INDEX

S.No: CONTENTS PAGE NO.

1.

INTRODUCTION
Scope of the Study Objectives of the Study Methodology of the Study Limitations of the Study

1-4

2. 3. 4. 5.

INDUSTRY PROFILE COMPANY PROFILE REVIEW OF LITERATURE DATA ANALYSIS AND INTERPRETATION

5-12 13-28 29-43

44-78 79-81 82-83

6.

CONCLUSION & SUGGESTION BIBLIOGRAPHY

7.

INVENTORY MANAGEMENT

INTRODUCTION:

Every enterprise needs inventory for smooth running of its activities. It serves as a link between production and distribution process. There is, generally, a time lag between the recognition of a need and its fulfillment. The greater the time lag, the higher requirements for inventory. It also provides a cushion for future price fluctuations. In a complex industry like UltraTech Industries Limited it studied clearly of how the thing are being performed and what is the real impact of these on industry and how effectively the inventory is utilized is interested to be known by researcher because of its great significance in the research.

IMPORTANCE OF THE STUDY: Decisions Relating to Inventories are taken primarily by executives in productions, purchasing, and marketing departments. Usually, raw material policies are shaped by purchasing and production executives, work-in-process inventory is influenced by the decisions of production executives, and finished goods inventory policy is evolved by production and marketing executives. Yet, as inventory management has important financial implications, the financial manager has the responsibility to ensure that inventories are properly monitored and controlled. He has to emphasize the financial point of view and initiate programmes with the participation and involvement of others for effective management of inventories.

NEED OF THE STUDY:

Every industry on average spends 70% on raw materials (inventory). Therefore there is a need to know the raw material cost and also there is great importance to understand the inventory management system of this industry. The study helps a log to various departments to take steps to control the inventory process.

OBJECTIVES OF THE STUDY:

1.

To examine the organization structure of inventory management in the stores of UltraTech Industries Limited.

2.

To discuss pattern, levels and trends of inventories in UltraTech Industries Limited.

3.

To understand the various inventory control techniques followed by studies in UltraTech Industries Limited.

4.

To access the performance of inventory management of the UltraTech Industries Limited by selected accounting ratios.

5.

To know the inventory control techniques of UltraTech Industries Limited

METHODOLOGY OF THE STUDY:

The study is based on both primary and secondary data. The primary data has been collected through structured questionnaire reflecting inventory management practices of UltraTech Industries Limited.

The collected data is tabulated and suitable interpretation had been made by considering the data collection through secondary data like annual reports purchase registers, storage records of the organization.

LIMITATIONS OF THE STUDY:

The study has the following limitations: 1. The study is limited only for a period of 5 years i.e., from 2005 06 to 2009 10. 2. 3. 4. The study in the organization is 45 days only. The limitations of ratio analysis can be applicable of the study. There may be approximation in calculating ratios and taking the figures from the annual reports.

INDUSTRY PROFILE

In the most general sense of the word, a cement is a binder, a substance which sets and hardens independently, and can bind other materials together. The word "cement" traces to the Romans, who used the term "opus caementicium" to describe masonry which resembled concrete and was made from crushed rock with burnt lime as binder. The volcanic ash and pulverized brick additives which were added to the burnt lime to obtain a hydraulic binder were later referred to as cementum, cimentum, cment and cement. Cements used in construction are characterized as hydraulic or non-hydraulic. The most important use of cement is the production of mortar and concretethe bonding of natural or artificial aggregates to form a strong building material which is durable in the face of normal environmental effects. Concrete should not be confused with cement because the term cement refers only to the dry powder substance used to bind the aggregate materials of concrete. Upon the addition of water and/or additives the cement mixture is referred to as concrete, especially if aggregates have been added. It is uncertain where it was first discovered that a combination of hydrated nonhydraulic lime and a pozzolan produces a hydraulic mixture (see also: Pozzolanic reaction), but concrete made from such mixtures was first used on a large scale by Roman engineers.They used both natural pozzolans (trass or pumice) and artificial pozzolans (ground brick or pottery) in these concretes. Many excellent examples of structures made from these concretes are still standing, notably the huge monolithic dome of the Pantheon in Rome and the massive Baths of Caracalla. The vast system of Roman aqueducts also made extensive use of hydraulic cement. The use of structural concrete disappeared in medieval Europe, although weak pozzolanic concretes continued to be used as a core fill in stone walls and columns.

Modern cement
Modern hydraulic cements began to be developed from the start of the Industrial Revolution (around 1800), driven by three main needs: Hydraulic renders for finishing brick buildings in wet climates Hydraulic mortars for masonry construction of harbor works etc, in contact with sea water. Development of strong concretes. In Britain particularly, good quality building stone became ever more expensive during a period of rapid growth, and it became a common practice to construct prestige buildings from the new industrial bricks, and to finish them with a stucco to imitate stone. Hydraulic limes were favored for this, but the need for a fast set time encouraged the development of new cements. Most famous was Parker's "Roman cement." This was developed by James Parker in the 1780s, and finally patented in 1796. It was, in fact, nothing like any material used by the Romans, but was a "Natural cement" made by burning septaria - nodules that are found in certain clay deposits, and that contain both clay minerals and calcium carbonate. The burnt nodules were ground to a fine powder. This product, made into a mortar with sand, set in 515 minutes. The success of "Roman Cement" led other manufacturers to develop rival products by burning artificial mixtures of clay and chalk. John Smeaton made an important contribution to the development of cements when he was planning the construction of the third Eddystone Lighthouse (1755-9) in the English Channel. He needed a hydraulic mortar that would set and develop some strength in the twelve hour period between successive high tides. He performed an exhaustive market research on the available hydraulic limes, visiting their production sites, and noted that the "hydraulicity" of the lime was directly

related to the clay content of the limestone from which it was made. Smeaton was a civil engineer by profession, and took the idea no further. Apparently unaware of Smeaton's work, the same principle was identified by Louis Vicat in the first decade of the nineteenth century. Vicat went on to devise a method of combining chalk and clay into an intimate mixture, and, burning this, produced an "artificial cement" in 1817. James Frost,orking in Britain, produced what he called "British cement" in a similar manner around the same time, but did not obtain a patent until 1822. In 1824, Joseph Aspdin patented a similar material, which he called Portland cement, because the render made from it was in color similar to the prestigious Portland stone. All the above products could not compete with lime/pozzolan concretes because of fast-setting (giving insufficient time for placement) and low early strengths (requiring a delay of many weeks before formwork could be removed). Hydraulic limes, "natural" cements and "artificial" cements all rely upon their belite content for strength development. Belite develops strength slowly. Because they were burned at temperatures below 1250 C, they contained no alite, which is responsible for early strength in modern cements. The first cement to consistently contain alite was made by Joseph Aspdin's son William in the early 1840s. This was what we call today "modern" Portland cement. Because of the air of mystery with which William Aspdin surrounded his product, others (e.g. Vicat and I C Johnson) have claimed precedence in this invention, but recent analysis of both his concrete and raw cement have shown that William Aspdin's product made at Northfleet, Kent was a true alite-based cement. However, Aspdin's methods were "rule-of-thumb": Vicat is responsible for establishing the chemical basis of these cements, and Johnson established the importance of sintering the mix in the kiln. William Aspdin's innovation was counter-intuitive for manufacturers of "artificial cements", because they required more lime in the mix (a problem for his father), because they required a much higher kiln temperature (and therefore more fuel) and because the resulting clinker was very hard and rapidly wore down the millstones which were the only available grinding technology of the time.

Manufacturing costs were therefore considerably higher, but the product set reasonably slowly and developed strength quickly, thus opening up a market for use in concrete. The use of concrete in construction grew rapidly from 1850 onwards, and was soon the dominant use for cements. Thus Portland cement began its predominant role. it is made from water and sand

Types of modern cement Portland cement Cement is made by heating limestone (calcium carbonate), with small quantities of other materials (such as clay) to 1450C in a kiln, in a process known as calcination, whereby a molecule of carbon dioxide is liberated from the calcium carbonate to form calcium oxide, or lime, which is then blended with the other materials that have been included in the mix . The resulting hard substance, called 'clinker', is then ground with a small amount of gypsum into a powder to make 'Ordinary Portland Cement', the most commonly used type of cement (often referred to as OPC). Portland cement is a basic ingredient of concrete, mortar and most non-speciality grout. The most common use for Portland cement is in the production of concrete. Concrete is a composite material consisting of aggregate (gravel and sand), cement, and water. As a construction material, concrete can be cast in almost any shape desired, and once hardened, can become a structural (load bearing) element. Portland cement may be gray or white.

Portland cement blends These are often available as inter-ground mixtures from cement manufacturers, but similar formulations are often also mixed from the ground components at the concrete mixing plant.

