Inventory management in neuland laboratries

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A Project Report
On
“INVENTORY MANAGEMENT”
IN
NEULAND LABORATORIES LTD
Project Work Submitted In Partial Fulfillment of the Requirement for the Award of Degree In
BACHELOR OF BUSINESS ADMINISTRATION
Submitted By
MD. ASIF UDDIN
(H.T.No:072111903)
Under The Guidance Of
Mr. SAJID PASHA
CHAITANYA DEGREE COLLEGE (AUTONOMOUS)
Kishanpura, Hanamkonda, Warangal-506601
KAKATIYA UNIVERSITY
YEAR 2011-2013

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DECLARATION
I MD. ASIF UDDIN, hereby declare that work entitled “A PROJECT REPORT ON INVENTORY MANAGEMENT” is original work done by me in NEULAND LABORATORIES LIMITED, HYDERABAD. This declaration is being submitted to Chaitanya Degree College, for the partial fulfillment of (B.B.A.) BACHELOR OF BUSINESS ADMINISTRATION (2010-2013). This report in full or part as not been submitted to any other University/Institution for the award of any degree/diploma.
DATE: - MD. ASIFUDDIN
PLACE: - WARANGAL. (H.T.NO.072111903)

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ACKNOWLEDGEMENT
It is great for me to record here my deep sense of gratitude to wards Mr. RAMREDDY, Manager, NEULAND LABORATORIES LIMITED, HYDERABAD. For giving this opportunity to do my project works in this organization.
I sincerely praise the efforts of Dr. VEERA VENKATAIAH, Principal of Chaitanya Degree College, (AUTONOMOUS), Kishanpura, Hanamkonda, Warangal, who encourage me in successful completion of my work.
I am very grateful to Dr. V. RAJESHWARI, Head of the Department of Business Management, CHAITANYA DEGREE COLLEGE, (AUTONOMOUS), Kishanpura, Hanamkonda, Warangal. For her guide support and advice.
I would like to express profound gratitude to Mr. SAJID project guide for this exceptional guidance and her encouragement in completing this project work
I am also grateful to all staff of NEULAND LABORATORIES LIMITED, Hyderabad. For their support in bringing out this project successfully
Last and not least my special thanks to my beloved family and friends to their support in successful completion of the project.
MD. ASIF UDDIN

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C O N T E N T S
Chapter No.
Title
Page No.
Chapter – I
INTRODUCTION
Chapter – II
COMPANY PROFILE
Chapter – III
THEORETICAL FRAMEWORK
Chapter – IV
DATA ANALYSIS
&
INTERPRETATION
Chapter – V
CONCLUSIONS & SUGGESTIONS
BIBLIOGRAPHY

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INTRODUCTION TO THE TOPIC
INTRODUCTION:
Every enterprise needs inventory for smooth running of it’s 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 the requirements for inventory, it also provides a cushion for future price fluctuations.
The investment in inventories constitutes the most significant part of current assets/ working capital in most of the undertaking. 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- process and stores etc.
INVENTORY INCLUDES THE FOLLOWING THINGS:
a) Raw Material: Raw material form a major input into the organization. They are required carry out production activities uninterruptedly. The quantity of raw materials required will be determined by the rate of consumption and time for replenishing the supplies. The factors like the availability of raw materials and government regulations etc. Too affect the stock of raw materials.

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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 greater the time taken in manufacturing the more will be the amount of work in progress.
c) Consumables : These are the materials which are needed to smother the process of production . These materials do not directly enter production but they act as catalysts. Consumables may be classified according to their consumption and criticality. Generally consumable stores do 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 stocking policies of spares differ 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 may arise due to their non- availability.

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BENEFITS OF HOLDING INVENTORIES:
Although holding inventories involves blocking of a firms funds 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 order. It will mean loss of time and delays in execution of orders which sometimes may causes loss of customers and business.
A firm also needs to maintain inventories to reduce ordering cost and avail quantity discounts etc.,
There are there main purposes of holding inventories.
i) The transaction motive: Which necessitates the holding of inventories for meeting the unpredictable changes in demand and supplies of materials.
ii) The precautionary motive :Which necessitates the holding of inventories for meeting the unpredictable changes in demand and supplies of materials.
iii) The speculative motive: which induces to keep inventories for taking advantage of price fluctuations, saving in re-ordering costs and quantity discounts.

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RISK AND COSTS OF HOLDING INVENTORIES:
The holding of inventories involves blocking of a firm’s funds and incurrence of a capital and other costs.
The various costs and risks involved in holding inventories are:
i) 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.
The funds may be arranged from own resources of form outsiders. But in both the case, the firm incures 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 the outsiders.
ii) Storage and handing costs: Holding of inventories also involves costs on storage as well as handling of materials. The storage of costs include the rental of the go down, insurance changes etc.
iii) Risk of price decline: There is always a risk of reduction in the prices of inventories by the suppliers in holding inventories. This may be due to increased market supply, competition or general depression in the market.
iv) Risk of obsolescence : The inventors may become obsolete due to improved technology, changes in requirements,
change in customer tastes etc.
v) Risk determination in quality : The quality of materials also deteriorate while the inventories are kept.

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OBJECTIVES 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 efficient use of components and the operation of components and the operation of an effective control and review of mechanism.
The main objective 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 mean that the materials and spares should be available in sufficient quantity so that work is not disrupted for want of inventory.
The following are the objective means that investments in inventory should not remain idle and minimum working capital be locked in it.
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 tie and the customers demand also be met.
2) To avoid both over-stocking and under-stocking of inventory.
3) To maintain investment in inventories at the optimum level as required by operational ad sales activities.
4) To keep material cost under control so that they contribute in reducing the of production and overall costs.
5) To eliminate duplication in ordering or replenishing stocks. This is possible with the help of centralizing purchases.

