A Project Report On…

Submitted as partial fulfilment of

Post Graduate Programme in International Business in
Asian School of Business Management, Bhubaneswar

Submitted By:
NILOMADHABA PANDA
Registration No- PGPIB/09-11/28

Under the esteemed guidance of

Mr. Sanjeeb Kumar Samal
Officer HRD, JK Paper Mills
Rayagada, Odisha

&
Prof. Ashish Mohanty
Asian School of Business Management
Bhubaneswar, Odisha.
 CONTENTS
 Certificate from Organization
 Certificate from faculty Guide
 Declaration
 Acknowledgement
 Executive summary

Chapter – I Synopsis & Introduction to the study:

- Brief Introduction
- Need For the Study
- Objective & Limitation of the Study

Chapter – II Profile of Paper Industry & the Unit:

- Profile of the Paper Industry
- Growth of the Paper Industry
- Paper Industry In Global Perspective
- Major Players in Paper Industry
- Globalization & Its Impact

Profile of JK Paper Mills Ltd.:

- Introduction JK Paper Mills Ltd.
- Overview of JK Paper Mills Ltd.
- Strategic Orientation
- Product Profile
- Segment Paper

Chapter – III Logistics & Distribution System of JK Paper Mills

- Logistics at JK Paper Mills
- Order Processing & Execution System
- Warehousing & Inventory
- Supply of Packing Material
- Transportation & Export

Chapter – IV Theoretical Aspect of Inventory Management in JK Paper Mills

Chapter – V Practical Aspect of Inventory Management in JK Paper Mills

Chapter – VI Methodology of the Study, Data Analysis, Interpretation &

Data Presentation, Analysis of Questionnaire
- Sample
- Procedure
- Behavior & Awareness & Comparative study
- Field work Detail

Chapter – VII Result & Analysis of the work

- Findings
- Conclusion
- Recommendation & Suggestions
- Bibliography

Annexure
 Questionnaire
 JK PAPER MILLS LTD.
JKPUR, RAYAGADA, ORISSA

Certificate from Corporate Guide...

This is to certify that Mr. Nilomadhaba Panda student of Post

Graduate Programme in International Business from Asian
School of Business Management with Registration no:
PGPIB/09-11/28 has under gone practical training in our
organization for a period of 8 weeks i.e.12-04-2010 to 05-06-
2010 as a unpaid trainee under my guidance.

Signature
Mr. Sanjeeb Kumar Samal (Officer HRD)
Asian School of Business Management
BHUBANESWAR, Orissa.

Certificate from Faculty Guide...

This is to certify that Mr. Nilomadhaba Panda is a Student of Post

Graduate Program in International Business, 2009-11, Bearing
Registration No: 28 have been found satisfactory in undertaking the
summer internship project report, entitled “Logistics & Inventory
Management System of JK Paper Mills Ltd.” for the requirement of
PGPIB course curriculum. From, ASBM, Orissa for the academic year
2009-11

Prof. Ashish Mohanty

Professor, ASBM

DECLARATION
I Nilomadhaba Panda do here by solemnly declare that this project
entitled “Logistics & Inventory Management System of JK Paper
Mills Ltd.” is originally done by me is being submitted in fulfilment
of the requirement for the award of a degree of Post Graduate
Program in International Business of Asian School of Business
Management, Bhubaneswar.

This project is my own & is not submitted to any other institution or

published any where before.

Nilomadhaba Panda

ACKNOWLEDGEMENT
I am thankful to the institute for giving me the permission to do my project
work in JK PAPER MILLS LTD.

I have great pleasure in acknowledging my deep sense of heartily gratitude to

Mr. Sanjeeb Kumar Samal (Officer HRD) who has given me an opportunity to
do my summer internship program in JK Paper Mills and helped me by giving
his precious time and guidance to expand my knowledge , and then I am highly
obliged to Mr. Samarendra Nath (Officer-stores), & Mr. M.A.R. Sharma (Asst.
Officer YARD) who has spent their precious time in furnishing me the
necessary information & guidance for the completion of the project and
specially thanks to Mr. Siba Sundar Panigrahy (Quality Control) for giving me
reference & guidance that helped me in knowing the organization.

I express my sincere thanks to the Executives & Managers of J.K. Paper Mills
for providing me the requisite data & information.

I am thankful greatly to all the respondent of my questionnaire for their co-

operation in providing me the necessary information in their replies.

I am also thankful to the esteemed faculty guide Prof. Ashish Mohanty of

ASBM, for his great support & encouragement provided during my summer
internship training.

I lastly thank my parents, friends and well-wishers for their everlasting support.

With deep gratitude

Nilomadhaba Panda
EXECUTIVE SUMMARY
The project is about the “Logistics & Inventory Management System of JK
Paper Mills Ltd.”. The project was completely done by me as directed by my
corporate guide. The process started from learning the industrial objective. A
company like JK Paper Mills Ltd. gives the best quality of paper as the verities
of products are defined further on. As the marketing lines of JKPM “Think
paper think JK” it shows the brand quality of the product. Here the employees
as well as the trainees got a lot of opportunity to learn & expand the knowledge
there of and do their best to improve the quality of the organization.

The objective of this project is to find out the weak links in the inventory
management system and the logistics of JK Paper Mills. This report also
facilitated that how to minimize the cost of production through proper
maintenance of the inventory. I have also given some important information
about the process of optimum utilization of resources of the firm and the
process of input of the raw materials in the firm directly to machines from
logistics i.e. from trucks and racks and not to use unnecessary time and money
for inventory. After the requirement is fulfilled the inventory should maintained.
This will enable the company to take decisions on which mode it should
concentrate more.

The report also gives an idea about the difficulties faced by the employees and
the firm in maintaining inventory & proper logistics channel. I also suggested
some important things where the company should really take some actions on
those issues to facilitate the logistics and inventory system of the mills.
CHAPTER-I
SYNOPSIS
JK PAPER INDUSTRY

INTRODUCTION
The growth of any organization depends on the overall performance such as
production, marketing, Human resource and financial performance of the
organization. The financial performance of any organization reflects the strength,
weakness, opportunities and threats of the organization with respect to profits earned,
investments, sales realization, turnover, return on investment, net worth of capital.
Efficient managements of financial resources and deliberate analysis of financial
results are pre requisite for success of an enterprise. In that working capital
management is one of the major and important areas of financial management. Every
organization required working capital for day/to/day business transactions. Managing
of working capital implies managing of current assets of the company like cash,
inventory, accounts receivable, loans and advances and current liabilities like sundry
creditors, interest payment and provision.

NEED AND SIGNIFICANCE OF THE STUDY

The scope of the study is confined to one of the key areas of “FINANCE,
OPERATIONS & MARKETING” i.e. “LOGISTICS & INVENTORY
MANAGEMENT” which plays a vital role in the manufacturing organization.

The study concentrates on the methods and techniques followed by the “JK PAPER
MILLS” for its “LOGISTICS & INVENTORY MANAGEMENT” and its relative
merits and demerits.

The present study also concentrates on the importance of the “LOGISTICS &
INVENTORY MANAGEMENT SYSTEM” and the study appraises the company
success in meeting requirements of the organization.

Finance is so basic that it cannot be considered a separate function.

Evaluation of financial performance of an organization is continuous processes for
understanding the direction in which the organization is heading so as to plan decide
and implement the future course of action with a view to achieve the present
objectives in the interest other organization. Logistics is always required for an
organization for its distribution channel, so I have selected “logistics & inventory
management” as my topic.

The theory of logistics & inventory management helps the management to understand
and manage the nature of components i.e., work in progress, finished goods. Raw
materials, consumables, stocks & spares, operations & marketing of the organization.

OBJECTIVES OF THE STUDY

 THE STUDY IS ORIENTED WITH THE FOLLOWING OBJECTIVES

 The primary objective was to compare and analyze the selling and
distribution channel of JK paper and to understand the inventory
management system of JK PAPER LTD.
 To familiarize our self with the marketing department and to know
about its selling and distribution function.
 To know various steps aspects of the marketing department such as
Order Execution System, Dispatching System, Warehousing,
Transportation, and Intermediaries in selling and distribution etc.
 To study the statutory and non-statutory matters relating to sales and
distribution.
 To gain the first hand knowledge about the selling and distribution
strategy followed by marketing department.
 To identify the pre requisites of designing the selling and distribution
strategy.
 To know the Marketing & operations of JK PAPER LTD.
 To know the liquidity position of JK PAPER LTD.
 To understand the cash management system of JK PAPER LTD.
 To understand the sales accounting and debtors management system of JK.
PAPER LTD.
 To know the position of current assets and current liabilities of JK PAPER
LTD.
 To know the working capital requirement of the firm.

LIMITATIONS
 More dependence on published data rather actual data, because financial data
are confidential in nature.
 Major activities like procurement of capital items, “A Class inventory are under
control of Head Office.
 Working capital budget is prepared only at head office, no activate of mills is
involved in such budget preparation.
 Less operation in the marketing areas inside the firm as the marketing is totally
done by the head office in Mumbai & New Delhi.
 Due to the confidential issues the data are not published to anybody.
CHAPTER II
PROFILE OF PAPER INDUSTRY &
PROFILE OF J.K PAPER MILL

PROFILE OF PAPER INDUSTRY

WHAT IS PAPER
“Paper” has played a vital role in the development of mankind, since time is immemorial, as
a means of communicat5ion, as the most versatile material for packaging of goods, as a
medium of preserving knowledge for progeny.
Paper is defined as “A mat of cellulose fibers arranged in crisscross fashion with hydrogen
bond and other forces.”

INTRODUCTION
Paper is derived from the word “papyrus”. Today, paper includes a wide range of products
with very different application: communication, cultural, educational, artistic, hygienic and
sanitary as well as storage and transport of all kinds of goods. It‟s almost impossible to
imagine a life without paper. There is a degree of consensus that the art of making paper was
first Discovered in China and its origin in that country is traced back to 2nd century in about
A.D 105 Tsai Lun, an official attached to imperial court of china, created a sheet of paper
using mulberry and other best fibers along with fishnets, old rags and hemp waste. (2nd
Century B.C). Chinese considered paper a key invention and kept this a closely guarded
secret for over Five Centuries until the technology slowly made it way westward. The Arabs
captured Chinese city containing a paper mill in the early 700‟s and from this started their
own paper making industry. (Early 700‟s) Invention of printing in 1450‟s brought a vastly
increased demand for paper. Paper was first made in England in 1496. The first U.S.Mill was
built in 1690, the Rittent House Mill, German town, Pennsylvania.

EVOLUTION OF PAPER INDUSTRY

A courtier named Ts‟ai-Lun, from Lei-Yang in China, was the inventor of paper (not
papyrus) circa 105 A.D. However, the word paper is derived from the name of the reedy plant
papyrus, which grows abundantly along the Nile River in Egypt. Paper is made of pulped
cellulose fibers like wood, cotton or flax. Papyrus is made from the sliced sections of the
flower stem of the papyrus plant, pressed together and dried.

EVOLUTION OF PAPER

3000BC
Of all the writing and drawing materials that people have employed down the ages,
paper is the most widely used around the world. Its name derives from the material
used by the ancient Egyptians, Greeks and Romans: papyrus. Papyrus, however, is one
of those predecessors of paper produced by beating or pressing. They are known by
the generic term “tapa” and are mostly made from the inner bark of paper mulberry.

CLASSIFICATION OF PAPER
 TYPE ENDUSE
Posters Beddi leaves,
Cream wove School books, bank slips etc.
Offset Printing
Duplicating Cyclostyling
Maplitho Photocopying
Cultural paper Super printing Annual reports
Bond paper Letter heads
Art paper Multicolored printing
Chromo paper Labels
Tissue paper Beedi labels, napkins, etc
Ledger paper Accounting Bank
Cartridge Paper Drawing books for artist and
Architects
Packing paper Duplex Board Consumer Goods
Pulp Board /straw board Filter Cigarettes packers etc
Kraft paper Corrugated packing
Micro Paper Cheque and Drafts
Glamine paper Waxed paper for Biscuits
Specialty paper Cellophane Paper Wrapping (colored)
Grease Proof Wrapping
Vegetable parchment Wrapping for butter
Base Boards Tetra packs

GROWTH OF THE PAPER INDUSTRY:

Paper Industry is one of the oldest industries established in India. Before the advent of
machine made paper a sizable hand made paper manufacture flourished in India. The earliest
efforts of mechanizing this industry in our country dates back to the beginning of 19 th
century.

In India, the first paper machine was installed in 1812 at Sorampet (west Bengal). Over the
decades the there was rapid growth in the number of Pulp & paper mills from 17 in the early
1950‟s to 250 Mills in 1980‟s. The domestic output of paper and paperboards grew form 1,
35,000mts in 1951 to 15, 00,000mts in 1985. What followed then is a virtual doubling of
capacities and production was around 25 lakh tons annum and the no, of mills increased to
over 350 in the organized sector.

 Figures speak of a production of 28-lakh tons form 375 organized mills.

 Future projections indicate that by the year 2005 A.D., India requires about 59-lakh
tons per annum of paper and board and there after the growth accelerates.
 The paper industry in India is more then a century old. The industry is predominately
in the private sector. There are about 406 paper mills in India with a total installed
capacity of around 6.2 million tones.

INDIAN PAPER INDUSTRY

Indians were using Copper plates, Iron plates and for the purpose of writing, before paper
came into existence. Papermaking entered our country through Arbs as an art. This art was
restricted to Muslim families as a secret, at that time, which were mainly based and lived
Kashmir & Punjab named Kagazius.

Nothing can be said about the first paper mills in India. But it was said that, William
Warvaty, in 1812 started the first paper mills at sarampur, with the help of Kagazius. In 1832
four machines were installed and introduced in India. “Royal Black Paper Mills” stated at
Hubli in 1870‟s and was merged in Teleghar Paper Mills. Later the remaining Paper Mills are
established one by one.

The per Capita Paper Consumption in India is only 3.62; it is inclusive of Newsprint paper
consumption. According to this it is clear that, we are much backward in paper consumption
that compared to the some developed countries.

Paper Industry supplies various types of Paper, Paper Boards and Specialty Paper to a
number of End users, which includes Government, Education, Companies, Packing, Printing,
News Paper and Magazines etc. Use of paper and paper product is intimately linked with the
cultural and Economic Development of a country. The demand for paper depends on a
number of intangible factors such as Population, National Income, Growth of Literacy spread
of Education, Standard of Living and Industrial production.
CONSUMPTION OF PAPER IN INDIA:
The per capita consumption of paper in India is at an average low level of about 3 kgs
at present. This is one of the lowest in Asia, where the average annul consumption is
around 18kgs per head. On the assumption, consumption of paper will move up to
5kgs by 2009 AD.

DEMAND FORECAST FOR PAPER & BOARD IN INDIA

1995 2000 2005 2010
Population(Million) 901.46 102.36 111.0 119.32
Per Capita Consumption(kg) 3.20 4.40 5.20 6.20
Paper and Board demand (millions Tones) 2.92 4.50 5.80 7.35
SOURCE : In paper International

CAPACITIES AND NUMBER OF PAPER MILLS

CAPACITY NUMBER OF MILLS %
upto-5000 140 Small Scale units 34,5
5001-10000 112 " 27,6
10001-20000 88 " 21,6
20001-33000 32 Medium Scale Units 7,9
33001-50000 19 " 4,7
50001and Above 15 Large Scale Units 3,7

PAPER INDUSTRY IN THE GLOBAL PERSPECITIVE

India‟s per capita consumption per annum as compared to other countries.
COUNTRY CONSUMPTION
USA 334kg
JAPAN 224kg
AUSTRALIA 150kg
HONG KONG 141kg
TAIWAN 134kg
NEW ZEALAND 104kg
SINGAPORE 81kg
KOREA 80kg
MALAYSIA 31kg
CHINA 12kg
PHILIPPINESS 8.5kg
INDIA 2.9kg
MAJOR PLACE IN PAPER INDUSTRY
1. FIVE UNITS OF BALLARPUR INDUSTRIES LTD.
PLACE INSTALLED CAPACITY
i. Illure, Maharastra 40,000 TPA
ii. Ballarpur, Maharastra 1,10,000 TPA
iii. Daulatabad, Orissa 22,000 TPA
iv. Yamuna Nagar 53,868 TPA
v. Gaganpur, Orissa 33,000 TPA

2. Century Paper Mill, Lalkua, Uttar Pradesh

Installed Capacity –1, 20,600 tones per annum
3. N.Ganga Group, Vapi, Gujurat
Installed Capacity –43,500 tones per annum
4. Hindustan News Print Ltd., News Print Nagar, Kerala
Installed Capacity – 1, 00,000 tones per annum
5. Hindustan Paper Corporation ltd., Panchgram, Assam
Installed Capacity –1, 00,000 tones per annum
6. Hindustan Paper Corporation ltd., Nagaon Paper Mills Ltd., Khagajnagar, Assam.
Installed Capacity –1, 00,000 tones per annum
7. ITC Bhadrachalam Paper Board Ltd., Sarapaka, AP.
Installed Capacity – 2, 12,000 tones per annum
8. Nepa Ltd., Nepa Nagar , M.P.
Installed Capacity- 88,000 tones per annum
9. Orient Paper Mills, Amali, M.P.
Installed Capacity- 85,000 tones per annum
10. Pudumjee Pulp and Paper Mills Ltd., Pune, Maharastra.
Installed Capacity – 48,000 tones per annum
11. Satia Paper Mills Ltd., Rupana, Punjab.
Installed Capacity –40,000 tones per annum
12. Sehasayee Paper and Board Ltd., Erode, Tamil Nadu
Installed Capacity – 60,000 tones per annum
13. Star Paper Mills Ltd., Saharanpur, U.P.
Installed Capacity – 1,80,000 tones per annum
14. The Andhra Paper Mills Ltd., Rajahmundry, A.P.
Installed Capacity – 98,500 tones per annum
15. The Mysore Paper Mills Ltd., Karnataka.
Installed Capacity – 1,05,000 tones per annum
16. Titlaghar Paper Mills Ltd., Titlaghar, West Bengal.
Installed Capacity – 66,000 tones per annum
17. The Sirpur Paper Mills Ltd., Sirpur, Kaghaznagar, A.P.
Installed Capacity – 71,000 tones per annum
SORUCE: Indian Press Services News Bulletin.

GLOBALISATION AND ITS IMPACT ON INDIAN PAPER INDUSTRY

India has 16% of the total population but consumes only 1.2% of the total paper produced in
the world. Its per capita consumption is very low around 3.7kg head year. The installed
capacity of the industry is 4.2 million 9 tones of paper and 6,50,000 tones of newsprint.

Even though there are 380 mills registered, only few mills are large with capacity of 50,000
to 9 tones per year ranging from 100 to 600 tones per day. Indian paper industry has potential
but it cannot meet growth in demand unless constraints are overcome. Demand should reach
8kg per head by 2010.

Several mills have closed down and others are running below the capacity. Most mills are in
losses for the year ended march 1998. Since 1995 reduction of import duty on paper, 15% to
20% paper import (especially newsprint) has raised sharply. Frequent industry requests for
restoring higher duties and imposition of anti-dumping have not been acted upon.
In 1995-96 mills typically kept 6-7 days production on head. Inventories often exceeded 30
days output. In 1998, several small and medium sized milled creased for 3-4 months due to
depressed demand. Major Mills like JK Corporations, century, orients and Brajraj Nagar had
been closed during November 1998 due to labour problems.
 OVERVIEW OF JK ORGRANISATION
JK Organization is an association of Industrial and commercial companies, which was
founded in 1918 by late Lala Kamalapatiji Singahania with its headquarters at Kanur (UP).
The initials JK are the grouping of the first letters of the name of Juggilal and Kamalaat,
father and son. The founder grew u in an atmosphere of nationalist favor and imbibed the
sprit of patriotism; he shook off alien dependence in the field of Industrial development of
India.

He marshaled all his energies and activities towards the fulfillment of one central object that
of industrialization of India capital, Indian management and above all Indian know-how.
Equipped with tenacity of purpose, perseverance and foresightedness, he achieved success in
his mission and in a short span of time, between 1921 and 1937 a series of Industries with
diversified interests were setup by him Kamala Ice Factory, JK Jute Mills co. Ltd., JK Cotton
Manufacturers, JK Iron & Steel co. Ltd., against the tough opposition of British
Industrialization and an alien Government.

He died at an early age of 53 on 31st May 1973 and left the legacy of his spirit of patriotism,
swadeshism, and the aptitude for planning and social service to his three illustrious sons, Sir
Padmapatiji Singhania, Lala Kailshpatiji Singhania and Lata Lakshimipatiji Singhania, who
along other family members have Contributed the best of their services to the growth of the
Organization, in a term spirit. To day JK Organization is engaged in diverse Industries e.g.
Cotton Textiles, Jute Textiles, Woolen Textiles Rayon, Nylon and other synthetic and man-
made fibers, Metal engineering, Paper Boards, Sugar, Chemical, Plastic, Cement, Electronics,
Tyres & Tubes, Cosmetic and so on. It has its ramification in seven States of India – Uttar
Pradesh, Bihar, West Bengal, Orissa, Madhya Pradesh, Maharastra and Rajasthan and has
also extended its overseas operations in Indonesia, Mauritius, and Kenya etc.

The Group was pioneer in indigenous manufacture of numerous products. For example, it
was first in India to produce Calico Prints(1933), Steel Bailing Hjoojps(1940),
Aluminum(1944), Engineering Files(1949), nylon-6 (1962), Sodium Suplhixylate
Formaldehyde (1965), TV sets(1968), Acrylic Fibers(1969), DMT Monomer and Polyester
Wastage (1976), and Steel Belted Radial Tyres(1977) and the list goes on.

JK Organization is constantly on the move and has ambitious plans of the expansion not only
in the existing product lines but also in many other for which there are new opportunities. To
those who are working in JK Organization, challenges and opportunities, and meeting
challenges is a way of life with them. Excellence in performance is the motto of JK
Employees.

JK Organization has provided housing facilities for its employees and established a number
of townships at different plants sites. The townships are equipped with modern amen ties
including schools, clubs, markets, recreation centers etc.
The Organization is also conscious of its social responsibilities and in this connection it has
opened schools, Collages, and institutions for higher technical education, modern hospitals
etc. In its endeavor to promote research and development and develop indigenous technology,
various research institutions have been promoted by the Organization. In the filed of sports
and games, many institutions have been established to develop and promote sports.

 The Organization is devoted to promoting the religious and ethical values of India and
has constructed a number of exquisite temples at various places.
 The above- mentioned activities clearly reflect the deep-rooted desire of the
organization to actively play its part in the sphere of nation building activities.
 With this phenomenal growth, the JK Organization is divided into three zones, viz,
Northern zone (Kanpur), Eastern zone (Delhi/Calcutta), and Western zone (Bombay)
for administrative convenience. A Central Board with Sri Hari Shankarji Singhania as
President Pilots the Organization.

JK ORGANISATION‟S EMBLEM

The Hand and Hammer of JK Organization came into use in the beginning of 1943. This
symbol was chosen by Late Lala Lakshmipat Singhania, third son of Late Lala Kamlapat
Singhania, the founder of JK Organization.

The circle denotes industry. 24 teeth in the circle symbolize round – the – clock activity. The
hand and hammer signify labour and tool. The hard grip of the hand stands for the strength
and workmanship.

This emblem signifies the strong belief of the organization in the capability of its employees.

GOVERNMENTS HELP TO JK PAPER :

1. Removal of import duty on waste paper.

2. Increase of import duty to at least 40% on paper.
3. Duty on IWC to be for the coast of modernization and expansion to Attract fresh
investment.
J.K. GROUP OF COMPANIES
 BRIEF OVERVIEW OF JK PAPER MILLS

JK Corp Limited (formerly Straw Products Ltd.) belongs to the Eastern Zone and is one of
the member-companies of JK Organization. JK Corp limited along with JK Raymond‟s,
Bombay are regarded as the flagship companies of JK Organization. It is a multi-product and
multi-unit company.

JK Paper limited was incorporated in the year 1938 and started its operation with the Board
Mill at Bhopal for manufacture of Straw Board. Since then the activities of the Company
have been diversified for time to time.

JK Paper Ltd., comprising of two units JK Paper mills at Rayagada, Orissa and Central Pulp
Mills at Songarh, Gujarat, is the 2nd largest producer of quality paper with turn over
exceeding Rs 650 Crores. Today, JK Paper has total manufacturing output in excess of
1,70,000 TPA pulp and Paper, operating at an average capacity utilization of 115%. In the
year 1962, JK Corp Limited set up this integrated Pulp and Paper MILL in the backward
district of Rayagada in Orissa with an installed capacity of 18,000 tones per annum. Presently
the installed capacity of the Paper Mills and Board Mills Stands at 90,000 tones per annum.
Their Papers and Board enjoy high reputation for qualities which are constantly, strive to
maintain.

JK Paper Mills was setup with an annual installed capacity of 18,000 tones in 1962, JK Paper
Mills has expanded its operations ad now has five Paper Machines with an annul installed
capacity of 1,70,000 tones of Writing and Printing Paper of different grades and varieties.
Production of Paper and Paper Boards of high quality has been the forte of JK paper mills.
This image for quality has sustained the Mills so far and has contributed to its own growth.
The Mills works to carve a niche for its especially paper in the market.

PRODUCTION CAPACITY OF JK PAPER MILLS

MACHINE YEAR OF INSTALLED
INSTALLATION CAPACITY, TPA
PAPER MACHINE-I 1962 35,000 TPA
PAPER MACHINE-II 1970 4,000 TPA
PAPER MACHINE-III 1972 26,000 TPA
PAPER MACNINE-IV 1989 8,000 TPA
PAPER MACHINE-V 1994 16,000 TPA
TOTAL 90.000 TPA
MISSION
To achieve and maintain brand leadership and products and services excellence in the paper
and board business through continuous technology up gradation to provide maximum
satisfaction to customer enriches employee life and maximize return on investment while
fulfilling societal obligations.

QUALITY PROLICY OF JK PAPER MILLS

To provide consistent products & services at optimum cost for customer delight through
TQM approach.

CORE VALUES
 Caring for people.
 Integrity including intellectual honesty, openness, fairness & trust.
 Commitment to excellence.

OBJECTIVES OF JK PAPER MILLS

 Sustained growth optimizing production potential in least possible time.
 Leadership in niche market & customer-orientated marketing.
 Internationalization of business.
 Cost competitive news with international bench-marketing.

STRATEGIC ORIENTATION OF JK PAPER MILLS

 Strategic Planning & Strategic Objectives.
 Quality assurance system.
 Continuous improvement in Productivity, Quality, Cost Reduction & Customer
service.
 Technology up gradation.
 Process 1 system development in all functions such as production, Maintenance.
 Marketing, Finance Management & inventory Management etc.
 Adopting modern management practices (TPM, JIT) * People involvement.

ENVIRONMENT POLICY

JK Paper Mills, Jaykaypur, Rayagada and Orissa (India) are committed to:
 Comply with applicable Environmental Legislations. * Prevention of pollution.
 Continual improvement in Environmental Performance.
 Afforestation through Social and farm forestry supported by colonel technology.
 Cleaner technologies and processes & Conservation of Resources.
 Reducing pollutants in discharged water * Reducing particulate emissions.
QUALITY ACCREDITATION:
First emphasis is quality product manufacturing is assured. All exports are checked of their
quality as per specifications laid down. Supplier considers no substandard materials even at
discount. J.K.P.M. is the first Indian paper mill to receive the ISO 9001(1994) certification. It
also received ISO 14001 for environmental friendly in the year 1998.

ISO –9000 QUALITY SYSTEM

JK Paper mills are the first Indian Paper Mills to receive the ISO-9000(1994) certification.
The ISO-9000 standards define an effective quality system with reference to Organizational
structures and responsibilities, processes and procedures and the documentation and
implementation of Quality Policy.

EXPORT
Export of selected grades of paper is made to Australia, Malaysia, Singapore, Sri Lanka,
Bangladesh, Africa and middle east, UK etc. The company is dispatching its consignment
through water transport. Normally the company is dispatching the consignment from its port
located at Chennai.

TPM POLICY
In continuous pursuit on organizational excellence by maximizing overall plant effectiveness
and achieving total customer satisfaction, the organization is committed to
 Achieve zero accidents, zero defects and zero breakdowns.
 Continuous reduction in cost of production.
 Involve all employees in systems and process improvement through teamwork.
 Create a clean and safe working environment.

PLANT LOCATION- JAYKAYPUR

Jaykaypur is located on the slopes of the Eastern Ghat Plateau in the southern part of Orissa
bordering the state of Andhra Pradesh and its geographical position 83-25‟ East Longitude
and 19-10‟ North Latitude. Its average height above the mean sea level is 758 feet.

The township has a population of about 25,000 and has a self-sufficient marketing complex,
including Employees Multi-purpose Co-operative society, a sub- post office and Telegraph
office, a branch post office, a police outpost and has two banks viz., State Bank of India and
Indian overseas Bank.

The township has two schools and places of worship of all major faiths. Singapur Road
Railways Station on the Raipur, Walter Section of south eastern Railway station and is at a
distance of 2km from the plant and all passenger and express trains halt here.
JK Paper Mills, JAYKAYPUR 765017, DIST Rayagada, Orissa (India)
The nearest town is Rayagada, which is the district headquarter and is located at distance of
about 10km form the mills.

Rayagada District has a predominance of tribal population. Therefore, the villages in and
around the mill are inhabited mostly by the adivasis, who too are assimilating the Industrial
culture and thus coming into the national mainstream.

MAJOR DEPARTMENTS IN JK PAPER MILLS

1. Pulp Mill 12. Power House

2. Stock Preparation 13. