A study on Inventory Management

1.1 INTRODUCTIONInventory management is the process of efficiently overseeing the constant flow of units into and out of an existing inventory. This process usually involves controlling the transfer in of units in order to prevent the inventory from becoming too high, or dwindling to levels that could put the operation of the company into jeopardy. Competent inventory management also seeks to control the costs associated with the inventory, both from the perspective of the total value of the goods included and the tax burden generated by the cumulative value of the inventory.Balancing the various tasks of inventory management means paying attention to three key aspects of any inventory. The first aspect has to do with time. In terms of materials acquired for inclusion in the total inventory, this means understanding how long it takes for a supplier to process an order and execute a delivery. Inventory management also demands that a solid understanding of how long it will take for those materials to transfer out of the inventory be established. Knowing these two important lead times makes it possible to know when to place an order and how many units must be ordered to keep production running smoothly.Calculating what is known as buffer stock is also key to effective inventory management. Essentially, buffer stock is additional units above and beyond the minimum number required to maintain production levels. For example, the manager may determine that it would be a good idea to keep one or two extra units of a given machine part on hand, just in case an emergency situation arises or one of the units proves to be defective once installed. Creating this cushion or buffer helps to minimize the chance for production to be interrupted due to a lack of essential parts in the operation supply inventory.Inventory management is not limited to documenting the delivery of raw materials and the movement of those materials into operational process. The movement of those materials as they go through the various stages of the operation is also important. Typically known as a goods or work in progress inventory, tracking materials as they are used to create finished goods also helps to identify the need to adjust ordering amounts before the raw materials inventory gets dangerously low or is inflated to an unfavorable level.Finally, inventory management has to do with keeping accurate records of finished goods that are ready for shipment. This often means posting the production of newly completed goods to the inventory totals as well as subtracting the most recent shipments of finished goods to buyers. When the company has a return policy in place, there is usually a sub-category contained in the finished goods inventory to account for any returned goods that are reclassified as refurbished or second grade quality. Accurately maintaining figures on the finished goods inventory makes it possible to quickly convey information to sales personnel as to what is available and ready for shipment at any given time.In addition to maintaining control of the volume and movement of various inventories, inventory management also makes it possible to prepare accurate records that are used for accessing any taxes due on each inventory type. Without precise data regarding unit volumes within each phase of the overall operation, the company cannot accurately calculate the tax amounts. This could lead to underpaying the taxes due and possibly incurring stiff penalties in the event of an independent audit.INVENTORY MANAGEMENT must tie together the following objectives ,to ensure that there is continuity between functions : Companys Strategic Goals Sales Forecasting Sales & Operations Planning Production & Materials Requirement Planning.Inventory Management must be designed to meet the dictates of market place and support the companys Strategic Plan . The many changes in the market demand , new opportunities due to worldwide marketing , global sourcing of materials and new manufacturing technology means many companies need to change their Inventory Management approach and change the process for Inventory Control .Inventory Management system provides information to efficiently manage the flow of materials , effectively utilize people and equipment , coordinate internal activities and communicate with customers . Inventory Management does not make decisions or manage operations, they provide the information to managers who make more accurate and timely decisions to manage their operations.Inventory is defined as the blocked Working Capital of an organization in the form of materials . As this is the blocked Working Capital of organization, ideally it should be zero. But we are maintaining Inventory . This Inventory is maintained to take care of fluctuations in demand and lead time. In some cases it is maintained to take care of increasing price tendency of commodities or rebate in bulk buying.Traditional Supply Chain solutions such as Materials Requirement Planning, Inventory Control , typically focuses on implementing more rapid and efficient systems to reduce the cost of communicating information between and across the Inventory links in the SCM.COM focuses in optimizing the total investment of materials cost and workload for every Inventory item throughout the chain from procurement of raw materials to finished goods Inventory . Optimization means providing a balance of supply to meet the demand at a minimum total cost , Inventory level and workload to meet customers service goal for each items in the link of Inventory Chain.It is strategic in the sense that top management sets goals. These include deployment strategies (Push versus Pull), control policies, the determination of the optimal levels of order quantities and reorder points and setting safety stock levels . These levels are critical, since they are primary determinants of customer service levels.Keeping in view all concerns, the latest concept of Vendor Managed Inventory is used to optimize the Inventory. We are entering into Vendor Managed Inventory, Annual Rate Contracts with manufacturers or their authorized dealers, who maintain Inventory on our behalf and supply the items as and when required.VMI reduces stock-outs and optimize inventory in supply chain. Some features of VMI include: Shortening of Supply Chain Centralized Forecasting Frequent communication of inventory, stock-outs and planned promotions Trucks are filled in a prioritized order , e.g. items that are expected to stock out have top priority then items that are furthest below targeted stock levels then advance shipments of promotional itemsDespite the many changes that companies go through, the basic principles of Inventory Management and Inventory Control remain the same. Some of the new approaches and techniques are wrapped in new terminology, but the underlying principles for accomplishing good Inventory Management and Inventory activities have not changed. The Inventory Management system and the Inventory Control Process provides information to efficiently manage the flow of materials, effectively utilize people and equipment, coordinate internal activities, and communicate with customers. Inventory Management and the activities of Inventory Control do not make decisions or manage operations; they provide the information to Managers who make more accurate and timely decisions to manage their operations. The basic building blocks for the Inventory Management system and Inventory Control activities are: Sales Forecasting or Demand Management Sales and Operations Planning Production Planning Material Requirements Planning Inventory ReductionThe emphases on each area will vary depending on the company and how it operates, and what requirements are placed on it due to market demands. Each of the areas above will need to be addressed in some form or another to have a successful program of Inventory Management and Inventory Control. Inventory is usually a distributors largest asset. But many distributors arent satisfied with the contribution inventory makes towards the overall success of their business: The wrong quantities of the wrong items are often found on warehouse shelves. Even though there may be a lot of surplus inventory and dead stock in their warehouse(s), backorders and customer lost sales are common. The material a distributor has committed to stock isnt available when customers request it. Computer inventory records are not accurate. Inventory balance information in the distributors expensive computer system does not accurately reflect what is available for sale in the warehouse. The return on investment is not satisfactory. The companys profits, considering its substantial investment in inventory, is far less than what could be earned if the money were invested elsewhere.