Portland blastfurnace cement contains up to 70% ground granulated blast furnace slag, with the rest Portland clinker and a little gypsum. All compositions produce high ultimate strength, but as slag content is increased, early strength is reduced, while sulfate resistance increases and heat evolution diminishes. Used as an economic alternative to Portland sulfate-resisting and low-heat cements. Portland flyash cement contains up to 30% fly ash. The fly ash is pozzolanic, so that ultimate strength is maintained. Because fly ash addition allows a lower concrete water content, early strength can also be maintained. Where good quality cheap fly ash is available, this can be an economic alternative to ordinary Portland cement. Portland pozzolan cement includes fly ash cement, since fly ash is a pozzolan, but also includes cements made from other natural or artificial pozzolans. In countries where volcanic ashes are available (e.g. Italy, Chile, Mexico, the Philippines) these cements are often the most common form in use. Portland silica fume cement. Addition of silica fume can yield exceptionally high strengths, and cements containing 5-20% silica fume are occasionally produced. However, silica fume is more usually added to Portland cement at the concrete mixer. Masonry cements are used for preparing bricklaying mortars and stuccos, and must not be used in concrete. They are usually complex proprietary formulations containing Portland clinker and a number of other ingredients that may include limestone, hydrated lime, air entrainers, retarders, waterproofers and coloring agents. They are formulated to yield workable mortars that allow rapid and

10

consistent masonry work. Subtle variations of Masonry cement in the US are Plastic Cements and Stucco Cements. These are designed to produce controlled bond with masonry blocks. Expansive cements contain, in addition to Portland clinker, expansive clinkers (usually sulfoaluminate clinkers), and are designed to offset the effects of drying shrinkage that is normally encountered with hydraulic cements. This allows large floor slabs (up to 60 m square) to be prepared without contraction joints. White blended cements may be made using white clinker and white supplementary materials such as high-purity metakaolin. Colored cements are used for decorative purposes. In some standards, the addition of pigments to produce "colored Portland cement" is allowed. In other standards (e.g. ASTM), pigments are not allowed constituents of Portland cement, and colored cements are sold as "blended hydraulic cements". Very finely ground cements are made from mixtures of cement with sand or with slag or other pozzolan type minerals which are extremely finely ground together. Such cements can have the same physical characteristics as normal cement but with 50% less cement particularly due to their increased surface area for the chemical reaction. Even with intensive grinding they can use up to 50% less energy to fabricate than ordinary Portland cements. Non-Portland hydraulic cements Pozzolan-lime cements. Mixtures of ground pozzolan and lime are the cements used by the Romans, and are to be found in Roman structures still standing (e.g. the Pantheon in Rome). They develop strength slowly, but their ultimate strength can be very high. The hydration products that produce strength are essentially the same as those produced by Portland cement.

11

Slag-lime cements. Ground granulated blast furnace slag is not hydraulic on its own, but is "activated" by addition of alkalis, most economically using lime. They are similar to pozzolan lime cements in their properties. Only granulated slag (i.e. waterquenched, glassy slag) is effective as a cement component. Supersulfated cements. These contain about 80% ground granulated blast furnace slag, 15% gypsum or anhydrite and a little Portland clinker or lime as an activator. They produce strength by formation of ettringite, with strength growth similar to a slow Portland cement. They exhibit good resistance to aggressive agents, including sulfate. Calcium aluminate cements are hydraulic cements made primarily from limestone and bauxite. The active ingredients are monocalcium aluminate CaAl2O4 (CaO Al2O3 or CA in Cement chemist notation, CCN) and mayenite Ca12Al14O33 (12 CaO 7 Al2O3 , or C12A7 in CCN). Strength forms by hydration to calcium aluminate hydrates. They are well-adapted for use in refractory (high-temperature resistant) concretes, e.g. for furnace linings. Calcium sulfoaluminate cements are made from clinkers that include ye'elimite (Ca4(AlO2)6SO4 or C4A3 in Cement chemist's notation) as a primary phase. They are

used in expansive cements, in ultra-high early strength cements, and in "low-energy" cements. Hydration produces ettringite, and specialized physical properties (such as expansion or rapid reaction) are obtained by adjustment of the availability of calcium and sulfate ions. Their use as a low-energy alternative to Portland cement has been pioneered in China, where several million tonnes per year are produced. Energy requirements are lower because of the lower kiln temperatures required for reaction, and the lower amount of limestone (which must be endothermically decarbonated) in the mix. In addition, the lower limestone content and lower fuel consumption leads to a CO2 emission around half that associated with Portland clinker. However, SO2 emissions are usually significantly higher.

12

"Natural" Cements correspond to certain cements of the pre-Portland era, produced by burning argillaceous limestones at moderate temperatures. The level of clay components in the limestone (around 30-35%) is such that large amounts of belite (the low-early strength, high-late strength mineral in Portland cement) are formed without the formation of excessive amounts of free lime. As with any natural material, such cements have highly variable properties. Geopolymer cements are made from mixtures of water-soluble alkali metal silicates and aluminosilicate mineral powders such as fly ash and metakaolin.

13

COMPANY PROFILE

14

COMPANY PROFILE

ULTRATECH CEMENT: UltraTech Cement Limited has an annual capacity of 18.2 million tonnes. It manufactures and markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzalana Cement. It also manufactures ready mix concrete (RMC). UltraTech Cement Limited has five integrated plants, six grinding units and three terminals two in India and one in Sri Lanka. UltraTech Cement is the countrys largest exporter of cement clinker. The export markets span countries around the Indian Ocean, Africa, Europe and the Middle East. UltraTechs subsidiaries are Dakshin Cement Limited and UltraTech Ceylinco (P) Limited. The roots of the Aditya Birla Group date back to the 19th century in the picturesque town of Pilani, set amidst the Rajasthan desert. It was here that Seth Shiv Narayan Birla started trading in cotton, laying the foundation for the House of Birlas. Through India's arduous times of the 1850s, the Birla business expanded rapidly. In the early part of the 20th century, our Group's founding father, Ghanshyamdas Birla, set up industries in critical sectors such as textiles and fibre, aluminium, cement and chemicals. As a close confidante of Mahatma Gandhi, he played an active role in the Indian freedom struggle. He represented India at the first and second round-table conference in London, along with Gandhiji. It was at "Birla House" in Delhi that the

15

luminaries of the Indian freedom struggle often met to plot the downfall of the British Raj. Ghanshyamdas Birla found no contradiction in pursuing business goals with the dedication of a saint, emerging as one of the foremost industrialists of preindependence India. The principles by which he lived were soaked up by his grandson, Aditya Vikram Birla, our Group's legendary leader. Aditya Vikram Birla: putting India on the world map A formidable force in Indian industry, Mr. Aditya Birla dared to dream of setting up a global business empire at the age of 24. He was the first to put Indian business on the world map, as far back as 1969, long before globalisation became a buzzword in India. In the then vibrant and free market South East Asian countries, he ventured to set up world-class production bases. He had foreseen the winds of change and staked the future of his business on a competitive, free market driven economy order. He put Indian business on the globe, 22 years before economic liberalisation was formally introduced by the former Prime Minister, Mr. Narasimha Rao and the former Union Finance Minister, Dr. Manmohan Singh. He set up 19 companies outside India, in Thailand, Malaysia, Indonesia, the Philippines and Egypt. Interestingly, for Mr. Aditya Birla, globalisation meant more than just geographic reach. He believed that a business could be global even whilst being based in India. Therefore, back in his home-territory, he drove single-mindedly to put together the building blocks to make our Indian business a global force. Under his stewardship, his companies rose to be the world's largest producer of viscose staple fibre, the largest refiner of palm oil, the third largest producer of insulators and the sixth largest producer of carbon black. In India, they attained the

16

status of the largest single producer of viscose filament yarn, apart from being a producer of cement, grey cement and rayon grade pulp. The Group is also the largest producer of aluminium in the private sector, the lowest first cost producers in the world and the only producer of linen in the textile industry in India. At the time of his untimely demise, the Group's revenues crossed Rs.8,000 crore globally, with assets of over Rs.9,000 crore, comprising of 55 benchmark quality plants, an employee strength of 75,000 and a shareholder community of 600,000. Most importantly, his companies earned respect and admiration of the people, as one of India's finest business houses, and the first Indian International Group globally. Through this outstanding record of enterprise, he helped create enormous wealth for the nation, and respect for Indian entrepreneurship in South East Asia. In his time, his success was unmatched by any other industrialist in India. That India attains respectable rank among the developed nations, was a dream he forever cherished. He was proud of India and took equal pride in being an Indian. Under the leadership of our Chairman, Mr. Kumar Mangalam Birla, the Group has sustained and established a leadership position in its key businesses through continuous value-creation. Spearheaded by Grasim, Hindalco, Aditya Birla Nuvo, Indo Gulf Fertilisers and companies in Thailand, Malaysia, Indonesia, the Philippines and Egypt, the Aditya Birla Group is a leader in a swathe of products viscose staple fibre, aluminium, cement, copper, carbon black, palm oil, insulators, garments. And with successful forays into financial services, telecom, software and BPO, the Group is today one of Asia's most diversified business groups.

17

Board of Directors :: Mr. Kumar Mangalam Birla, Chairman :: Mrs. Rajashree Birla :: Mr. R. C. Bhargava :: Mr. G. M. Dave :: Mr. N. J. Jhaveri :: Mr. S. B. Mathur :: Mr. V. T. Moorthy :: Mr. O. P. Puranmalka :: Mr. S. Rajgopal :: Mr. D. D. Rathi :: Mr. S. Misra, Managing Director

Executive President & Chief Financial Officer :: Mr. K. C. Birla

Chief Manufacturing Officer :: R.K. Shah

18

Chief Marketing Officer :: Mr. O. P. Puranmalka

Company Secretary :: Mr. S. K. Chatterjee

Our vision

"To actively contribute to the social and economic development of the communities in which we operate. In so doing, build a better, sustainable way of life for the weaker sections of society and raise the country's human development index."

Mrs. Rajashree Birla, Chairperson, The Aditya Birla Centre for Community Initiatives and Rural Development Making a difference Before Corporate Social Responsibility found a place in corporate lexion, it was already textured into our Group's value systems. As early as the 1940s, our founding father Shri G.D Birla espoused the trusteeship concept of management. Simply stated, this entails that the wealth that one generates and holds is to be held as in a trust for our multiple stakeholders. With regard to CSR, this means investing part of our profits beyond business, for the larger good of society. While carrying forward this philosophy, his grandson, Aditya Birla weaved in the concept of 'sustainable livelihood', which transcended cheque book philanthropy. In his view, it was unwise to keep on giving endlessly. Instead, he felt that channelising resources to ensure that people have the wherewithal to make both ends meet

19

would be more productive. He would say, "Give a hungry man fish for a day, he will eat it and the next day, he would be hungry again. Instead if you taught him how to fish, he would be able to feed himself and his family for a lifetime." Taking these practices forward, our chairman Mr. Kumar Mangalam Birla institutionalised the concept of triple bottom line accountability represented by economic success, environmental responsibility and social commitment. In a holistic way thus, the interests of all the stakeholders have been textured into our Group's fabric. The footprint of our social work today straddles over 3,700 villages, reaching out to more than 7 million people annually. Our community work is a way of telling the people among whom we operate that We Care.

