This document is a summer training project report submitted by Vijay for their MBA program. It discusses inventory management at Jupiter Laminators Pvt. Ltd, a company that manufactures flexible packaging materials. The report includes an introduction to the company, objectives of the study, methodology used, and chapters covering the company's incoming material and production processes, types of inventory held and associated costs, and analysis of inventory management techniques including economic order quantity, safety stock, and ABC analysis.

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Summer Training Project Report
On
“A STUDY ON INVENTORY MANAGEMENT”
SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF
MASTERS OF BUSINESS ADMINISTRATION (FINANCE)
COMPANY NAME: JUPITER LAMINATORS PVT. LTD
TRAINING SUPERVISOR SUBMITTED BY
Mr. RAVI KUMAR VIJAY
HR Manager ROLL NO.:
MBA-FINANCE
GURU JAMBHESHWAR UNIVERSITY OF SCIENCE AND TECHNOLOGY
HISAR
(SESSION 2015-2017)

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DECLARATION
I VIJAY, Roll No. ******** Class MBA IIIrd sem of the GURU JAMBHESHWAR
UNIVERSITY OF SCIENCE & TECHNOLOGY, HISAR hereby declare that the Sumer
Training report entitled “A STUDY ON INVENTORY MANAGEMENT” is an original work
and the same has not been submitted to any other institute for the award of any other
degree.
Faculty’s Signature Candidate’s
Signature
(Signature of Director/Principal of the Institute)

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ACKNOWLEDGEMENT
I would like to express my gratitude to all those who have been instrumental in the
preparation of my project report.
I am thankful to the organization JUPITER LAMINATOR PVT. LTD. for providing me the
opportunity to undertake this internship study and allowing me to carry out my project.
I am deeply grateful to my company guide and mentor, Mr. RAVI KUMAR, who guided
me to take this project and helped me bring it to conclusion. I am thankful to him for his
continuous support, advice and words of encouragement.
I am also grateful to Prof. USHA ARORA, the Dean of Haryana School of Business,
for her guidance and for giving me an opportunity to work.
Finally I would express my deep regards for all those who directly and indirectly helped
me to execute this project.
VIJAY
MBA FINANCE (F)

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Haryana School Business
CONTENTS
CHAPTER 1 6-23
1.1 INTRODUCTION
1.2 BACKGROUND OF COMPANY
1.3 COMPANY PROFILE
1.4 COMPANY EQUIPMENT
1.5 QUALITY OF PRODUCT
1.6 COMPANY SERVICES
CHAPTER II 24-27
2.1 OBJECTIVE OF STUDY
2.2 PROJECT OBJECTIVE
2.3 SCOPE OF STUDY
2.4 METHODOLOGY
2.5 LIMITATION OF STTUDY
CHAPTER III 28-33
3.1 SYSYEM FOR IMCOMING RAW MATERIAL INWARD
3.2 UNLOADING PROCESS FOR LIQUID MATERIAL TANKERS
3.3 PRODUCTION METHOD
3.4 STORE & MACHINE LAYOUT
CHAPTER IV 34-43
4.1 MEANING OF INVENTORY
4.2 TYPES OF INVENTORY
4.3 REASON FOR HOLDING INVENTORY

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4.4 MOTIVES OF HOLDING INVENTORY
4.5 COSTS ASSOCIATED WITH INVENTORY
4.6 INVENTORY CONTROL
4.7 BENEFITS OF INVENTORY CONTROL
4.8 PRINCIPLE OF INVENTORY CONTROL
4.9 INVENTORY CONTROL – TRIMNOLOGY
4.10 INVENTORY COST RELATIONSHIP
4.11 ECONOMIC ORDER QUANTITY
4.12 SAFETY STOCK
4.13 ABC ANALYSIS
4.14 INVENTORY TURNOVER RATIO
CHAPTER V 44-49
5.1 ECONOMIC ORDER QUANTITY
5.2 SAFETY STOCK
5.3 ABC ANALISIS
5.4 INVENTORY TURNOVER RATIO
CHAPTER VI 50
CONCLUSION
CHAPTER VII 51
BIBILOGRAPHY

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CHAPTER - I
1.1 INTRODUCTION
Jupiter laminators pvt. Ltd. an iso 22000:2005 accredited company
offering a variety of flexible packaging materials for your varied usage..... introductory
notehygiene and safe packaging determines the health quotient of any packed product.
To protect the internal contents from being tampered by insects and other climatic
factors, superlative packaging is the most essential part. Today publicity is the mother of
profit and as such, packaging wrappers are laden with various attractive features.
Jupiter laminators pvt. Ltd., established in 2003, has emerged as a key player in the
packaging industry. we introduce ourselves as a reputed manufacturer, exporter and
supplier of flexible packaging materials. Backed by an ultra modern infrastructural unit,
we boast of a highly skilled manpower which has taken the company to great heights of
success. Our packaging products and services are catered to various industries and
especially to the food industries. The packaging materials offered by us find wide
application in the packaging of foods & beverages, biscuits, ready made foods, atta,
rice, confectioneries, cereals, milk powder, noodles, tea, salt, coffee, frozen foods,
seeds, spices, soap wrappers, shampoo, detergent powders, namkeen and bhujia,
refined oil, etc. with a keen interest in manufacturing our line of products, we are
proceeding towards expansion with measured steps. The installed capacity of our
manufacturing plant counts up to 200 metric tons (10000 metric tons) per month and
earns us an annual turnover of rs. 100 crore. a customer centric service at reasonable
prices has won us accolades from different parts of the country and the world. This
further encourages us to perform and deliver on quality consistently. product
specialization jupiter laminators pvt. Ltd. Is a name to bank upon, when it comes to long
lasting and proficient packaging of a variety of products. We specialize in manufacturing
a wide range of flexible products.
All primary material about JUPITER LAMINATORS PRIVATE LIMITED is shown in the
table above, in the text below more detailed and specialized information is submitted.
The revision in the long-term rating of the bank facilities of Jupiter Laminators Pvt. Ltd.
(JLPL) takes into account the consistent increase in the scale of operations, comfortable
financial risk profile as characterized by high interest coverage, negligible term debt and
reduced dependence on the leased capacities for production. The ratings also take
into account the experience and resourcefulness of the promoters and diversified
customer base. The ratings are,however, constrained by its exposure to foreign
exchange volatility, working capital-intensive nature of operations and highly fragmented
nature of industry. Going forward, the ability of the company to increase its scale of
operations while improving its profitability margins and effectively manage its working
capital cycle will be the key rating sensitivitie.
.

