AN ANAILSIS OF INVENTORY MANAGEMENT IN

ZAFCO(INDIAN) PRIVATE LTD

PROJECT REPORT
Submitted
by
SOUNDARAPANDIYAN B
Register No: 62202263102935

In partial fulfillment for the award of the degree

Of

MASTER OF BUSINESS ADMINISTRATION

In
Submitted to

DEPARTMENT OF BUSINESS ADMINISTRATION

PAAVAI COLLEGE OF ENGINEERING

NAMAKKAL - 637018
JUNE 2024
 BONAFIDE CERTIFICATE

Certified that this summer training report is the bonafide work of

SOUNDARAPANDIYAN B, [Link].622022631035, II MBA, Paavai College
Of Engineering, Pachal, Namakkal, who undergone the training work under
my supervision. Certified further that to the best of my knowledge the work
reported herein does not form part of any other report on the basis of which a
degree or award was conferred on an earlier occasion on this or any other
candidate.

FACULTY GUIDE HEAD OF THE DEPARTMENT

Submitted for the End semester Examinations held on _______________

 INTERNAL EXAMINER EXTERNAL EXAMINER

ACKNOWLEDGEMENT

I Would like to express my gratitude to [Link], Chairman,

[Link], FCA, and [Link]., Correspondent, Paavai
College Of Engineering, Pachal, Namakkal for giving me an opportunity and
facility to complete this project.
I Feel immense pleasure in expressing my deep sense of gratitude to
[Link], M.E., Ph.D., Director Administration, Paavai
Engineering College, Pachal, Namakkal for all the encouragement received
during the MBA course.
I Wish to place my deep sense of gratitude to [Link] Kumar, M.E.,
Ph.D., Principal, Paavai College Of Engineering, Pachal, Namakkal for all
the encouragement received during the MBA course.
I Would like to express my gratitude to [Link] Kumar, M.E., Ph.D.,
Principal, Paavai College Of Engineering, Pachal, Namakkal and all the
faculty members of MBA department.
I Owe my boundless thanks and gratitude towards my faculty guide [Link].,
MBA., Paavai College Of Engineering, Pachal, Namakkal for her guidance
for preparation of this training report.

SOUNDARAPANDIYAN B
 CONTENTS
CHAPTER TITLE [Link].
LIST OF TABLE
LIST OF CHART ABSTRACT

I INTRODUCTION
1.1 Introduction of Inventory Management 1
1.2 Statement of Problem 5
1.3 Objectives of The Study 5
1.4 Scope of The Study 5
1.5 Need of The Study 6
1.6 Limitations of The Study 6
II REVIEW OF LITERATURE
2.1 Review Of Literature 7
2.2 Company Profile 10
III RESEARCH METHODOLOGY
3.1 Period of The Study 18
3.2 Area of The Study 18
3.3 Research Methodology 18
3.4 Data Collection 18
3.5 Tools For Analysis 18
IV DATA ANALYSIS AND INTERPRETATION 20
V FINDING, SUGGESTION AND CONCLUSION
5.1 Findings 38
 5.2 Suggestions 39
5.3 Conclusion 40
BIBLIOGRAPHY
APPENDIX
LIST OF TABLES

TABLE PAGE
NAME OF THE TABLE
NO. NO.

4.1 TABLE SHOWING INVENTORY RATIO 21

4.2 TABLE SHOWING INVENTORY TURNOVER RATIO 24

TABLE SHOWING INVENTORY AS PERCENTAGE OF CURRENT

4.3 26
ASSETS
TABLE SHOWING INVENTORY AS A PERCENTAGE OF TOTAL
4.4 28
ASSETS

4.5 TABLE SHOWING INVENTORY AS PERCENTAGE OF SALES 30

TABLE SHOWING PERCENTAGE OF INVENTORY OVER

4.6 32
CURRENT LIABILITIES

4.7 TABLE SHOWING CURRENT RATIO 34

4.8 TABLE SHOWING QUICK RATIO 36

 LIST OF CHARTS

CHART PAGE
NAME OF THE CHART
NO. NO.

4.1 CHART SHOWING INVENTORY RATIO 22

4.2 CHART SHOWING INVENTORY TURNOVER RATIO 25

CHART SHOWING INVENTORY AS PERCENTAGE OF

4.3 27
CURRENT ASSETS

CHART SHOWING INVENTORY AS A PERCENTAGE OF TOTAL

4.4 29
ASSETS

4.5 CHART SHOWING INVENTORY AS PERCENTAGE OF SALES 31

TABLE SHOWING PERCENTAGE OF INVENTORY OVER

4.6 33
CURRENT LIABILITIES

4.7 TABLE SHOWING CURRENT RATIO 35

4.8 TABLE SHOWING QUICK RATIO 37

 CHAPTER – I

INTRODUCTION

1.1 INTRODUCTION OF INVENTORY MANAGEMENT

India is a country of limited resources and it is the primary responsibility of each

organization whether it is public sector or private sector to ensure optimum utilization of
recourses for production of goods hi and services. Materials have come to occupy Avery vital and
critical position in the recourses of the country.

The major objective of every firm is to make profit. Profit rises through the way of raising
selling price or reducing cost reduction is the better option for snaking profit. Material cost forms
major par' of product cost. Reduction of material cost is very important. Hence there arises the
importance of material management.

Inventory management is the process of deciding what and how much of various items
are to be kept in the stock. It also determines the time and quantity of various items to be
procured. Inventory includes raw materials, stores and spares work in progress and finished
goods. The stock of material is a part of inventory. Inventory management is necessary to avoid
heavy losses due to leakage, theft and wastage because neglecting the management of inventory
may affect the long run profitability of the concern.