Our strategy Our projects are carried out under the aegis of the "Aditya Birla Centre for Community Initiatives and Rural Development", led by Mrs. Rajashree Birla. The Centre provides the strategic direction, and the thrust areas for our work ensuring performance management as well.

Our focus is on the all-round development of the communities around our plants located mostly in distant rural areas and tribal belts. All our Group companies Grasim, Hindalco, Aditya Birla Nuvo, Indo Gulf and UltraTech have Rural Development Cells which are the implementation bodies. Projects are planned after a participatory need assessment of the communities around the plants. Each project has a one-year and a three-year rolling plan, with milestones and measurable targets. The objective is to phase out our presence over a period of time and hand over the reins of further development to the people. This also enables us to widen our reach. Along with internal performance assessment

20

mechanisms, our projects are audited by reputed external agencies, who measure it on qualitative and quantitative parameters, helping us gauge the effectiveness and providing excellent inputs. Our partners in development are government bodies, district authorities, village panchayats and the end beneficiaries -- the villagers. The Government has, in their 5-year plans, special funds earmarked for human development and we recourse to many of these. At the same time, we network and collaborate with like-minded bilateral and unilateral agencies to share ideas, draw from each other's experiences, and ensure that efforts are not duplicated. At another level, this provides a platform for advocacy. Some of the agencies we have collaborated with are UNFPA, SIFSA, CARE India, Habitat for Humanity International, Unicef and the World Bank. Our focus areas Our rural development activities span five key areas and our single-minded goal here is to help build model villages that can stand on their own feet. Our focus areas are healthcare, education, sustainable livelihood, infrastructure and espousing social causes. The name Aditya Birla evokes all that is positive in business and in life. It exemplifies integrity, quality, performance, perfection and above all character. Our logo is the symbolic reflection of these traits. It is the cornerstone of our corporate identity. It helps us leverage the unique Aditya Birla brand and endows us with a distinctive visual image.

Depicted in vibrant, earthy colours, it is very arresting and shows the sun rising over two circles. An inner circle symbolising the internal universe of the Aditya Birla Group, an outer circle symbolising the external universe, and a dynamic meeting of rays converging and diverging between the two.

21

Through its wide usage, we create a consistent, impact-oriented Group image. This undoubtedly enhances our profile among our internal and external stakeholders.

Our corporate logo thus serves as an umbrella for our Group. It signals the common values and beliefs that guide our behaviour in all our entrepreneurial activities. It embeds a sense of pride, unity and belonging in all of our 130,000 colleagues spanning 25 countries and 30 nationalities across the globe. Our logo is our best calling card that opens the gateway to the world.

Group companies :: Grasim Industries Ltd. :: Hindalco Industries Ltd. :: Aditya Birla Nuvo Ltd. :: UltraTech Cement Ltd.

Indian companies :: Aditya Birla Minacs IT Services Ltd. :: Aditya Birla Minacs Worldwide Limited :: Essel Mining & Industries Ltd :: Idea Cellular Ltd.

22

:: Aditya Birla Insulators :: Aditya Birla Retail Limited :: Aditya Birla Chemicals (India) Limited

International companies Thailand :: Thai Rayon :: Indo Thai Synthetics :: Thai Acrylic Fibre :: Thai Carbon Black :: Aditya Birla Chemicals (Thailand) Ltd. :: Thai Peroxide Philippines :: Indo Phil Group of companies :: Pan Century Surfactants Inc. Indonesia :: PT Indo Bharat Rayon :: PT Elegant Textile Industry :: PT Sunrise Bumi Textiles

23

:: PT Indo Liberty Textiles :: PT Indo Raya Kimia Egypt :: Alexandria Carbon Black Company S.A.E :: Alexandria Fiber Company S.A.E China :: Liaoning Birla Carbon :: Birla Jingwei Fibres Company Limited :: Aditya Birla Grasun Chemicals (Fangchenggang) Ltd. Canada :: A.V. Group Australia :: Aditya Birla Minerals Ltd. Laos :: Birla Laos Pulp & Plantations Company Limited North and South America, Europe and Asia :: Novelis Inc.

24

Singapore :: Swiss Singapore Overseas Enterprises Pte Ltd. (SSOE) Joint ventures :: Birla Sun Life Insurance Company :: Birla Sun Life Asset Management Company :: Aditya Birla Money Mart Limited :: Tanfac Industries Limited

UltraTech is India's largest exporter of cement clinker. The company's production facilities are spread across eleven integrated plants, one white cement plant, one clinkerisation plant in UAE, fifteen grinding units, and five terminals four in India and one in Sri Lanka. Most of the plants have ISO 9001, ISO 14001 and OHSAS 18001 certification. In addition, two plants have received ISO 27001 certification and four have received SA 8000 certification. The process is currently underway for the remaining plants. The company exports over 2.5 million tonnes per annum, which is about 30 per cent of the country's total exports. The export market comprises of countries around the Indian Ocean, Africa, Europe and the Middle East. Export is a thrust area in the company's strategy for growth. UltraTech's products include Ordinary Portland cement, Portland Pozzolana cement and Portland blast furnace slag cement.

Ordinary Portland cement Portland blast furnace slag cement Portland Pozzolana cement Cement to European and Sri Lankan norms

25

Ordinary Portland cement Ordinary portland cement is the most commonly used cement for a wide range of applications. These applications cover dry-lean mixes, general-purpose ready-mixes, and even high strength pre-cast and pre-stressed concrete. Portland blast furnace slag cement Portland blast-furnace slag cement contains up to 70 per cent of finely ground, granulated blast-furnace slag, a nonmetallic product consisting essentially of silicates and alumino-silicates of calcium. Slag brings with it the advantage of the energy invested in the slag making. Grinding slag for cement replacement takes only 25 per cent of the energy needed to manufacture portland cement. Using slag cement to replace a portion of portland cement in a concrete mixture is a useful method to make concrete better and more consistent. Portland blast-furnace slag cement has a lighter colour, better concrete workability, easier finishability, higher compressive and flexural strength, lower permeability, improved resistance to aggressive chemicals and more consistent plastic and hardened consistency.

Portland Pozzolana cement Portland pozzolana cement is ordinary portland cement blended with pozzolanic materials (power-station fly ash, burnt clays, ash from burnt plant material or silicious earths), either together or separately. Portland clinker is ground with gypsum and pozzolanic materials which, though they do not have cementing properties in themselves, combine chemically with portland cement in the presence of water to form extra strong cementing material which resists wet cracking, thermal cracking and has a high degree of cohesion and workability in concrete and mortar. "As a Group we have always operated and continue to operate our businesses as Trustees with a deep rooted obligation to synergise growth with responsibility." Mr Kumar Mangalam Birla, Chairman, Aditya Birla Group

26

The cement industry relies heavily on natural resources to fuel its operations. As these dwindle, the imperative is clear alternative sources of energy have to be sought out and the use of existing resources has to be reduced, or eliminated altogether. Only then can sustainable business be carried out, and a corporate can truly say it is contributing to the preservation of the environment. UltraTech takes its responsibility to conserve the environment very seriously, and its eco-friendly approach is evident across all spheres of its operations. Its major thrust has been to identify alternatives to achieve set objectives and thereby reduce its carbon footprint. These are done through: :: Waste management :: Energy management :: Water conservation :: Biodiversity management :: Afforestation :: Reduction in emissions

Importantly, UltraTech has set a target of 2.96 per cent reduction in CO2 emission intensity, at a rate of 0.5 per cent annually, up to 2015-16, with 2009-10 as the baseline year. This will also include CO2 emissions from the recently acquired ETA Star Cement and upcoming projects. Our strategy Our projects are carried out under the aegis of the "Aditya Birla Centre for Community Initiatives and Rural Development", led by Mrs. Rajashree Birla.

27

The Centre provides the strategic direction, and the thrust areas for our work ensuring performance management as well.

Our focus is on the all-round development of the communities around our plants located mostly in distant rural areas and tribal belts. All our Group companies Grasim, Hindalco, Aditya Birla Nuvo and UltraTech have Rural Development Cells which are the implementation bodies. Projects are planned after a participatory need assessment of the communities around the plants. Each project has a one-year and a three-year rolling plan, with milestones and measurable targets. The objective is to phase out our presence over a period of time and hand over the reins of further development to the people. This also enables us to widen our reach. Along with internal performance assessment mechanisms, our projects are audited by reputed external agencies, who measure it on qualitative and quantitative parameters, helping us gauge the effectiveness and providing excellent inputs. Our partners in development are government bodies, district authorities, village panchayats and the end beneficiaries the villagers. The Government has, in their 5-year plans, special funds earmarked for human development and we recourse to many of these. At the same time, we network and collaborate with like-minded bilateral and unilateral agencies to share ideas, draw from each other's experiences, and ensure that efforts are not duplicated. At another level, this provides a platform for advocacy. Some of the agencies we have collaborated with are UNFPA, SIFSA, CARE India, Habitat for Humanity International, Unicef and the World Bank.

28

Our vision "To actively contribute to the social and economic development of the communities in which we operate. In so doing, build a better, sustainable way of life for the weaker sections of society and raise the country's human development index."