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1.2 Background:-
JLPL was incorporated in March 2003 by Mr Sandeep Bajaj. The
company is engaged in the manufacturing of flexible laminated packaging material in
the form of multilayer rolls and pouches which is used in packaging of food products,
snacks, pan masala, rubber contraceptives, etc. The manufacturing process includes
printing, lamination, slitting and pouching of various types of films and other products as
per the requirements of customers. Presently, JLPL has an installed capacity of 24,000
metric tons per annum (MTPA) (including leased capacity of 6,000 MTPA). The
company has two units located in Sonepat out of which one is taken on lease. During
FY14 (refers to the period April 1 to March 31), JLPL achieved a total operating income
of Rs.410 crore and PAT of Rs.4 crore as against a total operating income and PAT of
Rs.304 crore and Rs.4 crore, respectively, during FY13. For H1FY15 (refers to the
period April 1 to September 30), the company has reported a total operating income and
PAT of Rs.237 crore and Rs.3 crore, respectively.
Jupiter Laminators and Kap Cones in a Bobst M6 Line deal
The Bobst stand was buzzing with activity on the second and the third day evenings of
the Labelexpo show, with the maverick Federico D’Annunzio of Bobst Firenze extolling
the virtues of the Revo digital flexo on the second day and two Indian print company
CEOs at the stand, finalising the Bobst M6 Line buy.
Sandip Bajaj of Jupiter discussing nitty gritties of the Bobst M6 Line deal
Sandip Bajaj of Jupiter Laminators of Sonipat, Haryana, signed a deal to buy the Bobst
M6 Line – the UV digital flexo press for food packaging, while Deepak Duggal of Kap
Cones, who closed the Omet XFlex X6 deal yesterday, also signed for the Bobst M6 Line
– the UV digital flexo press for food packaging, with minor tweaks to the configuration.
Coming back to Bobst Firenze at Labelexpo, the company showcased the M4 and M6 UV
flexo presses driven by the Revo digital flexo system. Every two hours, a completely new
set of seven extended colour gamut plates, mounted on printing sleeves were printing
live print jobs.
D’Annunzio in his presentations conveyed that “one could make plate changes without
having to stop the press” with the Revo digital flexo, a collaborative programme between
eight industry players which was unveiled last year. These players are AVT, Adare, Apex,
Dupont, Esko, Flint, Bobst (then Gidue) and UPM Raflatac. “Catering to short run jobs by
quick job change over and colour management, is now achievable because of this the
Revo programme,” suggested D’Annunzio. Of course, one will need advanced colour
management techniques to enable achieve the extended colour gamut.

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1.3 Company Profile
Jupiter Laminators specializes in a wide range of flexible packaging
materials. Our products and services have wide application in the packaging of Foods &
Beverages, Biscuits, Ready Foods, Cereals, Milk Powder, Noodles, Tea, Salt, Coffee,
Frozen Foods, Seeds, Spices, Shampoo, Detergent Powder & Cake, Namkeen, Chips,
Bhujiya & Refined Oil etc.
Jupiter Laminators is a unique company specializing in aluminium foil conversion
including printing, laminating, coating, cutting, embossing, slitting, and punching on
aluminium foil.
Name of the company Jupiter Laminators Pvt. Ltd.
Year of Establishment 2001
Address VILLAGE: LIWASPUR, BAHALGARH
INDUSTRIAL AREA, Sonipat - 131021,
Haryana, India
Headquarter 25/33 3rd Floor, East Patel Nagar,
New Delhi – 11008, India
Contact
Website
Nature of Business
91-130-4001700
www.jupiterlaminators.com
Exporter / Manufacturer / Supplier
Business Scope Flexible, packaging
Services Printing , lamination, Extrusion, Hologram,
Slitting, Metalizing, Pouching etc
Standard Certification ISO 9001:2000, ISO 22000:2005
CEO Name Mr R. Kamra
Director Sandeep Monga

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1.4 Our Equipment
1. Five Gravure Printing Machine. These machines have state of the art features such
as……
 Pneumatic Shaft Chucking of printing cylinders to ensure closest T.I.R. mounting.
 ‘Soft Touch’ Doctor Blade Design with all the three direction movement markings to
ensure easy resettings.
 High Velocity Dryer hoods to ensure complete solvent removal.
 ‘Ink Circulation System’ to ensure shade consistency.
 Auto Registers Control with web viewer.
 Multimotor Digital A.C. Drives with dancer feedback tension control in all the zones.
2. Solventless Lamination Machine. This machine is comparable to any other world class
machine and is equipped with……
 Five Roll Precision Adhesive Coating Unit with electronic grammage control.
 ‘Dopag’ (Swiss make) Adhesive Dosing, Mixing and Dispensing System.
 Shaftless Unwind Units with Electronic Edge Guide Control.
 Multimotor Digital A.C. Drives with precise tension control in all zones.
3. Three Dry Lamination Machines. These machines are equipped with following
features to ensure absolute quality production…..

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 Gravure Coating Station for accurate adhesive deposition.
 High Velocity Dryer Hoods for efficient and precise solvent water removal.
 Precision Lamination Unit with independent drive to control web tension.
 Both the Primary and Secondary Unwind Units are fitted with Electronic Edge Guide
control.
 Multimotor A.C. Digital Drive with precise Loadcell feedback tension control in all zones.
4. 7 Wet Lamination Coating Machines. These machines are equipped with following
features to ensure absolute quality production…..
 Gravure Coating Station for accurate adhesive deposition.
 High Velocity Dryer Hoods for efficient and precise solvent water removal.
 Precision Lamination Unit with independent drive to control web tension.
 Both the Primary and Secondary Unwind Units are fitted with Electronic Edge Guide
control

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.
 Multimotor A.C. Digital Drive with precise Loadcell feedback tension control in all zones.
5. One Extrusion Coating Machines (specially for Food Products)
6. Metalizing of latest technology having decal of 2450mm and high barrier film processing
having alox processing.
7. Hologram for surving purpose of laminate security in all types of jobs.
8. Blown film of latest technology having decal of 2200mm producing all types of films.

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9. Ink Plant having dyno of 300Liter/hr manufacturing capacity. Producing high quality all
types of Inks.
1.5 Quality
Our Quality Assurance Systems / Procedures……
At Jupiter, we have adopted Elaborate & Strict quality assurance regime. To produce only
quality, we generate the following for each product…..
 Raw Material test report.
 Quality checking at printing stage, as well as at lamination stage.
 Laminate quality check before slitting.
 Slitting check.
 Pouching inspection report.
 Pre- dispatch inspection report.
Our Laboratory is equipped with…..
 Weighing Machine (Sansui make). Latest count of 0.001 gm for G.S.M. check.

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 “Peelapart” / Tensile Tester. (Presto make) with load cell indication.
 Coefficient of friction tester (Presto make) with digital display.
 Owen for accelerated curing drying of samples (Presto make)
*(G.C. has been ordered)
 Chemical checking for treatment solution of different ranges.
Quality Control Staff…..
 Lab Assistant.
 Online inspector for online checking.
 Production manager for floor documentation checking.
1.6 Companies Services
1. Packaging material
2. Printed Pouch
3. Food Packaging
4. Frozen Food Packaging
1. Packaging material:-
Packaging is the technology of enclosing or protecting
products for distribution, storage, sale, and use. Packaging also refers to the
process of designing, evaluating, and producing packages. Packaging can be
described as a coordinated system of preparing goods for transport, warehousing,
logistics, sale, and end use. Packaging contains, protects, preserves, transports,
informs, and sells.[1] In many countries it is fully integrated into government,
business, and institutional, industrial, and personal use.
Purpose of the Packaging and Package Labels
Packaging and package labeling have several objectives.

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 Physical protection – The objects enclosed in the package may require protection
from, among other things, mechanical shock, vibration, electrostatic discharge,
compression, temperature, etc.
 Barrier protection – A barrier to oxygen, water vapour, dust, etc., is often
required. Permeation is a critical factor in design. Some packages
contain desiccants or oxygen absorbers to help extend shelf life. Modified
atmospheres or controlled atmospheres are also maintained in some food
packages. Keeping the contents clean, fresh, sterile and safe for the duration of the
intended shelf life is a primary function. A barrier is also implemented in cases
where segregation of two materials prior to end use is required, as in the case of
special paints, glues, medical fluids, etc. At the consumer end, the packaging barrier
is broken or measured amounts of material are removed for mixing and subsequent
end use.
 Containment or agglomeration – Small objects are typically grouped together in
one package for reasons of storage and selling efficiency. For example, a single box
of 1000 pencils requires less physical handling than 1000 single
pencils. Liquids, powders, and granular materials need containment.
 Information transmission – Packages and labels communicate how to use,
transport, recycle, or dispose of the package or product.
With pharmaceuticals, food, medical, and chemical products, some types of
information are required by government legislation. Some packages and labels also
are used for track and trace purposes. Most items include their serial and lot
numbers on the packaging, and in the case of food products, medicine, and some
chemicals the packaging often contains an expiry/best-before date, usually in a
shorthand form. Packages may indicate their construction material with a symbol.
 Marketing – Packaging and labels can be used by marketers to encourage potential
buyers to purchase a product. Package graphic design and physical design have
been important and constantly evolving phenomena for several decades. Marketing
communications and graphic design are applied to the surface of the package and
often to the point of sale display. Most packaging is designed to reflect the brand's
message and identity.
 Security – Packaging can play an important role in reducing the security risks of
shipment. Packages can be made with improved tamper resistance to deter
manipulation and they can also have tamper-evident features indicating that
tampering has taken place. Packages can be engineered to help reduce the risks
of package pilferage or the theft and resale of products: Some package
constructions are more resistant to pilferage than other types, and some have pilfer-