Majority of firms are incurring huge losses due to poor inventory management. Inventory
management is more relevant to public sector companies. Hence the study is made in
connection with Government undertaking Zafco India Private Limited., In Zafco India Private
Limited., inventory constitutes more than 50% of total current asset. The inventory management
policies to the company are studied through with material managers.
 Inventories are unconsumed goods purchased or manufactured. According to Accounting
Standard2 (AS2) issued by the institute of Chartered Accountants of India, which is based on
International Accounting Standard2 (1AS2), inventories are tangible properties:

• Held for sale in the ordinary course of business.

• In the process of production of such sale, or
• To be consumed in the production of goods and services for sale including maintenance
supplies and consumable other than machinery spares.
Thus the term inventory includes stock of:
I. Finished goods
II. Work -in- progress
II. Raw materials and components
In case of trading concern inventory primarily consist of finished goods while in case of
manufacturing concern, inventory consist of raw material, components, stores, work-in-progress
and finished goods.

INVENTORY MANAGEMENT

Inventories represent a significant portion of firm's asset. Inventories of manufacturing

concerns can be classified in to three categories: raw materials, work in progress and finished
goods. Raw materials are materials; part, sub assemblies that are purchased from others and that
become part of final product. Work in progress includes good in various stage of production.
Finished goods include completed product waiting for sale. The inventory of a wholesaler or
retailer, are opposed to a manufacturer normally would consist of only single category, goods s
purchased from others for resale.

MEANING OF INVENTORY MANAGEMENT:

„Inventory refers to the stockpile of the product a firm is offering for sale and the
components that make up the product.‟ In short, inventory is such type of assets which will be
disposed of in future in the ordinary course of the business.
NEED TO HOLD INVENTORIES
1. Meet variation in Production Demand

Production plan changes in response to the sales, estimates, orders and stocking
patterns. Accordingly the demand for raw material supply for production varies with the
product plan in terms of specific SKU as well as batch quantities.
Holding inventories at a nearby warehouse helps issue the required quantity and
item to production just in time.

2. Cater to Cyclical and Seasonal Demand

Market demand and supplies are seasonal depending upon various factors like
seasons; festivals etc and past sales data help companies to anticipate a huge surge of
demand in the market well in advance. Accordingly they stock up raw materials and hold
inventories to be able to increase production and rush supplies to the market to meet the
increased demand.

3. Economies of Scale in Procurement

Buying raw materials in larger lot and holding inventory is found to be cheaper
for the company than buying frequent small lots. In such cases one buys in bulk and holds
inventories at the plant warehouse.

4. Take advantage of Price Increase and Quantity Discounts

If there is a price increase expected few months down the line due to changes in
demand and supply in the national or international market, impact of taxes and budgets
etc, the company‟s tend to buy raw materials in advance and hold stocks as a hedge
against increased costs.

Companies resort to buying in bulk and holding raw material inventories to take
advantage of the quantity discounts offered by the supplier. In such cases the savings on
account of the discount enjoyed would be substantially higher that of inventory carrying
cost.
5. Reduce Transit Cost and Transit Times

In case of raw materials being imported from a foreign country or from a far away
vendor within the country, one can save a lot in terms of transportation cost buy buying in
bulk and transporting as a container load or a full truck load. Part shipments can be
costlier.
In terms of transit time too, transit time for full container shipment or a full truck
load is direct and faster unlike part shipment load where the freight forwarder waits for
other loads to fill the container which can take several weeks.

There could be a lot of factors resulting in shipping delays and transportation too,
which can hamper the supply chain forcing companies to hold safety stock of raw
material inventories.

6. Long Lead and High demand items need to be held in Inventory

Often raw material supplies from vendors have long lead running into several
months. Coupled with this if the particular item is in high demand and short supply one
can expect disruption of supplies. In such cases it is safer to hold inventories and have
control.
1.2 STATEMENT OF PROBLEM

Inventories often constitute a major element of the total working capital and hence it has
been correctly observed, “Good inventory management is good financial management”.
Inventory a double edged sword is usually an asset of an Industry, if not used properly it will
become liability. If inventories are kept at a high level, higher interest and storage costs would be
incurred. On the other hand, a low level of inventories may result in underutilization of capacity
and lower sales. It is therefore absolutely very important to manage inventories efficiently and
effectively in order to overcome unnecessary investment. And to identify the
problems/challenges involved in the Inventory Management in Zafco India Private Limited.

1.3 OBJECTIVES OF THE STUDY

 To study and analyze the inventory management system followed in Zafco India Private
Limited.
 To study and analyse of different factors influencing inventory management system in
Zafco India Private Limited.
 To review and evaluate the steps taken by the Zafco India Private Limited towards
inventory management operations.
 To suggest the ways and means to improve inventory management in Zafco India Private
Limited.
 To analyze inventory management with the help of ratio analysis.

1.4 SCOPE OF THE STUDY

 The study aims at developing effective tools and techniques have been evolved for
efficient management of inventory.
  The study aims at assessing the overall profitability, liquidity and the stability of the
organization.
 Further the study is also aimed at future scope of the organization with respect to
inventory management.
 The scope of the study should be maintaining the continue growth rate of stock level in
Zafco India Private Limited reference to Namakkal
15. NEED OF THE STUDY

 The Needs of inventory management lies in the fact that much significant effort for the
reducing the materials cost will go a long way in improving the profitability and rate
return on investment.
 It provides a check against the loss of materials through carelessness or pilferage.
Inventory management ensures an adequate supply of materials, stores, spares etc.
Minimizes the stock out and shortages an avoids a costly interruption in operations. It
reduces length of manufacturing cycle to the minimum. It enables the management make
cost and consumption between operations and periods.

