and warehousing are discussed.

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25
POSSIBILITY AND NECESSITY REPRESENTATIONS OF FUZZY
INEQUALITY AND ITS APPLICATION TO TWO WAREHOUSE
PRODUCTION-INVENTORY PROBLEM.

Maity (2011) APPLIED MATHEMATICAL MODELING, Mar2011, vol.35 issue

3, p1252-1263,12p; in this paper, possibility and necessity representations of fuzzy
inequality constraints are presented and then crisp versions of the constraints are
derived. Here analogous to chance constraints, real-life necessity and possibility
constraints in the context of two warehouse multi-item dynamic production-inventory
control system are defined and defuzzified following followings fuzzy relations.
Hence, a realistic two warehouse multi-item production-inventory model with fuzzy
constraints has been formulated for a finite period of time and solved for optimal
production with the objective of having maximum profit. The rate of production is
unknown, assumed to be a function of time and considered as a control variable. Also
the present system is produces some defective units along with the perfect ones and the
rate of produced defective units is stochastic in nature. Demand of the good units is
stock dependent and known and the defective units are sold at a reduced price. The
space required per unit item and available storage spaces are assumed to be imprecise.
The inequality of budget constraints is also imprecise. The space and budget
constraints are expressed as necessity and/or possibility types. The model is reduced to
an equivalent deterministic model using fuzzy relations and solved for optimum
production function using pontryagins optimal control policy, the Kuhn-Tucker
conditions and Generalized Reduced Gradient (GRG) technique. The model is
illustrated numerically and values of demand, optimal production function and stock
level are presented in both tabular and pictorial forms.

26
 CHAPTER 3

RESEARCH METHODOLOGY

Research methodology is a system of models, procedures and

techniques used to find the result of a research problem. Research is the systematic
process of collecting and analyzing information or data in order to increase our
understanding of the phenomenon about which are concerned or interested. Research is
an endeavor to discover answer to logical and practical problems through the
application of scientific method. It is a systemized effort to gain knowledge. scientific
method attempts to achieve a systematic interrelation of facts by experimentation,
observation, and logical arguments from accepted postulates and a combination of
these three in varying proportions. Methodology concentrates more towards the nature
and kinds of processes to be followed in attaining an objective.

3.1 RESEARCH DESIGN

In this research the research design used was descriptive research design.
Descriptive studies are aimed at finding out what is so observational and survey
methods are frequently used to collect descriptive data.

3.2 SAMPLING DESIGN

3.2.1 POPULATION SIZE

The population size is 462 employees.

3.2.2 SAMPLE SIZE

The sample size chosen for the study is 30 employees.

27
 3.2.3 SAMPLING UNIT

Sampling unit is the production employees of MALCO Ltd. This

includes Production Manager, Supervisors, Clerks, Store Keepers and Labors.

3.2.4 SAMPLING METHOD

Non-Probability Sampling

Non-probability sampling is a sampling technique where the samples

are gathered in a process that does not give all the individuals in the population
equal chances of being selected.

PERIOD OF THE STUDY

The period of the study under taken to complete the project was from
May 2 to June 26, 2016

3.3 DATA COLLECTION

QUESTIONNAIRE DESIGN

Structured questionnaire is used to collect the feedback from the

respondents. The questionnaire is used for collecting information from respondent
of questions. Questionnaire used for gathering suggestion from respondent are
classified in to open ended, closed ended and multiple questions.

PRIMARY DATA COLLECTION

The primary data are those which are collected as fresh and for the first time.
And thus happen to be original in character. Primary data may pertain to demographic
and socioeconomic characteristics of consumers, attitude and opinions of people their
awareness and knowledge.

28
METHOD USED FOR COLLECTING PRIMARY DATA

Structured questionnaire is used to collect the primary data. The questionnaire

is used for collecting information from respondent.

SECONDARY DATA COLLECTION

The process of secondary data collection and analysis is called desk

research. This includes data which are collected from earlier research work.
Researchers believe that a problem can be partially solved with the help of
secondary data. The researcher using secondary data must also know the
fundamentals of primary data collection.

The data regarding inventory for the last five years in collected from the
Stock In and Out register and Balance sheet.

METHOD USED FOR COLLECTING SECONDARY DATA

Internet

3.4 TOOLS USED FOR ANALYSIS

RATIO ANALYSIS
Inventory Turnover Ratio
Inventory Holding Ratio
Inventory to Sales Ratio
Inventory to Current Asset Ratio
Inventory to Working Capital Ratio
CHI-SQUARE TEST

29
3.5LIMITATIONS OF THE STUDY

Since the project is done at a Public and Private Limited Company and the
company has been around some years of details were not able to get and also the most
of the employees are from other departments and they could not be reached for a study,
so the study is based on sample data with support and corrective information of
department workers.

The information given by the customers may be biased.

Most of the respondents were indifferent to give their suggestion for the
survey.
Some of the respondents should have not given actual facts in order to
quickly finish off the interview due to their time constraint.
The customers are busy while collecting the information so there may be
inaccuracy in information given by the customers.

30
 CHAPTER 4
DATA ANALYSIS AND INTERPRETATION

INVENTORY TURNOVER RATIO

Cost of goods sold
Inventory Turnover Ratio=
Average inventory at cost

Sales
Inventory Turnover Ratio=
Average inventory

TABLE NO. 4.1 INVENTORY TURNOVER RATIO

COST OF AVERAGE
YEAR GOODS INVENTORY RATIOS
SOLD (Rs.) (Rs.) (TIMES)

2010-11 170074136.3 22399143.92 7.5

2011-12 138664410.1 18816700.89 7.36

2012-13 140046588.5 11191847.82 12.51

2013-14 146626438.4 10566005.83 13.87

2014-15 129272432 10850478.44 11.91

31
 CHART NO. 4.1 INVENTORY TURN OVER RATIO

RATIOS (TIMES)
16

14
13.87
12 12.51
11.91
10
RATIOS (TIMES)
8
7.5 7.36
6

0
2010-11 2011-12 2012-13 2013-14 2014-15

4.1 INTERPRETATION
From the above table and chart, it has been observed that the inventory turnover
ratio of the company is showing downward trend from the year 2010-2011 till the year
2011-I2. The ratio is showing an increased trend from the year 2012-13 to 2013-2014
the ratio is 12.51 and 13.87 respectively. The ratio was 7.5 in the year 2010-2011 and
it increased to 11.91. In the year 2014-15. In 2012-13 to 2014-15 the Inventory
Turnover Ratio is above the standard (8 times). It indicates that firms stock turnover
or converted into sales from 7.5 to 11.91 times. Here the goods are laying in store
from 49 to 31 days. Thus the inventory management or inventory policy is good.

32
INVENTORY HOLDING RATIO

365
Inventory Holding Ratio=
Inventory turnover ratio

TABLE NO.4.2 INVENTORY HOLDING RATIO

YEAR ITR
DAYS IHR
(times)

2010-11 365 7.5 49

2011-12 365 7.36 50

2012-13 365 12.51 29

2013-14 365 13.87 26

2014-15 365 11.91 31

Average 365 10.63 37

CHART NO. 4.2 INVENTORY HOLDING RATIO

33
 IHR
60

50
49 50

40

IHR
30 31
29
26
20

10

0
2010-11 2011-12 2012-13 2013-14 2014-15

4.2. INTERPRETATION
From the above table and chart, it can be observed that the inventory holding
ratio of the company shows a fluctuating trend. From the year 2010-2011 onwards till
the year 2011- 12 trend increased. During from 2011-12 to 2013-14, it shows a
downward trend as 50 and 26 respectively. The ratio was 49in the year 2010-2011,
but it decreased to 31 in the year 2014-15.so we can conclude that the inventory
holding ratio is decreased. Here it indicates the inventory management or inventory
policy is good because the conversion period is less. A shorter inventory period
indicates that the inventory is sold fast.

34
INVENTORY TO SALES RATIO

Total Inventory
Inventory Sales Ratio=
Sales for t h e period

TABLE NO.4.3 INVENTORY SALES RATIO

INVENTORY
YEAR INVENTORY SALES SALES
RATIO
(Times)

2010-11 35732541.16 279724184.4 0.12

2011-12 19792078.64 181370255.3 1.09

2012-13 15972787.27 217530438.9 0.073

2013-14 16424364.18 215678305.8 0.076

2014-15 11082194.84 197682356.5 0.056

CHART NO.4.3 INVENTORY TO SALES RATIO

35
 INVENTORY SALES RATIO (TIME)
1.2

1.09
1

0.8

INVENTORY SALES RATIO

(TIME)
0.6

0.4

0.2

0.12
0
2010-11 2011-12 2012-13
0.07 2013-14
0.08 2014-15
0.06

4.3 INTERPRETATION
From the above table and chart, it has been observed that the inventory to sales
ratio of the company is showing a fluctuating trend. During the year 2010-2011 and
2011-12 the ratio is increased from 0.12 to 1.09. Then it decrease to 0.073in the year
2012-2013. Then it increase to 0.076 in the year 2013-2014. In the year 2010-2011 the
figure is 0.12,by comparing it with 2014-2015,the figure also 0.056,So it is concluded
that the inventory to sales ratio is fluctuating trends. In 2011-12 it show a high
fluctuation why because the sales are less than the inventory.

36
INVENTORY TO CURRENT ASSETS RATIO

Inventory
Inventory current asset Ratio=
Current assets

TABLE NO.4.4 INVENTORY TO CURRENT ASSET RATIO

INVENTORY
CURRENT TO
YEAR INVENTORY
ASSETS CURRENT
ASSETS
(Times)

2010-11 35732541.16 65187242.99 0.54

2011-12 19792078.64 50514030.13 0.39

2012-13 15972787.27 65479502.11 0.24

2013-14 16424364.18 55494686.64 0.29

2014-15 11082194.84 56717887.40 0.19

37
 CHART NO.4.4: INVENTORY TO CURRENT ASSETS RATIO

INVENTORY TO CURRENT ASSETS (Times)

0.6

0.54
0.5

0.4
0.39
INVENTORY TO CURRENT
ASSETS (Times)
0.3
0.29
0.24
0.2
0.19

0.1

0
2010-11 2011-12 2012-13 2013-14 2014-15

4.4 INTERPRETATION
From the above table and chart, it can be observed that the inventory to current
asset ratio of the company is showing a downward trend from the year 2010-11
onwards till the year ending 2012-13. The ratio is showing a declining trend from the
year 2010-11 onwards till the year ending 2011-12 as 0.54 and 0.24 respectively, but it
increased to 0.29 in the year 2013-14 and again decreases to 0.19 in the year 2014-
2015.So we can concluded that, it is the favorable condition of the company.

38
 INVENTORY TO NET WORKING CAPITAL RATIO

Inventory
Inventory net working capital=
Net working capital

TABLE NO.4.5 INVENTORY TO NET WORKING CAPITAL

INVENTORY TO
NET WORKING
YEAR INVENTORY NET WORKING
CAPITAL
CAPITAL RATIO
(Times)

2010-11 35732541.16 -14635741.40 -2.44

2011-12 19792078.64 -61798972.13 -0.32

2012-13 15972787.27 -35070450.04 -0.45

2013-14 16424364.18 -34512405.70 -0.47

2014-15 11082194.84 -25969809.45 -0.42

39
 CHART NO: 4.5 INVENTORY TO NET WORKING CAPITAL
RATIO

-0.42 2014-15

-0.47 2013-14

-0.45 2012-13

-0.32 2011-12

-2.44 2010-11

-3 -2.5 -2 -1.5 -1 -0.5 0

INVENTORY TO NET WORKING CAPITAL RATIO (TIMES)

4.5 INTERPRETATION
The position of Net Working Capital is more during the year 2011-12 which
shows a negative figure of -6,17,98,972. This negativity decreases and the Net
Working Capital-3,50,70,450 during 2012 -13, -3,45,12,405 during 2013-14 and
-2,59,69,809 during 2014-15 which means the position is improving. The inventory
position of the company is showing a fluctuating trend and there is a direct
relationship between the changes in inventory and changes in Net Working Capital.
But the company has to take steps to reduce its Current A/c balance to make the Net
Working Capital better in order to improve its liquidity position.

40
41
 RESULT FROM THE QUESTIONNAIR

TABLE NO: 4.6 GENDER

Valid Cumulative
Frequency Percent Percent Percent
Valid Male 27 90.0 90.0 90.0
Female 3 10.0 10.0 100.0
Total 30 100.0 100.0

4.6 INTERPRETATION

From the above table it can be interpreted that 30 of the respondents 27 are male and 3
females.

CHART NO: 4.6 GENDER

42
43
 TABLE NO: 4.7 DESIGNATION

Valid Cumulative
Frequency Percent Percent Percent
Valid Supervisor 4 13.3 13.3 13.3
Clerk 6 20.0 20.0 33.3
Labor 17 56.7 56.7 90.0
production
1 3.3 3.3 93.3
manager
store keeper 2 6.7 6.7 100.0
Total 30 100.0 100.0
4.7 INTERPRETATION
Here we can interpret that 30 of the respondents 17 are Labors,4 Supervisors,6
Clerks,1 Production Manager and 2 Store Keepers.