1.2 INDUSTRY PROFILEINTRODUCTIONThis chapter deals with industry profile which gives about the information regarding the batteries and its related products, characteristics and in which sector these are useful. A battery is an electrochemical device in which the free energy of chemical reactions is converted into the electrical energy. The chemical energy contained in the active materials is converted into elect cal energy be means of electrochemical oxidation-reduction reaction. HOW A BATTERY WORKSWhen you place the key in your cars ignition and turn the ignition switch to ON a single is sent to the cars battery. Upon receiving this signal the car battery takes energy that it has been strong in chemical form and releases it as electricity. This electric power is used to crank the engine. The battery releases energy to power the cars lights and other accessories. It is the only device, which can store electrical energy in the form of chemical energy, and hence it is called as a strong battery.SEALED MAINTENANCE FREE (SMF) BATTERIES Sealed maintenance free (SMF) batteries technologies are loading the battery industry in recent year in automobile and industrial sector around the globe. SMF battery come under the rechargeable battery category so is can be use a no. of time in the life of a batterys batteries are more economical than nickel cadmium batteries .these batteries are more compact than the west type batteries. It can be use at any position; these batteries are very popular for portable power requirements and space constraint application. VALUE REGULATED LEAD ACID (VRLA) BATTERIESVRLA batteries are leak proof, spill-proof and explosion restrict and having life duration of 15-20 years. These batteries withstand the environmental conditions due to high technology, in built in the batteries. Each cell is housed in a power coated steel tray making them convent transport and installations transit damages are minimized in cases of batteries. Sealed maintenance free (SMF) batteries and value regulated lead acid (VRLA) batteries technology are leading the batteries industries in recent years. In auto mobile and industrial battery sector around the globe VRLS batteries have become the preferred choice in various applications such as uninterrupted power supply, emergency lights, and security systems and weighting scales.CLASSIFICATION OF BATTERIESBatteries are broadly classified into two segments like:- Automotive batteries

Industrial batteriesAUTOMOTIVE BATTERIES Apart from mopeds all other automobiles including need storage batterys automotive batteries are playing predominant role in automobile sector by influencing customers in the automobile market. Automobile batteries can be further distinguished as the original equipment (OE) markets as low as 5-6%.OE segment has the advantage of securing continuous order and in queries. This enables manufactures to streamline production facilities, plan production schedules and attain certain level of operational efficiency.The replacement market, on the other hand, is much larger. The replacement market is characteriesed by the pre sense of large unorganized sector, which constitutes around 55-60% of the total replacement market. This is possible due to low capital entry barrier. These players have the advantage of in applicability duties.INDUSTRIAL BATTERIESThe industrial battery segment comprises of to main categories. One comprise of the stationary segment and second relating to motive power and eclectic vehicles. The motive power and the electric vehicle segment comprising of telecom, railways and power industries have registered a growth In excess of 20% and this trend is likely to continue in the next five years.The Industrial segment is highly technological intensive and access to high quality world-class technology is an important factor and is vital for brand reference. The total demand for the industrial battery segment is met by indigenous production with small saves of about 10% by imports. The demand for industrial batteries has grown slowly and steadily. All for as industrial batteries are concerned the evolving consciousness among Corporate and Government departments regarding environment factors will result in a shift towards pollution-free technology. There has been a preferential shift in this segment from the Conventional Lead batteries to sealed maintenance free batteries (SMF). The bull of battery industry admits that the sales are fallen but at the same time they are expecting larger orders especially from telecom industry, which gets going. Due to strong customers like telecom, railways and electricity boards, the industrial batteries are on prosperous scalePORTABLE POWER SYSTEMPortable power system offers the convenience of Alternating Current (AC) power. Whenever utility is unavailable. Due to their non-reliance on gird lines, power packs make an ideal companion to be along on vocations to deliver hours of power to a cellular phone, a laptop computer, or a portable television. RECYCLING BATTERIESBattery acid is recycled by neutralizing it into water of converting it to sodium sulphate for laundry detergent, glass and textile manufacturing. Cleaning the battery cases, meeting the plastic and reforming it into uniform pellets recycle plastic. Lead, which makes up 50% of every battery, is method, poured into slabs and purified.The following are the major manufacturers in battery industry in India, Exide Industries Standard Batteries Amco Batteries Tudor India Amara Raja Batteries Ltd. Hyderabad Batteries Ltd.Sealed Maintenance Free (sum) batteries and Value Regulated Lead Acid (VRLA) technologies are leading the battery industry in the recent years in the preferred choice in various applications such as uninterrupted power supply, emergency lights, and Security systems and weighing scale. CHARACTERISTICS OF VRLA BATTERIES DMF batteries are comes under the rechargeable battery category so it can used a number of times in the life of battery. SMF batteries are more economical than nickel cadmium batteries. These batteries are more compact than the wet type batteries. It can be used at any position: these batteries are very popular for portable power requirements and space constraint applications. VRLA batteries are leak proof, spill proof and explosion resistant and having life duration of 15-20 years. These batteries withstand the environmental conditions due to high technology in built in the batteries. Each cell is housed in a power coated steel tray making them convenient to transportation and installation, so transit damages are minimized in the case of the batteries.PROSPECTS OF SMF/VRLA BATTERIES IN INDIAThe following factors are influencing the demand for VRLA technology batteries. Entry to multinational in Telecom industry. DOTs policy decisions to upgrade the overall technology base. Constraints in the use of use of conventional battery in radio paging and cellular segments.Due to project expansion in Telecom & Railways, the demands for VRLA Batteries are greater than other industrial batteries.Telecom The Governments policy to increase the capacity from 10 million to 21 million lines by 2000 increased the demand for storage batteries considerably the value added services like radio paging and cellular will increase the demand for storage batteries in future considerably.RAILWAYSIn Railways, the demand estimate is based on the annual coach production this comes to 2500 numbers by Railways itself and 1000 numbers more by various other segments, replacement demand and annual requirement for railways electrification. FIRST NATIONAL BATTERIES-LEAD ACID BATTERIS FOR ALL APPLICATIONSFirst national batteries is the leading manufacture and distributor of lead acid batteries for use in mine lighting, automotive and other industrial applications in South Africa. At present, a significant share of all new motor.First national batteries are currently the original equipment supplier to the following South African motor manufacture. Daimler Chrysler Toyota Mitsubishi M.A.N BMW and Nissan.MISSION STATEMENT OFAMARARAJAPOWER SECTORSIn this sector, the estimated 90 private power prefects who are expected to produce 40,000 MV with an approximate capital outlay of RS. 1, 40,000 crores would keep the industrys future brighter in the coming years.The demand of VRLA batteries is increasing due to its performance over conventional batteries. So it is more acceptable to consumers. There appears to be a considerable pote4ntial for electrically operated material handling equipment and related vehicle besides the privatization of technology. It is expected to generate demand for various applications. The power sector is also opening up a setting up pf generating stations will give a boost to demand levels. The demand is OEM segments will grow time with the growing automation in industries.The domestic storage battery industry is in the process of transcending the past limitations in the technology front and the new sophisticated battery will be introduced in future threat from the overseas supplies do not at the current moment appeal to be significant.STORAGE BATTERIESIn the storage battery industry, some new units have come up. The latest development in this field is maintenance free rechargeable storage battery. These are also known as Value Regulated Lead Acid (VRLA) or Sealed Maintenance Free (SMF) batteries. Improvement of technology in this industry is benefiting customers.PLASTIC BATTERY COMPONENTSFirst national battery has plastic processing plant where more than 20 million battery components is produced annually on plastic injection moldings equipment from 50t to 85t capacity.

1.3 COMPANY PROFILE Amara raja batteries limited (ARBL) incorporated under the companys act 1956 on 13th February 1985 and converted in to public limited company on 16th September 1990.The chairman and managing director of the company is Sri Galla Ram Chandra Naidu. ARBL is the first company is India which manufactures value regulated lead acid (VRLA) batteries. the main objective of the company is manufacturing of good quality of sealed maintenance free (SMF) acid batteries .The company is setting up to rs.1,920 lakhs plant is in 185 acres in karakambadi village, Renigunta Mandal. The project site is notified under B category.The company has the clear-cut policy of direct selling without any intermediate. So they have setup six branches and are operated by corporate operations office located in Chennai. The company has virtual monopoly in higher A.H (Amp Hour) rating market its product VRLA. It is also having the facility for industrial and automotive batteries.Amara raja is 5 S companies and its aim is to improve the work place environment by using 5 S techniques which is:A systematic and rational approach to work place and methodical house keeping with a sense of purpose, of following five elements.1. SEIRI - Sort out , - Segregate necessary from unnecessary. - Discard what is not required. - Decide on frequency of sorting.

2. SEITION - Systematic arrangement - Arranging in order - A place for everything and everything in it place

3. SEISO - Spic and spam - Cleaning the work place/equipment - Ensuring tip top condition4. SEIKETSU - Standardition - Working methodology (procedures and work instruments)

5. SHITSUKE - Self discipline - Forming the habit-Be disciplineTHEY PURPOSE TO ACCOMPLISH THIS BY: Training the people and creating awareness on 5s Motivating and changing the behavior patterns of the People Establishing standard/procedures for the Implementation of each element of 5sThey believe that effective implementation of 5Stechniques will result in: Consistent and better quality product Higher productivity Lesser accidents Higher employee moraleCOLLABORATIONAmara raja batteries limited were a strategic tie up with Johnson controls Inc of USA who owns 26% stack in this company .It is the largest manufactures of lead acid batteries in North America. The main objective of the company is manufacturing of good quality of sealed maintenance free acid batteries (SMF).The annual growth rate of a company is 2.5%per annum. The present turnover of the company is Rs.270crores.Major customers are BSNL, VSNL, SIEMEN, and BHEL, ETC.Amara raja has always offered time tested world class technology and process development on international standards. High integrity VRLA systems like power stack and power plus or the recently launched high performance UPS Battery-KOMBAT And AMARON hi-life automotive batteries are the products of the collaborative battery efforts of engineering at Johnston controls Inc and amararaja.AMARON launched in January 2000, Amara raja has pioneered the introduction of hi-cube automotive batteries in India. This zero maintenance product uses the revolutionary patend silver X technology developed by Johnson controls for high environments and incorporates May superior features that make it the most advantage battery on roads anywhere in the world.STRENGTHS Proven technology from GNB and being a pioneer: Strong and well organized customer base Full-organized infrastructure in place Manufacturing facilities perceived as a benchmark in India Complete range of VRLA batteries Proven field performance in all user segment Approved vendor status in major user segments To transfer our spheres of influences and enrich the quality of life by building institutions that provides better access to better opportunities, goods and services. To more people All the time.VALUES & BELIEFS They believe in treating each other with honesty, fairness, dignity and respect and in creating a safe ,healthy and pleasant workplace They believe in innovative and optimum use of our continuous improvement everything we do, as they are pre-requisites for sustained growth. They believe that the empowerment of our people is the foundation of our strength. We will help each other to work in teams and hold each other accountable to fair contribution in achieving our collective goals, They will strive to exceed our customers ever increasing expectations though continuous improvement in quality, service support and time compression.SOCIAL PROGRAMMES Housing colony for employees in progress. Total plan, 500 families over five years. Plan to provide community hall, open auditorium, parks and play ground. Training center for employees. Bachelors hostel, co-operative stores banks in operation. Roads, water supply, streetlights, greenery educational villages. Award and reward to the younger generation for improvement of education. Modernization of public parks for the fledged recreation of children. Public awareness programs (in Mumbai) on environmental protection, through street Theatrewhose Mumbai is it any way on the occasion Of Earthday April 23rd 2001.BRAND Amara rajas reflects the innate dynamism of the company .the emblem demonstrates the interplay of the universally in Yang symbols and the philosophy of balanced forces. the color green and black emphasize the perfect symmetry of absorbing and releasing energies, while the entire form in continuous motion signifies unrelenting progress. The color green also elucidates the role of technology as an integral part of the companys growth. Not incidentally, it also connotes the companys resolve to preserve and nature the environment.CULTURE AND ENVIRONMENT Amara raja is putting a no. of HRD initiatives to foster a spirit of togetherness and a culture of meritocracy. Involving employees at all levels in building organizational support plans and in evolving our vision for the organization. ARBL encourage initiative and growth of young talent allows the organization to develop innovative solution and ideas. Benchmark pollution control measures, energy conversation measures, waste reduction schemes, massive green belt development programs. Employee health monitoring and industrial safety programs have helped ARBL to take further environment management program.QUALITY PLOICYARBLs main aim is to achieve customer satisfaction through the collective commitment of employees in design; manufacture and marketing of reliable power systems, batteries, allied products and services.TO ACCOMPLISH, ARBLFOCUS ONEstablishing superior specifications for our products and processes Employing state of-the-art technologies and robust design principles. Striving for continuous improvement in process and product quality. Implementing methods and technique to monitor quality levels. Provided prompt after sales service.RESEARCH & DEVELOPMENT Specific areas in which the company carries out R&D are, New product development Process technology up gradation Application engineering for new market place Quality improvementsBENEFITS DERIVED AS A RESULT OF ABOVE R & D 4v/200ah batteries Design optimization of higher AH batteries for DOT application Design optimtsation of batteries92v/1285 for TL/AC-railway application. Formation cycle optimization results in reduced duration and rejection Chemist curing cycle optimization Manufacturer of automobile battens for four-wheeler vehicles. Commercialization of motor-cycle batteries development FUTURE PLAN OF ACTION A new range high integrity VRLA cell design Establishment of product for new application segment Studies on paste additives to enhance the battery performance In-dept evaluation of metal surface treatment chemicals to reduce the process cycle time Validating alternative grades of propylene to converse energy and to improve productivity.AWARDS Honorable doctorate degree 2008by S V University, Tirupatthi and JNTU , Hyderabad The spirit of excellence Award by academy of fine arts, Tirupatthi Best entrepreneur of the year 1998 - by Hyderabad association Industrial economist business excellence award-1991 award by the industrial economist Chennai. Excellence award by institution of Economic Studies (ES), New Delhi. Undying rattan award by institution of ES I, new Delhi Q1 certificate-2002 by FORD Company.AMARARAJA GROUP OF COMPANIES AMARARAJA POWER SYSTEM PUBLIC LTD (ARPSL) , Karakambadi , Tirupati MANGALA PRECISION PRODUCTS PUBLICLTD. (MRPL1), karakambadi, Tirupati. MANGALAM PRECISION PRODUCTS PUBLICLTD(MRPPL8), Petamitta, chittoor AMARARAJA ELECTRRONICS PUBLIC LTD, (AREPL), Dighavamgham, chittoor GALLA FOODS PUBLIC LTD(GFPL), Puthalapattu, chittoorGENERAL INFORMATION ARBL

Industrial battery division Auto battery division Railway coaches Telecom UPSINDUSTRIAL BATTERY DIVISIONAmara raja has become the benchmark in manufacturer of industrial batteries. India has one of the largest and fasted growth markets for industrial batteries in the world. Amara raja has leading in the front; with an 80%market sahare is stand by VRLA batteries point of view .It is also having the facility for production plastic components.ARBL is the first company in India to manufacturer VRLA (SMF) batteries .The initial investment of the company has Rs.1920lakhs; the total land is around 18 acres in karakambadi village, and Renigunta Mandal. The project site is notified under B category.AUTOMOTIVE BATTERY DIVISION (ABD)ARBL has inaugurated its new automotive plant at karakambadi in Tirupatthi on September 24th ,2001.This plan is a part of the most completely integrated battery manufacturing facility in India with all critical components, including plastics sourced in house form existing facilities on site. In this project, Amararaja s strategic alliance partners Johnson controls Inc., of USA have closely worked with their Indian counterparts put together the latest advances in manufacturing and plant engineering. It is also having the facility for producing plastic components required for automotive batteries.CAPACITYThe capacity per the year 2005-2006 of IBD is 3, 70,000 cells per annum.With an existing production capacity of 5 lakh units of automotive batteries, the-new Greenfield plant will now be able to produce one million batteries per annum.This is the first phase in the enhancement of Amararajas production capacity, for this the first company has invested Rs.45 crores and the next phase, at an additional cost of Rs 25 crores , for the production capacity will be increase to two million units and the company has estimated to complete around 3 years,after that ARBL, will become the single larges battery manufacturer in Asia . The fiscal year 2005-2006s capacity of abd is 2.2 million numbers per year.CUSTOMERSARBL has prestigious OEM (Original Equipment Manufacturer) clients like FORD, GEHERAL MOTORS, DAEWOD MOTORS, MERCEDS BENZ, DAILMLER, MARUTHI UDYOGE LTD., Premier auto Ltd, and Recent acquired a preference supplier alliance with ASHOK LEYLAND, HINDUSTAN MOTORS, TELCO, MAHINDRA & MAHINDRA and SWARAJ MAZAD.

COMPETITORS

The major competitors for Amararaja batteries products are: Exide Industries Ltd Hyderabad Batteries Ltd GNB Industries (US based)PRODUCTS Type of VRLA batteries manufactured in IBD is: POWERSTACK KOMBAT(UPS Battery) BRUTE GENPROFEATURES & BENEFITS OF THE PRODUCT: Absorbed Electrolyte -safe, no fee acid construction -spells proof and leak Oxygen recombination cycle -no external gassing Resealing safety value -explosion proof and Pressure regulated Copper core terminal - improved connection Special hybrid alloy - Deep cycle capability Factory charged - Ready to use

1.4 PRODUCT PROFILEVRLA batteries manufactured in the industrial battery division and their applications are as follows:POWER STACKApplications: Power plants, process and service industry, Railways, Telecommunication, Uninterruptable power supply (UPS) systems, electronic private automatic branch exchange (EPABX) , Defence (Onshore & Off share wireless communication cellular radios), Motive power.KOMBAT (UPS BATTERY)Applications: UPS, EPBX, Engine starting, emergency lighting, SPV, portable power, security systemsBRUTE:Applications: Forklifts, pellet truck, stackers, 8platforms trucks.

PRODUCTION FACILITIESDuring the year under review ARBL has priorities and directed its objectives towards streamlining the production process by assimilating and synchronizing capacities of different section of plant to optimize the capacity utilization. As a part of this prograhhe, ARBL has proposed to increase the capacity of assembly and formation section. The reasons for the capacity are as follow:

EXPANSIONS IN AN AS UNDER To meet the growing demand for the power stack batteries. To cope-up with the peak level operations during the second half of the fiscal year To improve the overall productivity & quality/ To balance the line capacity of the plant with essential utilities & facilities. To achieve the above, ARBL had conducted an elaborate study on the capacities of different sections and identified the section wide requirements. This had clearly spelt out the need for capacity expansion in power stack assembly line formation section, on completion of the explanation programmed the capacity will increase from 1,00,000 to 1,60,000 batteries per annum.

GALLA FOODS PRIVATE LIMITED (GFPL) GFPL incorporated in 11th march 2004and having the its registered office at Eangampet village, puthalapattu mandal, Chittoor district, AndraPradesh. It is the process of setting up at world class food processing unit on par with the international standards for extracting natural fruit concentrates from tropical fruits and export to USA, Europe and other advanced international market.

S.NOPRODUCT NAMEFEATURESAPPLICATIONS

1AMARON HARVESTHigh performance, Totally maintenance free, High power charge acceptanceFor Tractors

2AMARON SHIELDReady to fit, long life low maintenance Higher cranking powerFor Inverters

3AMARON HI-LIFE BATTERIES Long life maintenance free, fully scaled and tested No leakage/improved safetyCars, Utility Vehicles, Tractors, 4 Wheelers, HCVs Genets & LCVs

4KOMBATHigh discharge, High performance batteries which are compact light weight factory charge, explosion resistant and environmental friendlyUPS, EPBX, Engine starting, Emergency lighting, SPB, portable power, Fire alarm security systems.

5AMARA RAJA(POWER STACK)INDUSTRIESLight weight, study weather proof and long lasting, High integrity, High energy density.Industrial applications, Power plants, Railways, Telecommunications, process and service Industry, Defense, Motive, Power solar Photo voltaic, Electric vehicle, Emergency lighting.

6AMARA RAJA GENPROZero maintenance, No specific gravity checks, No water tapping up required long life, ideal size factory charged, therefore ready to use assured starting and service.For Generators

7AMARON HI-WAY BATTEIRSLong life, Ultra low maintenance ready to fit, Higher cranking power.For Trucks

8QUANTA --Ups Batteries

9BRUTE(THE MOTIVE POWER HOUSE)Sera maintenance, No life time, No leaks, High energy density, No sulphation of plates, Valve Regulated, Safe and expansion proofFactory vehicles like forklifts, Pal lot trucks, stackers and platform trucks.

LOCATION OF ARBL

M.DVice-President-FinanceAGM-FinancialAGM-SecretarialManager MISSr. Manager asuryManager CommercialAsst. Manager Sr. OfficerOfficer A/c receivableManagergSr. OfficerCo-OrdinatorCo-OrdinatorCo-OrdinatorCo-ordinatorCo-OrdinatorCo-OrdinatorHIERARCHY

PROSPECTUS OF MF-VRLA BATTERIES IN INDUSTRIAL BATTERYThe prospectus of MF-VRLA batteries technology and the demand for VRLA batteries in various segments in estimated based on the following: Entry of multinationals in telecom sector. Data policy decision to upgrade the overall technology base. Constraint in use of conventional battery in radio paging cellular segments Switch over railways to Maintenance Free Value Regulated for Lead Acid (MF-VRLA) for coach air conditioning to 100%level and the expected gradual shift for application like TL, S&T and railway electricians. Technology up graduation and privatization of the power segment. Strong performance towards VRLA in the office automation industry (UPS and EPABX application due to user friendly and compact features).PRODUCTION FACILITIES, CAPACITY EXPANSION AND PLASTIC PROJECT During the year under review, ARBL had prioritized and directed its objectives toward streamlining the production process by assimilating and synchronizing capacities of different section of the plans to optimize the capacity utilization. As a part of this program, ARBL has proposed to increase the capacity assemble and formation section. The reasons for the capacity expansion are as under To meet the growing demand for the power stack batteries. To cope-up with thaw peak level operations during second half of the fiscal year . To improve the overall productivity & quality. To balance the line capacity of the plant with essential utilities and liabilities.To achieve the above, ARBL had conducted and elaborated study on the capacities o different sections and identified the section wide requirements. This had clearly spelt out for capacity expansion program .The plant capacity will increase from 1, 60,000 to 2, 75,000 batteries per annum. The estimated cost of expansion is Rs.1, 080 cores.RESEARCH & DEVELOPMENTSpecific areas in which the company carries out R & D. New product development. Process technology up graduation. Application engineering for new market place. Quality improvements.FUTURE PLAN ACTION Commercialization of motor-cycle batteries. Development of new range high integrity VRLA cell design. Establishment of products for new application segment. Studies on paste additives to enhance the battery performance. In-depth evaluation of metal surface treatment chemicals to reduce the process cycle time.MAJOR USERSA. RAILWAYSTrain lighting, air conditioning, diesel engine starting, signaling systems, control systems, emergency breaking systems and telecommunications.B. TELECOMMUNICATIONCentral office power plants, microwave repeaters station, RAX in public building, emergency lighting systems at air ports, fire alarm system etc.C. POWER SYSTEMSSwitch gear control systems, power hose control systems, rural street lighting etc.D. UPS SYSTEMSBackup power to computers in progress control system in industry etc.,E. TRACTIONForklift trucks, earth motioning machinery, mining locomotives and road vehicles etc.

F. PETROCHEMICALSOff-shore and On-shore pill exploration lighting systems, security systems etc.G. DEFENCE:Defense communication, aircraft and helicopter ground starting, stationary and mobile diesel engine starting etc.

FLOW CHART BATTERIES PROCESS FLOW

Converting pure Lead into Lead OxidePaste mixing by Adding sulphuric Acid and waterGird CastingPasting Gird with Lead Oxide PasteWinding the pasted Grid with SeparatorGroup insertion jarSealing the jarFormationFinishing

BOARD OF DIRECTORSThe company has a non-executive chairman and the number of independent directors is 3 representing 33.33% of the total number of directors i.e. more than one-third of the total number of directors. The number of the total non-executive directors are 8 i.e. 88.89% which is more than 50% of the total number of directors. Hence the board of the company has an optimum combination of executive and non-executive directors in conformity with the provisions clause 49 of the listing agreement.None of the members of the board is holding membership in more than 10 committees or chairmanship in more than 5 committees as specified in clause 49 of the listing agreement.The composition and category of the board of directors as at March 31, 2008 and the number of other directorships/committee memberships held by them are as under:S.no.Name of the Director Category1.Dr. Rama Chandra N Galla Promoter/Non-executive chairman2.Mr. Jayadev Galla Promoter/Managing Director3.Dr. G.Ramadevi Promoter/Non-executive Director4.Mr. Frank E Kraick Non-Executive Director5.Mr. Raymond J Brown Non-Executive Director6.Mr. Shu Qing Yang Non-Executive Director7.Mr.P.Lakshmana Rao Independent Director8.Mr. Ravi Bhamidi pati Independent Director9.Mr.Nagarjun Valluripalli Independent Director10.Mr. Rohit Kotchar Alternate director to Mr.Shu Qing YangAMARA RAJA NETWORKRegistered Office - Karakambadi, Tirupathi.Corporate Operations Office - Chennai, Hyderabad Marketing Offices & Services Centers- Bangalore, Mumbai, Kolkata, New Delhi, Hyderabad and ChennaiSELLING POLICYThe Company is adopting the policy of direct selling without any intermediates as the product falls under the category of Capital Goods. The Company established its based and in major cities like Mumbai, Calcutta, New Delhi, Mysore, Bangalore and Hyderabad. All these units are fully equipped with experienced staff and infrastructure. ARPS has also widened services network. As a member of Amara Raja Batteries automotive branchs facilities for service points to serve the need of its clientele better.PRODUCT LINEConventional Batteries Charges: Up to 220V / 500 A 24 V /2000 A.Switch Mode Power Supply (SMPS) : Modules of 48 V/25A up to 200A and 48V/100A up to 3200A Integrated Power Supply (IPS) Systems Specially.Designed for Railway Signaling & Telecommunications.DC/AC Distribution Boards. AMARA RAJA BATTERY PRODUCTSPower stacks (general purpose battery): 40AH to 6000AH.Brute (Motive Power Battery): 40AH to 1500AH.Combat (UPS battery): 40AH to 80 AH.Diagnostic ToolsBeta Check (Health Monitor) : 100A & 300A.

ENVIRONMENTAL PROGRAMS Advancement for ISO-4001 Certification. Health monitoring and awareness Programme. Both personal and Industrial Safety Programme. Start up of EMS implementation Programme. Nil discharge and lowest emission awareness and implementation Programme. Waste Reduction Scheme. Energy Conservation Programme. Continuous and massive greenbelt development Programme. Ground Waste Collection, Treatment, Storage and Safe Disposal Programmed. Central Waste Collection, Treatment, Storage and Safe Disposal Programme. Personal health Safe Guarding Programme. SOCIAL PROGRAMS Housing Colony to the Employees is in Progress. Total Plan 500 families over five years, 108 already commissioned. Plant provide Community Hall Open Auditorium, Recreation club, Park and play Ground. Training Centre for Employees. Bachelors hostel, Co-operative Store and Banks in Operation. Roads, Water Supply, Street Lights, Greenery, Educational and Cultural Activities. Enhancement in neighboring villages. Awards and Rewards to the Younger Generation for improvement of education Modernization of Public Parks for the fledged of Children.AMARA RAJA GROUP OF COMPANIES1. Amara Raja Batteries Limited (ARBL).2. Amara Raja Power Systems Limited (ARPSL )3. Mangal Precision. Ltd., (1)4. Mangal Precision.Ltd. (2).5. Amara Raja Electro Systems Ltd.6. Galla Foods Ltd.HISTORY OF THE ORGANISATION: DEC 1985 -Foundation stone laid for Amara raja. MAY 1992 -Designed and implemented the most advanced battery manufacturing facility in India. FEB 1997 -Received the ISO 9001 certification. DEC 1997 -Commissioned own plastics and tool room sections. Signed Joint Venture with Johnson controls. MAY 1999-Received QS 9000 certification. JAN 2000- Launched Amaron batteries. April 2001-Launched the new corporate logo.Sep 2001-Awarded the ISO 14001 certification New corporate logo launched. May 2002-commissioned phase1 of new automotive battery plant with a capacity of 2 million batteries. JUL 2002-Launched Quanta UPS batteries. AUG 2002-Launched Amaron Hiway and Harvest batteries. MAR 2004-Received Ford World Excellence Award. SEP 2004-Launched Amaron PRO,GO and FRESH automotive batteries OCT 2004-OE agreement with Maruthi Udyog Ltd. JUN 2005-OE agreement with Hyundai Motors. AUG 2005-NK series limited edition batteries launch. DEC 2007-Launched power zone. Launched new-look Amaron range with Amaron Black, Flo batteries. MAY 2008-Launched Amaron PRO BIKE RIDER 2w batteries. Public awareness programs (in Mumbai) on environmental protection, through street theatrewhose Mumbai is it any way on the occasion Of Earth day April 23rd 2001.

REVIEW OF LITERATUREDEFINITIONS OF INVENTORY MANAGEMENTThe overseeing and controlling of the ordering, storage and use of components that a company will use in the production of the items it will sell as well as the overseeing and controlling of quantities of finished products for sale. Inventory management is a science primarily about specifying the shape and percentage of stocked goods. It is required at different locations within a facility or within many locations of a supply network to precede the regular and planned course of production and stock of materials.The scope of inventory management concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods, and demand forecasting.Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different locations within a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods.Inventory management is the process of ensuring that a company always has the products it needs on hand and that it keeps costs as low as possible. Inventory Management is concerned with keeping enough product on hand to avoid running out while at the same time maintaining a small enough inventory balance to allow for a reasonable return on investment. Proper inventory management is important to the financial health of the corporation. Excessive level of inventory, results in large inventory carrying cost, including the cost of capital tied up in inventory warehouse fees, insurance etc. Inventory is needed for the definite consumption demand of materials, and to take care of the uncertainty involved in the usage or availability of the materials. Some times other authors described as the decoupling function of the inventory of materials is maintained at the different stages of production.The inventory taking care of the normal consumption requirements i.e., depending upon the average consumption rates and average lead times for procurement/manufacture of the material, inventories are kept at the appropriate times is called the normal inventory and the inventory taking care of a production process, however continuous it maybe, is bound to have some interruptions; it may also have imbalances in the consumption and production rates of the materials at different stages.These interruptions and imbalances make it necessary to keep stocks of inventory between the different stages of the operations the aspect of this uncertainty is called the safety stock or buffer stock of inventoryMEANING OF INVENTORY MANAGEMENTInventory management means safeguarding the company property in the form of inventories and maintaining it at the optimum level, considering the operating requirements and financial resources of the business. Inventory management emphasizes control over purchases, storage, consumption of materials and determining the optimum level for each item of investments.IMPORTANCE OF INVENTORY MANAGEMENTInventory management is concerned with keeping enough products on hand to avoid running out while at the same time maintaining a small enough inventory balance to allow for a reasonable return on investment. Proper inventory management is important to the financial health of the corporation; being out of stock forces customers turn to competitors or results in a loss of sales. Excessive level of inventory however, results in large carrying costs, including the cost of capital tied up in inventory warehouse fees, insurance etc.A major problem with managing inventory is that the demand for a corporations product is to a degree uncertain. The supply of the raw materials used in its production process is also somewhat uncertain. In addition the corporations own production contains some degree of uncertainty due to possible equipment breakdowns and labor difficulties.Because of these possibilities, inventory acts as a shock absorber between product demand and product supply. If product demand is greater than expected, inventory can be depleted without losing sales until production can be stepped up enough to select the unexpected demand.However inventory is difficult to manage because it crosses so many lines of responsibility. The purchasing manager is responsible for supplies of raw material and would like to avoid shortages and to purchases in bulk order take advantages of quantity discounts. The production manager is responsible for uninterrupted production and wants to have enough raw materials and work in process, inventory on hand to avoid disruption in the production process. The marketing manager is responsible for selling the product and wants to minimize the chances of running out of inventory. The financial manager is concerned about achieving an appropriate overall rate of return. Funds invested in an inventory are idle and do not earn a return.Nature of Inventories Inventories are stock of the product a company is manufacturing for sale and components that make up the product. The various forms in which inventories that exist in manufacturing company are Raw materials Work-in-process Finished goods

RAW MATERIALS These are those basic inputs that are converted into finished product through the manufacturing process. Raw materials inventories are those units which have been purchased and stored for future production.WORK-IN-PROCESS These inventories are semi-manufacture products. They represent products that need more work before they became finished for sale.FINISHED GOODS These inventories are those completely manufactured products which are ready for sale. Stocks of raw materials and work-in-process facilitate production while stock of finished goods is required for smooth marketing operations. Thus, inventories serve as link between the production and consumption of goods.NEED TO HOLD INVENTORIES Maintaining of inventories involves trying up the companies and incurrence of storage and handling cost. There are three general motives for holding inventories.TRANSACTION MOTIVE It emphasizes the need to maintaining inventories to facilitate smooth production and sales operation.PRECAUTIONARY MOTIVE It necessitates the holding of inventories to guard against risk of unpredictable changes in demand and supply force and other factors.SPECULATIVE INVENTORIES It influences the decision to increase or reduce inventory level to take advantage of price fluctuations.The firm should always avoid a situation of over investment or under investment in inventories.The major dangers of over investment in inventories arei. Unnecessary tie up of the funds and loss of profits.ii. Excessive carrying cost.iii. The risk of liquidity.The consequences of under investment in inventories are i. Production hold-upsii. Failure to meet delivery commitments. Inadequate raw materials.iii. Work-in-process will result in frequent in production interrupts.AN EFFICIENT INVENTORY MANAGEMENT SHOULD Ensure a continuous supply of raw materials to facilitate uninterrupted production. Maintain sufficient supply of raw materials in periods of short supply and anticipate price changes. Maintain sufficient finished goods inventory for smooth sales operation and efficient customer service. Minimize the transportation cost on time. Control investment in inventories and keep it at an optimum levelCOST OF HOLDING INVENTORIESThe determination of inventory cost is essentially an income measurement problem, a means where by there is rational orderly, systematic interpretation of the effect on the economic progress of the company of expenditures involved acquiring goods or in maintaining and operating productive facilities. Ability to quantify and develop rigorous models of most managerial problems is dependent on the determination behavior of relevant costs. The practical application of such models is also dependent on ability to obtain the cost data. Relevant inventory costs which change with level of inventory are listed below.ORDERING COSTSEvery order is placed for stock replenishment, certain cost are involved. The ordering cost may vary, dependent upon type item.This cost of ordering includes Paper work cost, typing and dispatching order. Follow-up costs the follow-up required ensure timely supplies include the travel cost for purchases follow-up, telephone telex and postal bills. Cost involved in receiving the order inception, checking and handling to the stores. Any set up cost of machines if charged by supplier, either directly indicated in quotations or assessed thought quotations for various quantities. The salaries and wages to the purchase department are relevant for consideration if the purchasing function is carried out at the same level with existing staff. There are certain costs that remain the same regardless of the size of the lot purchased or requisitioned. This would be retailer ordering from the distributor, from the distributor ordering from a factory warehouse, for the factory warehouse ordering a new production run from the factory, and for the factory ordering raw materials from vendors. These kinds of costs are called preparation or set up costs.If we are ordering to replenish supplies at one stock point from another stock point, our interest is in the incremental clerical costs of preparing orders, following these orders. Expediting them when necessary, etc, a large segment of the total cost of the ordering function is fixed, regardless of the number orders issued. Even then it may be difficult determined satisfactorily the incremental cost, which results from one more order. Quantity discounts and handling and transport cost are other factors, which vary lot sizes. Preparation cost are the incremental costs of planning production, writing production orders, setting machines and controlling the flow orders through the factory. Material handling cost in the plant have an effect on production lot sizes in much the same way that freight costs may effect purchase lot sizes.Besides the preparation costs of production, there are some other production costs, which have a direct bearing on inventory models, however. These are over time premiums and the incremental cost of changing production levels, such as hiring, training, and separation costs.Carrying costsCarrying costs constitutes all the costs of holding items in inventory for a given period of time. They are expressed either in rupees per period or as percentage of the inventory value per period.Components of these costs include the following Storage and handling cost. Obsolescence and deterioration costs Insurance Taxes The cost of the funds invested in inventories Storage and handling costs include the cost of warehouse space. Obsolescence costs represent the decline in inventory value caused by style changes that make the existing product less salvable.Deterioration costs represent the decline in value caused by changes in the physical quality of the inventory such as spoilage and breakage. Another element of carrying cost is the cost of insuring the inventory against losses due to theft, fire and natural disaster. In addition, a company must pay any personal property taxes required by local and state government on the value of its inventories. Like ordering costs, inventory-carrying costs contain both fixed and variable components. Most carrying costs vary with inventory level, but a certain portion of them-such as warehouse rent and depreciation on inventory handling equipment- are relatively fixed over the short run, inventory model such as EOQ model treat the entire carrying cost as variable.Stock out costs Stocks out costs are incurred when ever a business is unable to fill orders because the demand for an item is greater than the amount currently available in inventory. When a stock out in raw materials occur, for example, stock out costs include the expenses of placing special orders (back ordering) and delays. A stock out in work in progress inventory results in additional costs of rescheduling and speeding production with in the plant, and it also may result in reduce production costs if work stoppages occur. Final, a stock out in finished goods inventory may result in the immediate loss of profits of customers decide to purchase the product from the competitor and in potential long-term losses if customers decide to order from other companies in the future.Other characteristics of inventory situations. Besides the various types of costs involved, there are other characteristics of the situation that vary among types of inventory and must be captured if the decision model is to be an accurate representation of the physical circumstances.LEAD TIMES Obtaining inventory usually requires a lag from the initiation of the process until the inventory starts to arrive. This lead-time may be a few minutes or it may be many months, and depends in part on whether the firm is producing goods for its inventory or is ordering these goods from another firm. To produce goods for its own use, the firm must schedule, set up and adjust manufacturing equipment.SOURCES AND LEVELS OF RISK Uncertainties play a significant role in inventory situations. Uncertainties usually involve lead times and demand times and demand levels, but situations where other variables are uncertain also occur. Where are substantialuncertainties and where the costs of stock out are important Strategies for addressing risk must be formulated?STATIC VERSUS DYNAMIC PROBLEMS Inventory problems are usually divided into two types based on the characteristics of the goods involved. In static inventory problems, the goods have one-period life; there can be carrying over of goods from one period to the next. Inventory situations where decisions involve the number of news papers to print, the number of greeting cards to purchase or the number of calendars to produce are static inventory problems. In dynamic inventory problems, the goods have value beyond the initial period; they do not lose their value completely over time.Replenishment rate Once goods start to be received from a vendor or from the firms own production processes, there are differences among goods in the rate at which they are received. Small orders from vendors are likely to by receive all at once. For example, assume that a firm has placed in order for 10 cases of paper towels. For such a small order the rate of replenishment is infinite; the firms inventories well go up 10 cases in a very short time as the goods are quickly unloaded.For large order from vendors, or for inventory produced with in the firm, the replenishment rate may be slower.Types of inventoryInventories can be classified into five basic types on the basis of their production. These various types of inventories cannot be identified and segregated within the organization. These five types are1. MANAGEMENT INVENTORY They are needed because of the time required to move stocks from one place to another place.

2. LOT SIZE INVENTORIES These are as a result of buying materials in quantities larger than the immediate requirement, with a view to minimizing cost of transportation, buying, receipt and handling and to obtaining quantity discount.3. FLUCTUATION INVENTORIES These are carried to ensure ready suppliers to consumer even when these are irregular and unpredictable fluctuations in their demand.4. ANTICIPATION INVENTORIESThese are usually maintained to meet a predictable but changing pattern of future demand.5. CYCLE INVENTORIES These result from managements attempt to minimize the total cost of carrying and ordering inventory. They arise from ordering in batches or lots, rather from needed basis.Inventories can be further classified into production inventories maintenance repair and operation (MRO) inventories, in-process inventories and finished goods inventories. Production inventory consists of raw materials parts and components which are used in the production process forming parts of the final product. Maintenance, repair and operation supplies which are used in the production of goods or services but do not become part of the product. In-process inventories are semi-finished materials, parts and assemblies found at various stages in the production operation.Finished goods inventory consists of completed products ready for sale.