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indicating seals. Counterfeit consumer goods, unauthorized sales (diversion),
material substitution and tampering can all be minimized or prevented with such
anti-counterfeiting technologies. Packages may include authentication seals and
use security printing to help indicate that the package and contents are
not counterfeit. Packages also can include anti-theft devices such as dye-
packs, RFID tags, or electronic article surveillance tags that can be activated or
detected by devices at exit points and require specialized tools to deactivate. Using
packaging in this way is a means of retail loss prevention.
 Convenience – Packages can have features that add convenience in distribution,
handling, stacking, display, sale, opening, reclosing, using, dispensing, reusing,
recycling, and ease of disposal
 Portion control – Single serving or single dosage packaging has a precise amount
of contents to control usage. Bulk commodities (such as salt) can be divided into
packages that are a more suitable size for individual households. It also aids the
control of inventory: selling sealed one-litter bottles of milk, rather than having
people bring their own bottles to fill themselves.
Symboluse on packagesand label
Many types of symbols for package labeling
are nationally and internationally standardized. For consumer packaging, symbols exist
for product certifications (such as the FCC and TÜV marks), trademarks, proof of
purchase, etc. Some requirements and symbols exist to communicate aspects of
consumer rights and safety, for example the CE marking or the estimated sign that
notes conformance to EU weights and measures accuracy regulations. Examples of
environmental and recycling symbols include the recycling symbol, the recycling
code (which could be a resin identification code), and the "Green Dot". Food packaging
may show food contact material symbols. In the European Union, products of animal
origin which are intended to be consumed by humans have to carry standard, oval-
shaped EC identification and health marks for food safety and quality insurance
reasons.
Bar codes, Universal Product Codes, and RFID labels are common to allow automated
information management in logistics and retailing. Country of Origin Labeling is often
used. Some products might use QR codes or similar matrix barcodes. Packaging may
have visible registration marks and other printing calibration and troubleshooting cues.

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Environmental consideration
Package development involves considerations
of sustainability, environmental responsibility, and applicable environmental
and recycling regulations. It may involve a life cycle assessment which considers the
material and energy inputs and outputs to the package, the packaged product
(contents), the packaging process, the logistics system, waste management, etc. It is
necessary to know the relevant regulatory requirements for point of manufacture, sale,
and use.
The traditional “three R’s” of reduce, reuse, and recycle are part of a waste
hierarchy which may be considered in product and package development.
 Prevention – Waste prevention is a primary goal. Packaging should be used only
where needed. Proper packaging can also help prevent waste. Packaging plays an
important part in preventing loss or damage to the packaged product (contents).
Usually, the energy content and material usage of the product being packaged are
much greater than that of the package. A vital function of the package is to protect
the product for its intended use: if the product is damaged or degraded, its entire
energy and material content may be lost.
 Minimization – (also "source reduction") The mass and volume of packaging (per
unit of contents) can be measured and used as criteria for minimizing the package in
the design process. Usually “reduced” packaging also helps minimize costs.
Packaging engineers continue to work toward reduced packaging.
 Reuse – Reusable packaging is encouraged. Returnable packaging has long been
useful (and economically viable) for closed loop logistics systems. Inspection,
cleaning, repair and recouperage are often needed. Some manufacturers re-use the
packaging of the incoming parts for a product, either as packaging for the outgoing
product or as part of the product itself.
 Recycling – Recycling is the reprocessing of materials (pre- and post-consumer) into
new products. Emphasis is focused on recycling the largest primary components of
a package: steel, aluminum, papers, plastics, etc. Small components can be chosen
which are not difficult to separate and do not contaminate recycling operations.
Packages can sometimes be designed to separate components to better facilitate
recycling.
 Energy recovery – Waste-to-energy and Refuse-derived fuel in approved facilities
make use of the heat available from incinerating the packaging components.
 Disposal – Incineration, and placement in a sanitary landfill are undertaken for some
materials. Certain US states regulate packages for toxic contents, which have the

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potential to contaminate emissions and ash from incineration and leachate from
landfill. Packages should not be littered.
Development of sustainable packaging is an area of considerable interest to standards
organizations, governments, consumers, packagers, and retailers.
Packaging Machines
Choosing packaging machinery includes an assessment of
technical capabilities, labor requirements, worker safety, maintainability,
serviceability, reliability, ability to integrate into the packaging line, capital cost,
floorspace, flexibility (change-over, materials, etc.), energy requirements, quality of
outgoing packages, qualifications (for food, pharmaceuticals, etc.), throughput,
efficiency, productivity, ergonomics, return on investment, etc.
Packaging machinery can be:
1. purchased as standard, off-the-shelf equipment
2. purchased custom-made or custom-tailored to specific operations
3. manufactured or modified by in-house engineers and maintenance staff
Efforts at packaging line automation increasingly use programmable logic
controllers and robotics.
Packaging machines may be of the following general types:
 Accumulating and collating machines
 Blister packs, skin packs and vacuum packaging machines
 Bottle caps equipment, over-capping, lidding, closing, seaming and sealing
machines
 Box, case and tray forming, packing, unpacking, closing and sealing machines
 Cartooning machines
 Cleaning, sterilizing, cooling and drying machines
 Coding, printing, marking, stamping, and imprinting machines
 Converting machines
 Conveyor belts, accumulating and related machines
 Feeding, orienting, placing and related machines
 Filling machines: handling dry, powdered, solid, liquid, gas, or viscous products
 Inspecting: visual, sound, metal detecting, etc.
 Label dispenser

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 Orienting, unscrambling machines
 Package filling and closing machines
 Palletizing, DE palletizing, unit load assembly
 Product identification: labelling, marking, etc.
 Sealing machines: heat sealer
 Slitting machines
 Weighing machines: check weigher, multihead weigher
 Wrapping machines: stretch wrapping, shrink wrap, banding
 Form, fill and seal machines
 Other specialty machinery: slitters, perforating, laser cutters, parts attachment, etc.
2. Printing Pouch :-
A retort pouch is a type of food packaging made from
a laminate of flexible plastic and metal foils. It allows the sterile packaging of a
wide variety of food and drink handled by aseptic processing, and is used as an
alternative to traditional industrial canning methods. Packaged foods range
from water to fully cooked, thermo-stabilized (heat-treated) high-caloric (1,300 on
average) meals such as Meals, Ready-to-Eat (MREs) which can be eaten cold,
warmed by submersing in hot water, or through the use of a flameless ration
heater, a meal component introduced by the military in 1992.[1] Retort pouches
are used in field rations, space food, camping food, and brands such as Capri
Sun and Tasty Bite.
3. Food packaging: -Food Packaging is packaging for food. A package
provides protection, tampering resistance, and special physical, chemical, or
biological needs. It may bear a nutrition facts label and other information about
food being offered for sale.
Functions
Packaging and package labeling have several objectives.
 Physical protection - The food enclosed in the package may require protection
from, among other things, shock, vibration, compression, temperature, bacteria, etc.
 Barrier protection - A barrier from oxygen, water vapor, dust, etc., is often
required. Permeation is a critical factor in design. Some packages
contain desiccants or oxygen absorbers to help extend shelf life. Modified
atmospheres or controlled atmospheres are also maintained in some food