CHART NO: 4.7 DESIGNATION

44
 TABLE NO: 4.8 FORM OF BUSINESS

FORM OF BUSINESS
Valid Cumulative
Frequency Percent Percent Percent
Valid Public ltd.
30 100.0 100.0 100.0
Company

4.8 INTERPRETATION

From the above table it can be interpreted that 100% of the respondents agree that it is
a PublicLimited Company.

CHART NO: 4.8 FORM OF BUSINESS

45
 TABLE NO: 4.9 RATINGOF THE COMPANY

RATING OF THE COMPANY

Valid Cumulative
Frequency Percent Percent Percent
Valid Excellent 2 6.7 6.7 6.7
very
9 30.0 30.0 36.7
good
Good 11 36.7 36.7 73.3
Average 8 26.7 26.7 100.0
Total 30 100.0 100.0

4.9 INTERPRETATION

From the above table it can be interpreted that 36.7% of respondents say that company
is good,30% of respondents are rating the company as very good.

CHART NO: 4.9 RATINGOF THE COMPANY

46
 TABLE NO: 4.10 EXPERIENCE WITH COMPANY
EXPERIENCE WITH COMPANY
Valid Cumulative
Frequency Percent Percent Percent
Valid less than 2 years 12 40.0 40.0 40.0
2-5 years 10 33.3 33.3 73.3
5-10 years 4 13.3 13.3 86.7
more than 10
4 13.3 13.3 100.0
years
Total 30 100.0 100.0

4.10 INTERPRETATION

From the above table it can be interpreted that 40% of respondents have less than 2
year experience with company,13.3% of respondents have more than 10 years relation
ship with the company.

CHART NO: 4.10 EXPERIENCE WITH COMPANY

47
 TABLE NO: 4.12WORKERS IN WAREHOUSE

WORKERS IN WAREHOUSE
Valid Cumulative
Frequency Percent Percent Percent
Valid 5-10 28 93.3 93.3 93.3
10-15 1 3.3 3.3 96.7
20 above 1 3.3 3.3 100.0
Total 30 100.0 100.0

4.12 INTERPRETATION

From the above table it can be interpreted that 93.3% of the respondents are says that
5-10 woekers in warehouse.
CHART NO: 4.12WORKERS IN WAREHOUSE

48
 TABLE NO: 4.12 WAREHOUSE CAPACITY

WAREHOUSE CAPACITY
Valid Cumulative
Frequency Percent Percent Percent
Valid 500-1000 3 10.0 10.0 10.0
more than
27 90.0 90.0 100.0
1000
Total 30 100.0 100.0

4.12 INTERPRETATION

From the above table it can be interpreted that 90% of respondents says that warehouse
capacity of the firm is more than 1000 kg.

CHART NO: 4.12 WAREHOUSE CAPACITY

49
 TABLE NO: 4.13 TYPE OF INVENTORY

TYPES OF INVENTORY
Valid Cumulative
Frequency Percent Percent Percent
Valid Material 15 50.0 50.0 50.0
finished
15 50.0 50.0 100.0
goods
Total 30 100.0 100.0

4.13INTERPRETATION

From the above table it can be interpreted that there is a neutral opinion between
material and finished goods.

CHART NO: 4.13 TYPE OF INVENTORY

50
 TABLE NO: 4.14 TYPE OF MATERIAL HANDLING

TYPE OF MATERIAL HANDLINGS

Valid Cumulative
Frequency Percent Percent Percent
Valid manual
14 46.7 46.7 46.7
handling
semi-automated 16 53.3 53.3 100.0
Total 30 100.0 100.0

4.14INTERPRETATION

From the above table it can be interpreted that 53.3% of respondents says that
company mostly using semi automated handlings.
Materials handling covers movement and storage of everything in and around
an establishment. The ideal factory would have an absolute minimum of materials
handling and hence more use of mechanical appliances. The shortage of labor and
increasing wages cost demand the most efficient use of labor. Proper materials
handling offers opportunity for improving productivity, reducing materials wastage,
minimizing industrial accidents, reducing man-power, etc. The following are the
equipment using for material handling;

1. Hand truck
a)Two wheeled hand truck
b)Dolly
c)Floor hand truck

2.Pallet jack
a) Manual pallet jack

3. Single bale trolleys

51
4. Platform truck
a) Walkie platform truck

CHART NO: 4.14 TYPE OF MATERIAL HANDLING

52
 TABLE NO: 4.15 SAFETY STOCK LEVELS

SAFETY STOCK LEVELS

Valid Cumulative
Frequency Percent Percent Percent
Valid strongly
2 6.7 6.7 6.7
agree
Agree 19 63.3 63.3 70.0
Neutral 8 26.7 26.7 96.7
Disagree 1 3.3 3.3 100.0
Total 30 100.0 100.0

4.15 INTERPRETATION

From the above table it can be interpreted that 63.3% of respondents agree that the
company using the most effective method to calculate safety stock level. Here the
company use MRP for mainataining the stock and to mitigate risk of stockouts.