Mrs. Rajashree Birla, Chairperson, The Aditya Birla Centre for Community Initiatives and Rural Development Making a difference Before Corporate Social Responsibility found a place in corporate lexicon, it was already textured into our Group's value systems. As early as the 1940s, our founding father Shri G.D Birla espoused the trusteeship concept of management. Simply stated, this entails that the wealth that one generates and holds is to be held as in a trust for our multiple stakeholders. With regard to CSR, this means investing part of our profits beyond business, for the larger good of society. While carrying forward this philosophy, our legendary leader, Mr. Aditya Birla, weaved in the concept of 'sustainable livelihood', which transcended cheque book philanthropy. In his view, it was unwise to keep on giving endlessly. Instead, he felt that channelising resources to ensure that people have the wherewithal to make both ends meet would be more productive. He would say, "Give a hungry man fish for a day, he will eat it and the next day, he would be hungry again. Instead if you taught him how to fish, he would be able to feed himself and his family for a lifetime." Taking these practices forward, our chairman Mr. Kumar Mangalam Birla institutionalised the concept of triple bottom line accountability represented by economic success, environmental responsibility and social commitment. In a holistic way thus, the interests of all the stakeholders have been textured into our Group's fabric.

29

The footprint of our social work today spans 2,500 villages in India, reaching out to seven million people annually. Our community work is a way of telling the people among whom we operate that We Care.

Achievements
As part of the eighth biggest cement manufacturer in the world, UltraTech Cement has eleven integrated plants, one white cement plant, one clinkerisation plant in UAE, 15 grinding units 11 in India, 2 in UAE, one in Bahrain and Bangladesh each and and five terminals four in India and one in Sri Lanka.. These facilities gradually came up over the years, as indicated below: 2010 :: UltraTech Cement Middle East Investments Limited, a wholly owned subsidiary of the Company has acquired management control of ETA Star Cement together with its operations in the UAE, Bahrain and Bangladesh :: The cement business of Grasim demerged and vested in Samruddhi Cement Limited in May, 2010. Subsequently, Samruddhi Cement Limited amalgamated with UltraTech Cement Limited in July 2010. 2006 :: Narmada Cement Company Limited amalgamated with UltraTech pursuant to a Scheme of Amalgamation being approved by the Board for Industrial & Financial Reconstruction (BIFR) in terms of the provision of Sick Industrial Companies Act (Special Provisions) 2004 :: Completion of the implementation process to demerge the cement business of L&T and completion of open offer by Grasim, with the latter acquiring controlling stake in the newly formed company UltraTech

30

2003 :: The board of Larsen & Toubro Ltd (L&T) decides to demerge its cement business into a separate cement company (CemCo). Grasim decides to acquire an 8.5 per cent equity stake from L&T and then make an open offer for 30 per cent of the equity of CemCo, to acquire management control of the company.

31

32

REVIEW OF LITERATURE

The investment in inventories constitutes the most significant part of current assets / working capital in most of the undertakings. Thus, it is very essential to have proper control and management of inventories. The purpose of inventory management is to ensure availability of materials in sufficient quantity as and when required and also to minimize investment in inventories.

Meaning and Nature of Inventory:

In accounting language, inventory may mean the stock of finished goods only. In a manufacturing concern, it may include raw materials, work- in progress and stores etc.

Inventory includes the following things:

a) Raw Material: Raw material from a major input into the organization. They are required to carry out production activities uninterruptedly. The quantity of raw materials required will be determined by the rate of consumption and the time required for replenishing the supplies. The factors like the availability of raw materials and Government regulations etc., too affect the stock of raw materials. b) Work in progress: The work in progress is that stage of stocks which are in between raw materials and finished goods. The quantum of work in progress depends upon the time taken in the manufacturing process. The quantum of work in progress depends upon the time taken in the manufacturing process. The greater the time taken in manufacturing, the more will be the amount of work in progress.

33

c)

Consumables: These are the materials which are needed to smoother the process of production but they act as catalysts. Consumables may be classified according to their consumption add critically. Generally, consumable stores doe not create any supply problem and firm a small part of production cost. There can be instances where these materials may account for much value than the raw materials. The fuel oil may form a substantial part of cost.

d)

Finished goods: These are the goods, which are ready for the consumers. The stock of finished goods provides a buffer between production and market, the purpose of maintaining inventory is to ensure proper supply of goods to customers.

e)

Spares: The stock policies of spares fifer from industry to industry. Some industries like transport will require more spares than the other concerns. The costly spare parts like engines, maintenance spares etc., are not discarded after use, rather they are kept in ready position for further use. All decisions about spares are based on the financial cost of inventory on

such spares and the costs that may arise due to their non availability.

BENEFITS OF HOLDING INVENTORIES Although holding inventories involves blocking of a firms and the costs of storage and handling, every business enterprise has to be maintain certain level of inventories of facilitate un interrupted production and smooth running of business. In the absence of inventories a firm will have to make purchases as soon as it receives orders. It will mean loss of time and delays in execution of orders which sometimes may cause loss of customers and business.

34

A firm also needs to maintain inventories to reduce ordering cost and avail quantity discounts etc.

There are three main purpose of holding inventories. 1. The transaction motive: This facilitates continuous production and timely execution of sales order.

2.

The precautionary motive: Which necessitates the holding of inventories for meeting the unpredictable changes in demand and supplies of materials

3.

The speculative motive: Which induces to keep inventories for taking advantage of price fluctuations, saving in reordering costs and quantity discounts

RISK AND COSTS OF HOLDING INVENTORIES

The holding of inventories involves blocking of firms funds and incurrence of capital and other costs. The various costs and risks involved in holding inventories are: Capital costs: Maintaining of inventories results in blocking of the firms financial resources. The firm has therefore to arrange for additional funds to meet the cost of inventories.

35

The funds may be arranged from own resources or from outsiders. But in both the cased, the firm incurs a cost. In the former case, there is an opportunity cost of investment while in the later case; the firm has to pay interest to t he outsiders.

1.

Storage and Handling Costs: Holding of inventories also involves costs on storage as well as handing of materials. The storage of costs include the rental of the godown, insurance charges etc.

2.

Risk of Price decline: There is always a risk of reduction in the prices of inventories by the supplies, competition or general depression in the market.

3.

Risk of Obsolescence: The inventories may become absolute due to improved technology, changes in requirements, change in customer tastes etc.

4.

Risk Determination in quality: The quality of materials may also deteriorate while the inventories are kept.

Objects of Inventory Management Definition of Inventory Management: Inventory Management is concerned with the determination of optimum level of investment for each components of inventory and the operation of an effective control and review of mechanism. The main objectives of inventory management are operational and financial. The operational objective mean that the materials and spares should be available in sufficient quantity so that work is not disrupted for want of inventory. The financial objective means that inventory should not remain idle and minimum working capital should be locked in it.

36

The following are the objectives of inventory management:

1.

To ensure continuous supply of materials, spares and finished goods so that production should not suffer at any time and the customers demand should also be met.

2. 3.

To avoid both over stocking and under stocking of inventory. To maintain investment in inventories at the optimum level as required by the operational and sales activities.

4.

To keep material cost under control so that they contribute in reducing the cost of production and overall costs.

5.

To eliminate duplication in ordering or replenishing stocks. This is possible with the help of centralizing purchases.

6.

To minimize losses through deterioration, pilferages, wastages and damages.

7.

To ensure perpetual inventory control so that materials shown in stock ledgers should be actually lying in the stores.

8.

To ensure right quality goods at reasonable prices. Suitable quality standards will ensure proper quality of stocks. The price analysis, the cost analysis and value analysis will ensure payment of proper prices.

9.

To facilitate furnishing of data for short term and long term planning and control of inventory.

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TOOLS AND TECHNIQUES OF INVENTORY MANAGEMENT A proper inventory control not only helps in solving the acute problem of liquidity but also increases profit and causes substantial reduction in the working capital of the concern. The following are the important tools and techniques of inventory management and control. 1. Determination of stock levels: Carrying of too much and too little of inventory is detrimental to the firm. If the inventory level is too little, the firm will face frequent stock outs involving heavy ordering cost and if the inventory level is too high it will be unnecessary tie up of capital. An efficient inventory management requires that a firm should maintain an optimum level of inventory where inventory costs are the minimum and at the same time there is no stock out which may result in loss or sale or shortage of production. a) Minimum stock level: It represents the quantity below its stock of any item should not be allowed to fall. Lead time: A purchasing firm requires sometime to process the order and time is also required by the supplying firm to execute the order. The time in processing the order and then executing it is known as lead time. Rate of Consumption: It is the average consumption of materials in the factory. The rate of consumption will be decided on the basis of past experience and production plans.

38

Nature of materials: The nature of material also affects the minimum level. If a material is required only against the special orders of the customer then minimum stock will not be required for such material. Minimum stock level can be calculated with the help of following formula. Minimum stock level Re ordering level (Normal consumption x Normal re order period) b) Re ordering Level: When the quantity of materials reaches at a certain figure then fresh order is sent to get materials again. The order is sent before the materials reach minimum stock level. Re ordering level is fixed between minimum level maximum level. c) Maximum Level: It is the quantity of materials beyond which a firm should not exceeds its stocks. If the quantity exceeds maximum level limit then it will be over stocking. Overstocking will mean blocking of more working capital, more space for storing the materials, more wastage of materials and more chances of losses from obsolescence. Maximum stock level Reordering Level + Reorder Quantity (Maximum Consumption x Minimum reorder period) d) Danger Stock Level: It is fixed below minimum stock level. The danger stock level indicates emergency of stock position and urgency of obtaining fresh supply at any cost. Danger Stock level = Average rate of consumption x emergency delivery time.

39

e)

Average Stock Level: This stock level indicates the average stock held by the concern. Average stock level = Minimum stock level + x reorder quantity.