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6) To minimise loses through deterioration pilferage wastages and damages.
7) To ensure perpetual inventory control so that materials show in stock ledgers should be actually lying in the stores.
8) To ensure right quality goods at reasonable prices. Suitable 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 date for short-term and long-term planning and control of inventory.
Finance is regarded as the lifeblood of a business enterprise. This is, because in the modern money-oriented economy, finance is one of the basic foundation of all kinds of economic activities. It is the master key, which provides access to all the sources employees in manufacturing and merchandising activities, It has rightly been said that business needs money begets more money only when it is properly managed. Hence efficient management of every business enterprise is closely linked with efficient management of finance
Inventory is the third major current asset after cash and receivables.
The cost of money used to buy and carry inventories is about 15 percent for many firms and storage, insurance, pilferage and obsolescence amount to another 10-15 percent. With these high costs, holding excess inventories can literally ruin a company. On the other hand, inventory shortages can lead to lost sales, to production interruptions, and to customer ill will.
Excess or shortage of inventory is going to affect the company’s profitability. So proper control should be exercised so that required level of inventory is maintained for smooth running of production process.
Objectives of the Study
1.To examine the organization structure of inventory management in the stores of M/S Neula

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nd Laboratories Ltd.,
2.To discuss the various inventory control techniques followed by Neuland Laboratories.
3.Assessing the efficiency of Inventory Management in Neuland Labs.
4.In the light of findings make some suggestions inorder to improve its inventory management.
Scope of the Study
Inventory Management deals with many aspects of inventory like
- How much to order?
- When to order?
- How much safety stock is needed?
- Pricing of raw materials and valuation of stocks.
- Inventory control techniques and many more.
The study mainly deals with the techniques of inventory control(precisely ABC analysis and EOQ model). The sample is taken considering the various categories of materials that the production department deals in.
METHODOLOGY: -

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The methodology in this content involves the process of collection of data from primary and secondary sources and interpreting the same by using the analytical tools and techniques utilizing the consequent finding to put forward liable and insightful suggestions to the company.
Primary Data:
A large part of primary data was collected in the course of my interaction with the personnel concerned departments and also developed in consultation with costing manager, material manager and officers. The data collected was regarding various aspects of inventory management like lead-time, ordering cost, carrying cost and working of online computerized stores system.
Secondary Data:
Secondary data was collected from Neuland labs annual reports, manuals, purchase registers and stores records.
LIMITATIONS OF THE STUDY: -

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Some information is highly confidential so it is very difficult to get the data from the organization.
The result realized are applicable to this firm only the major constraints on this endeavor. Where the policy of time and information, the scope of the work is confined to the inventory management rather than material management as a whole.
The endeavor suffers from all those limitations experienced by ventures of stimulates in nature.
Neuland Laboratories Limited
The reliable resource partner

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It has been 23 years since Neuland set out in its strengths of unique competencies in pharmaceutical chemistry and on a vision, which recognized ethics, transparency and long-term bonds; an approach that has become the cornerstone of its growth. Translating every little strength into an opportunity, Neuland has grown to become one of the most reliable API source for the pharma Industry. Today, the company is the preferred partner to leading pharma majors in around 70 countries with close to Rs.1010 million turnover.
From a single product to a global player with a diversified product mix and multi-locational facilities, Neuland has established its strengths and competencies. Unmatched quality, timely delivery and strict adherence to standards like CGMP and ICH guidelines lend more flexibility to Neuland's profile. It is Neuland's commitment to such practices that has enabled long- term relationships with customers in India and around the World.
Manufacturing Facilities
Neuland has two world-class API manufacturing facilities close to the city of Hyderabad, capable of handling complex and hazardous reactions. The manufacturing facilities comply with stringent guidelines & requirements of Good Manufacturing Practices (GMP) and are successfully inspected/approved by international health and regulatory agencies.
A few key features of the facilities include:
 More than 11 production blocks covering 2,800 to 4,500 Sq. Mts. of area, and a mini-plant for scaling up of new products.
 Total reactor volume ranging from 151,000 to 375,000 litres.
 Capable of handling broad spectrum reactions and wide range process parameters.
 Facilities have been inspected by US FDA, EDQM, BfArM (Germany), TGA (Australia) and PMDA Japan).
 TGA cGMP and WHO GMP approved ISO 9001:2000 certified; OHSAS ISMS Certified.

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 Manufacturing base typically consists of high value and volume facility.
 kilo-labs facility for scale up activities
These features ensure an effective structural methodology at workplace which includes manufacturing of quality products, rational and effective use of available resources, minimization of waste along with good safety and hygiene standards.
Safety aspects have been given utmost importance, in all aspects including plant installation, equipment, systems and trained personnel to ensure smooth productivity. Combination of a dedicated team and world class production techniques guarantee delivery of products to customers across the globe.
Unit-I
Bonthapally
In keeping with its commitment to provide assured quality, the manufacturing facility at Bonthapally (Unit I) adheres to stringent guidelines & requirements of Good Manufacturing Practices (GMP) and is approved by international health and regulatory agencies such as US FDA, TGA (Australia), PMDA (Japan) and WHO.
A key feature of the manufacturing process is the supervision and the involvement of a committed team which with the help of latest production techniques and calibrated planning guarantees on-time delivery of products.
Unit-1 is situated at Bonthapally Village in Medak District which is approximately 35 kilometers from the Hyderabad Airport. It is developed on a total area of 11.2 acres and has seven production blocks including the kilo labs and other supporting departments such as quality assurance & quality control (QA&QC) and Regulatory Affairs (RA).
The facility was inspected by the US FDA in 1997 (and re-inspected in 2008), cGMP approval in 2004, EDQM approval in 2005. PMDA (Japan) has also audited and approved the facility in 2008.

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The facility is certified by the following management systems:
ISO 9001 certified for its quality systems ISO 14001 certified for its environment management OHSAS 18001 certification for occupational health systems
Highlights of Unit-1
 Consists of small volume high value production facility with vessels ranging between 20 liters to 3000 liters.
 Seven production blocks covering 2,500 square meters of area, kilo lab and 4 ware houses (including explosive warehouse).
 Built up area of the plant is approximately 45,325 sq mts.
 Total reactor volume of 100,500 liters.
 Capable of handling broad spectrum reactions and a wide range process parameters.
 Products manufactured include:
Anti-Asthmatics, Cardiovasculars, Anti-Fungal, Anti convulsants, Anti emetic, Central Nervous System (CNS), Fluoroquinolones, Corticosteroids, Anti Psychotic, Anti bacterial and Anti-parkinson.
Services Following is an illustrative list of reactions that are handled at Neuland’s facilities on a continuous basis:
 Bromination
 Diazotization
 Friedel Craft Reactions

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 Hydrogenations
 Mannich Reactions
 Grignard Reactions
 Metal Hydride Reactions
 Oxidation
 Cryogenic Reactions
 Hydrofluorination
 Methylation
 Resolution of Racemic mixtures
 Stereo-specific synthesis
 Micheal Addition Reaction
 Silylation Reaction
Unit - II
Pashamylaram Unit-II situated at Pashamylaram is about 45 kilometers from Hyderabad airport. The facilities are built in a total area of 36,800 sq.mts and consist of three main production blocks, engineering workshop and four warehouses.
Highlights of Unit-II
 Inspected by US FDA in 1999, 2002 and 2005.
 Inspected by BfArM (Germany) in 2007
 TGA cGMP and WHO GMP approved.
 High volume facility with dedicated production blocks for range of products.