CHART NO: 4.15 SAFETY STOCK LEVELS

53
 TABLE NO: 4.16 ABSENCE OF THE SPECIFICATION

ABSENCE OF THE SPECIFICATION

Valid Cumulative
Frequency Percent Percent Percent
Valid Frequently 3 10.0 10.0 10.0
Sometimes 22 73.3 73.3 83.3
Often 5 16.7 16.7 100.0
Total 30 100.0 100.0

4.16INTERPRETATION

From the above table it can be interpreted that 73.3% of respondents feels that
sometimes
the absence of specification on the product affect the distribution.

CHART NO: 4.16 ABSENCE OF THE SPECIFICATION

54
 DISTRIBUTION PROCESS
Valid Cumulative
Frequency Percent Percent Percent
Valid highly
1 3.3 3.3 3.3
satisfactory
Satisfactory 14 46.7 46.7 50.0
Neutral 9 30.0 30.0 80.0
Dissatisfactory 6 20.0 20.0 100.0
Total 30 100.0 100.0

TABLE NO: 4.17 DISTRIBUTION PROCESS

4.17 INTERPRETATION

From the above table it can be interpreted that 46.7% of people are satisfied ,30% of
people have neutral opinion,20% of people are dissatisfied. Here the most of the
respondents are satisfied with companys current distribution system.
55
CHART NO: 4.17 DISTRIBUTION PROCESS

56
 TABLE NO: 4.18 OLD STOCK REMAINING ON WAREHOUSE

OLD STOCK REMAINING ON WAREHOUSE

Valid Cumulative
Frequency Percent Percent Percent
Valid 100-500 kg 15 50.0 50.0 50.0
501-1000 kg 10 33.3 33.3 83.3
2001-2500
5 16.7 16.7 100.0
kg
Total 30 100.0 100.0

4.18 INTERPRETATION

From the above table it can be interpreted that 50% of respondents say that old stock
remaining on warehouse is 100-500 kg.

CHART NO: 4.18 OLD STOCK REMAINING ON WAREHOUSE

57
 TABLE NO: 4.19 PRESENT INVENTORY SYSTEM

PRESENT INVENTORY SYSTEM

Valid Cumulative
Frequency Percent Percent Percent
Valid highly
1 3.3 3.3 3.3
satisfied
Satisfied 13 43.3 43.3 46.7
Average 13 43.3 43.3 90.0
Dissatisfied 3 10.0 10.0 100.0
Total 30 100.0 100.0

4.19 INTERPRETATION

From the above table it can be interpreted that43.3 % of respondents are

satisfied,43.3% respondents have equal opinion. Here most of the respondents are
satisfactory with present inventory system. But it could be more better.

CHART NO: 4.19 PRESENT INVENTORY SYSTEM

58
 TABLE NO: 4.20 DIRECT CONTACT WITH RETAILERS

DIRECT CONTACT WITH RETAILERS

Valid Cumulative
Frequency Percent Percent Percent
Valid Always 1 3.3 3.3 3.3
Frequently 8 26.7 26.7 30.0
Sometimes 18 60.0 60.0 90.0
Often 3 10.0 10.0 100.0
Total 30 100.0 100.0

4.20 INTERPRETATION

From the above table it can be interpreted that 60% of respondents are agrees that they
have a contact with their retailers.

CHART NO: 4.20 DIRECT CONTACT WITH RETAILERS

59
 MONTHS OF RETURN STOCK
Valid Cumulative
Frequency Percent Percent Percent
Valid January 5 16.7 16.7 16.7
Februar
8 26.7 26.7 43.3
y
March 16 53.3 53.3 96.7
April 1 3.3 3.3 100.0
Total 30 100.0 100.0
TABLE NO: 4.21 MONTH OF RETURN STOCK

4.21 INTERPRETATION

From the above table it can be interpreted that 53.3% of respondents feels that usually
in the month of march return stock pile up in the inventory.