2)

Determination of Safety Stocks: Safety stock is a buffer to meet some unanticipated increase in usage. The

demand for materials may fluctuate and delivery of inventory may also be delayed in such a situation the firm can be facing a problem of stock out. In order to protect against the stock out arising out of usage fluctuations, firms usually maintain some margin of safety stocks. Two costs are involved in the determination of this stock that is opportunity cost of stock outs and the carrying costs. If a firm maintains low level of safety frequent stock outs will occur resulting into the larger opportunity costs. On the other hand, the larger quantity of safety stocks involves carrying costs.

3)

Economic Order Quantity (EOQ): The quantity of material to be ordered at one time is known as economic

ordering quantity. This quantity is fixed in such a manner as to minimize the cost of ordering and carrying costs. Total cost material = Acquisition Cost + Cost + Carrying Costs + Ordering Cost. Carrying Cost:

40

It is the cost of holding the materials in the store.

Ordering Cost: It is the cost of placing orders for the purchase of materials. EOQ can be calculated with the help of the following formula EOQ = 2CO / I Where C = Consumption of the material in units during the year O = Ordering Cost I = Carrying Cost or Interest payment on the capital.

4)

A B C Analysis: (Always better control analysis): Under A B C Analysis. The materials are divided into 3 categories viz., A, B

and C. Almost 10% of the items contribute to 70% of value of consumption and this category is called A category. About 20% of the items contribute about 20% of value of category C covers about 70% of items of materials which contribute only 10% of value of consumption.

5)

VED Analysis: (Vitally Essential Desire) The VED analysis is used generally for spare parts. Spare parts classified as

Vital (V), Essential (E) and Desirable (D).

41

The vital spares are a must for running the concern smoothly and these must be stored adequately. The E type of spares is also necessary but their stocks may be kept at low figures. The stocking of D type spares may be avoided at times. If the lead time of these spares is less, then stocking of these spares can be avoided. 6) Inventory Turnover ratio: Inventory turnover ratios are calculated to indicate whether inventories have been used efficiently or not. The inventory turnover ration also known as stock velocity is normally calculated as sales / average inventory of cost of goods sold / average inventory.Inventory conversion period may also be calculated to find the average time taken for clearing the stocks. Symbolically.

Inventory Turnover Ratio

Cost of goods sold __________________________ Average inventory at cost

And, Inventory conversion period = Days in a year _____________________ Inventory Turnover ratio

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7)

Classification and Codification of Inventories:

The inventories should first be classified can then code numbers should be assigned for their identification. The identification of short names are useful for inventory management not only for large concerns but also for small concerns. Lack of proper classification may also lead to reduction in production. Generally, materials are classified accordingly to their nature such as construction materials, consumable stocks, spares, lubricants etc. After classification the materials are given code numbers. The coding may be done alphabetically or numerically. The later method is generally used for coding. The class of materials is assigned two digits and then two or three digits are assigned to the categories of items divided into 15 groups. Two numbers will be category of materials in that class. The third distinction is needed for the quality of goods and decimals are used to note this factor.

8)

Valuation of inventories Method of valuation: FIFO method LIFO method Base Stock method Weighted average price method

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CRITERIA FOR JUDGING THE INVENTORY SYSTEM

While the overall objective of the inventory system is to minimize the cost to the firm at the risk level acceptable to management, the more proximate criteria for judging the inventory system are: Comprehensibility Adaptability Timeliness

Area of improvement: Inventory management in India can be improved in various ways. Improvements could be affected through.

Effective Computerization: Computers should not be used merely for accounting purpose but also for improving decision making. Review of Classification: ABC and FSN classification must be periodically reviewed.

Improved Coordination: Better coordination among purchase, production, marketing and finance departments will be help in achieving greater efficiency in inventory management.

Development of long term relationship: Companies should develop long term relationship with vendors. This would help in improving quality and delivery.

44

Disposal of obsolete / surplus inventories: Procedures for disposing obsolete / surplus inventories must be simplified.

Adoption of challenging norms: Companies should set benchmarks with global competitors and use ideals like JIT to improve inventory management.

Inventory cost an overall view:

Introduction: In financial parlance, inventory is defined as the sum of the value of the raw materials, fuels and lubricants spare parts maintenance consumable semi processed materials and finished goods stock at any giving point of time. The operational definition of inventory would be amount of raw materials, fuel and lubricants, spare parts and semi processed materials to be stock for the smooth running of the plant / industry. Need of Inventory: Inventories are maintained basically for the operational smoothness which they can be affected by uncoupling successive stages of production, whereas the monetary value of the inventory serves as a guide to indicate the size of the investment made to achieve this operational convenience. The materials management departments primary function is to provide this operational convenience with a minimum possible investment in inventories. Materials department is accused of both stock outs as well a large investment in inventories.

45

The solution lies in exercise a selective inventory control and application of inventory control techniques. Inventories build to act as a cushion between supply and demand. It is sufficient to take care of the requirements of demand till the next supply arrives. It is sufficient to take care of probable delays in supply as well as probable variations in demand. The size of the inventory depends upon the factors such as size of industry internal lead time for purchase, suppliers lead time, vendor relations availability of the materials, annual consumption of the materials. Inventory coat can be controlled by applying Modern Techniques viz., ABC analysis, SDE, ESN, HMC, VED etc. These techniques can be used effectively with the help of computerization.

What is meant by inventory cost: A. B. C. The total value of stores and spares and capital spares. Stores in transit and under inspection and Stock of finished products. Normally, there are certain problems in maintaining optimum level of inventory. Problems of inventory can be resolved by the cost implications. Costs which are relevant for consideration are discussed in the following lines;

Basically there are four costs for consideration in developing and inventory model. 1. 2. 3. 4. The cost of placing a replenishment order. The cost of carrying inventory. The cost of under stocking and The cost of over stocking.

46

The cost of ordering and inventory carrying cost are viewed as the supply side costs and help in the determination of the quantity to be ordered for each replenishment. The under stocking and over stocking costs are viewed as the demand side costs and help in the determination of the amount of variations in demand and the delay in supplies which the inventory should withstand. Whenever an order placed for stock replenishment, certain costs are involved, and, for most practical purpose it can be assumed that the cost per order is constant. The ordering cost may vary depending upon the type of items, for example raw material like steel against production component like castings in steel plants, support materials in the case of Steel industry.

The cost ordering includes: 1) 2) 3) Paper work costs, typing and dispatching an order. Follow up costs the follow up, the telephones, telex and postal bills etc., Costs involved in receiving of the order, inspection, checking and handling in the stores. 4) Any set up cost of machines charged by the supplier, either directly indicated in quotations or assessed through quotations of various quantities. 5) The salaries and wages of the purchase department.

47

Cost of Inventory carrying: This cost in measured as of the unit cost of the item. This measure gives basis for estimating what is actually costs a company to carry stock.

This cost includes: 1) 2) 3) Interest on capital. Insurance and tax charges. Storage costs labor costs, provision of storage area and facilities like bins, racks etc., 4) 5) 6) 7) Transport bills and hamali charges. Allowance for deterioration or spoilages. Salaries of stores staff. Obsolescence. The inventory carrying cost varies and a major portion of this is Accounted for by the interest on capital. Under stocking cost: This cost is the cost incurred when an item is out of stock. It includes cost of lost production during the period of stock out and the extra cost per unit which might have to be paid for an emergency purchase.

Over stocking cost: This cost is the inventory carrying cost (which is calculated per year) for a specific period of time. The time varies in different contexts it could be the lead time of procurement of entire life time of machine. In the case of one time purchases, over cost would be = Purchase Price Scrap Price

48

INVENTORY VALUATION AND COST FLOWS:

What is the cost of inventory? One can readily visualize the determination of inventory quantities by physical count or by use of perpetual inventory records. When this quantity is determined, it must be multiplied by a unity cost in order to determine the inventory value that is used on financial statements. Trade and quantity discount are to be excluded from unit cost since these discount exist for the purpose of defining the true invoice cost of merchandise. Cash discounts, on the other hand, have been considered as a reward for early payment and as a penalty for late payment. The reward has often been interpreted as a loss rather than as a part of unit cost. Thus it would not be difficult to find difference of opinion as to whether invoice cost includes or excludes cash discount. When the current replaAutomobial cost of material on hand at the close of a year is less than the actual cost, the inventory value is reduced to replaAutomobial cost (current market price). Thus the acceptable basis inventory valuation is the lower of cost or market or more properly the lower of actual cost or replaAutomobial cost. The determination of inventory values is very important from the point of view of the balance sheet and the income statement since costs not included in the inventory (the balance sheet) are considered to be expensive and are thus included in the income statement.

49

Valuation of inventories methods of determination: Although the prime consideration in the valuation of inventories is cost, there are a number of generally accepted methods of determining the cost of inventories at the close of an accounting period. The most commonly used methods are first in first out (FIFO) average, and last in first out (LIFO). The selection of the method for determining cost for inventory valuation is important for it has a direct bearing on the cost of goods sold and consequently on profit. When a method is selected, it must be used consequently and cannot be changed for year to year in order to secure the most favorable profit for each year.

THE FIFO METHOD (FIRST IN FIRST OUT METHOD) Under this method it is assumed that the materials or goods first received are the first to be issued or sold. Thus, according to this method, the inventory on a particular date is presumed to be composed of the items which were acquired most recently. The value inventory would remain the same even if the perpetual inventory system is followed. Advantage:- The FIFO method has the following advantages. 1) It values stock nearer to current market prices since stock is presumed to be consisting of 2) 3) The most recent purchases. It is based on cost and, therefore, no unrealized profit enters into the financial accounts of the company. 4) The method is realistic since it takes into account the normal procedure of utilizing or selling those materials or goods which have been longer longest in stock.