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 Three blocks covering 1,968 sq. mts of production area.
 Total Reactors Volume of 300,000 liters.
 Product line includes Fluoroquinlones, Anti-Ulcerants, and Prostaglandins.
Why Neuland
 Absolute assurance of quality service and reliability delivery.
 Innovative solutions for the most cost-effective routes of manufacturing.
 Creation of approximately 200 in-house manufacturing processes.
 Extensive experience in several new and complex routes of synthesis at varied scales of manufacturing.
 Neuland does not manufacture generics in conflict of the customer’s business.
Neuland’s reliable and unique project management system – Neuland GuarD
Neuland GuarD- the reason why our clients continue working with us Neuland’s unique project management approach has helped clients overcome the difficulties involved in outsourcing projects to a foreign manufacturer. At Neuland, we use the Neuland GuarD approach which ensures that our clients receive highest standards of transparency, flexibility and reliability.

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The project planning is done using the principles of Critical Chain Project Management ( CCPM), which emphasizes on resource availability and flexibility to maintain overall project timelines rather than focusing on rigid scheduling of individual tasks.
 Upon receiving an order or contract from the client, we start resource planning by dividing the project in to several meaningful tasks. Each has a team leader (at PhD level) and all the tasks are allocated to specific task managers with mapping specific resources (lab space, chemicals, financial budget, etc.)
 The project team meets to create the plan (in a Microsoft Project template), with the collective objective of completing project within target timelines. Using the principles of CCPM, buffers are allocated at end project rather than the end of each task which encourages manager to complete their tasks as soon as possible.
 Once the project plan has been prepared and signed off by entire team, template is uploaded onto our online project management portal, which makes the project live and available to the entire team (including customer) for online updates.
With the help of GuarD, Neuland’s team members as well as clients can log in at any time to check the current status of their project. Critical information such as latest task updates, expected time of task completion, challenges being faced in each task, etc are candidly updated. All users can make comments/ updates. However, detailed experimental data or confidential information is not fed into the system and is circulated via periodic reports.
Contract Manufacturing Overview Neuland’s Contract Manufacturing Services derives its strength from its proven expertise in manufacturing at varied scales, a deep understanding of complex chemistry and the company’s manufacturing facilities that are compliant with the guidelines of the leading regulatory authorities like USFDA, PMDA, EDQM and TGA. For more than twenty-five years, Neuland has been at the forefront of aiding and accelerating the drug substance development and manufacturing process.

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Neuland offers integrated and versatile GMP manufacturing facilities capable of handling complex reactions tuned to ensure seamless transfer the processes from small-scale through validation to commercial manufacturing thus helping our customers expedite the discovery –to-market timelines. Services Offered / Medicinal Chemistry Support
Neuland has established itself as one of the world's leading providers of medicinal chemistry support services including synthetic chemistry. With proven expertise in handling complex chemistry, and a highly successful track record, Neuland is the superior choice for your medicinal chemistry outsourcing needs. Neuland Laboratories Research Center employs 170 scientists with Ph.D, Post doctoral and proven industry experience recruited from the top chemistry schools in India, the US and Europe.
Neuland Laboratories is established in offering the following services:
 Synthesis of chemical libraries
 Synthesis of scaffolds, building blocks
 Reference compounds
For each collaborative project, Neuland assembles an integrated project team combining relevant skills headed by an experienced project manager who provides efficient project management. With the help of a sophisticated project management tool, Neuland maintains complete transparency by providing access to the customers for regular monitoring of their on-going project and provide the feedback on timely basis.
Custom Synthesis
Neuland provides custom synthesis services in rapid scale-up of compounds from mill

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igrams to multi kilo scale (non-GMP/cGMP) through medicinal chemistry. Broadly the service includes scale-up, process optimization, process validation, analytical methods development and validation, structural elucidation, impurity profile studies. Customer support services include material supply and documents support for IND filing (CMC part in the IND).
Process Research
Neuland Laboratories provides support for process chemistry in design and development of novel synthetic routes for NCEs. The objectives include,
 increase yield
 increase purity
 reduce number of steps
 avoid usage of dangerous/harmful/costly reagents/materials
 reduce cycle time, and
 increase batch size
Neuland has scaled-up more than 300 processes from gram scale to commercial scale and filed more than 400 DMFs worldwide.
Quality Assurance & Regulatory Affairs
Neuland has in place an efficient TQM program that covers R&D, raw material sourcing, manufacturing, testing, packaging, and dispatch. Quality teams are trained by International experts and all testing is doneas per ICH guidelines. Neuland's commitment to quality a confidence in its capabilities are reflected in the high quality of work acknowledged. In its drug documentation. The top management is totally committed to ensure an effective implementation of the Quality Management System. Neuland's list of approvals by the international regulatory authorities indicates the company's acceptence in the world market.

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Neuland has already filed DMFs for most of its products to the USFDA. Applications are also being submitted to the Council of Europe, HPB canada, and TGA Australia for various products. Neuland is a dependable supplier commited to integrating supply schedules seamlesslywith customer's manufacturing programs.
Research & Development
Neuland's R&D facility was recognised by the Department of Science & Technology, Government of india in1992.The strengths of Neuland's R&D are evident in the that manufacturing technologies for all existing products were developed in- house. Recent achievements include process development for Pirbuterol, Flecainide acetate, and Citalopram.
Neuland has an excellent track record in contract
Manufacturing and development. The capability to produce milligram to multi- kilogram quantities of complex organic compounds is proven. Neuland works in close partnership with clients, under strict confidentially to bring products early to the market. Neuland also offers analytical services to its customers.
Human Resources
Behind Neuland's success is the skill and the outstanding
Achievements. of its workforce. Dedication and commitment make for the right fuel for the company to surge ahead. Out of the 500 employees that form Neuland’s strength, 300 are college graduates, 60 out of them in Quality Control & Assurence, and 25 in R&D and process Improvement team.Every team member at Neuland is trained regularly to enhance skills and to ensure consistent quality standards. These practices not only help the company in maintaining the best practices but also give its workforce a sense of ownership.
Focus On Clean Environment