CHART NO: 4.21 MONTH OF RETURN STOCK

60
61
 TABLE NO: 4.22 INVENTORY PLANNING METHOD

INVENTORY PLANNING METHOD

Valid Cumulative
Frequency Percent Percent Percent
Valid EOQ 3 10.0 10.0 10.0
MRP 1 3.3 3.3 13.3
JIT 26 86.7 86.7 100.0
Total 30 100.0 100.0
4.22INTERPRETATION

From the above table it can be interpreted that 86.7% of respondents feels that JIT(Just
in Time) inventory planning method to be more effective. Company presently using the
MRP method it is only based on demand.

CHART NO: 4.22 INVENTORY PLANNING METHOD

62
 TABLE NO: 4.23 SATISFACTION

SATISFACTION
Valid Cumulative
Frequency Percent Percent Percent
Valid Always 20 66.7 66.7 66.7
Frequently 3 10.0 10.0 76.7
Sometimes 7 23.3 23.3 100.0
Total 30 100.0 100.0

4.23 INTERPRETATION

From the above table it can be interpreted that 66.7% of respondents are always
satisfied with the company.
CHART NO: 4.23 SATISFACTION

63
 TABLE NO: 4.24 EXPECT ANY IMPROVEMENT

EXPECT ANY IMPROVEMENT

Valid Cumulative
Frequency Percent Percent Percent
Valid Always 6 20.0 20.0 20.0
Frequently 7 23.3 23.3 43.3
Sometimes 17 56.7 56.7 100.0
Total 30 100.0 100.0

4.24 INTERPRETATION

From the above table it can be interpreted that 56.7% of respondents sometime expect
improvement in the system of the company.

CHART NO: 4.24 EXPECT ANY IMPROVEMENT

64
 Designation V/s Rate theChi-Square
company MALCO
Tests Ltd Cross tabulation
Value Df Asymptotic
Rate the company MALCO Ltd
Significance
Very (2-sided)
Pearson Chi-Square Excellent
21.665 a good
12 Good
.041 Average Total
Designation Supervisor
LikelihoodCount
Ratio 23.077 0 12 1 3
.027 0 4
Expected
Linear-by-Linear .011 1 .918
.3 1.2 1.5 1.1 4.0
Count
Association
N of Valid Count
Clerk Cases 30 2 2 0 2 6
a. 18 cells (90.0%) have expected count less than 5. The
Expected
.4 1.8 2.2 1.6 6.0
minimum expected count is .07.
Count
Labor Count 0 3 8 6 17
Expected
1.1 5.1 6.2 4.5 17.0
Count
Production Count 0 1 0 0 1
Manager Expected
.1 .3 .4 .3 1.0
Count
Store Count 0 2 0 0 2
keeper Expected
.1 .6 .7 .5 2.0
Count
Total Count 2 9 11 8 30
Expected
2.0 9.0 11.0 8.0 30.0
Count
4.25 CHI- SQUARE ANALYSIS

Chi-square analysis on the relationship between Designation and

Rating of the company

Ho; There is no significant relationship between Designation and Rating of the

company

65
H1; There is a significant relationship between Designation and Rating of the company

4.25 INTERPRETATION
Here there is a significant association bet ween Designation and Rating of the
company. That is 0.041 < 0.05. 35.29% and 47.05% of labors rates as average and
good respectively. Hence we can say that H1 is accepted Ho is rejected.

66
 4.26 CHI- SQUARE ANALYSIS

Chi-square analysis on the relationship between Experience with

company and Rating of the company

Experience with company V/s Rate the company Cross tabulation

rate the company MALCO Ltd Total

very
excellent good Good Average
Experience less than Count 0 3 5 4 12
with 2 years Expected Count .8 3.6 4.4 3.2 12.0
company 2-5 years Count 1 3 4 2 10
Expected Count .7 3.0 3.7 2.7 10.0
5-10 Count 0 0 2 2 4
years Expected Count .3 1.2 1.5 1.1 4.0
more than Count 1 3 0 0 4
10 years Expected Count .3 1.2 1.5 1.1 4.0
Total Count 2 9 11 8 30
Expected Count 2.0 9.0 11.0 8.0 30.0

67
Ho; There is no significant relationship between Experience with company and Rating
of the company
H1; There is a significant relationship between Experience with company and Rating
of the company

Chi-Square Tests
Asymptotic
Significance
Value Df (2-sided)
Pearson Chi-Square 11.273a 9 .257
Likelihood Ratio 14.222 9 .115
Linear-by-Linear
3.037 1 .081
Association
N of Valid Cases 30
a. 16 cells (100.0%) have expected count less than 5. The
minimum expected count is .27.