20. 20
packages. Keeping the contents clean, fresh, and safe for the intended shelf life is a
primary function.
 Containment or agglomeration - Small items are typically grouped together in one
package to allow efficient handling. Liquids, powders, and granular materials need
containment.
 Information transmission - Packages and labels communicate how to use,
transport, recycle, or dispose of the package or product. Some types of information
are required by governments.
 Marketing - The packaging and labels can be used by marketers to encourage
potential buyers to purchase the product. Package design has been an important
and constantly evolving phenomenon for several decades. Marketing
communications and graphic design are applied to the surface of the package and
(in many cases) the point of sale display.
 Security - Packaging can play an important role in reducing the security risks of
shipment. Packages can be made with improved tamper resistance to deter
tampering and also can have tamper-evident features to help indicate tampering.
Packages can be engineered to help reduce the risks of package pilferage; some
package constructions are more resistant to pilferage and some have pilfer-
indicating seals. Packages may include authentication seals to help indicate that the
package and contents are not counterfeit. Packages also can include anti-theft
devices, such as dye packs, RFID tags, or electronic article surveillance tags, that
can be activated or detected by devices at exit points and require specialized tools
to deactivate. Using packaging in this way is a means of retail loss prevention.
 Convenience - Packages can have features which add convenience in distribution,
handling, stacking, display, sale, opening, reclosing, use, and reuse.
 Portion control - Single-serving packaging has a precise amount of contents to
control usage. Bulk commodities (such as salt) can be divided into packages that
are a more suitable size for individual households. It also aids the control of
inventory: selling sealed one-litter bottles of milk, rather than having people bring
their own bottles to fill themselves.
Types
The above materials are fashioned into different types of food packages and
containers such as: .
Food Safety and Public Health

21. 21
It is critical to maintain food safety during processing,
packaging, storage, logistics (including cold chain), sale, and use. Conformance to
applicable regulations is mandatory. Some are country specific such as the US Food
and Drug Administration and the US Department of Agriculture; others are regional such
as the European Food Safety Authority. Certification programs such as the Global Food
Safety Initiative are sometimes used. Food packaging considerations may include: use
of hazard analysis and critical control points, verification and validation protocols, Good
manufacturing practices, use of an effective quality management system, track and
trace systems, and requirements for label content. Special food contact materials are
used when the package is in direct contact with the food product. Depending on the
packaging operation and the food, packaging machinery often needs specified daily
wash-down and cleaning procedures.
Health risks of materials and chemicals used in food packaging need to be carefully
controlled. Carcinogens, toxic chemicals, mutagens etc. need to be eliminated from
food contact and potential migration into food
Reducing food Packaging
Reduced packaging and sustainable packaging are
becoming more frequent. The motivations can be government regulations, consumer
pressure, retailer pressure, and cost control. Reduced packaging often saves packaging
costs.
In the UK, a Local Government Association survey produced by the British Market
Research Bureau compared a range of outlets to buy 29 common food items and found
that small local retailers and market traders "produced less packaging and more that
could be recycled than the larger supermarkets
Recycling food Packaging
After use, organic matter that is still in the food packaging
needs to be separated from the packaging. This may also require rinsing of the food
packaging.
Trends in Food Packaging

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 Numerous reports industry associations agree that use of smart indicators will
increase. There are a number of different indicators with different benefits for food
producers, consumers and retailers.
 Temperature recorders are used to monitor products shipped in a cold chain and to
help validate the cold chain. Digital temperature data loggers measure and record
the temperature history of food shipments. They sometimes have temperatures
displayed on the indicator or have other output (lights, etc.): The data from a
shipment can be downloaded (cable, RFID, etc.) to a computer for further analysis.
These help identify if there has been temperature abuse of products and can help
determine the remaining shelf life. They can also help determine the time of
temperature extremes during shipment so corrective measures can be taken.
 Time temperature indicators integrate the time and temperature experienced by
the indicator and adjacent foods. Some use chemical reactions that result in a
color change while others use the migration of a dye through a filter media. To
the degree that these physical changes in the indicator match the degradation
rate of the food, the indicator can help indicate probable food degradation.
 Radio Frequency Identification is applied to food packages for supply chain control
and has shown a significant benefit in allowing food producers and retailers create
full real time visibility of their supply chain.
 Plastic packaging being used is usually non-biodegradable due to possible
interactions with the food. Also, biodegradable polymers often require
special composting conditions to properly degrade. Normal sealed landfill conditions
do not promote biodegradation. Biodegradable plastics includes biodegradable films
and coatings synthesized from organic materials and microbial polymers. Some
package materials are edible. For example, pharmaceuticals are sometimes
in capsules made of gelatin, starch, potato or other materials. Newer bio plastics,
films and products are being developed.
 Barcodes have been used for decades in packaging many products. 2D
barcodes used in Auto coding are increasingly applied to food packaging to ensure
products are correctly packaged and date coded.
 The ability of a package to fully empty or dispense a viscous food is somewhat
dependent on the surface energy of the inner walls of the container. The use of
super hydrophobic surfaces is useful but can be further improved by using new
lubricant-impregnated surfaces
4. FrozenFood Packaging :-

23. 23
Freezing food preserves it from the time it is prepared to the
time it is eaten. Since early times, farmers, fishermen, and trappers have preserved
their grains and produce in unheated buildings during the winter season. Freezing
food slows down decomposition by turning residual moisture into ice, inhibiting the
growth of most bacterial species. In the food commodity industry, there are two
processes: mechanical and cryogenic (or flash freezing). The freezing kinetics is
important to preserve the food quality and texture. Quicker freezing generates smaller
ice crystals and maintains cellular structure. Cryogenic freezing is the quickest freezing
technology available due to the ultra-low liquid nitrogen temperature −196 °C (−320 °F).
Preserving food in domestic kitchens during the 20th and 21st centuries is achieved
using household freezers. Accepted advice to householders was to freeze food on the
day of purchase. An initiative by a supermarket group in 2012 (backed by the
UK's Waste & Resources Action Program me) promotes advising the freezing of food
"as soon as possible up to the product's 'use by' date". The Food Standards
Agency was reported as supporting the change, providing the food had been stored
correctly up to that time
Technology
The freezing technique itself, just like the frozen food market, is
developing to become faster, more efficient and more cost-effective.
Mechanical freezers were the first to be used in the food industry and are used in the
vast majority of freezing / refrigerating lines. They function by circulating a refrigerant,
normally ammonia, around the system, which withdraws heat from the food product.
This heat is then transferred to a condenser and dissipated into air or water. The
refrigerant itself, now a high pressure, hot liquid, is directed into an evaporator. As it
passes through an expansion valve, it is cooled and then vaporises into a gaseous
state. Now a low pressure, low temperature gas again, it can be reintroduced into the
system.
Cryogenic or (flash freezing) of food is a more recent development, but is used by many
leading food manufacturers all over the world. Cryogenic equipment uses very low
temperature gases – usually liquid nitrogen or solid carbon dioxide – which are applied
directly to the food product