TECHNIQUES OF THE INVENTORY MANAGEMENT1) ABC ANALYSES The ABC method is an analytical method of stock control which aims at concentrating efforts on those items where attention is needed most. It is based on the premise that a small number of the items in inventory may typically represent the bulk money value of the total materials used in production process. While a relatively large number of items may represent a small portion of the money value of stores used and that small number of items should be subject to the greatest degree of continuous control. Under this system, the materials stocked may be classified into a number of categories according to their importance i.e., their value and frequency of replenishment during a period. The first category, we may call it the group of A items, may consist of only a small percentage of total items handled but its combined value may be a large portion of the total stock value.The second category, naming it as group of B items, may be relatively less important. In the third category consisting of C items, all the remaining items of stock may be included which are quite large in number but their value is not high.Categories of ABC analysisIn ABC analysis the items are classified in three main categories based on their respective consumption value.1. Category A items: The items, which are most costly and valuable, are classified as A nearly 10 percentage of the total number of items stored will account for 70 percentage of total value of all items stocked.2. Category B items:The items having average consumption value are classified as B nearly20 percentage of total number of items will account for 20 percentage of total value. Statistical sampling is general useful to control them.3. Category C items: The items having low consumption value are put in category C nearly 70 percentage of total number as items will account for 10 percentage total values. Generally these items are slow and non-moving items in the stores, which are frequently used for production process but with more quality.2) VED CLASSIFICATION This analysis is based on criticality of inventory, it is used to determine the criticality of the item and its effect on production and other services .it is specially used for classification of spare parts. If a part is vital, it is given V classification. if essential ,then it is given E classification and if it is not essential the part is given D classification for V items, a large stock of inventory is generally maintained ,these item have immediate effect on production more attention paid for this item.3) ECONOMIC ORDER QUANTITYThe economic order quantity is that inventory level, which minimizes the total of ordering cost and carrying costs.It is the question, how much to order the quantity when inventory is replenished. If the firm is buying raw materials, the question is to purchase the quantity of; each replenishment and if it has to plan for production run, it is how much production to schedule. It may be solved through EOQ. COST OF HOLDING INVENTORIESThe determination of inventory costs is essentially an income measurement problem, a means whereby there is a rational, orderly, systematic interpretation of the effect on the economic progress of the company of expenditures involved in acquiring goods or in maintaining and operating productive facilitates. Ability to quantify and develop rigors models of most managerial problems is dependent on the determination of the behavior of relevant costs. The practical application of such models is also dependent on ability to obtain the cost data. Relevant inventory costs which change with the level of inventory are listed below.Ordering cost: Every time an order is placed for stock replenishment, certain costs are involved. The ordering cost may vary, dependent upon the type of item. However, an estimate of ordering cost can be obtained for a given range of items.1. Paper work costs, typing and dispatching an order.2. Follow up costs-the follow-up required to ensure timely to ensure timely supplies include the travel cost for purchase followup, telephone, telex and postal bills.3. Cost involved in receiving the order inspection, checking and handling to the stores.4. Any set up cost of machines if charged by the supplier, either directly indicated in quotations or assessed through quotations for various quantities.5. The salaries wages to the purchase department are relevant for consideration if the purchasing function is carried out at the same decreases significantly, obviously a proportional amount of personnel will be transferred to other departments.CARRYING COSTS Carrying costs constitute all the costs of holing items in inventory for a given period of time. They are expressed either in rupees per unit per period or as a percentage of the inventory value per period. Components of this cost include the following.1.Storage and Handling costs: It includes the cost of warehouse space.1. Obsolescence and deterioration costs:Obsolescence costs represent the decline in inventory value caused by technological or style changes that make the existing product less salable. Deterioration costs represent the decline in value caused by changes in the physical quality of the inventory, such as spoilage and breakage.2. Insurance: The inventory against losses due to the theft, fire, and natural disaster.3. Taxes: A company must pay any personal property taxes and business taxes required by local and state governments on the value of its inventory.4. The cost of funds invested in inventories: It is measured by the required rate of return on these funds. Because inventory investments are likely to be of average risk the overall weighted cost of capital should be used to measure the cost of these funds.5. Storage and Handling costs: It includes the cost of warehouse space.EOQ for an item is arrived on the following assumptions1. .Demand is continuous at a constant rate.2. The process continues infinity.3. No constraints are imposed on quantities ordered, storage capacity, budget etc.,4. Replenishment is instantaneous.5. All costs are time invariant.6. Units are not available.EOQ for an item is arrived by the following formula

EOQ=WhereEOQ=economic order quantityCo=cost of ordering an orderAD= annual consumption of an itemCH=cost of carrying one unit/year4) HML CLASSIFICATION The high and medium and low (HML) classification follows the same procedure as is adopted in ABC classification. Only difference is that in HML, the classification unit value is the criterion and not the annual consumption value. The item of inventory should be listed to the descending order of unit value and it is up to the management to fix limits for the three categories. For example, the the management may decided that all units with unit value of Rs.2000 and above will be H items, Rs 1000 to 2000 M items and less than Rs. 1000, l items. The HML analyses is useful for keeping control over consumption at department levels for deciding the frequency of physical , and for controlling purchases. 5) SDE CLASSIFICATION The SDE classification is based upon the availability of items and is very useful in the context of scarcity of supply. In this analysis, S refers to scarce items, generally imported, and those which are in short. D refers to difficult items, which are available indigenously but are difficult items to procure. Items which have to come form distance places or for which reliable suppliers are difficult to come by, fall in to D category. E refers to items which are easy to acquire and which are available in the local strategies The SDE classification. Based on problems faced in procurement, is vital to the lead-time analyses and in deciding on purchases strategies.6) MINIMUM-MAXIMUM TECHNIQUE The minimum maximum system is often used in connection with manual inventory control system. The minimum quantity is established in the same way as any re- order point. The maximum is the minimum quantity plus the optimum lot size. In practice, a requisition is initiated when, a withdrawal reduces the inventory below the minimum level, and the order quantity is the maximum minus the inventory status after the withdrawal. If the final withdrawal reduce the stock the stock substantially below the minimum level, the order quantity will be higher than the calculated EOQ. The effectiveness of a minimum system is determined by the method and precision with which the minimum and maximum parameters are established 7) TWO BIN SYSTEM One of the oldest systems of inventory control is the two-bin system, which is mainly adopted to control C group inventories. In the two bin system. Stock of each item is separated in to two bins. One bin contained stock; just enough to last from the date a new order is placed until it is received in inventory. The other bin contains a quantity of stock. When the first bin is empty, an order for replenishment is placed, and although the system itself possesses a high degree of atomic, in practice, we need, for such a system, the most desirable quantity to re-order is the EOQ. Since the quantity to re-order is fixed in advance, initiation of replenishment action can be delegated to the lower staff and there is need to take physical count of inventory levels.

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