4.26 INTERPRETATION
Here there is no significant association between experience and rating of the company.
Here less experienced respondents (less than 2 years) 42 % and 33.3 % of respondents
are rate good and average respectively.

68
 CHAPTER 5

FINDINGS, SUGGESTIONS AND CONCLUSION

5.1 FINDINGS OF THE STUDY

5.1.1 FINDINGS FROM RATIO ANALYSIS

In 2012-13 to 2014-15 the Inventory Turnover Ratio is above the standard (8

times). It indicates that firms stock turnover or converted in to sales from 7.5
to 11.91 times. Here the goods are laying in store from 49 to 31 days. Thus the
inventory management or inventory policy is good.

Inventory holding ratio of the company shows a fluctuating trend. From the
year 2010-2011 onwards till the year 2011- 12 trend increased. During from
2011-12 to 2013-14, it shows a downward trend as 50 and 26 respectively. The
ratio was 49in the year 2010-2011, but it decreased to 31 in the year 2014-15.so
we can conclude that the inventory holding ratio is decreased. Here it indicates
the inventory management or inventory policy is good because the conversion
period is less. A shorter inventory period indicates that the inventory is sold
fast.

During the year 2010-2011 and 2011-12 which ratio is increased from 0.12 to
1.09. Then it decrease to 0.073in the year 2012-2013. Then it increase to 0.076
in the year 2013-2014. In the year 2010-2011 the figure is 0.12,by comparing it
with 2014-2015,the figure also 0.056,So it is concluded that the inventory to
sales ratio is fluctuating trends. In 2011-12 it show a high fluctuation why
because the sales are less than the inventory.

69
 Which ratio is showing a declining trend from the year 2010-11 onwards till the
year ending 2011-12 as 0.54 and 0.24 respectively, but it increased to 0.29 in
the year 2013-14 and again decreases to 0.19 in the year 2014-2015.So we can
conclude that, it is the favorable condition of the company.

The position of Net Working Capital is more during the year 2011-12 which
shows a negative figure of -6,17,98,972. This negativity decreases and the Net
Working Capital -35070450 during 2012 -13 -3,45,12,405 during 2013-14 and
-2,59,69,809 during 2014-15 which means the position is improving. The
inventory position of the company is showing a fluctuating trend and there is a
direct relationship between the changes in inventory and changes in Net
Working Capital. But the company has to take steps to reduce its Current A/c
balance to make the Net Working Capital better in order to improve its liquidity
position.

5.1.2 FINDINGS FROM QUESTIONNAIRE

All respondents say the Malappuram Co-Operative Spinning Mills Ltd. is a

public company.

36.7% of respondent rate the company as good,30% of respondents are rating

the company as very good.

40% of respondents have less than 2 year experience with company,13.3% of

respondants have more than 10 years relation ship with the company.

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 50% of the respondents say that the type of inventory the company holds is

finished products and 50% of the respondents say that of inventory of the

company hold as materials.

53.3% of respondents say that company in using semi automated handlings mostly.

The company 70 % of the material handling which is fully automated and

remaining 30%mannually operated.

63.3% of respondents agree that the company using the most effective method to

calculate safety stock level. Here the company use MRP for maintaining the stock

and to mitigate risk of stockouts.

73.3% of respondents feel that sometimes the absence of specification on the

product affect the distribution.

46.7% of people are satisfied with current distribution process ,30% of people have
neutral opinion,20% of people are dissatisfied.46.7% of people are satisfied ,30%
of people have neutral opinion,20% of people are dissatisfied. Here the most of the
respondents are satisfied with companys current distribution system.

50% of respondents say that old stock remaining on warehouse is 100-500 kg.

93.3% of the respondents says that 5-10 woekers arebworking in warehouse.

90% of respondents says that warehouse capacity of the firm is more than 1000 kg

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 43.3 % of respondents are satisfied,43.3% respondents have equal opinion.

60% of respondents are sometime agrees that the company have contact with
retailers.

53.3% of respondents feel that usually in the month of March return stock pile up
in the inventory.

86.7% of respondents feels that JIT(Just in Time) inventory planning method to be

more effective.

66.7% of respondents are always satisfied with the company.

56.7% of respondents sometime expect improvement in the system of the

company.

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 5.2 SUGGESTIONS

Although the current inventory system is satisfactory, implementing new

methodology and using software to find the location and quantity of the product
stored can improve the overall efficiency of the company.

Old stocks can be moved out as soon as possible, and more space can be made
available.