24. 24
Packaging
Frozen food packaging must maintain its integrity throughout machine filling,
sealing, and freezing, and storage, transportation, thawing, and often cooking.[7] As
many frozen foods are cooked in a microwave oven, manufacturers have developed
packaging that can go straight from freezer to the microwave.
In 1974, the first differential heating container (DHC) was sold to the public. A DHC is a
sleeve of metal designed to allow frozen foods to receive the correct amount of heat.
Various sized apertures were positioned around the sleeve. The consumer would put
the frozen dinner into the sleeve according to what needed the most heat. This ensured
proper cooking.Today there are multiple options for packaging frozen foods. Boxes,
cartons, bags, pouches, Boil-in-Bags, lidded trays and pans, crystallized PET trays, and
composite and plastic cans.
Scientists are continually researching new aspects of frozen food packaging. Active
packaging offers a host of new technologies that can actively sense and then neutralize
the presence of bacteria or other harmful species. Active packaging can extend shelf-
life, maintain product safety, and help preserve the food over a longer period of time.
Several functions of active packaging are being researched:
 Oxygen scavengers
 Time Temperature Indicators and digital temperature data loggers
 Antimicrobials
 Carbon Dioxide controllers
 Microwave susceptors
 Moisture control: Water activity, Moisture vapor transmission rate, etc.
 Flavor enhancers
 Odor generators
 Oxygen-permeable films
 Oxygen generators
 Validation of cold chain
Quality
The speed of the freezing has a direct impact on the size and the number of ice
crystals formed within a food product's cells and extracellular space. Slow freezing
leads to fewer but larger ice crystals while fast freezing leads to smaller but more
numerous ice crystals. Large ice crystals can puncture the walls of the cells of the

25. 25
food product which will cause a degradation of the texture of the product as well
as the loss of its natural juices during thawing. That is why there will be a
qualitative difference observed between food products frozen by ventilated
mechanical freezing, non-ventilated mechanical freezing or cryogenic freezing with
liquid nitrogen
Reaction
According to a study, an American consumes on average 71 frozen foods a
year, most of which are pre-cooked frozen meals. Many food critics host shows are
dedicated to the tasting and reviewing of frozen foods, the web
show Freezerburns being one of the more notable ones.
CHAPTER – II
2.1 Objectives of the Study:-
Proper control over raw materials, intermediate products, final
products and the associated waste streams are now being recognized by industry as an
important waste reduction technique. In many cases waste is just out-of-date, off-
specification, contaminated, or unnecessary raw materials. The cost of disposing of
these materials not only includes the actual disposal costs but also the cost of the low
cost raw materials or product. There are two basic aspects to inventory management:
controlling the types and quantities of materials in the plant inventory; and controlling
the handling of raw materials, along with the finished products and waste streams in the
production facility.
The former aspect, referred to as inventory control, includes techniques to reduce
inventory size and hazardous chemical use while increasing inventory turnover. The
latter aspect, referred to as material controls, includes methods to reduce raw material
and finished product loss and damage during handling, production, and storage.
Handling waste as if it were a product helps reducing waste and increasing the potential
for recovery.
The project objective is to study the material flow and institute material wastage during
the value addition process, finding out reasons for the same, tracking reasons for
difficulties in material reconciliation and formulating plans for improving the existing
system.
2.2 Projectobjectives:-

26. 26
To study the material flow and institute material wastage during the value addition
process.
 To find out the reasons for the same, tracking reasons for difficulties in material
reconciliation and formulating plans for improving the existing system.
 To optimize individual and group efforts for minimization in wastage and to
achieving the organizational goals efficiently and effectively by cost savings.
Here the objective of this project is to reengineering the existing value addition process
to reduce wastage of Raw Materials during the Value Addition Processes and to have
better control on inventory management.
2.3 Scope of the Study:-
The scope of the study is in problem solving process in manufacturing companies and
that too specially in fast growing Automobile sector. In Automobile companies in
addition to the Original Equipment Manufacturer (OEMs) there are huge set up of
components manufactures. The overall turnover of Henkel (Components manufactures)
is greater even than the certain OEMs.
In order to achieve objectivity, it is necessary to Understand:
 The existing system for Inward Raw Materials.
 Lay out of Present Raw Material Stores.
 Manufacturing Lines and Machines
 Modification in work operations and any corrective action suggestion.
 Checking for continuous improvement.
First of all , There is a immense need to Understand, the Working Environment In which
whole store functions and method of usage of Raw Materials as input.
Data are collected through observation method, interviewing method and questionnaires
method. Direct observation method is used to understand the existing process. The
personal interview with Middle Management, Shift Supervisors, Maintenance Incharge,
Store Incharge , Security Guards and Work Force has been carried out. The data
sources of the organization was also studied.
In order to understand the customers actual requirements and level of satisfaction
questionnaires method is used. These questionnaires were given to different workers in

27. 27
all the three shifts. After receiving the responses those are thoroughly analyzed. A
feedback control system has been developed. This feedback system continuously
compares output of new changes and clients satisfaction level achieved with standards.
If the standards are not achieved then corrective measures are to be carried out. In
case the requirements are achieved a slightly higher than standards, they are fixed as
our aim is to achieve these standards. Thus, it ensures the continuous improvement.
The studies show that the highest attrition is found in the Work Force and Supervisory
categories. The Supervisory and workers categories experience lesser attritions. Hence
the scope of the study was designed to concentrate on that particular segment of higher
attrition. This segments includes the Workers and Supervisors who are generally
employed in Store and working on Machines in all the three Shifts.

28. 28
2.4 Methodology:-
Methodology is the specification of the method for acquiring the information needed to
structure the study.
There are Some basic strategies to minimize wastes are as follows:
 Inventory management
Inventory control
Material control
 Production process modification
Operation and maintenance procedures
Material change
Process equipment modification
 Volume reduction
Source segregation
Concentration
 Recovery
1. On-Site recovery
2. Off-Site recovery
Proper control over raw materials, intermediate products, final products and the
associated waste streams are not being recognized properly at Henkel India (HTIL) as
an important waste reduction technique. There are two basic aspects to inventory
management: controlling the types and quantities of materials in the plant inventory; and
controlling the handling of raw materials, along with the finished products and waste
streams in the production facility.
To apply these strategies following techniques were identified for this project to
successfully minimization of Waste through production process modifications.
1. Mass flow balancing
2. Value Stream mapping
3. ABC analysis
4. Theories of Total quality management.

29. 29
2.5 Limitations of the Study :-
Following Limitations were observed while study carrying out on the project:
1. Lack of time: - Mass flow balancing technique require process sequencing and
continuous time bound studies on a particular chosen batch till the batch production is
completed (End of Batch cycle time). There are approximately 200 Nos. of Finished
goods, which HTIL make to feed OEMs monthly requirements. Out of these, Approx. 80
Nos. products are regular in demand as well as in regular production. These 80 Nos.
regular finished goods comprises 65 % of the volume of total monthly production. Since
my self is employed and It was not possible for me to exercise Mass Flow Balancing
and Value stream mapping study on each & every finished products. Hence as a
sample, certain regular finished products were selected to conduct the studies..
2. Since HTIL is using approximately 400 Nos types of Indian and Imported raw
materials. Hence this Study could not be conducted on all the raw materials / products,
hence random FG products were selected for the study. Various Raw materials are
common in usage.
3. It is a general phenomenon, due to casual attitude of people working at lower ranks, it
is very hard to get informations from them. Respondent‟s lack of time and unwillingness
to give information due to their casual attitude was a big hindrance in the study.
As this project is limited to Gurgaon, its findings can‟t be taken as the findings for other
Henkel plants in the India because other plants are 16
newer than Gurgaon Plants with advanced machines (Blenders etc) and equipments.
The other plants have different kinds of machines with extra capacities than Machines
available with Gurgaon Plants. Hence studies carried out in Gurgaon can not be co-
related with the other HTIL‟s plants in India.