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Neuland ranks among the few Indian companies to have made very High investments for effluent treatment and environmental protection.
These include secondary treatment plants and incinerators. Regular Environment audits and additional investments are aimed at reaching the Most eco-friendly operational standards. with Neuland , customers are dealing with an environmentally responsible supplier. With over 3% of its turnover dedicated to maintaining and improving it’s clean operation's status, Neuland has established itself as a partner who enhances customer's performance score cards.
Board Of Directors:
Dr.D.R.RAO , The Chairman & Managing Director, is the Chief Promoter and largest shareholder of Neuland. He has a Masters in Science from Andhra University, Post Graduate Diploma in Technology from IIT Kharagpur and a Ph.D., in Organic Chemistry from The University of Notre Dame, U.S.A. He has authored eight research publications. Prior to promoting Neuland in 1984, Dr.Rao has held senior positions in R & D, Production, and Quality Assurance at Glaxo India for about ten years. He is a member of Royal Society of Chemistry. He takes keen interest in environmental issues and is Chairman of Common Effluent Treatment Plant at Patancheru, Medak District, Andhra Pradesh.
Mr. S.B.BUDHIRAJA, a non-executive Director, has vast industrial experience. He was the Managing Director (Marketing) of Indian Oil Corporation, the largest corporate in India and a past President of the Institute of Management Consultants of India. He brings with him considerable industrial experience.
Mr. HUMAYUN DHANRAJGIR, a non-Executive Director, is one of the most respected personalities in the pharmaceutical industry. He has held several senior positions in Glaxo India, including Managing Director and Executive Vice-Chairman. He is a past President of Organization of Pharmaceutical Producers of India. Presently, he is the Managing Director of Kodak India. Neuland gains from his invaluable insight into the pharma industry.

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Mr. P.V.MAIYA, a non-executive Director, is a successful banker. He was General Manager in State Bank of India and Executive Director of ICICI. He set up ICICI Bank and retired as its CMD. He was associated later with Central Depository Services India Limited as its MD. Neuland often draws on his rich field experience.
Mr. D.SUCHETH RAO, Executive Director and Chief Operating Officer, is a Mechanical Engineer by profession and has an MBA in Corporate Finance from University of Notre Dame, USA. He started his career as a Production Group Leader in Cummins Inc USA and later went on to become Greenbelt in SIX SIGMA . His background primarily consists of exposure to various fields of business such as Marketing, Finance, Manufacturing, Operations and Information Technology.
Dr. BANDARU S. REDDY, a non-executive Director, is a Research Professor at Susan Cullman Laboratory for Cancer Research, the Rutgers University USA. He serves on the editorial board of Nutrition & Cancer, and International Journal of Oncology. He has over 400 publications to his credit.
Mr. S.K.MURTHY, alternate director to Dr. B.S.Reddy , is a well-known consulting engineer with four decades of experience in several fields of engineering. He is a member of the International Federation of Hospital Engineers, and of the Illumination Engineering Society of North America.
Mr. G.V.K.RAMA RAO, one of the promoters, is a non-Executive Director. He is a practicing advocate.
Mr. N.BALAKRISHNA IYER, represents the State Bank of India. He is a retired banker with nearly four decades of experience in the baking industry. He retired as the Managing Director of State Bank of Hyderabad.

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Neuland's Laboratories Limited Product List
Anti-Asthmatics
Cardiovascular
Fluoroquinolones
Anti-Ulcerent
Anti-Fungal
Anti-Depressant
Anti-Psychotic
Business Strategy
The spirit of research and professionalism pervades Neuland’s corporate culture. From inception, Neuland has strived to offer the best in quality to customers in the pharmaceutical industry backed by its manufacturing capabilities and competence to deal with complex chemistry. Neuland will continue to differentiate itself by offering products and services that are not only superior in quality but also reliable.
Neuland today supports some of the successful companies in the pharmaceutical industry in both research and manufacturing. The core strategy of Neuland is never to compete with its customers. In doing so, Neuland focuses purely on a service provider model, whether in manufacture of APIs, contract research or contract manufacturing services. As a result of this strategy, Neuland’s customers are never in a situation where they find themselves competing

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with Neuland, either in the drug development space or the generics space.
Corporate Fact sheet
 26 years of successful presence in the pharmaceutical industry
 Focused on manufacture of APIs, contract research and manufacturing
 2 US FDA inspected manufacturing facilities
 Over 400 DMFs worldwide; with a presence in over 85 countries
 40,000 sq. ft. state-of-the-art R&D facility at Hyderabad
 Over 1000 employees
 Approximately 170 scientists working in R & D with 22 Ph.Ds
 Listed on the Bombay Stock Exchange
and National  US FDA, TGA, EDQM, German Health Authority, ISO 14001, 27001 and OHSAS 18001 Certified
Corporate Social Responsibility
Neuland is proud to be a responsible corporate citizen. We have assumed a degree of responsibility for the cause of society apart from enhancing shareholder value. Corporate social responsibility has been placed in a position of crucial significance through a strong mutual relationship between our businesses and the society. This ethos makes us revisit our facilities, standards, work practices and requirements from a wider perspective. Our activities for the cause of society have emerged in response to both the needs as expressed by the community and an assessment of the situation by our management. The key thrust areas we work relate to education, health, capacity building and development of community & its assets.
Neuland’s contribution includes providing funds for creating infrastructure & facilities to

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nearby schools, providing funds towards teacher’s salaries, enabling drinking water supply by constructing a water tank to cater to the drinking water needs of nearby village. A few specific initiatives taken by the Company are detailed below:
 Closely associated with a charitable organization called “AMMAVODI” – A home for destitute women.
 Regular contributions towards primary education, development of cement concrete roads as well building a school in villages neighboring the Company’s production facilities.
 Constructed an overhead drinking water tank with a capacity of 100,000 litres for the benefit of the villagers adjoining Bonthapally plant.
APIs - An Overview
The Company’s core business and operational expertise for over 25 years since inception has been manufacturing of Active Pharmaceutical Ingredients (APIs). Neuland has earned the identity of a Preferred & Reliable source in the pharmaceutical industry primarily due to:
 Consistency in product quality;
 Knowledge and ability to deal with niche chemistry; and
 On-time delivery performance.
Neuland has 2 US FDA and EU GMP compliant manufacturing facilities with collective capacity of 600 KL to produce more than 40 APIs across 10 diverse therapeutic areas.

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The Company’s strengths in synthetic chemistry, process development, controlled supply chain and project management approach, built into all our operations and product development programs makes Neuland an ideal API partner for generics.
INVENTORY MANAGEMENT –THEORATICAL ASPECTS
The concept of inventory management as known today is radically different from what it was just a few years ago. Until the last decade, Indian Industry needed maximum production since there existed sellers’ market for almost all products. Cost was not a serious problem that it is today, for there was always somebody ready, willing and able to buy the product as soon as it was available. Excess manufacturing costs were simply passed along to the buyer in the form of higher prices.
In this environment, the emphasis was on the successful production man and it was not unusual to find Inventory Management getting a secondary place within the production function.