1.6 LIMITATIONS OF THE STUDY

 As the work in descriptive in manner conclusion and observation are general in nature.
 As in any case time is limited to collect & analyze data, the study is limited for a period
of 5 years only.
 Some of information were kept confidential
 The secondary data source is not enough for my study due to period constrain
 CHAPTER – II

2.1 REVIEW OF LITERATURE

Spyros Foteinis ed al (2011) The main aim of this study is to evaluate whether the potential
transformation of the existing Tyre plants of Northern Greece to modern bioethanol plants, using
the existing cultivations of Tyre beet, would be an environmentally sustainable decision. Using
Life Cycle Inventory and Impact Assessment, all processes for bioethanol production from Tyre
beets were analyzed, quantitative data were collected and the environmental loads of the final
product (bioethanol) and of each process were estimated. The final results of the environmental
impact assessment are encouraging since bioethanol production gives better results than Tyre
production for the use of the same quantity of Tyre beets. If the old Tyre plants were transformed
into modern bioethanol plants, the total reduction of the environmental load would be, at least,
32.6% and a reduction of more than 2 tons of CO2e/Tyre beet of ha cultivation could be reached.

Ana Paula Barbosa-Póvoa (2012) Process industry supply chains (SCs) involve challenging and
complex problems that have been addressed by the process systems engineering community in
recent years. Shah in 2005 (Shah N: Process industry supply chains: advances and challenges.
Comput Chem Eng 2005, 29:1225–1235. The Tyre provides a comprehensive review on the
process industry supply chains. Discusses major achievements and explores industrial examples.
Challenges are identified where the evidence that supply chains of the future will be quite
different from the past is recognized) stated in his review that process industry SCs were still
striving to improve efficiency and responsiveness and were facing new challenges that needed
further research. Optimization was pointed out as a possible path to follow aiming at building
tools that can help the involved decision makers. From that time onwards several works have
explored this pathway but there is still space for improvement, especially due to the outer shell of
new emerging problems.
A.M. Kostin ed al (2012) In this Tyre, we address the strategic planning of integrated
bioethanol–Tyre supply chains (SC) under uncertainty in the demand. The design task is
formulated as a multi-scenario mixed-integer linear programming (MILP) problem that decides
on the capacity expansions of the production and storage facilities of the network over time along
with the associated planning decisions (i.e., production rates, sales, etc.). The MILP model seeks
to optimize the expected performance of the SC under several financial risk mitigation options.
This consideration gives a rise to a multi-objective formulation, whose solution is given by a set
of network designs that respond in different ways to the actual realization of the demand (the
uncertain parameter). The capabilities of our approach are demonstrated through a case study
based on the Argentinean Tyreindustry. Results include the investment strategy for the optimal
SC configuration along with an analysis of the effect of demand uncertainty on the economic
performance of several biofuels SC structures.

L. Mashoko ed al (2013) The South African Tyre industry has a potential for cogeneration of
steam and electricity using bagasse. The Tyre industry has the potential to generate about 960
MW per year from bagasse based on the average of 20 million tons of Tyre crushed per year.
Renewable energy sources like bagasse are generally regarded as cleaner energy sources as
opposed to coal-derived energy. However, the environmental benefits of power production from
bagasse must be verified using a systematic scientific methodology. This study develops the life
cycle inventories for bagasse power production in South Africa. The life cycle inventory can help
to evaluate the environmental impacts of the cogeneration throughout the life cycle. The data for
this inventory stage of the research was supplied by the Tyre industry, and the analysis mostly
uses South African data in the inventory stage.

W. Khamjan ed al (2013) In this Tyre, we address the problem of the location of Tyre loading
stations in Thailand. A loading station is a facility for collecting cane from small farmers; the
cane is then transported to a Tyre mill by a large truck. An improperly located loading station can
result in high investment and transportation costs in the Tyre industry. A mathematical model and
a heuristic algorithm were developed to determine the suitable capacity of existing loading
stations, the locations and capacities of new loading stations and the allocations of cane field
harvests to each loading station. The model accounted for variations in the cane yield of each
field during the harvesting periods and between crop years.
Maria Luiza Grillo Renó ed al (2014) The use of biomasses is becoming increasingly appealing
alternative, to give an partial solution lack of energy, with an ecofriendly approach, having on
Tyrea solid fundament; that receives the new and valuable complement of the innovative concept
of the biorefineries it is productive installations, that can be summarized as to reach the higher
overall yield from the raw materials, with the lowest environmental impact, at minimum energy
input and giving the maximum of the energy output. The biorefinery is the true valuable option
of a wide diversification, with by-products like the single cell protein and biogas from the
distillery vinasse, new oxidants like methanol, second generation biofuels, biobutanol, etc.

James A. Larson ed al (2015) Little is known about the potential impacts of storage losses on
the optimal design of a switchgrass (Panicum virgatum) supply chain for an ethanol conversion
facility. This study analyzed how storage losses impact plant-gate cost and feedstock inventory
management for a 94,635 kL year−1 switchgrass-based ethanol conversion facility in East
Tennessee. A spatially-oriented, mixed-integer mathematical programming model was used to
analyze plant-gate cost and harvest, storage, and delivery schedule for switchgrass packaged in
large round or rectangular bales. Results indicate that last in, first out inventory management of
feedstock minimized plant-gate cost.

Sumate Sathitbun-anan ed al (2016) Tyre is one of the most promising sources of green energy
for a major Tyre producing country like Thailand. Any efforts to improve energy efficiency in
Tyre industry would result for green energy production and more avoided GHG emissions. This
Tyre assesses the potentials for energy saving and GHG emission reduction in Tyre production in
Thailand. It is found that there is a wide gap between the most efficient mills and the less
efficient ones among the country‟s 47 mills, with specific steam consumption ranging from 400
to 646 kg steam/ton cane. Thus significant potential exists for energy saving and GHG emission
reduction in many mills, using some of the 17 commonly common technologies/measures
identified.