30. 30
CHAPTER - III
INVENTORY MANAGEMENT
3.1 System for Incoming Raw MaterialInward :-
I have discussed the existing process for incoming Raw materials into Store. This
process has different procedures for incoming Powder and liquid raw materials.
As I have mentioned earlier that Henkel Teroson (HTIL) is manufacturing around 180
different kind of Automotive Sealants and Adhesive products for which at least 400
different kind of raw materials are used. 50% of raw material is sourced from within the
country whereas 50 % of inbound materials are imported only from Henkel‟s globally
approved suppliers. Huge quantity of imported materials forces HTIL to keep sufficient
amount of inventory
The biggest problem however is of severe space crunch. 74 IDC has total floor area of
9234 Sqr.ft. and 64 IDC has total floor area of 6963 Sqr ft. (Floor plans attached in the
last of this chapter). Monthly inventory level is Approx. 750 MT. Owing to space
constraints, maintaining of store activities, reconciliation of stock is little difficult work.
The procedure for accepting imported in-warding raw materials is different than Indian
raw materials. And raw material accepting criteria for bulk materials and liquids bulk
materials are different than small items.
Certain Imported items are very old and their past quality record are good and these
certain items are declared as self-certified and used without any pre quality testing.
While various bulk and fast consuming 19 Indian items are unloaded after sample
testing and approval of quality tests. For Example –Plasticizers like DOP/ DINP/ Exxsol
D 80 etc.
Certain Materials are unloaded without testing but are used only after getting the
sample testing and quality validation. In such materials quality testing lead time is 3 – 5
days. Small pilot batches are made, results are validated before approving the quality
standards. For Example – Neo light SP etc.

31. 31
The whole process is summarized in below steps:-
Step – 1: The Raw Material is received at receive reported by Security Guard.
Step –II: Store Officer checks whether all the raw materials are available as per the
Purchase order and material is unloaded in the “ Material under Testing Area”
Step – III: Random Sampling is done as per the sampling plan. Sample is sent to QC
department for Quality testing with Sample Requisition Slip.
Step – IV: The Quality Assurance Department checks the Physical & Chemical
properties of sample material as per the methods and generates the test report for
Quality Approval or non-Approval.
Step – V: In case of Quality Approval, material is shifted to OK Store for production
purpose.
Step – VI: In case of Non quality approval, Supplier is intimated and whole rejected lot is
sent back to Supplier.
Step – VII: Fresh material is received and whole procedure Step 1 to VI is repeated.
Step – VIII: Due to bulk materials and space constraints, Store Areas are open and are
available at different locations. Hence these store can not be put into Lock.
Step – VIII: Whenever required, Production department issues the Production plan and
Material requisition slip to Store and store issue the materials by updating their store
records.

32. 32
Flow Chart:-

33. 33
PhysicalConditionand
Quantitiesare verified
from P.O.
Materialare unloaded
into Under Testing Area
and sampling is done
Quality officer carries
out Physical&
Chemicaltest
If Result Satisfactory
Yes
Materialis shifted to
Store , Store records
are updated
Sent back to SupplierNo

34. 34
3.2 Unloading process for Liquid MaterialsTankers :-
The Unloading Process for Liquid Plasticizers materials are summarized below : (See
the flow Chart also)
1. Bulk Plasticizers are transported by suppliers through 16 MT or 20 MT tankers
2. On the arrival of Tanker, Physical checking of tankers is thoroughly carried out for
any leakage of discharging valves, any mal practice by tanker drivers in Transit. Sealed
broken or Intact etc.
3. Sampling of plasticizers is done from each cuppa of tankers by removing initial 20 –
25 lts plasticizers, to avoid any moisture, rust , dust within pipe line.
4. Tanker is moved to two nos. local weighing balances in the custody of Store officer
and Security Guard.
5. Dip measurement is carried out for the existing storage tankers by dip rods to
measure current stock available in empty storage underground or overhead tanks
6. Meanwhile Quality Test Report is received from QC. In quality Ok condition,
Discharging Flange are fitted on discharging vales of tankers.
7. Motor fitted flexible plastic pipes are fitted connecting to Tankers flange and mouth of
empty tanker through flame proof electrical motor. And motion tanker is unloaded into
the empty tanks.
8. After emptification of Tanker, emptification is verified by searching inside the tanker
through Torch light and quantity unloaded is verified by dip measuring of filled under
ground or over head tanks in the presence of Store officer. In dip measurement,
previous dip measured quantity is reduced.
9. Again, empty tanker is weighed in the custody of Store officer and Security Guard at
destine two previous weighing balances.
10. Average Weight (In Kgs) of said plasticizer of weighment slips are verified with cross
checking of supplier‟s invoiced quantity. only 0.5 % shortage due to transportation loss
is accepted as quantity received as full for commercial purpose only while for inventory
purpose actual quantity received is recorded into inventory stocks.
11. Empty tankers are released to return to supplier after weight verification.

35. 35
12. Now the said plasticizer is available for use to production department. It is issued to
production (in Kgs.) on the material requisition slips (MRS Slips) received from
production.
13. Here it is found there is no control of Store in issuing the liquid plasticizers to
production. The production department has control
over it and they use or can manipulate the quantity what ever they are doing. This is the
grey area of possible wastage.
3.3 ProductionMethods:-
Since Sealants are of two types:
1. PVC Based
2. Mastic (Rubber) Based
For both types of Sealants different types of machines are used. These are :
1. Blender # 1 ( HT # 1) Capacity 4 MT
2. Blender # 2 (HT # 2) , Capacity 4 MT
3. Double Planetary Mixer (DPM), Capacity 1 MT
4. RAM Press for Discharging
5. Double Planetary Mixer (DPM), Capacity 400 Kgs
6. RAM Press for Discharging
7. Sigma Mixer Capacity 500 Kgs
8. Sigma Mixer Capacity 300 Kgs
9. Kneader Mixer Capacity 300 Kgs
10. Triple Roll Mill (TRM)
11. Mahale Filters
12. Static Filters
13. Churners.
PVC Based sealants are made in PVC Blenders and Double Planetary mixers while
Mastic sealants are made in Sigma mixers and kneader etc RAM Press , Triple Roll Mill
are supporting units..

36. 36
Both Sealants are manufactured by the application of Blending technique. In blending
technique, is a chemical processing technique in which various ingredients are
combined in such proportions as to give a product of some desired composition.
The overall production method for the both types of sealants are same, Blending
operations are performed under vacuum at ambient temp ( < 30 oC) at high speed.
3.4 Store & Machines Layouts :-
Following Layouts are attached for Store. Since Henkel store approx. 750 MT inventory
in more than 400 Nos Raw materials hence large space are occupied by store which
are very congested. Layouts are self-explanatory.
1. Layout of Liquid Raw Material Area (74 IDC, Ground Floor)
2. Layout of raw Material Store (74 IDC, Ist Floor)
3. Layout of Raw Material Store for Racks (74 IDC 2nd Floor)
4. Layout of Liquid Raw Material Area ( 64 IDC)
5. Layout of raw Material Store, Bags (64 IDC)
6. Layout of raw Material Store (64 IDC, AC Room I)
7. Layout of raw Material Store (64 IDC, AC Room II)
8. Layout of DPM and RAM Press

37. 37
CHAPTER - IV
REVIEW OF LITERATURE
4.1 MEANING OF INVENTORY:-
Inventory generally refers to the materials in stock. It is also
called the idle resource of a company. Inventories represent those items which are either
stocked for sale or they are in the process of manufacturing or they are in the form of
materials which are yet to be utilized.
It also refers to the stockpile of the products a firm would sell in future in the normal course
of business operations and the components that make up the product.
Inventory is a detailed list of those movable items which are necessary to manufacture a
product and to maintain the equipment and machinery in good working order.
4.2 TYPES OF INVENTORIES: -
A manufacturing firm generally carries the following
types of inventories:
 Raw Materials.
 Bought out parts.
 Work-in-process inventory (WIP).
 Finished goods inventories.
 Maintenance, repair and operating stores.
 Tools inventory.
 Miscellaneous inventory.
 Goods in transit.
 Goods for resale.
 Scrap Material.
4.3 REASONS FOR HOLDING INVENTORY:-
 To stabilize production.
 To take advantage of price discounts.