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Over the last decade or so we have been witnessing slow reversal of this situation as the supply is catching up with the demand and the market is turning from sellers’ to buyers’ market. For the first time, Indian Industry is trying to compete in the world wide market which demand low cost and high quality products. Meeting this kind of competition has become a major concern of business today and solutionof the problem demands most efficient use of manufacturing resources of men, money, materials count for more than half the total money spent by any business, inventory management has assumed significant importance.
Prof. Peter F. Drucker, has defined the purpose of business as
“To create the customer ”. Logically , objective of Inventory management is then to provide maximum customer service, this however, cannot be done without regard to the competitive capability of business, as it is only this capability that ensures continued existence and growth of business. Competitive capability demands that inventory management ensures maximum plant efficiency and minimum inventory investment.
Maximum customer service will usually result in increased market penetration, increased business and added profits; maximum plant efficiency will permit stable production rate, as also economics in cost of manufacture minimum inventory investment will release limited and scarce funds for other areas like research and development capital equipment, advertising, marketing programme and the like. Inventory management, must balance these objectives which are obviously in conflict with each other for any company. Thus, the purpose of inventory management can be defined as providing optimum customer service consistent with efficient plant operation at minimum inventory investment.
A typical inventory management system is represented in figure.
The principle input to such a system are:
1. Forecast of demand - both long term and short term for the products.
2. Current demand for products.

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3. Measurable characteristics of products and items such as cost, lead time, essentiality set up time, and so on.
4. Management policies - as regard carrying charges, level of service and rate of response to change in customer demand.
Management Policies
Forecasts Inventory Order Point
of Demand Management
System
Inventory
Control System
Order quantity or
Operating level

31
Characteristics
(cost, lead time,
bulk essentiality,
set up)
This information forms the basis for various decisions concern the order quantity and operating level, which in turn form the basis of inventory control system. Inventories are essential for sales, and sales are necessary for profits. Actual inventory control is generally not under the direct controlof the financial manager. Rather, in manufacturing companies,production people typically have control over inventories, whereas in retail concerns this control is exercised by the merchandising people.However, the financial manager is vitally concerned with inventory levels, for he or she has responsibility for tracking factors which affect the overall profitability of the firm, and, because inventories generally amount to some 20 - 40 percent of the total assets, poor inventory control will hurt the firms profitability.
Inventory management has an effect on the cash conversion cycle.One of the components of the cash conversion cycle is the inventory conversion period, the average length of time required to convert raw materials into finished goods and then to sell these goods. Naturally, the larger the amount of inventories held, the longer inventory conversion period, hence the longer cash conversion cycle.
Alternative Reasons for Inventories:
The reasons given above are the logical ones on deliberate decisions. How ever, stocks accumulate for other, less praiseworthy reasons, typical of which are following :
- Obsolete items are retained in stock. Poor or nonexistent inventory control resulting in over large orders being out of phase with production etc.

32
- Inadequate or nonexistent stock records.
- Poor liaison between the production control, purchasing and
marketing departments. Sub-optimal decisions making, example the production department
might increase work-in-progress stocks unduly so as to ensure
long production runs.
Why Firms Hold Inventories
Inventories form a link between the production and sales of a product. A manufacturing company must maintain a certain amount of inventory, known as work-in-process, during production. Although other types of inventory-in-transit, raw materials and finished-goods inventories are not necessary in the strictest sense, they allow firm to be flexible.
Inventory in transit- that is inventory between various stages of or storage-permits efficient production scheduling and utilization of production resources. Without this type of inventory, each stage of production would have to wait for the preceding stage to complete a unit The possibility of resultant delays and idle time gives the firm an incentive to maintain in transit inventory.
Avoid losses of sales

33
Which
Helps
Why firm hold inventories
Classification of Inventories
The term inventory refers to the stockpile of the products a firm is offering for sale and the components that make up the product. In other words, inventory is composed of assets that will be sold in future in the normal course of business operations. The assets which firms store as inventory in anticipation of need are
(i) Raw Materials : The raw material inventory contains items that are purchased by the firm from others and are converted into finished goods through the manufacturing (production) process. They are an important input of the final product. The following are the important determinants as regard the level of raw materials to be maintained :
- The quantity representing safety stocks.
- Economy in the matter of purchases.
- Anticipated fluctuating in the prices of the materials in the future.
Gain quantity
Discounts
Firms hold
Inventory to
Producing
Reduce order
Costs
Achieve efficient
production
Selling

34
- Cost of carrying stocks.
- Funds available for investment in materials.
- Expected quantity of consumption, and
- Management’s efficiency in the purchases and control of the materials.
(ii) Work-in-Progress : The work-in-progress inventory consists items currently being used in the production process. They are
normally semi-finished goods that are at various stages of production in a multi - stage production process. The amount of funds tied up in work-in-progress will be directly influenced withthe volume or production process.
(iii) Finished Goods : Finished goods inventory represents final or completed products which are available for sale. The inventory of such goods consists of items that have been produced but are yet to be sold. Finished goods inventories are generally maintained to the minimum by providing only to orders. Some manufacturers maintain sufficient stock in anticipation of sales. In seasonal industries, retailers are forced to carry larger stock than the manufacturers.
Motives in Holding Inventories
Generally three motives are involved in holding inventories
(i) Transaction Motive : It emphasizes the need to maintain
inventories to facilitate smooth production and sales
operations(called transaction inventory).

35
(ii) Precautionary Motive : It necessitates the holding of inventor to guard against the risks of unpredictable changes in demand and supply forces (called precautionary inventory).
(iii) Speculative Motive : It influences the decision to increase or reduce inventory levels to take advantage of price fluctuations(called speculative inventory).
Objectives of inventory
The efficient management of inventory should ultimately result in the maximization of the owner’s wealth. The two conflicting objectives of inventory management are
 To maintain a large size of inventory for efficient and
smooth production and sales operation.
 To maintain a minimum investment in inventories to
maximize profitability.
Both excessive and inadequate inventories are not desirable.
The goal of the firm is to determine and maintain the optimum level of inventory lies in between two extreme points of excessive and inadequate inventories.