50

Disadvantages:- The method suffers from the following disadvantages. 1) It involves complicated calculations and hence increases the possibility of clerical errors. 2) Comparison between different jobs using the same type of material becomes sometimes difficult. A job commenced a few minutes after another job may have to bear an entirely different charge for materials because the first job completely exhausted the supply of materials of the particular lot. The FIFO method of valuation of inventories is particularly suitable in The following circumstances. I. II. III. The materials or goods are of a perishable nature. The frequency of purchases is not large. There are only moderate fluctuations in the prices of materials or goods purchased. IV. Materials are easily identifiable as belonging to a particular purchase lot.

The LIFO method (Last in First Out method) This method is based on the assumption that last item of materials or goods purchased are the first to be issued or sold. Thus, according to this method, inventory consists of items purchased at the earliest cost. Advantages: - This method has the following advantages: 1) It takes into account the current market conditions while valuing materials issued to different jobs or calculating the cost of goods sold. 2) The method is base on cost and, therefore, no unrealized profit or loss is made on account of use of this method. The method is most suitable for materials which are of bulky and non Perishable type.

51

Base Stock Method: This method is based on the contention that each enterprise maintains at all times a minimum quantity of materials or finished goods in its stock. This quantity is termed as base stock. The base stock is always valued at this price and its carried forward as a fixed asset. Any quantity over and above the base stock is valued in accordance with any other appropriate method. As this method aims at matching current costs to current sales, the LIFO method will be most suitable for valuing stock of materials or finished goods other than the base stock. The base stock method has advantage of charging out material / goods at actual cost. Its other merits or demerits will depend on the method which is used for valuing materials other than the base stock.

Weighted average price method: This method is based on the presumption that once the materials are put into a common bin, they lose their identity. Hence, the inventory consists of no specific batch of goods. The inventory is thus priced on the basis of average priced on the quantity purchased at each price. Weighted average price method is very popular on account of its being based on the total quantity and value of materials purchased besides reducing number of calculations. As a matter of fact the new average price is to be calculated only when a fresh purchase of materials is made in place of calculating it every now and then as is the case with FIFO, LIFO methods. However, in case of this method different prices of materials are charged from production particularly when the frequency of purchases and issues/sales in quite large and the concern is following perpetual inventory system.

52

Valuation of inventories impact on the flow of costs: As should be quite evident, the different methods of calculating inventory values will all have their impact on the flow of costs through the balance sheet into the income statement. The dollars that are paid to acquire inventory are always divided between the balance sheet (inventories) and the income statement (cost of goods sold), there is not other place to put them. Thus if the different methods of calculating inventory produce differing inventory values, they will also produce differing cost of goods sold figures, and the differing cost of goods sold figures will naturally produce differing profit figures. In order show the impact of inventory valuation on cost flows, the preceding exhibits are summarized. Each method produces a different figure for the transfer of raw materials to work in process. These differences appear small, but the only reason for this is that the dollar amounts have been kept small to make the illustration workable. With the transfer of materials to work in process, the cost flow or transfer with have its impact on the work in process inventory and the transfer of completed merchandise to finished gods. Ultimately when goods are sold; the varying methods of valuing inventories will have their impact on cost of goods sold and these profits. The effects of the cost flows on cost of gods sold and profits can be accentuated further it the differing methods of valuing inventories are applies to work in process and finished goods.

Evaluation of methods What causes the differences? The differences in inventory values and flows for each of the method illustrated result from only one factor, that it, changing purchases prices or unit costs. If purchase prices had remained stable or unchanged, each method would have produced the same inventory value and cost flow.

53

Cost flows and inventory are exactly the some under stable prices. With a falling price level, the LIFO method produces the highest cost flow and the lowest inventory. With a falling price level, the LIFO method produces the lowest cost flow and highest inventory. The cost flow under LIFO follows the price level, LIFO produces larger cost flows when prices are rising and smaller cost flows when prices are falling. A final item to consider is that the average method produces results which fall between the extremes of LIFO and FIFO. Evaluation of methods can we justify the differences? The best method of inventory valuation might be specific identification, that is, the units in inventory should be identified with the specific invoices and thus specific unit costs to which they apply. Fortunately, the FIFO method constitutes a very useful approximation to the specific identification method if one can reasonably assume that the actual flow of materials is first-in first-out. This assumption is not unreasonable and thus we have stated the main argument for the FIFO inventory scheme, that is, the physical flow of materials would match the flow of costs under the first in first out method. When the units in inventory are identical, interchangeable and do not follow any specific pattern of physical flow, the average cost system would seen to appropriate. The primary difference between the FIFO and average methods is centered on the physical flow since both methods could involve identical and interchangeable units. The FIFO method fits a first-in first-out physical flow. The average method fits a system which has no specific pattern of physical flow. Finding a situation where there is no specific pattern of physical flow should be quite difficult because of the fact that most inventory items are subject to deterioration by instituting a person would attempt to reduce such deterioration and any reasonable person would attempt to reduce such deterioration by instituting a physical flow approximating

54

first-in-first-out. The major reason for the use of the average method is something other than the lack of specific physical flow.

Ordinarily the LIFO method cannot be justified on the basis of the physical flow of materials. Under conditions of changing prices, the advocate of LIFO says that the only method which matches costs and revenues is the LIFO method. The LIFO method assumes that the latest item is the first item out, and thus the current costs of materials are matched with the other hand, assumes that the first item in is the first item out, and thus the non-current costs of matching current costs with current revenues is the essence of the argument for the LIFO method. As can be seen by the above comments, there is no one best method of valuing inventories. The method chosen should fit the situation. A physical flow pattern comparable to FIFO would force one to consider the FIFO method. The lack of a discernible physical flow pattern would force one to consider the average method. Concentration on cost flows, as distinct from physical flows, would force to consider the LIFO method especially where there appears to be a discernible trend towards rising prices (or falling prices) as has been the case in our economy during recent years.

Inventories valued at standard cost: A very useful method of valuing inventories is at a standard cost. With a standard cost system is no need of spending a great deal of time and money tracing unit cost through perpetual inventory record.

55

PERPETUAL INVENTORY CARD UNDER A STANDARD COST SYSTEM

Perpetual inventory Plant: Standard cost: Location: Order Quantity:..... Order Point: .. Available Date Description On order Received Issued On order On hand

As shown above, there is need only for physical quantities since the inventory values is the physical quantity multiplied by the standard cost. With the cost and value columns disposed off, a perpetual inventory card can include additional data such as quantities on order, quantities reserved, and quantities available. These additional data are very useful for inventory and production control purpose. On the basis of a few calculations concerning into inventories on a FIFO, a LIFO, or an average cost basis.

56

Inventory of Obsolescence:

Absolvent inventories cannot be used or disposed off at values carried on the books. Frequent reviews should be made of all inventories, and when obsolescence is indicated a request for revaluation should be prepared for approval by management. The difference between original and obsolete value should be recorded by a change to operating account. Inventory obsolescence, and a credit to inventory. If the material is scrapped, this will be for the full inventory value or used in areas where it will be work less than its

Original value, the entry would be only for the amount of write down. Some companies carry a solvage inventory and transfer to it materials which may be sold or used at reduced values. Where this is done, the entry would be: Dr. Solvage inventory Dr. Inventory Obsolescence. Cr. Raw Material inventory or Supplies inventory.

Inventory cost in relation ULTRA TECH shall to classifieds follows: Inventory can be classified as capital and revenue certain items through titled as capital in nature. Hence, due care is to be take whole drawing the material. Materials which are to be imported from other countries have to be planned well in advance nearly about 24 months are to initiate the proposals for procurement. Similarly some of the items do not require any lead time some they are available in the local market.

57

Cement is highly energy intensive industry, the inputs like power and Steel are the major part of the variable cost since Government controls the Steel & fuel sector, and increase is rates adversely effects the Cement industry. ULTRA TECH has its own power plant and through which it saves energy consumption. By this the cost since Government controls the Steel & fuel sector, any increase rates adversely affects the Cement industry. Inventory cost of any organization also adversely affects by retaining obsolete / scraps and inventory costs can be reduced by management with an advance planning of procurement of materials, periodical reviews of existing spares with reference to the fast consumption, ascertaining the information regarding the availability of spares in other areas. Holding of extra inventory will be an additional financial burden to the company due to payment of interest charges on the materials purchased, diminishing value of materials purchased, diminishing value of materials by keeping them in stores for a log time, handling charges, spare rent etc., The inventory of ULTRA TECH mainly includes Limestone, Bauxite, Gypsum, Fly ash. Inventory in ULTRA TECH during 2005 06 to 2009 10 are as follows: (Units in m.t)

Years Steel Rubber Plastic fiber

2005 06 1042230 49637 23243 5752

2006 07 974490 44256 20703 10301

2007-08 956940 41872 21747 18101

2008-09 968730 431151 23091 33695

2009-10 1239443 64961 38765 159344

58

Inventory in ULTRA TECH during 2005 06 to 2009 10.

Years Steel Rubber Plastic fiber

2005 06 122161492 32294775 19613001 28203

2006 07 13853482 27971993 17100574 644473

2007-08 13853482 27971993 17100574 644473

2008-09 157130922 23488745 19699583 2546948

2009-10 243412189 38552277 49061196 20223404

Value of imported and indigenous raw materials, stores, spare parts and components consumed during the year:

250000000 200000000
Steel

150000000
Rubber

100000000 50000000 0 2004-05 2006-07 2007-08 2008-09 2009-10

Plastic fiber

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Imported

Years Raw Materials Stores spare parts and components

2005 06 95354856

2006 07 593002633

2007-08 666190014

2008-09 491339625

2009-10 1454235982

522588043

522588043

75345209

131624912

42279637

1.5E+09 1E+09 500000000 0 2005-06 2006-07 2007-08 2008-09 2009-10

Raw Materials

Stores spare parts and components

(Imported Raw materials and Stores spare parts and components)

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Indigenous

Years Raw Materials Stores spare parts and components

2005 06 1104787879

2006 07 3995869418

2007-08 3558875426

2008-09 4117405138

2009-10 7906341716

611204564

981990949

189149420

1365664385

3868715827

8E+09 7E+09 6E+09 5E+09 4E+09 3E+09 2E+09 1E+09 0 2005-06 2006-07 2007-08 2008-09 2009-10
Stores spare parts and components Raw Materials

Indigenous Raw Materials Stores spare parts and components.

