Inventory Management is totally about how to maintain Inventory while running a business. It is very important for every company to follow the techniques covered in this topic.

1. A STUDY ON INVENTORY
MANAGEMENT
SUBMITTED BY
D. LAKSHMI MANASA

2. INTRODUCTION
• “Inventory” means physical stock of goods, which is kept in hands for smooth and efficient running
of future affairs of an organization at the minimum cost of funds blocked in inventories. The
fundamental reason for carrying inventory is that it is physically impossible and economically
impractical for each stock item to arrive exactly where it is needed, exactly when it is needed.
• Inventory management is the integrated functioning of an organization dealing with supply of
materials and allied activities in order to achieve the maximum co-ordination and optimum
expenditure on materials. Inventory control is the most important function of inventory
management and it forms the nerve center in any inventory management organization.
• Inventory management is a very important function that determines the health of the supply
chain as well as the impacts the financial health of the balance sheet.
• Inventory can be in complete state or incomplete state.
• Inventory is held to facilitate future consumption, sale or further processing/value addition.
• All inventory resources have economic value and can be considered as assets of the organization.

3. INDUSTRY PROFILE
• The Indian pipe industry with presence across all the categories of pipes (steel, cement and plastic)
has become a major exporting hub to the regions like Middle East, US and Europe due to its
locational advantage and global accreditations. Also, the lower oil and gas pipeline penetration
level in India provides huge opportunity for laying new pipeline infrastructure in the country,
considering its vast geographical area.
• The operating environment for the Indian pipe industry was challenging during FY2012. The steel
pipe companies expanded their capacities domestically as well as globally during the last couple of
years, which led to excess capacities. Hence, most of the domestic players had to resort to lower
margin orders domestically to maintain their order books. The higher input and finance costs
significantly eroded their profitability margins.
• CARE Research expects the demand for Indian pipe industry to improve from FY2014 & remain
healthy over the longer term, both on the global as well as domestic fronts, on the back of
increasing demand arising from oil & gas and infrastructure projects. Enhanced global energy
demand arising from increasing population and economic spending in the emerging markets will
lead to need for higher exploration and production (E&P) activity, giving boost to the demand for
steel pipe segment. Shale gas discovery is likely to increase demand for pipeline infrastructure
globally

5. NEEDS OF THE STUDY
• Inventory management systems helps the company in order to maintain
inventory accurately by recording consumer sales.
• Inventory management system that will track and maintain the inventory
required to meet customer demand.
• The present study helps the company in the process of implementing various
techniques in order to maintain inventory at an optimum level.

6. SCOPE OF THE STUDY
• The value of the inventory at the end of each period provides a basis for
financial reporting on the balance sheet.
• To determine the cost of inventory sold during the period, the company
allows measuring the changes in inventory.
• Together, inventory values and level changes allow the company to plan for
future inventory needs.
• Though the company has several departments, the prime area of my interest
was in Finance.

7. OBJECTIVES OF THE STUDY
• To know about the Inventory Management in TIRUPATI CONTAINERS PRIVATE
LIMITED.
• To study about the ordering levels for the important components of inventory
in the company.
• To understand and measure economic order quantity for the selected raw
material items of the company.
• To analyze its inventory management methods with the help of ABC analysis
in the company

8. RESEARCH METHODOLOGY
• The data has been gathered through interaction and discussions with the executives working in the division.
• Some important information has been gathered through couple of unstructured interviews of executive.
• Annual reports and other magazines published by the company are used for collecting the required information.
Source of data collection.
All research needs adequate and accurate data or information so the collection of data is the first step in any
resource’s activity. The data needed for research can be classified in to two categories.
• Primary Data
First-hand information was collected from experts of Finance department on their course of actions towards
collections.
• Secondary Data
Most of the information pertaining to this study has been collected from the secondary source. The study has
depended up on both internal as well as external secondary data.
Internal secondary data consists of annual reports, brochures, sales records, internal manuals and other records etc.
External secondary data consists of journals, newspapers, economic times, financial express, magazines, Internet
web sites, paper associations, publications and textbooks, industrial directories etc.

9. LIMITATIONS OF THE STUDY
• Detail study about all the material was not possible because of time limit.
• Some of the information was kept confidential by the stores department.
• Study was confined only to the selected components in the stores
department.

10. DATA ANALYSIS &INTERPRETATION
• Analysis of Inventory Management
The total inventory management of the company includes the raw materials
inventory, work in process inventory, finished goods inventory. The total
inventory of the company in 2018-19 is Rs. 40503.38 lacks. TIRUPATHI
CONTAINERS PVT LTD has total of approx. 214683 different types of
inventories.

11. COSTS
ORDER QUANTITY
ANNUAL TOTAL COSTS
ANNUAL ORDERING COST
ANNUAL INVENTORY CARRYING COST
ECONOMIC ORDER QUANTITY
Generally economic order quantity is the point at which inventory carrying costs are equal to order costs.
In determining economic order quantity, it is assumed that cost of managing inventory is made up solely of two parts
i.e., ordering cost and carrying cost.

12. DESCRIPTION 2014-2015 2015-2016 2016-2017
LEAD-A 767009.1 425982.0477 2262568.412
LEAD-B 195923.4 206267.3246 371490.1401
LEAD-C 151622.2 118106.85 16495.46548
LEAD-D 1343638 778638.5699 999862.5682
LEAD-E 607488 410296.4271 1306525.806
LEAD-F 884577.9 608770.4427 872086.4981
LEAD-G 598927.9 382263.0582 598729.1058
LEAD-H 571933.1 857415.8952 845860.8362
LEAD-I 468733.1 309913.5389 1232910.711
0
500000
1000000
1500000
2000000
2500000
Chart Title
Series 1 Series 2 Series 3 Series-4 Series-5
COMPARISION OF EOQ (2014-2017)
INTERPRETATION:
In the year 2017 the items like Lead-A, Lead-B's EOQ and
company orders are increased when compared to previous
years. In the year 2016 Lead-E, Lead-F, Lead-G’s EOQ and
Company Orders are decreased when compared to 2015
respectively.