36
Classification of Costs
The first step in the process of building an inventory model is to specify those costs that rise and those that decline with the size and frequency of orders and the resulting levels of inventory. The table below lists some typical costs associated with ordering goods and with carrying inventories.
Costs associated with Approximate cost as a
inventories % of inventory value
A. Carrying costs
1. Storage costs 0.50
2. Insurance 1.00
3. Property taxes 4.58
4. Cost of capital tied up 1.25
5. Depreciation and obsolescence 1.67

37
B. Ordering costs
1. Costs of placing an order
or production setup costs Varies
2. Shipping and handling costs -
C. Costs related to safety stocks
1. Loss of sales Varies
2. Loss of customer goodwill Varies
3. Disruption of production schedules Varies
Part A involves carrying costs. Obviously, the larger the inventory, the larger will be storage costs, insurance and property taxes.Warehousing costs are likely to be more related to the size of the inventory item rather than to the value of the item purchased.However, all other carrying costs vary with the value of the item. It is, general practice to express storage costs and carrying costs as a percentage inventory value.
Part B involves ordering costs. Ordering costs are the costs of placing an order if the items are purchased from others or production setup costs if produced within the firm. Ordering costs would also include the related costs of receiving and inspecting the material and the costs of paying invoices. Another type of “ ordering cost ” is represented by quantity discounts which may be available if size of purchase order is large enough.
Part C involves costs relating to safety stocks. Safety stocks represent the inventories held by the firm in the effort to avoid running short of goods to meet sales opportunities. If safety stocks are inadequate, the firm will incur lost sales and the loss of customer goodwill. If

38
we are considering an inventory production system, running short may require overtime and other disruptions of production schedules.
Inventory Control Decisions
One of the major concerns of a purchase manager is to reduce the cost of inventory. At the same time too little of inventory might result in shortage and consequent production holdup. Hence one of the major decisions in purchase is the optimum level of inventory and optimumquantity of order. Due to environmental influences beyond the control of manager, the performance and activities often do not adhere to planned targets. Control is therefore brought in, through feedback, so that corrective actions are initiated, whenever deviation exceed accepted limits. Inventory control may therefore be defined as application of control theory in managing inventory with predetermined levels.Inventory is storage of goods and maintaining of stocks. In manufacturing, inventories mean keeping items in stock. Considered under this sense, inventory control can be visualized as techniques of maintaining stock keeping items at desired levels.
A schematic inventory cycle is shown below :-
Inspect&Accept Receiving
Production Issue Stores Supplies
supplies supplies
Department
Demand investment
in
hand

39
Place
Dues order
in
Net order Issue Receive Tender
quantity tenders quotation evaluation
INVENTORY CYCLE
In most manufacturing concerns, inventories are controlled through the following techniques or tools :
1. Economic order quantity(EOQ)
2. Determination of stock level
3. Inventory turnover ratio
4. ABC analysis
The scientific inventory management helps the purchase department to determine when to buy and how much to buy. The problem before the management is to balance the following opposing costs.
Evils of Excess Inventory

40
- Lockup of capital unnecessarily which could be invested in more profitable operations.
- Excess inventory adds to the cost of carrying the inventory, more store space, equipment and personnel, insurance, taxes, pilferage.
- Excess inventory invites risk of deterioration and obsolescence.
- Changes in the prices of inventory materials sometime go unfavorable.
Economic Order Quantity (EOQ)
It is also known as reorder quantity or standard order quantity.
One of the most commonly cited sophisticated tools for determining the optimal order quantity for an item of inventory is the EOQ model. This could well be used to control the firm’s A items. It takes into account various operating and financial costs and determines the order quantity that minimizes total inventory costs.
EOQ refers to the order size that will result in the lowest total of order and carrying costs for an item of inventory. If a firm places unnecessary orders, it will incur unneeded order costs. If it places too few orders, it must maintain large stocks of goods and will have excessi

41
ve carrying costs. By calculating an EOQ, the firm identifies the number of units to order that result in the lowest total of these two costs.
Assumptions of EOQ
The major weaknesses of the EOQ model are associated with several of its assumptions, in spite of which the model tends to yield quite good results. The model’s assumptions are as follows –
Demand is known : Although it is difficult to predict accurately the firm’s level of sales for individual items, the marketing manager must provide a sales forecast. Using past data and future plans, the manager can often make a reasonable accurate prediction of demand. This is expressed in units sold per year.
Sales occur at a constant rate : This model may be used for goods that are sold in relatively constant units throughout the year. A more complicated model is needed for firms whose sales fluctuate in response to seasonal or other cyclical factors.
Costs of running out of goods are ignored : Costs associated with shortages, delays, or lost sales are not considered. These costs are considered in the determination of safety level in the reorder point system.
Safety stock level is not considered : Because the firm must always be above the safety stock level, the EOQ formula need not consider the costs of maintaining the safety level.

42
Graphic Approach
The stated objective of the EOQ model is to find the order quantity that minimizes the firms total inventory cost. The EOQ can be found graphically by plotting order quantities in the x, or horizontal, axis and costs on the y, or vertical, axis. The figure given shows the general behavior of these costs. The total cost represents the sum of the order costs and carrying costs for each order quantity. The minimum total cost occurs the point labeled EOQ, where the order cost line and the carrying cost line intersect.
total costs
COSTS

43
Quantity ordered
Determination of Stock Levels :
The demand and supply method of sock control technique determines different stock levels viz., maximum level, minimum level, reorder level, danger level, average level etc.
Maximum Stock Level : It represents the quantity above which inventory should not be allows to be kept. This quantity is fixed keeping inview the disadvantages of overstocking. Some of the disadvantages of overstocking are -
(i) Unnecessary blocking up of working capital
(ii) More storage space requirement which indirectly means more rent, insurance and other carrying costs.
(iii) Risk of deterioration in quality, depreciation in quantity due to evaporation and risks of o

44
bsolescence.
(iv)Possibility of financial loss on account of subsequent fall in prices.
Minimum Stock Level : It represents the quantity below which stockshould not be allowed to fall. This is known as Safety or Buffer stock. The main purpose of this level is to ensure that production is not held up due to shortage of any material.
Re-order Level: It is the point at which the storekeeper should initiate the purchase requisition for fresh supplies as and when materials in store approach that level. This level is fixed between maximum and minimum stock levels in such a way that the difference of quantity of the materials between the reorder level and the minimum level will be sufficient to meet the requirements of production up to the time the fresh supply of material is received.
Re-order Quantity: It is the quantity of the replenishment order. In some types of inventory control systems this is the EOQ, but in some other systems a different value is used.
Danger Level: It means a point at which issues of the material are stopped and issues are made only under specific instructions. When stock of materials reaches the danger level the purchase officer should take specialarrangement to get the materials at any cost.
Optimum Stock Level: It is the level of stock that ensures that the requirements of production are met and that the amount of stock carried at any time is the minimum having regard to all relevant factors.
Physical Stock Level: The number of items physically in stock at a given time.