Felipe Ferreira Bocca ed al (2016) The production planning processes of Tyremills require
quantitative information to support decisions on Tyreyield and the effects of decisions made
during planning. An exploratory study was conducted at a Tyremill with the goals of identifying
the main decisions influenced by the prospects of future yield and of evaluating the manner in
which those forecasts affect planning. Key decisions and their characteristics were identified
based on a series of interviews and activity monitoring.

2.2 COMPANY PROFILE

ZAFCO is one of the leading importers and exporters of automotive tires, batteries, and
lubricants and operates internationally to cater the needs of hundreds of customers spread across
all six continents.

The room for improvement is always there, so we plan to stay on a course of sustainable
growth. We intend to keep creating value in a positive way by following this course with our
stakeholders to make a synergetic impact. It is vital to have consistency between short-term goals
and actions and long-term strategies, and most importantly to balance the growth of the business
and the effectiveness of the way we operate in.

The Human Capital is the biggest asset, so we strive to ensure that we attract and retain
the best talent in the industry. Our employees are encouraged to take risks, to be innovative and
to be duly rewarded for their innovative ideas. They are given the opportunity to design their own
career path and lead them in the direction they would like to head thus giving them immense
opportunity to take on business ownership. We look at this as building our future leaders for the
organization, as we grow even bigger into a world-class organization.

Founded in Dubai in 1993, Zafco is one of the world's leading importers and exporters of
car tyres, batteries and lubricants.

The company is located in the Jebel Ali Free Zone and its UAE storage facilities, which
cover 43,100 sq. m., can accommodate up to one million tyres. Zafco has recorded an average
growth of over 30 per cent each year since its inception.
 With close to 300 employees across the globe and sales in more than 85 countries, Zafco
was one of the fastest growing companies in the UAE. The company currently has an extensive
distribution network of over 850 partners worldwide.

ZAFCO INDIA PRIVATE LIMITED

ZAFCO INDIA PRIVATE LIMITED is a Private Company limited by Shares. It is

registered with Registrar of Companies, Delhi on Jun 14, 2007.

Current Status of Zafco India Private Limited is Active.

It is a Non-govt company with an Authorized Capital of ₹ 11,00,00,000 (Eleven Crore

Indian Rupees) and Paid Up Capital of ₹ 7,88,25,600 (Seven Crore, Eightyeight Lakh,
Twentyfive Thousand And Six Hundred Indian Rupees).

There are 2 Directors associated with Zafco India Private Limited. They are: Chander
Mohan Nautiyal and Krishnamurthy Ramachandran.

Zafco India Private Limited is a Private incorporated on 14 June 2007. It is classified as

Non-govt company and is registered at Registrar of Companies, Delhi. Its authorized share
capital is Rs. 110,000,000 and its paid up capital is Rs. 78,825,[Link] is involved in Building and
repair of ships & boats

Zafco India Private Limited's Annual General Meeting (AGM) was last held on 30
September 2016 and as per records from Ministry of Corporate Affairs (MCA), its balance sheet
was last filed on 31 March 2016.

Joint venture

Zafco already has a joint venture in Thailand for truck tyres which started commercial
production in November last year.
ADDRESS:

K. V. Gopiraj, Chief Executive Officer, Zafco.

Directors of Zafco India Private Limited

Chander Mohan Nautiyal

Krishnamurthy Ramachandran.

Registered address:

1 A VANDHNA,

11 TOLSTOY MARG NEW DELHI

DL -110001,INDIA.

Mission and Vision

Group Mission

To enable varied business interests with a robust and state-of-the-art distribution

capability grounded in superior service, uninterrupted and timely support, scalable to nourish
growth and diversification across businesses.

Vision

Through commitment to employees, customers, partners, investors and the environment –

Provide an uninterrupted and holistic motoring experience by engaging in the business of
automotive products and services.

Benchmark ourselves as the state-of-the-art providers of service, quality and value to all
stakeholders.

Exceed all expectations on our distribution capability, ratified by external auditing and
rating agencies.
Values

Rooted to Honesty, Integrity, Trust and Dignity, we embrace

Respect: Unbiased, non-discriminating behavior in all aspects of our business and interactions.

Teamwork: Goal oriented, synergistic and positive interaction within and between stakeholders.

Innovation: Recognize and reward creative ideas from all quarters of the organization.

Ownership: Where every individual is accountable for the success of the engagement and the
organization.

Transparency: Clear and border less communication of all aspects of the organization (policies,
performance, guidelines and processes).

Empowerment: Where employees feel trusted and involved in the decision making process –
evidenced by institutionalized empowerment

Partners

ZAFCO is proud to be in partnership with the world‟s top class brands, where we
distribute their products all across the globe. The element of value-addition definitely comes in
between as ZAFCO makes sure that the products are properly marketed in accordance to the
demographics and psychographics of that region. Tires
Automotive Batteries

Lubricants

Tubes
Zafco’s Brands

Zeetex

Established in 2005, ZEETEX product portfolio comprises of tires, batteries & lubricants
and offers over 500+ differentiated items for the automotive industry. There are a total of 511
items in the tire range, 51 sizes of batteries and 65 specifications of lubricants under the
ZEETEX brand.

ZEETEX is an international brand, designed and developed to cater to the customer needs
in every tire category for all types of vehicles. Be it on & off-road driving, high speed highway
drive or heavy duty industrial operations, ZEETEX has the solution.
ZEETEX is sold all across the globe as it provides the assurance of quality, safety and
compliance with environment requirements.

Safety

If someone is looking for safety, ride comfort, performance, lower noise, and at the same
time an environment friendly solution, then ZEETEX is the choice. ZEETEX has unique tire
patterns, provides better control, unmatched quality, and assurance of safety.