13. TOTAL INVENTORY COST EVERY YEAR (IN LACS)
years 2014-15 2015-16 2016-17 2017-18 2018-19
Total 26957.87 38846.52 38599.79 43075.71 40503.38
2015 2016 2017 2018 2019

14. • ANALYSIS OF INVENTORY MANAGEMENT
• Inventory conversion period is very closely related to the inventory
management.
• Inventory conversion is the part of the net operating cycle.
• Raw material conversion period
• Work in process conversion period
• Finished goods conversion period.

15. RAW MATERIAL CONVERSION PERIOD
Particulars 2014-15 2015-16 2016-17 2017-18 2018-19
Average R.M. Inventory 4041.72 5274.76 5522.4 6090.595 8270.05
R.M. Consumption per day 214.72 294.78 341.99 343.39 346.56
R.M. Conversion Period 16 days 18 days 19 days 18 days 24 days
Average Raw material Inventory
Raw Material Conversion Period = ______________________________
Raw material consumption period

16. Raw Material Conversion Period
2015 2016 2017 2018 2019

17. WORK IN PROCESS CONVERSION PERIOD
Particulars 2014-15 2015-16 2016-17 2017-18 2018-19
Average W.I.P Inventory 2422.75 1793.74 2031.60 2707.93 1110.41
Cost of Production per day 319.38 398.08 461.47 507.88 498.04
W.I.P Conversion Period 4 days 5 days 8 days 5 days 2 days
Average WIP Inventory
Work in Process Conversion Period =____________________
Cost of Production

18. Work in Process Conversion Period
2015 2016 2017 2018 2019

19. FINISHED GOODS CONVERSION PERIOD
Particulars 2014-15 2015-2016 2016-17 2017-18 2018-19
Average Finished Inventory 4351.265 8795.65 11532.51 10332.275 7251.50
Cost of Goods Sold 70.81 84.71 188.63 81.05 39.632
Finished Goods Conversion Period 61 days 103 days 61 days 127 days 182 days
Average finished goods Inventory
Finished Goods Conversion Period = ______________________________
Costs of goods sold

20. Finished Goods Conversion Period
2015 2016 2017 2018 2019

21. INVENTORY CONVERSION PERIOD
Particulars 2014-15 2015-2016 2016-17 2017-18 2018-19
R.M. Conversion Period 19 days 18 days 16 days 18 days 24 days
W.I.P. Conversion Period 8 days 5 days 4 days 5 days 2 days
F.G. Conversion Period 61 days 103 days 61 days 127 days 182 days
Inventory Conversion Period 88 days 126 days 81 days 150 days 208 days

22. 2015 2016 2017 2018 2019
INVENTORY CONVERSION PERIOD

23. TOTAL INVENTORY TURNOVER RATIO
Particulars 2014-15 2015-2016 2016-17 2017-18 2018-19
Inventory Turnover
Ratio
6.92 times 7.5 times 7.95 times 6.63 times 5.96 times
Total inventory turnover ratio is concerned with the cost of goods sold and average inventory. Total inventory
turnover ratio is showing how many times inventory is replaced during the year symbolically,
Costs of goods sold (sales)
Total Inventory Turnover Ratio = ______________________
Average Inventory

24. Total Inventory Turnover Ratio
2015 2016 2017 2018 2019

25. WORK IN PROCESS TURNOVER RATIO
Particulars 2014-15 2015-2016 2016-17 2017-18 2018-19
Work in Process Turnover
Ratio
75 times 137 times 152 times 99 times 224 times
WORK IN PROCESS TURNOVER RATIO:
Work in process turnover ratio is concerned with the cost of goods sold and average work in process
inventory. Work in process turnover ratio shows how many times work in process inventory is replaced
during the year. Symbolically,
Cost of production
Work in Process Turnover Ratio = ___________________
Average WIP Inventory

26. 0
50
100
150
200
250
INTERPRETATION:
Work in process indicates the stock withdrawn
from warehouse and are yet to get converted
into finished stock. The higher the ratio the
higher will be the management efficiency. In
2014-15 the ratio is approx, 75 times which
shows good profitability for the company. But it
reduced to 99 times in 2017-18 which shows
decrease in profitability, company is taking more
time to produce finished goods which is not good
for the company.
2015 2016 2017 2018 2019

27. FINISHED GOODS TURNOVER RATIO
Particulars 2014-15 2015-2016 2016-17 2017-18 2018-19
Finished Goods
Turnover Ratio
42 times 28 times 26 times 26 times 34 times
Finished goods turnover ratio is concerned with the cost of goods sold and average finished
goods inventory. Finished goods turnover ratio indicates how many times finished goods are
replaced during the year. Symbolically,
Costs of goods sold
Finished Goods Turnover Ratio = ____________________________
Average finished goods inventory

28. Finished Goods Turnover Ratio
INTERPRETATION:
Finished goods turnover ratio indicates
how much time finished goods gets
turnover. The higher the ratio the more will
be the sales and vice versa. But after it
subsequently reduces and lasts to 26 times
in 2014-15 which is not a good sign for the
company. It shows that company is holding
huge stock at warehouse.
2015 2016 2017 2018 2019