45
Free Stock: Physical stock plus outstanding replenishment orders minus unfulfilled requirements.
Marginal Stock Level: It is the stock level at which current orders cannot be met.
Revision of Levels: It has been experienced that persons concerned take the levels for granted once they are fixed. The various factors like lead time, consumption rate affecting the levels are dynamic and not static. The levels must be revised as and when changes occur in any one or all of the factors. It is a good practice to review levels periodically, say, at yearly intervals and revise these, if need be.
Formulation For Determination Of Stock Levels
(i) Maximum Level = Reorder level + Reorder
Quantity ( minimum
Consumption * minimum reorder
period )
(ii) Reorder Level = Maximum consumption * Maximum reorder
period
(iii) Minimum Level = Reorder level - ( Normal consumption *

46
Normal reorder period )
(iv) Average Stock Level = Minimum level + 1/2 of reorder
quantity
(v) Danger Level = Maximum delivery time * Maximum rate of
Consumption
Control Through Ratio Analysis
The following financial/business ratios, directly connected with inventory management, can be applied to appraisal and review the effectiveness of inventory control.
(i) Inventory to working capital ratio,
(ii) Turnover (net sales) to fixed assets,
(iii) Turnover (net sales) to total assets,
(iv) Cost of goods sold to Average stock holdings,
(v) Net sales to Inventory,
(vi) Net sales to Stocks and work in progress.

47
Inventory turnover ratio is also another method of exercising control. It is essential to compare the turnover of different kinds of materials to find out the items which are slow moving, thus helping management to avoid keeping capital locked up in such items. A low ratiois an indicator of slow moving stock, which leads to the disadvantages arising out of overstocking. On the other hand, a high turnover ratio is anindication of fast moving stock and less investment in stock. If the stock turnover ratio for a particular item(expect for spare parts) is zero, it meansthat the item had not been used at all during the period and should be immediately disposed off otherwise the quality of the item may get deteriorated.
Input-Output Ratio Analysis
The input-output ratio is the ratio of the raw materials put into manufacturing and the standard raw material content of the actual output.
A standard ratio of input of material and output of material should be determined and the actual ratio should be compared with the standard ratio, if the actual ratio is higher than the standard ratio, the performance will be considered to be below the standard ratio and vice versa. In process industries, it is a valuable report to show the percentage of losses that have occurred at each stage. It measures the productivity of capital. This method is also useful to ascertain the raw material cost of finished output by multiplying the raw material cost per unit by this ratio.

48
ABC Analysis (Selective Control)
This analysis is also called the Pareto analysis after Vilfredo pareto, the Italian economist.
The question ‘what the system should concentrate its control efforts on’ is normally resolved by applying the ABC concept to inventory management. J. M. Juran has defined this concept as follows:
“In any series of elements to be controlled, a selected small fraction in terms of numbers of elements always accounts for a large fraction in terms of effect. A few percent of the purchase orders account for the bulk of scheduling and delivery date failures. A few percent of the purchase orders account for the bulk of the total effect of all decisions”.
He further goes on to say “It is important to any control system or any management planning that the vital few be separated from trivial many”. This concept is as applicable to inventory as it is to any other areas of management. When applied to inventory control, this prin

49
ciple implies that relatively small percentage of total items in inventory account for the major annual usage in terms of inventory investment. Normally it is found that 20% percent of the items represent as much as 80% of annual usage.This fact provides a basis for concentration of control on these relatively few items delegating the control of lesser important items to lower levels of management. This principle is applied to inventory control with the help of
ABC analysis. The steps in computing ABC analysis are inventory are :
1. The items of inventory are ranked, in a descending order, on the basis of their annual consumption value and number them 1 through n.
2. The running cumulative totals of annual consumption values are recorded and expressed as percentages of the total values of consumption Each number in the list is expressed, 1 through n, as a percentage of
3. The cumulative percentages of consumption value are compared against the cumulative percentages of numbers and items are classified into three broad categories : A,B, and C.
As said before, this approach calls for classifying inventories
into three broad categories, A, B, and C.
Category A, represents the most important items, generally consists of 15 to 25 percent of inventory items and accounts for 60 to 75 percent of annual usage value.
Category B, representing items of moderate importance, generally consisted of 20 to 30 percent of the inventory items and accounts for 20 to 30 percent of annual usage value.
Category C, representing items of least importance, generally consists of 40 to 60 percent of inventory items and accounts for 10 to 15 percent of annual usage value.

50
However, there is nothing sacred about this assignment of categories and it will depend on management decision in a particular situation.
Advantages of ABC Analysis
The advantages of ABC analysis are :
(a) Individual item analysis or selective method ensures a closer, and stricter control over such items which represent a major portion of total stock value;
(b) It realizes working capital, which would otherwise have been locked up , for a more profitable channel of investment;
(c) It reduces inventory-carrying costs;
(d) It enables the relaxation of control for the ‘c’ items thus makes it possible for a sufficient buffer stock to be created;
(e) It enables the maintenance of a higher inventory turnover rate.

51
Disadvantages of ABC Analysis
a) In view of the fact ABC analysis concentrates on money value, relative importance of components materials is lost sight of. For example, a bearing or rubber seal may be very critical item.
b) Since its cost is small there no proper control.
Hence stock outs can occur. This is to be prevented
Variants of ABC analysis
VED Analysis
It is the process of listing items under three classes. This analysis is important especially where non availability of less value items can be very critical. This can cause production holdups of entire lines.Where work-in-progress inventory builds up to crores of rupees. The classifications are done as follows:
V - Vital: Items without which production would come to a halt.
E - Essential: Items without which temporary losses of production or dislocation of production work occurs.
D - Desirable: All other items which are necessary but do not cause any immediate loss in production.

52
Having classified them, selective control is now exercised over them so that stock outs of vital and essential items are prevented.
Superimposition of VED on ABC
Superimposition of ABC and VED take advantage of both. The analysis is given below. This yields five groups, which are subjected to selective inventory control.
Superimposition of VED on ABC
Group I - Class A and Vital
Group II - Class A and Essential
A
B
C
V
I
II
III
E
II
III
IV
D
III
IV
V

53
Class B and Vital
Group III- Class A and Desirable
Class B and Essential
Class C and Vital
Group IV - Class B and Desirable
Class C and Essential
Group V - Class C and Desirable
FNS Analysis
Rapid advancement of technology creates a threat to inventory management because large number of items might become obsolete during Storage. Change in production mix or/and deviations of actual consumption can also result in accumulation of inventory. This inventory can be categorize as fast moving or slow moving. It is therefore necessary for the materials manager to keep back of the accumulated inventory to take advance proactive actions. FNS analysis is a technique to facilitate this aspect. In FNS analysis inventory is categorized under three heads, viz.,
F - Fast Moving
N - Normal Moving
S - Slow Moving
Other Inventory Control Systems
- Read line method : An inventory control procedure in which a red line is drawn around the inside of an inventory stocked bin to indicate the reorder point level.