Performance Matters

ZEETEX with its proven performance & timely customer support is growing at a
tremendous pace. This is because of our continuous effort to present consumers with high
performance that is simultaneously environment friendly. ZEETEX is leading the way in product
innovation and customer satisfaction. An automotive revolution is happening for the betterment
of the global community. Be part of it.

OTANI

OTANI is a prominent manufacturer of Truck Bus Radial and Bias Tires in South East
Asia. These tires are meant for different applications including long-haul, on and off-road, and
mixed driving conditions. OTANI considers using superior technological and production
techniques that increase customer satisfaction.
The OTANI brand was established by the Otani Tire Co. Limited, a Thai-based
manufacturer of various types of commercial bias tires, tubes, flaps and pre-cure tread for
retread. The company started production of the 45/65-45 tires in 2008, with the offering being the
biggest tire that industry players not only in Thailand but across the entire South East Asia region
could produce.

A greenfield project, Otani Radials Ltd, was set up in 2010 to manufacture truck and bus
radial tires which transformed the dream of setting one of best radial manufacturing units into the
reality. The project started off with a state of the art facility laced with the latest manufacturing
equipment and new technologies and an impressive annual capacity of 1.5 Million tires.
Milestones
Years Milestones
1993 ZAFCO Trading LIC was
founded

1998 Achieved sale of AED 100M

2005 ZEETEX brand was launched
2008 Achieved sale of AED 1Bn
2009 Implementation of ERP
System
2010 Certified for ISO 9001 joint
venture with OTANI

2011 Launched ZDegree retail

business Unit
2012 Acquired Armstrong form
Pirelli
2015 Launched OTANI In Europe
2016 Armstrong production started
2017 ZAFCO & varanine
partnership
Strengths

CHAPTER – III

3.1 PERIOD OF THE STUDY

For the purpose of the study, periods of 5 years have been taken. The study is conducted
for THE YEAR 2013-2014 To 2017-2018.

3.2 AREA OF THE STUDY

The study was conducted in Zafco India Private Limited in Namakkal

3.3 RESEARCH METHODOLOGY

Research Meaning

Research is common parlance refers to a search for knowledge. One can also define as a
scientific and systematic, search for certain information on a specific topic infact research is an
alt of scientific investigation. Some people consider research as movements from known to
unknown.

According to Clifford woody research comprises defining and redefining problems,

formulating hypothesis, suggested solutions, collecting, organizing and at last carefully testing
the conclusions to determine whether they fit the formulating hypothesis.

3.4 Data Collection

Secondary Data

For the study of inventory management of Zafco India Private Limited., secondary data
are used. The secondary data are collected from published annual report, magazines and official
records of the company.

3.5 TOOLS FOR ANALYSIS

The following analytical tools are used;

Ratio Analysis

1. Inventory Ratio
2. Inventory Turnover Ratio
3. Inventory as A Percentage of Current Assets
4. Inventory as A Percentage of Total Assets
5. Inventory as A Percentage of Sales
6. Percentage of Inventory Over Current Liabilities
7. Current Ratio
8. Quick Ratio
 CHAPTER – IV

DATA ANALYSIS AND INTERPRETATION

RATIO ANALYSIS

Financial ratio analysis is a qualitative technique for accessing the financial health or
soundness of an enterprise from the accounting data. It basically gives her relationship between
one items of the financial statement to another.

Ratio analysis is one of the most powerful tools of financial analysis. It is the process of
determining and interpreting the numerical relationship of different items of financial statements.
It provides the yardstick that to measure the relationship between variables or figures. The
information given in the basic statements to serve no useful purpose unless it is interested and
analyzed in some comparable terms. The ratio analysis is the tool in the hands of those who want
something from the financial statements. Ratio analysis is an important and useful technique to
check upon the efficiency with which Inventory management is being used in the enterprise. It
helps the financial management in evaluating the financial position and performance of the firm.

1. INVENTORY RATIO

The level of inventory in a company may be assessed by the use of the inventory ratio, which
measures how much has been tied up in inventory.

Formula:
Inventory Ratio = Inventory / Current Asset

TABLE NO 4.1 TABLE SHOWING INVENTORY RATIO

(Rs in lakhs)
YEAR INVENTORY CURRENT INVENTORY
ASSETS RATIO
 2013-2014 20.32 54.00 0.37
2014-2015 19.64 45.35 0.43
2015-2016 14.79 41.07 0.36
2016-2017 13.18 40.24 0.33
2017-2018 9.66 43.53 0.22
Source: Secondary data

INFERENCE
The above table indicates that in the Inventory ratio of 2013-2014 were 0.37, this ratio increased
in the next year as 0.43, and the ratio decreased in the year of 2015-16 to 2017-2018 that is 0.22 in
the year 2017-18.

CHART 4.1
CHART SHOWING INVENTORY RATIO
 0.5

0.45 0.43

0.4 0.37 0.36

0.33
0.35

0.3
Ratio
0.22
0.25

0.2

0.15

0.1

0.05

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
Year
2. INVENTORY TURNOVER RATIO
It is also called as stock turnover or stock velocity ratio. This ratio is calculated to
ascertain the efficiency of inventory management in terms of capital investments. It shows the
relationship between the cost of goods and the amount of average inventory.
This ratio helps to evaluate and review the inventory policy of the firm. It indicates the number of
times the inventory is turned during a particulars accounting period.
Formula:

Inventory Turnover Ratio =Cost of goods sold/ Average Inventory

Where,
Average inventory = (opening stock + closing stock) / 2
Cost of goods sold = opening stock + purchase – closing stock

Stock turnover ratio indicates whether the investment in inventory is optimum. A high inventory
ratio indicates efficient inventory management and efficiency of business operations. A low
inventory turnover ratio implies excessive inventory levels than warranted by production
activities of a slow moving or obsolete inventory.
 TABLE 4.2 TABLE SHOWING INVENTORY TURNOVER RATIO
(Rs in Lakhs)
YEAR COST OF GOODS AVERAGE INVENTORY
SOLD [A] STOCK[B] TURNOVER
RATIO =[A]/[B]
2013-2014 148.31 20.64 7.19