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Cement factory runs with various equipments:

i. technical department 1. 2. 3. 4. ii. Store Mechanical Electrical Civil

Commercial departments 1. 2. 3. stores purchase accounts

To run the plant and maintain equipments departments require spares. for such requirement of spares departments raise indents and send the indents to purchase department through stores.

Indents: 1) 2) 3) Annual indents for consumable items (stores items). Regular indents raised by consuming departments. Annual requirement of raw materials promo & QC.

Enquiries: 1) Enquires will be sent approved sun contractors.

62

Order processing form: 1) 2) Receiving quotations from sub contractors. Enter the price details of enquiry sent in the Order processing form. 3) Selection of party on merit basis.

Purchase order: 1) 2) Prepare purchase order on selected party. Send purchase order copies to party, stores and Departments. Goods receipt note: 1) Receiving goods receipt note from stores.

Purchase department: Activity receiving indents:

Flow chart:

Receipt of annual indents for consumable items / stores items from stores department. Checking of indent number an authority of item, delivery time consumption period.

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 In case of any deficiency, send the information to concerned department for clarification. Segregation of indents for attending at C.P.D. and Hyderabad Office. Sent the Hyderabad indents to Hyderabad Office. Enter the indents details in indent register.

PURCHASE DEPARTMENT
PURCHASE ENQUIRY

Ms. Sl. No.

Material Code

Department

Quantity

Unit

When Required

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ACTIVITY: FLOATING ENQUIRIES: FLOW CHART: Checking indented items and equipment name. Taking previous suppliers information from previous supply. If new equipment / item, information to be taken from concerned department or from competitors / journals / yellow pages. Prepare enquiry to approved sub contractors through enquiry format. If emergency requirement, send the enquiries through fax / e-mail. Enter the details of enquiries sent in order processing form.

PURCHASE DEPARTMENT
ORDER PROCESSING FORM

Sl. No.

Indent Ref

Material Code No. Description Size Qty 1 2 3 4 5 6 Remarks

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ACTIVITY: PREPARATION OF ORDER PROCESSING FROM FLOW CHART: Receiving quotation against enquiries sent. Enter price and other of the quotation received from sub contractors in the order processing from. Mention the earlier purchase details of indented items against each item in the order processing form if available. Put up the processing from with enquiry and quotations to head (purchase). Examine order processing from with decide the sub contractor to whom purchase order to be placed.

PURCHASE DEPARTMENT
PURCHASE ORDER Indent No. Item Code

Sl. No.

Description

Qty

Rate

Unit

Amount

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ACTIVITY: PREPARATION OF PURCHASE ORDER FLOW CHART: Prepare purchase order after finalization of price and other technical terms mentioning the following details. 1. Material code 2. Indent number 3. Material specification & part number 4. Quantity 5. Rate 6. Payment and other terms & conditions Stipulation of terms of test certificate / ibr / manufactures certificate where applicable. Fill in and attach the purchase order review proforma to purchase order. Send the prepared purchase order to head (purchase) and competent authority for approval. Send the purchase order to identified approved sub contractor. Send the purchase order copies to store and concerned departments. Enter the details of purchase order in purchase order register.

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PURCHASE DEPARTMENT AMENDMENT / CANCELLATION OF ORDER

Material Code

Material

Price / Quantity as per Order

Amended Price / Quantity

ACTIVITY: ORDER AMENDMENT, ORDER FOLLOW UP AND INFORM THE SUPPLIER FOR THE REJECTIONS / DAMAGES / SHORTAGES: FLOW CHART: Issue of amendments in case of modification to purchase order. Review the pending order and follow up the pending order for breakdown requirement. Send regular reminders to suppliers against pending purchase order every month. Receive shortage / excess / damages report from stores for the material received. Information the supplier for the rejections / damage / excess / shortage.

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PURCHASE DEPARTMENT

ACTIVITY: IMPORTS: FLOW CHART: Receipt of indents for import items from stores department. Taking previous / item, information to be taken from concerned department or from competitors / journals / Yellow pages. Send enquiry to overseas supplier. Receiving quotations against enquiries sent. Enter price and other terms of the quotations received from overseas supplier in the order processing form. Examine order processing form and decide the sub contractor to whom purchase order to be placed. Prepare purchase order after finalization of price and other technical terms mentioning the following details.

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1) Material code 2) Indent number 3) Material specification & part number 4) Quantity 5) Rate 6) Payment 7) Insurance and other terms and conditions.

Send the prepared purchase order to head (purchase) and competent authority for approval.

Send the purchase order to overseas supplier. Send the purchase order copies to stores and concerned departments. Prepare IC documents and submit to bank for onward transmission to overseas supplier.

Receive shipping documents from overseas supplier and send same to clearing agents for collection of the material.

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STORES DEPARTMENT
ACTIVITY: RECEIPTS AND UNLOADING MATERIAL Receiving of Goods through Trunk / Personnel Delivery. Entry of vehicle at Gate Office. Stamping on Dispatch Advise / Delivery challan by Gate Office. Checking of challans / Dispatch Advise with purchase order. Unloading of Goods at allotted place or in case of urgency direct at works site. All safety precautions are taken while unloading of material like workers should wear safety shoes, helmets, leather head gloves, noise respirator, nose mask. Training is given to workers for unloading Heavy & Bulky material by using chain pulley Blocks, Wire Rope Ceilings, Fork Lift. After UIL receipt acknowledgement given to driver maintaining Lorry receipts register.

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STORES DEPARTMENT
Activity: preparation of receipt and approval book for general material / d.c. enter of block, repair and stationary material manually in register Sorting of Delivery challans as below: a) General b) Stationery c) Repairs d) Block Checking with P.O. and mentioning Material Code, Party Code, Indent No. Department Name on each & every challans. Creation of D.C. entry in system for general materials. Preparation of identification tags for General Materials through system. Preparation of Receipt & Approval Book for General materials. Manual entry of block, stationery, repairs materials. Preparation of intimations for block, stationery, repairs materials.

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STORES DEPARTMENT
ACTIVITY: PHYSICAL VERIFCATION OF GOODS: All D.C. handed over to stores assistant physical verification like measuring, counting and tallying with D.C.s Quantity / Description of the materials by the Stores Assistant. Identification tags to be attached to the verified material. Shortage / Excess / Damages if any found to be noted on challans and inform to section incharge. Preparation of Shortage / Excess / Reports if any sending to parties under copy to purchase / bills sections.

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STORES DEPARTMENT
ACTIVITY: APPROVAL OF MATERIAL AND PREPARATION OF GOODS RECEIPT NOTES: Intimation is be sent to all the concerned departments. Showing materials to concern person. Taking approval of the material in receipt & approval book. Preparation general material in receipt & approval book. Preparation general material GRNs through system and stationery / block / repairs GRNs manually. Forwarding true copy to issue section of GRN for general material forwarding true copy to issue section of GRN for General material forwarding true copy of block / Repair / Stationery GRN to issue section and copy to purchase department.

STORES DEPARTMENT
ACTIVITY: REJECTED MATERIALS Rejected materials kept in allotted area of rejected materials. Packing of rejected materials. Preparation of gate passes for rejected materials. Sending back to suppliers through our Hyderabad Office. Sending consignee copy to party vides Register Letter for booking of Register goods to partys other than.

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STORES DEPARTMENT
ACTIVITY: EXCISE GATE PASSES Sending duplicate for transport copy of excise invoice from suppliers delivery challans. Mentioning A.B. Sl. No. and named of concerned department. Duplicate for transport copy of excise invoice over to bills section for sending the same to Excise Department. Corresponding with supplier. If the Excise Invoice is not found with delivery challans.

STORES DEPARTMENT
ACTIVITY: RECEIPTS OF MEDICINES Physical verification of Medicines as per Invoices. Verification of expiry date on medicines. Verification of MRP. Sending shortage / excess note if any found. Taking approval of Medical Officer. Sending Rejection notes if any medicine is rejected. Issuing to dispensary. Bills forwarding to Account Department vide IOM for making the payment.

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76

RATIO ANALYSIS

The investment on raw materials over a period of 5 years from 2004 to 2009 is presented in the following table. 1. Investment on Raw Materials: Year Investment on Raw Material crores) 2005 2006 2006 2007 2007 2008 2008 2009 2009 -2010 11690.67 49950.88 42950.66 46087.45 93605.78 (in

Interpretation: 1) From the above table it can be understood that the inventory of was recorded at 11,690.67 during the year 2005 06 and it is increased to 93605.78 during the year 2009 10. 2) It shows that there is on increase in the inventory to the more extent of 81915.11. 3) 4) The average inventory of ULTRA TECH was recorded at Rs.48857.08. The highest investment in inventory was recorded in the years 2009-10

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2.

Trend Analysis: Trend analysis technique is applied to know the growth rate in investment of

raw material of ULTRA TECH over the review period which is shown in the following table.