54
- Two bin method : An inventory control procedure in which an order is placed when one of two inventory stocked bin is empty.
- Computerized inventory control system : A system of inventory control in which a computer is used to determine reorder points and to adjust inventory balances.
- Just-in-time systems : A system of inventory control developed by japanese firms in which a manufacturing coordinates with production with suppliers so that raw materials or components arrive just as they are needed in the production process.
- Outsourcing : The practice of purchasing components rather than making them in house. This is done to reduce the costs.
Inventory Management In India
How are inventories being managed in India? What may be done to improve inventory management in India? These questions are addressed below.
Inventory Management Practices
1. Inventory levels in India appear to be high. The reasons commonly cited for this as follows :
(a) Purchase executives are severely penalized for stock outs, but they are not questioned for high inventories.

55
(b) Lengthy and cumbersome import procedures in the past forced companies to carry huge amounts of inventories for imported items.
(c) It pays to keep inventories high because prices rise due to inflation.
(d) Most of the vendors are not reliable in terms of delivery schedules andquality of the materials supplied. Hence, companies carry large safety stocks.
(e) Due to lack of standardization there are a large variety of stores.
2 The most commonly used tools of inventory management in India are
ABC analysis, inventory turnover analysis.
Areas of improvement: Inventory management in India can be improved in various ways.
Improvements can be effected through
- Effective Computerization: Computers should not be used merely for accounting purposes but also for improving decision making.
- Review of classification: ABC classification must be eriodically reviewed.
- Improved Coordination: Better coordination among purchase, marketing and finance departments will help in achieving greater efficiency in inventory management.

56
- Development of Long-Term Relationships: Companies should develop long-term relationships with vendors .This would help in improving quality and delivery.
- Disposal of Absolute/Surplus Inventories: Procedures or disposing obsolete and surplus inventories must be simplified.
- Adoption of Challenging Norms: Companies should set Benchmarks with global competitors and use ideas.
ABC ANALYSIS:
ABC analysis is calculated on the basis of annual consumption that 70% of total value of items comes under ‘A’ Category and 20% of the value of the items under ‘B’ Category and 10% of total value of items comes under ‘C’ category.
1.Proportion of value of ‘A’ items to the total value of all items :
=(Total value of A items /Total value of all items)*100
= (14760347.75/216793864)*100
= 68.17%
2. Proportion of value of ‘B’ items to the total value of all items :
=(Total value of B items /Total value of all items)*100

57
=(43364279.34/216793864)*100
=20.002%
3. Proportion of value of ‘C’ items to the total value of all items :
=(Total value of C items /Total value of all items)*100
=(25627138.05/216793864)*100
= 11.828%
Interpretation:
ABC analysis which is called Always Better Control analysis is the first important step in inventory management and it is to adopt a selective approach in laying down the inventory levels and the closeness of the control to be exercised.
In Neuland Labs, ABC analysis has been calculated on the basis of 70:20:10 that is taking 70% of the total annual consumption value as A category and 20% as B category and the remaining 10% as C category.
The total of A items in terms of value comes to Rs 14760347.75 with a proportion of 68.17 % of total value.

58
The total of B items in terms of value comes to Rs 43364279.34 with a proportion of 20.002 % of total value.
The total of C items in terms of value comes to Rs 23364279.34 with a proportion of 11.82% of total value.
A category inventories require high care and they should be kept under tight control since annual consumption is more.
B category inventories require average attention and moderate control.
C category inventories needs less attention as it occupies only 11.82% of value to the annual consumption value.
INVENTORY TURNOVER RATIO
Particulars
2010
2011
2012
Sales
14706.21
15841.72
17028.93
Inventory
4127.98
3828.29
4082.09
IT Ratio
3.56
4.13
4.17
Interpretation:
Inventory turnover ratio indicates the efficiency of the firm in selling its product. The inventory turnover ratio shows how rapidly the inventory is turning into receivables throug

59
h sales. The inventory turnover ratio is steadily rough sales. The inventory turnover ratio is steadily increasing which indicates that the stock is fast moving. A consistent ratio of inventory turnover ratio indicates good management and control over the inventory.
INVENTORY TO CURRENT ASSETS
Particulars
2010
2011
2012
Inventory
4127.98
3828.29
4082.09
Current Assets
6764.84
6331.11
7658.38
Ratio of Inventory to Current Assets
1.63
1.65
1.87
Interpretation:
The ratio of inventory to current asset is increasing from year to year . In 2010,inventory is more as compared to 2012.It means the investment in other assets has been increased.

60
Analysis of Valuing of Materials
The company for pricing the issues of materials adopts the FIFO method. This method is suitable in times of falling prices .In FIFO method material is first issued from the earlier consignment on hand priced at the cost at which that consignment was placed in the stores.The materials are issued in chronological order.
Under this method it is assumed that the materials or goods first received arc 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.
Advantages: The FIFO method has the following advantages:
1) It values stock nearer to current market prices since is presmed be consisting or
2) The most recent purchases
3) It is based on cost and therefore, no unrealized profit enters into the financial accounts of the company.

61
4) The method is realistic since it takes into account the normal procedure of utilizing or selling those materials or goods which have been longest in stock.
Disadvantages: The method suffers from the following disadvantages:
1) It involves complicated calculations ad hence increase the possibility of clerical errors.
2) Comparison between different jobs using the same type of materials become sometimes difficult. A job commenced a few minutes after another may have to been an entirely different charge for material because the first job may have to bean a entirely different charge for materials because the first job completely exhausted supply of materials the particular lot.

62
SUGGESTIONS:
1. The company is not following EOQ technique for inventory control .should follow this technique so as to reduce carrying and ordering costs.
2. The company should maintain stock levels,which will be helpful for the to know about stock position at a particular time so as to avoid out situations.
3. The maintenance of B class items is good and also the same importance should be given to class A as well C items.
4. The company can use either LIFO or Weighted average methods.

63
FINDINGS:
1. The ratio inventory to current assets is increasing from year to year.
2. Inventory turnover ratio is increasing year to year.
3. In 2006 there was high turnover ratio it means that high
inventory turnover ratio.
4. ABC analysis is calculated on the basis of annual consumption
that 70%of total value of itemscomes under A category and
20% comes under B category and 10% under C category.
5. The NEULAND LABS maintained FIFO method.
6. It is keeping pace with the latest happenings .This shows that
the company has been vibrant and dynamic.
7. M/S Neuland Labs Ltd., has been adopting latest technology in
the field of Pharmaceutical Industry.

64
BIBLIOGRAPHY
1. Prasanna Chandra Financial management(Theory and
Practice),
Fourth Edition,
Tata McGraw-Hill Publishing
Company Limited.
2. I.M.Pandey Financial Management,
Eighth Edition,
Vikas Publishing House Pvt Limited.

65
3. M.Y.Khan Financial Management,
P.K.Jain Third Edition,
Tata McGraw-Hill Publishing Co. Ltd.
4.websites: www.neulandlabs.com/
www.google.co.in

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