If markings are marked as per grade of the product it helps to make operation
faster and easier.

If system data is centralized stock out or over stocking can be avoided.

Increase more storage facility and spaces in warehouses. It helps the company
to produce without any delay. Seasonal variations may affect the ware housing.

Arrange factory area, store and packing area separately. It will help smooth
functioning.

Use more equipment for loading and unloading. Loading is time consuming
process if using equipment can save time and money. Chain puller is more
better to loading also unloading.

Better utilization of containers and trucks. It will help to reduce transportation

cost.

Use suitable transportation ways. Company can try sea ways to transport goods.
It is the cheapest way of transportation. We can transport more yarn at very low
cost.

Proper utilization of the Raw materials. Here we can so many wastages. If raw
materials utilizing properly we can increase the production.
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 Take proper solutions to get Power Supply Continuously without any lag. It
will help the companys smooth working and if any problems in electricity can
work continuously.

The company has to take steps to reduce its Current A/c balance to make the
Net Working Capital better in order to improve its liquidity position.

Try to use fully auto mated material handling technique. It will help to save
money and time

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 5.3 CONCLUSION

Maintaining a clean, orderly, properly lighted, and secure warehouse or

stockroom is the basic key to maintaining inventory control. Adding computer
technology and implementing an effective inventory control method to aid in
management and administration creates a system that is current and competitive.
Properly training employees in modern techniques and standards results in a system
that will be effective and profitable.

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 BIBLIOGRAPHY

Burt, john. (1992). Controlling Inventory in Process Inventories; integration is

the key. production & inventory management, 12( February):25,29.

Christensen, David L. (1997). inventory reviews; inventory control may sound

easy when you read it in textbooks, but auditors need more than theory to
perform successful reviews. Internal Auditor, 54(October); 50-53.

IM Pandy,Financial Management,Vigas Publishing House Private

Limited.,2003

Malburg, Chistopher R. (1994). Controllers and treasurs Desk Reference,New

York: McGraw-Hill.

Thomas, Michael F ,,and Mackey, James T. (1994). Activity-Based Cost

Variances for Just-in-Times Management Accounting IMA,75 (april);49-54

Wren, Daniel A,(1994). Just-in-Time Inventory, Knowledge Management

Magazine, September;1

Waters Donald,, Inventory Control and Management John Wiley &

Sons(ASIA) Pte Ltd.

ONLINE REFERENCE

http://www.sbaonline.sba.gov/idc/groups/public/documents/sba homepage

http://www.iia.org.uk/filemanager/root/site assets/technical

http://www.asu.edu/fs/documents/icq/inventory icq pdf

www.inventorymanagement.com

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 www.malco.in

ANNEXURE

1) Name of the person.

2) Age/gender..

3) Resignation.

4) Work experience.

5) Designation.

6) Salary..

7) Form of business organisation?

Sole proprietorship Partnership Private and public ltd

Government agency Others
8) Rate the company MALCO Ltd.?
Excellent very good Good
Average Poor
9) How long have you been associated with MALCO Ltd.?

Less than 2 years 2-5 years 5-10 years

More than 10 years
10) How many workers are there in this warehouse?
5-10 10-15 15-20 20 Above
11) How much is the warehouse capacity of the company in (kg)?

200 500 500-1000

More than 1000

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12) What type of inventory does the company hold?

Material In process Finished product

13) Which type of material handlings are used in here?

Manual handling Automated handling Semi-automated

14) Company using the most effective method to calculate your safety stock levels.

Strongly agree Agree Neutral

Disagree Strongly disagree

15) Does absence of the specification on the product affect the distribution?

Always frequently Sometimes

often Not at all
16) Distribution process of the company?

Highly satisfactory Satisfactory Neutral

Dissatisfactory Very dissatisfactory

17) Quantity of old stock remaining on warehouse in (kg)?

100 500 501 1000 1001 2000

2001 2500

18) Status of present inventory system?

Highly satisfied Satisfied Average

Dissatisfied Highly dissatisfied

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19) Does the company manage direct contact with the retailers or distributors to know
the actual demand in order plan the reorder quantity and inventory control?

Always frequently Sometimes

often Not at all
20) During which month of the year does the return stock pile up in the inventory?

January February March April

21) Which inventory planning model will be effective to implement in the company?

EOQ MRP DRP

JIT (Justin Time)

22) Are you satisfied with the rules and regulations followed by MALCO Ltd. ?

Always frequently Sometimes

Often Not at all

23) Do you expect any improvement in the system?

Always frequently Sometimes

Often Not at all

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