Trend Analysis: Raw Material Lacks) 11690.67 49950.88 42950.66 46087.45 93605.78 (in

Year

Trend %

2005 2006 2006 2007 2007 2008 2008 2009 2009 -2010

87% 373% 315% 344% 699%

Trend analysis technique is applied to know the growth rate in investment of raw material of ULTRA TECH Cement. (From2005-06 to 2009-10)

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Interpretation: 1)

The investment on inventory has increased in the year 2007

08. And the lost year investment has declared continuously. The percentage in 2005 06 was 315% as compared to years 2005 06 to 2007 08. 2) The trends in inventories show that inventory have been more in the year 2007 08 and then it has shown a downward trend and again it increased to some extent. 3) The investment in inventories has shown fluctuating trend is initial years and then it raised to 699% and again showing fluctuating trend. 3. Inventory Turnover Ratio: This ratio indicates the number of times the stock has been turned over during the period & evaluates the efficiency with which a firm is able to manage its inventory. This ration is calculated by applying the following formula. Cost of goods sold Inventor turn over ration = _________________ Average inventory Inventory turn over ration: Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 -2010 Cost of goods sold 59021.41 121551.71 127533.58 130392.68 311636.92 Avg. Inventory 37975.30 95065.28 12390.06 1333.8.01 160035.93 Ratio 1.55 12.79 10.29 9.78 1.32

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Interpretation: 1. From the above table it can be observed that (1) inventory turnover ratio is

8.13 and it gradually decreased to 1.55 during 2005 2006. 2. In the year 2009 10 it is clear that the ratio is very less i.e., his stock Is not turned into sales quickly. 3. 4. As compared to all the years the ratio is very less in 2009 10. The average inventory turn over ratio was recorded at 7.3 times during the

review period.

4.

Inventory conversion period: It may also be of interest to see average time taken for clearing the stocks.

This can be possible by calculating inventory conversion period. This period is calculated by dividing the number of the days by inventory turns over. This formula may be as: Days in a year (360 days) Inventory conversion period = _____________________ Inventory turnover ratio

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Inventory conversion period: (in crores) Cost of goods sold 59021.41 121551.71 127533.58 130392.68 311636.92

Year

Avg. inventory

Ratio

ICP (Days)

2005 2006 2006 2007 2007 2008 2008 2009 2009 -2010

37975.30 95065.28 12390.06 1333.8.01 160035.93

1.55 12.79 10.29 9.78 1.32

232 28 34 36 272

Interpretation: From the above table it can be identified the following observations: 1) The inventory conversion period was 232 days during the year, which indicates that the stock has been very quickly converted into sales which mean the company is managing the inventory efficiently. 2) The lowest inventory conversion period was recorded at 28 days in the year 2005 06 and the highest inventory conversion was recorded at 232 days in the year 2009 10. 3) The average inventory conversion period was recorded at 107 days during the review period. 5. Percentage of Inventory over current assets: In order to know the percentage of inventory over current assets the Ratio of inventory to current assets is calculated and which is presented in the Following table.

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Inventory Inventory over current assets ratio = __________ X 100 Current assets

Percentage of Inventory Over current assets: Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 -2010 Inventory 11690.67 49950.88 42950.66 46087.45 93605.78 Current Assets 28770.78 53063.75 45598.02 49713.32 86811.49 Ratio (%) 40% 94% 92% 92% 107%

Interpretation: 1) From the above table it can be understand that the % of inventory over current assets ratio was showing a declining trend for two years 2005 2006. 2) 3) However from the year2009 10 it is showing an increasing trend. The lowest inventory over current assets ratio was recorded at 40% during the year 2009 10 and the highest inventory over current assets ratio we recorded at 107% during 2009-2010 4) The average inventory over current assets ratio was recorded at 80%.

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7. Percent of Inventory Over total current assets & fixed assets:

Inventory / Current + Fixed assets

Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 -2010

Inventory 11690.67 49950.88 42950.66 46087.45 93605.78

Current Assets 87468.76 117985.89 112647.26 112637.07 197330.50

Ratio (%) 13.36% 42.33% 37.50% 40.91% 47.43%

Interpretation:

1)

From the year 2005-06 it is showing fluctuating trend but as compared to above 2 years it is increasing.

2)

The lowest inventory over total assets ratio was recorded at 13.36% during the year 2005-06 and the highest inventory ratio was recorded at 43.43% during the year 2009-10.

3)

The average inventory to total assets ration was recorded at 32.81% during the review period

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7.

Percentage of Inventory over current liabilities: In order to know the percentage of inventory over current liabilities the

Ration of inventory to current liabilities is calculated and which is presented in The following table. Inventory Inventory over current liabilities ratio = __________________ X 100 Current liabilities Percentage of Inventory Over current liabilities: Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 -2010 Inventory 11690.67 49950.88 42950.66 46087.45 93605.78 Current liabilities 8042.62 16204.14 16204.14 17728.22 36253.41 Ratio (%) 145% 308% 284% 259% 258%

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Interpretation: 1) From the above table it can be understand that the % inventory over current liabilities ratio was showing a declining trend for two years 2005-06 2) During the year 2005-06 the ratio was it gradually increased to 145 and there is a net increase to the extent of 128. 3) The lowest inventory over total amounts ratio was recorded at 17 during the year 2005-06. 4) The highest inventory to current liabilities ratio was recorded at 308 during the year 2006-07 5) The average inventory to current liabilities ratio was recorded at 211 during the review period. 8. Current Ratio: In order to know the current ratio the percentage of current assets to current liabilities is calculated and which is presented in the following table. Current assets Current Ratio = _____________________ Current liabilities Calculation of Current Ratios: Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 -2010 Inventory 28770.78 53063.75 45598.02 49713.32 86811.49 Current liabilities 8042.62 16204.14 16204.14 17728.22 36253.41 Ratio (%) 3.57% 3.27% 3.06% 2.80% 2.39%

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Interpretation:

1)

From the above table it can be interpreted that the % of current assets over current liabilities ratio i.e., current ratio was showing a decreasing trend from year 2005-2006.

2)

In the year 2005-2006 the ratio was 3.07% and has increased to 3.57% in the year 2005-2006

3)

The lowest current ratio was recorded at 2009-10 which is 2.39% and the highest current ratio was recorded at 3.57% during the year 200506.

4)

The average current ratio was recorded at 3.02% during the review period.

9.

Quick Ratio: The quick ratio is the relationship between quick to current liabilities quick

assets is more rigorous test of liability position of a firm it is computed by applying the following formula. Quick ratio = Quick assets / Current Liabilities

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Where Quick assets = Current Assets Inventory Year 2005 2006 2006 2007 2007 2008 2008 2009 2009 -2010 Inventory 17080 3112 3347 3625 3207 Current liabilities 8042.62 16204.14 16204.14 17728.22 36253.41 Ratio (%) 2.12% 0.002% 0.22% 0.20% 0.08%

Interpretation:

1)

From the above table it can be understand as that the % of quick assets to current liabilities i.e., the quick ratio was 0.002% in 2006-07 and from that year it is showing increasing trend.

2)

The highest quick ratio was recorded at 2.12% during the year 200506and the lowest quick ratio was recorded at 0.002% during the year 2006-07.

3)

The average quick ratio was recorded at 0.66 during the review period.

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CONCLUSIONS

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1) 2)

Over all the inventory of ULTRA TECH is up to the mark. The production during 2005-06 was 7,47,436 and 7,77,092 respectively which is higher as compared to 2008-2009 which is 6,87,373 and 7,27,447.

3)

Investment on raw material is 93605.78 lakhs which very high as compared to 2008-09 which is only 460870.45 lakhs.

4)

The inventory turn over ratio shows that the stock has been converted into sales is only 1.32 times.

5)

In the year 2006-07 the stock was cleared within 28 days whereas it took 232 days in the year 2006-2007 which took more days for clearing stock.

6)

Year 2006-07 is not showing sample profits. This is because of Iron prices have been continuously under pressure due to persistent mismatch between supply and demand.

7)

The quantity of Plastic in the year 2008-09 is 9,53,940 and its value is 13,85,34,812 but whereas in the year the quantity was 9,74,490 and the value is 12,21,61,492.

8)

In purchase department for want of any item it should go through several processes. This may include receiving indents, floating enquiries, preparation of order processing form, preparation of purchase order and order follow up inform the supplier. Most of the time was spent in accounts payable.

9)

In this type of process, it requires more number of employees and supplier should also wait for until the accounts are matched.

10)

This process takes an input, adds value to it and provides an output to an internal or external customer.

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SUGGESTIONS
1) Though the production is higher is the year 2006-07 and the sales were very high i.e., as per inventory conversion period it took 272 days. This shows that there is demand for Cement and the funds unnecessarily tied up. So, proper demand forecasting should be done and according to that it may be manufactured. 2) The investment on raw material should be made as per the requirement. Unnecessary investment may block up the funds. 3) Neither too high nor too low inventory turnover ratios may reduce profit and liquidity position of the industry. So, proper balance should be made to increase profits and to ensure liquidity. 4) The raw material should be acquired from the right source at right quality and at right cost. 5) The process that was being used by ULTRA TECH with the purchasing department should undergo changes, so that, it seeks enhance the celerity of the delivery of a product without compromising its quality by improving the utilization of materials, labour and equipment. 6) To reduce the work, the purchasing department may enter the purchasing order into database and did not send a copy to any one. When the merchandise arrived, the receiving clerk would enter the database and determine whether the order agreed with the electronic purchase order. If it did, payment was authorized to be made at the appropriate Time. If it didnt match, the order would be returned until if it is agreed by the Ultra tech. If it institutes Invoice less purchasing where the supplier did not need to send an invoice to be paid. This generally simplifies the process for all concerned. As a result, it would able to reduce the work of its accounts payable department.

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BIBLIOGRAPHY

1. 2. 3. 4. 5. 6.

Financial Management Financial Management

By IM Pandey By Prasanna Chandra By K. Shridhara Bai R.K.Sharma &S.KGuptha

Total Quality Management Management Accounting Companys Stores Manual Companys Annual Reports

www.google.com www.herohonda.com www.indiancompanys.com www.automobilsindia.com

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