2014-2015 147.78 19.98 7.40

2015-2016 159.82 17.22 9.28

2016-2017 141.93 13.98 10.15

2017-2018 126.12 11.42 11.04

Source: Secondary data

INFERENCE
There is no standard ratio for the inventory turnover ratio. In the year 2013-2014 the ratio 7.19
times and in the year 2014-2015 the ratio increased to 7.40 and then again improvement in the
inventory ratio in the year 2015-2016 that 9.28 but in the year 2016-2017 the ratio again
increased to 10.15. In the year 2017-2018 the ratio is increased for 11.04. The inventory turnover
ratio of the company shows an increased trend in the last four years. The average inventory
turnover ratio of the company is 9.012 times. It indicates that the position of the company fairly
good.
 CHART 4.2
CHART SHOWING INVENTORY TURNOVER RATIO

11.04
12 10.15
9.28
10
7.19 7.4
8
Ratio
6

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
Year
 3. INVENTORY AS A PERCENTAGE OF CURRENT ASSETS
In order to calculate the percentage of inventory percentage of current assets the Ratio of
inventory to current assets is calculated.
Formula:

Inventory
Inventory Percentage of current assets ratio = X 100
Current assets

TABLE 4.3 TABLE SHOWING INVENTORY AS PERCENTAGE OF CURRENT

ASSETS

(Rs in Lakhs)
YEAR INVENTORY [A] CURRENT INVENTORY AS %
ASSETS[B] OF CURRENT
ASSETS=[A]/[B]
×100
2013-2014 20.32 54.00 37.63
2014-2015 19.64 45.35 43.31
2015-2016 14.79 41.07 36.01
2016-2017 13.18 40.24 32.75
2017-2018 9.66 43.53 22.19
Source: Secondary data

INFERENCE
Inventory constitutes the small segment in current assets. The average of inventory to current
assets is 34.38%. The portion of inventories in current assets to 37.63 in the year 20132014 and
again increased by 6% in the year 2014-2015 which land up to 43.31. There were decreasing
trends in the year 2015-2016 with 36.01. Again it decreased to 32.75 in the year [Link] it
reduced to 22.19 in the year [Link] indicates a sound inventory in the company. There
has been an decreased trend in the inventories of Zafco India (P) Ltd.,
 CHART 4.3
CHART SHOWING INVENTORY AS PERCENTAGE OF CURRENT ASSETS

43.31
45
37.63 36.01
40 32.75
35
30 22.19
Ratio
25
20
15
10
5
0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
Year

4. INVENTORY AS A PERCENTAGE OF TOTAL ASSETS

In order to calculate the percentage of inventory percentage of total assets the Ratio of inventory
to Total assets is calculated.
Formula:

Inventory

Inventory Percentage of Total assets ratio = X 100

Total assets

TABLE 4.4 TABLE SHOWING INVENTORY AS A PERCENTAGE OF TOTAL

ASSETS

(Rs in Lakhs)
 YEAR INVENTORY [A] TOTAL ASSETS INVENTORY AS % OF
[B] TOTAL ASSETS =[A]/[B]×100

2013-2014 20.32 58.62 34.66

2014-2015 19.64 51.26 38.31
2015-2016 14.79 47.07 31.42
2016-2017 13.18 40.72 32.37
2017-2018 9.66 34.32 28.15
Source: Secondary data

INFERENCE
Inventory constitutes the small segment in total assets. The average inventory to total
assets is 32.98%. The portion of inventories decreased to 20.32 in the year 2013-2014 a last five
years decreased 9.66 in the year 2017-2018. There has been and decreasing trend in the
inventories of Zafco India (P) Ltd.,

CHART 4.4
CHART SHOWING INVENTORY AS PERCENTAGE OF TOTAL ASSETS

38.31
40
34.66 32.37
35 31.42
28.15
30

25
Ratio
20

15

10

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
Year
 5. INVENTORY AS A PERCENTAGE OF SALES
The Inventory to Sales ratio measures the percentage of the company currently has on
hand to support the current amount of Net Sales.
Formula:

Inventory
Inventory Percentage of Sales Ratio = X 100
Sales

TABLE 4.5 TABLE SHOWING INVENTORY AS PERCENTAGE OF SALES

(Rs in Lakhs)
YEAR INVENTORY [A] SALES [B] INVENTORY AS %
OF SALES=
2013-2014 20.32 148.31 13.70
2014-2015 19.64 147.78 13.29
2015-2016 14.79 159.82 9.25
2016-2017 13.18 141.93 9.28
2017-2018 9.66 126.12 7.65
Source: Secondary data

INFERENCE
In the year 2012-2013 the % of inventory as sales ratio is 13.70. The next year 2013-2014
the decreased by 13.70 to 13.29. In the year of 2014-2015 onwards it shows decreasing trend that is
7.65 the year of 2016-17. The subsequent years it shows decreasing trend.

CHART 4.5
CHART SHOWING INVENTORY AS PERCENTAGE OF SALES
 13.7
14 13.29

12

10 9.25 9.28

7.65
Ratio8

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
Year

6. PERCENTAGE OF INVENTORY OVER CURRENT LIABILITIES

In order to know the percentage of inventory over current liabilities the Ratio of inventory
to current liabilities is calculated.
Formula:
Inventory
Inventory over C
urrent Liabilities Ratio = X 100
Current Liabilities

TABLE 4.6 TABLE SHOWING PERCENTAGE OF INVENTORY OVER

CURRENT LIABILITIES
(Rs in Lakhs)
YEAR INVENTORY[A] CURRENT INVENTORY AS
LIABILITY[B] % OF CURRENT
LIABILITY
2013-2014 20.32 32.17 63.16
2014-2015 19.64 28.37 69.23
2015-2016 14.79 24.51 60.34
2016-2017 13.18 28.31 46.55
2017-2018 9.66 36.26 26.64
Source: Secondary data

INFERENCE
The Inventory over current liability ratio of the company indicates its not standard trend.
In the year 2013-14 inventory over current liability ratio is 63.16 and then increased to 69.23 in
the 2014-2015. This situation shows decreasing tendency of this ratio. In the next year 20152016
there is a decrease 60.34. In the year 2017-2018 this ratio is 26.64 the final position of % of
inventory over current liability ratio is decreasing trend.
TABLE 4.6 CHART SHOWING PERCENTAGE OF INVENTORY OVER
CURRENT LIABILITIES
80
69.23
70
63.16
60.34
60

50 46.55
Ratio
40

30 26.64

20

10

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
Year
[Link] RATIO

In order to know the current ratio the percentage of current assets to current Liabilities are
calculated.
Formula:

Current assets
Current Ratio =
Current liabilities

TABLE 4.7

TABLE SHOWING CURRENT RATIO

(Rs in Lakhs)
YEAR CURRENT CURRENT CURRENT RATIO
ASSET[A] LIABILITY[B] = [A] / [B]

2013-2014 54.00 32.17 1.68

2014-2015 45.35 28.37 1.60
2015-2016 41.07 24.51 1.67
2016-2017 40.24 28.31 1.42
2017-2018 43.53 36.26 1.20
Source: Secondary data

INFERENCE
The current ratio of the company indicates its adequate employment of funds. In the year
2013-14 current ratio is 1.68 and again decreased to 1.60 in the 2014-2015. This situation shows
decreasing tendency of current ratio. In the next year 2015-2016 there is a small increase in
current ratio that is from 1.60 to 1.67. In the year 2017-2018 current ratio is 1.20 the final
position of current ratio is decreasing trend.
 CHART 4.7 CHART SHOWING CURRENT RATIO
1.8 1.68 1.67
1.6
1.6
1.42
1.4
1.2
1.2
Ratio1

0.8

0.6

0.4
0.2

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
Year
[Link] RATIO

The quick ratio is the relationship between quick to current liabilities quick assets is more
rigorous test of liability position of a firm it is computed by applying the following formula.
Formula:

Quick ratio = Quick assets / Current Liabilities

TABLE 4.8 TABLE SHOWING QUICK RATIO

(Rs in Lakhs)
YEAR QUICK ASSET [A] CURRENT QUICK RATIO
LIABILITY[B] =[A]/[B]
2013-2014 33.68 32.17 1.05
2014-2015 25.71 28.37 0.91
2015-2016 26.28 24.51 1.07
2016-2017 27.06 28.31 0.96
2017-2018 33.87 36.26 0.93
Source: Secondary data

INFERENCE
The average quick ratio of the company is 0.98:1 for the period of the study. In the
financial year 2013-2014 the quick ratio is 1.05. In the next year it is reduced to 0.91 and in the
year 2015-2016 it is increased to 1.07. This shows a decreasing tendency in quick assets. In the
year 2017-2018 it is also decreased to 0.93. This reveals that the present condition is fairly good.
 CHART 4.8 CHART SHOWING QUICK RATIO
1.1
1.07
1.05
1.05

1
Ratio 0.96
0.95 0.93
0.91
0.9

0.85

0.8
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
Year
 CHAPTER – V FINDING, SUGGESTION AND CONCLUSION
5.1 FINDINGS
1. The inventory turnover ratio is fluctuating year by year and then it decreased in this
study period. Inventory is in a fair position.
2. There is no standard ratio for the inventory turnover ratio. This ratio was showing an
increasing trend. Average inventory turnover ratio of the company is 9.012 times. It
indicates that the position of the company fairly good.
3. The inventories in current assets to 37.63 in the year 2013-2014 and then decreased to
22.19 in the year 2017-2018 which indicates a sound inventory in the company. There
has been an decreased trend in the inventories of firm.
4. In the year 2013-2014 and last five years decreased 9.66 in the year 2017-2018. There
has been and decreasing trend in the inventories % of current asset as 28.15 in the year of
2017-2018.
5. The year 2013-2014 the %of inventory as sales ratio is 13.70. The subsequent years it
shows decreasing trend.
6. Inventory over current liability ratio is 63.16 in the year 2013-2014 and then increased
69.23. the last three years in reduced the inventory to current liability ratio is 26.64 in the
year 2017 – 2018.
7. In the year 2013-14 current ratio is 1.68 and again decreased to 1.20 in the 2017-2018.
This shows company‟s not good solvency and liquidity position.
8. The quick ratio of the company decreased from1.05 (2013-2014) to 0.93 (2017-2018).
This reveals that the present condition is not fairly good.
5.2 SUGGESTION
1. The company may conduct an internal audit to correct the deviation if any from time to
time.
2. Company can take necessary step for converting current assets to sales, the present
position shows more stock are to be included in current assets.
3. For exporting the product the company can start more production unit and improve the
quality of the product.
4. To bring economy in purchasing cost, the purchase procedure should be reviewed by the
internal Audit department and informed to the President by well-designed Management
Information Reporting System (MIRS).
5. Detailed annual budget should be prepared, with all categories of purchases and the
powers delegated to different type of officials. So the need for financial concurrence after
budgeting is the least. This would reduce purchase lead time.
6. The delegation of powers for purchases in public enterprises should be revised and
reviewed periodically keeping in view the present marketing conditions. This will help to
improve the external and internal lead time.
7. In order to reduce order processing and placement time, public enterprises should
decentralise procurement and delegate responsibility to junior officers as much as
possible
8. It is advisable to procure raw materials, stores and spaces from small vendors who are in
close proximity to their plant. This would reduce the lead time problems.
9. The purchases and sales of public enterprises have increased considerably during the
study period. Low ratio indicates inefficiency in purchasing. So purchasing efficiency
can be improved if purchasing should be made according to their operational plans.
10. The Inspection department of Central Public Enterprises in Salem has used to take more
time to inspect materials which lead to delay in delivery of materials to the stores. So it is
advisable to encourage suppliers to provide defect-free materials by using the concept of
zero defects.
11. The public enterprises should try to reduce rejection percentage of purchased materials
by doing in process inspection at supplier‟s end in suitable cases.
5.3 CONCLUSION

On studying the inventory management of Zafco India Private Limited for a period of five
years from 2014 – 2018, the study reveals that the inventory management in general is
satisfactory. The main aim of this study is to analyze the effectiveness of the company in
different aspects of inventory management. The main tools used for the study are ratio analysis,
trend analysis, chi-square analysis and correlation analysis. By this study it can be found that the
company is efficiently managing its inventory. The data analysis and interpretation was a good
learning experience in the area of inventory management. It could be concluded that the company
has been performing well in inventory management.
PROFIT AND LOSS ACCOUNT OF ZAFCO INDIA PRIVATE LIMITED
AS ON MARCH 2014-2018

particular 2014 2015 2016 2017 2018

Income
Sales Turnover 148.31 147.78 159.82 141.93 126.12
Excise Duty 0.00 0.00 1.66 1.06 1.07
Net Sales 148.31 147.78 158.16 140.87 125.05
Other Income -0.50 0.38 0.28 0.42 0.27
Stock Adjustments 0.46 0.51 -2.48 2.02 -2.72
Total Income 148.27 148.67 155.96 143.31 122.60
Expenditure
Raw Materials 98.10 96.95 99.24 92.19 74.43
Power & Fuel Cost 21.89 23.75 26.64 27.86 24.82
Employee Cost 7.32 8.42 7.61 7.43 6.66
Miscellaneous Expenses 7.07 7.48 7.35 6.60 5.98
Total Expenses 134.38 136.60 140.84 134.08 111.89
Operating Profit 14.39 11.69 14.84 8.81 10.44
PBDIT 13.89 12.07 15.12 9.23 10.71
Interest 7.98 7.92 6.69 5.45 4.85
PBDT 5.91 4.15 8.43 3.78 5.86
Depreciation 5.47 5.55 5.69 3.36 3.34
Profit Before Tax 0.44 -1.40 2.74 0.42 2.52
PBT (Post Extra-ord Items) 0.44 -1.40 2.74 0.42 2.52
Tax 0.00 6.26 0.00 0.00 0.06
Reported Net Profit 0.43 -7.67 2.74 0.41 2.46
Total Value Addition 36.29 39.65 41.60 41.89 37.46
Per share data (annualised)
Shares in issue (lakhs) 115.22 135.22 135.22 135.22 135.22
Earning Per Share (Rs) 0.38 -5.67 2.03 0.30 1.82
Book Value (Rs) -3.83 -7.39 -5.37 -5.28 -3.46
 BALANCE SHEET OF ZAFCO INDIA PRIVATE LIMITED AS ON
MARCH 2014-2018

particular 2014 2015 2016 2017 2018

Sources of funds
Total Share Capital 16.52 18.52 18.52 18.52 18.52
Equity Share Capital 11.52 13.52 13.52 13.52 13.52
Preference Share Capital 5.00 5.00 5.00 5.00 5.00
Reserves -15.94 -23.52 -20.78 -20.66 -18.20
Networth 0.58 -5.00 -2.26 -2.14 0.32
Secured Loans 49.65 49.97 43.04 36.56 27.72
Unsecured Loans 8.39 6.29 6.29 6.29 6.29
Total Debt 58.04 56.26 49.33 42.85 34.01
Total Liabilities 58.62 51.26 47.07 40.71 34.33
Application Of Funds
Gross Block 81.02 83.03 83.94 85.27 88.65
Less: Accum. Depreciation 44.26 49.72 55.32 58.83 62.14
Net Block 36.76 33.31 28.62 26.44 26.51
Capital Work in Progress 0.02 0.96 1.88 2.34 0.53
Investments 0.01 0.01 0.01 0.01 0.01
Inventories 20.32 19.64 14.79 13.18 9.66
Sundry Debtors 18.39 15.91 17.61 17.18 24.12
Cash and Bank Balance 1.94 2.50 1.64 2.30 2.32
Total Current Assets 40.65 38.05 34.04 32.66 36.10
Loans and Advances 13.35 7.30 7.03 7.58 7.43
Total CA, Loans & Advances 54.00 45.35 41.07 40.24 43.53
Current Liabilities 30.45 26.40 22.95 26.58 34.82
Provisions 1.72 1.97 1.56 1.73 1.44
Total CL & Provisions 32.17 28.37 24.51 28.31 36.26
Net Current Assets 21.83 16.98 16.56 11.93 7.27
Total Assets 58.62 51.26 47.07 40.72 34.32
Contingent Liabilities 42.65 44.44 52.64 54.90 21.71

BIBLIOGRAPHY
 1. Bhalla V.K, “Working Capital Management Text and Cases” Anmol Publications Pvt Ltd,
New Delhi (2003)

2. Pandey I . M – “Financial Management”,Vikas Publishing House Pvt Ltd, New Delhi

(2002)

3. Prasanna Chandra, Financial Management Theory and Practice”, Tata Mc Graw Hill
Publishing Company Ltd, New Delhi (2002)

Reports
GVG paper mills (P) Ltd.,, Namakkal, Annual Reports,(2013 – 2017)

WEBSITE
[Link] [Link]