38. 38
 To meet the demand during the replenishment period.
 To prevent loss of orders.
 To keep pace with changing market conditions.
4.4 MOTIVES OF HOLDING INVENTORIES:-
 The Transaction Motive which facilitates continuous production and timely
execution of sales orders.
 The Precautionary Motive which necessities the holding of inventories for meeting
the unpredictable changes in demand and supplies of materials.
The Speculative Motive which induces to keep inventories for taking advantage of price
fluctuations, saving in re-ordering costs and quantity discounts etc.,.
4.5 COSTS ASSOCIATED WITH INVENTORY:-
 Production cost.
 Capital cost.
 Ordering cost.
 Carrying cost.
 Shortage cost.
4.6 INVENTORY CONTROL:-
The main objective of inventory control is to achieve maximum efficiency in
production & sales with minimum investment in inventory.
Inventory control is a planned approach of determining what to order, when to order and
how much to order and how much to stock, so that costs associated with buying and
storing are optimal without interrupting production and sales.
4.7 BENEFITS OF INVENTORY CONTROL:-
The benefits of inventory control are:

39. 39
 Improvement in customers’ relationship because of the timely delivery of goods
and services.
 Smooth and uninterrupted production and hence, no stock out.
 Efficient utilization of working capital.
 Economy in purchasing.
 Eliminating the possibility of duplicate ordering.
4.8 PRINCIPLES OF INVENTORY CONTROL:-
 Inventory is only created by spending money for materials and the labour and
overhead to process the materials.
 Inventory is reduced through sales and scrapping.
 Accurate sales & production schedule forecasts are essential for efficient
purchasing, handing & investment in inventory.
 Management policies which are designed to effectively balance size and variety of
inventory with cost of carrying that inventory are the greatest factor in determining
inventory investment.
 Forecasts help determine when to order materials. Controlling inventory is
accomplished through scheduling production.
 Records do not produce control.
 Control is comparative & relative, not absolute. It is exercised through people with
varying experiences and judgment rules & procedures establish a base from which
the individuals can make evaluation and decision.
 With the consistent practices being followed, inventory control can become
predictable and properly related to production and sales activity.
4.9 INVENTORY CONTROL – TERMINOLOGY:-
 Demand:

40. 40
It is the number of items required per unit of time. The demand may be either
deterministic or probabilistic in nature.
 Order cycle:
The time period between two successive orders is called order cycle.
 Lead time:
The length of time between placing an order and receipts of items is called lead
time.
 Safety stock:
It is also called buffer stock or minimum stock. It is the stock or inventory needed
to account for delays in materials supply and to account for sudden increase in
demand due to rush orders.
 Inventory turnover:
If the company maintains inventories equal to 3 months consumption. It means that
inventory turnover is 4 times a year i.e., the entire inventory is used up and replaced 4
times a year.
4.10 INVENTORYCOST RELATIONSHIPS:-
There are two major cost associated with inventory. Procurement cost and
carrying cost. Annual procurement cost varies with the numbers of orders. This implies
that the procurement cost will be high, if the item is procured frequently in small lots. The
annual procurement cost is directly proportional to the quantity in stock. The inventory
carrying cost decreases, if the quantity ordered per order is small. The two costs are
diametrically opposite to each other. The right quantity to be ordered is one that strikes a
balance between the two oppositioncosts. This quantity is referred to as “Economic Order
Quantity”.
4.11 ECONOMIC ORDER QUANTITY:-
MEANING

41. 41
A decision about how much to order has great significance in inventory management. The
quantity to be purchased should neither be small nor big because costs of buying and
carrying materials are very high. Economic order quantity is the size of the lot to be
purchased which is economically viable. This is the quantity of materials which can be
purchased at minimum costs. 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. The cost relationships are shown in below figure.
FORMULA FOR CALCULATING ECONOMIC ORDER QUANTITY (EOQ)
Economic Order Quantity
Costs Annual Total Cost
Annual InventoryCarryingCost
Annual OrderingCost
Q* Economic OrderQuantity
OrderQuantity

42. 42
4.12 SAFETY STOCK:-
MEANING
The economic order quantity formula is developed based on assumption that the
demand is known and certain and that the lead time is constant and does not vary. In
actual practical situations, there is an uncertainty with respect to the both demand as well
as lead time. The total forecasted demand may be more or less than actual demand and
the lead time may vary from estimated time. In order to minimize the effect of uncertainty
due to demand and the lead time, a firm maintains safety stock, reserve stocks or buffer
stocks.
The safety stock is defined as “the additional stock of material to be maintained in
order to meet the unanticipated increase in demand arising out of uncontrollable factors”.
In simple it is tells about which is used to protect against uncertainties.
Because it is difficult to predict the exact amount of safety stock to be maintained,
by using statistical methods and simulation, it is possible to determine the level of safety
stock to be maintained.
DETERMINATION OF SAFETY STOCK
If the level of safety stock is maintained is high, it locks up the capital and there is
a possibility of risk of obsolescence. On the other hand, if it is low, there is a risk of stock
out because of which there may be stoppage of production. When the variation in lead
time is predominant, the safety stock can be computed as:
Safety Stock = (Maximum Lead time- Normal Lead time) * Demand

43. 43
SAFETY STOCK
The service level of inventory thus depends upon the level safety stocks. Large the
safety stocks, there is a lesser risk of stock out and, hence, higher service level.
Sometimes higher service levels are not desirable as they result in increase in costs,
thus, fixing up a safety stock level is critical. Using past date regarding the demand and
lead time data, reliability of suppliers and service level desired by management, safety
stock can be determined with accuracy.
4.13 ABC ANALYSIS:-
MEANING
The inventory of an organization generally consists of thousands of items with
varying prices, usage rate and lead time. It is neither desirable nor possible to pay equal
attention of all items.
ABC analysis is a basic analytical tool which enables management to concentrate
its efforts where results will be greater. The concept applied to inventory is called as ABC
analysis.

44. 44
Statistics reveal that just a few items account for bulk of the annual consumption of the
materials. These few items are called A class items which hold the key to business. The
other items known as B & C which are numerous in number but their contribution is less
significant. ABC analysis thus tends to segregate the items into three categories A,B &
C on the basis of their values. The categorization is made to pay right attention and
control demanded by items.
FEATURES OF ABC ANALYSIS
A Class (High Value) B Class (Moderate Value) C Class (Low Value)
1. Tight control on stock
levels
2. Low safety stock
3. Ordered frequently
4. Individual posting in
stores
5. Weekly control
reports
6. Continuous effort to
reduce lead time
Moderate control
Medium
Less frequently
Individual
Monthly control
Moderate efforts
Less control
Large
Bulk ordering
Collective posting
Quarterly control
Minimum efforts
ADVANTAGES
 This approach helps the manager to exercise selective control & focus his attention
only on a few items.
 By exercising strict control on A class items, the materials manager is able to show
the results within a short period of time.

45. 45
 It results in reducer clerical costs, saves time and effort and results in better
planning and control and increased inventory turnover.
 ABC analysis, thus, tries to focus and direct the effort based on the merit of the
items and, thus, becomes an effective management control tool.
4.14 INVENTORYTURNOVER RATIO:-
Kohler defines inventory turnover as “a ratio which measures the number of times
a firm’s average inventory is sold during a year”.
A higher turnover rate indicates that the material in question is a fast moving one.
A low turnover rate, on the other hand, indicates over-investment and locking up of
working capital on undesirable items.
Inventory turnover ratio may be calculated in different ways by changing the
numerator, but keeping the same denominator. For instance, the numerator may be
materials consumed, cost of goods sold or net sales. Based on any one of these, the ratio
differs from industry to industry.
Stock turnover is measured in terms of the ratio of the value of materials consumed
to the average inventory during the period. the ratio indicates the number of times the
average inventory is consumed and replenished. By diving no. of days in a yeat by
turnover ratio, the number of days for which the average inventory is held, can be
ascertained.
Comparing the no. days in the case of two different materials, it is possible to know
which is fast moving & which is slow moving. On that basis, attempt may be made to
reduce the amount of capital locked up, and prevent over-stocking of slow moving items.

46. 46
Net sales
Inventory turnover ratio =
Avg. inventory
No. of days in a year
Inventory velocity =
Inventory turnover ratio

47. 47
CHAPTER-V
DATA ANALYSIS AND INTERPRETATION
5.1 ECONOMIC ORDER QUANTITY (EOQ)
MEANING
Economic Order Quantity is the Inventory management technique for determining
optimum order quantity which is the one that minimizes the total of its order and carrying
costs.
EXPECTAON TABLE
TABLE 5.1.1 ECONOMIC ORDER QUANTITY
SR. No.
Components
Demand
Per year
Re-Order
Cost/ order
Carrying
Cost/unit
/year
EOQ
No. of
units
Ordered
No. of
order
per year
1.
Bearing - Ball Sealed –
6006 3,60,000 12,200 2 66,272.17 30,000 5.43
2.
Bearing - Ball Sealed -
6205 - Swift 48,000 6,200 2 17,251.09 4,000 2.78
3.
Drive assly - NBO - China
(Agitator) - 2 pin drive 1,44,000 1,700 36 3,687.82 12,000 39.05

48. 48
4.
Drive assly - ECO Dlx -
NBO - China (Impeller) 96,000 1,700 36 3,011.09 8,000 31.88
5.
Driven Pulley - NBO -
China (Same pulley) 2,40,000 1,700 36 4,760.95 20,000 50.41
ANALYSIS & INTERPRETATION:-
In the above table the EOQ & the no. of orders purchased per year for various
components are calculated. The calculated EOQ is compared with the no. of units of
each component purchased in the organization. It is found that, there is a variation in
the EOQ & no. of unit purchased. It is understood that the company is not following
EOQ for purchasing the materials & therefore the inventory management is not
satisfactory
5.2 SAFETY STOCK
MEANING:-
Safety stocks are the minimum additional inventory which serve as a
safety margin to meet an unanticipated increase in usage resulting from an unusually
high demand and an uncontrollable late receipt of incoming inventory.
Table 5.2.1 Safety stock
Sl. No.
Components
Max. Lead
Time
Normal
Lead Time Demand
Safety
Stock
1. Bearing - Ball Sealed – 6006 0.27 0.166 3,60,000 37,440
2. Bearing - Ball Sealed - 6205 – Swift 0.27 0.166 48,000 4,992
3. Drive assly - NBO - China (Agitator) - 2 pin drive 0.27 0.166 1,44,000 14,976

49. 49
4. Drive assly - ECO Dlx - NBO - China (Impeller) 0.27 0.166 96,000 9,984
5. Driven Pulley - NBO - China (Same pulley) 0.27 0.166 2,40,000 24,960
ANALYSIS & INTERPRETATION:-
In the above table, safety stock for the various components calculated are
shown. Actual demand is given for each component for a period of 1 year and the lead-
time is calculated at a maximum of 100 days & normal of 60 days and these were
converted into per annum. So, from calculation of safety stock, we can able to
determine how much the company can hold the inventory in reserve stock per annum.
5.3 ABC ANALYSIS
MEANING:-
The ABC system is a widely used classification technique to identify various
items of inventory for purposes of inventory control. On the basis of unit cost involved, the
various items are classified into 3 categories:
(1) A, consisting of items with the large investment,
(2) C, with relatively small investments but fairly large number of items and
(3) B, which stands mid-way between category A & C.
Category A needs the most rigorous control, C requires minimum attention and B
deserves less attention than A but more than C.

50. 50
Categories
Total No. Items in Classes Percentage
A 18 45
B 14 35
C 8 20
Total
40 100

51. 51
ANALYSIS & INTERPRETATION:-
The above table shows the classification of various components as
A, B & C classes using ABC analysis techniques based on unit value. From the
classification A classes are those whose unit value is more than Rs.100 and constitutes
45% of total components. B classes are those whose unit value is between Rs.25-100
constitutes 35% of total components and C classes are those whose unit value is less
than Rs.25 constitutes 30% of total components. It is good that the company maintains
its inventories based on its value using controlling techniques.
5.4 INVENTORIES TURNOVER RATIO:-
MEANING
This ratio is calculated to consider the adequacy of the quantum of capital and its
justification for investing in inventory. A firm must have reasonable stock in comparison
to sales. It is the ratio of net sales and the average inventory. This ratio helps the
financial manager to evaluate inventory policy. This ratio reveals the number of times
finished stock is turned over during a given a accounting period.
The formula for the ratio is Net sales
Avg. Inventory

52. 52
Table 5.4.1 Inventories Turnover Ratio & Velocity
Year
Net Sales
(Rs.)
Avg. Inventory
(Rs.)
Ratio Velocity
(in Days)
2003 12,30,05,134 8,42,09,371 1.46: 1 250
2004 16,06,43,669 8,92,28,407 1.80: 1 203
2005 11,73,30,581 14,52,26,925 0.80: 1 456
2006 55,53,74,571 18,98,23,381 2.92: 1 125
2007 79,11,78,220 17,40,71,613 4.5: 1 81
ANALYSIS & INTERPRETATION :
In the above table shows inventory turnover ratio for the past years. The ratio is
showing increasing trend from1.46 to 4.5 in the year 2003 to 2007, except in the year
2005 which shows only 0.80 times. Whereas in the velocity of inventories shows less in
2007 as compared to 2003 which is 81 days in 2007 and 250 days in 2003 except in the
year 2005 which is 456 days. This shows that the inventories are easily converted into
sales within the shortest period i.e. the company was able to sell Rs. 4.5 by investing
rupee one in the stock in 2007.

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CHAPTER-VII
CONCLUSION
A better inventory management will surely be helpful in solving the problems the
company is facing with respect to inventory and will pave way for reducing the huge
investment or blocking of money in inventory. From the analysis we can conclude that
the Company can follow the Economic Order Quantity (EOQ) for optimum purchase and
it can maintain safety stock for its components in order to avoid stock-out conditions &
help in continuous production flow. This would reduce the cost and enhance the profit.
Also there should be tight control exercised on stock levels based on ABC analysis &
maintain high percentage in fast moving items in inventories as per on FSN analysis for
efficient running of the inventory. Since the inventory Turnover ratio shows the increasing
trend, there will be more demand for the products in the future periods. If they could
properly implement and follow the norms and techniques of inventory management, they
can enhance the profit with minimum cost.

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CHAPTER VIII
BIBLIOGRAPHY
 REFERENCES BOOKS
 M Y Khan P K Jain “Financial Management” 4th edition Tata McGraw Hill.
 R.S.N. Pillai V. Bagavathi “Management Accounting” S Chand & Co.
 WEB SITES
 www.jupiterlaminator.com
 www.inventorymanagementreview.org/2005/06/safety_stock
 www.inventorymanagementreview.org/inventory_basics/index
 www.inventorymanagementreview.org/justintime/index
 www.inventorymanagementreview.org/inventory_control/index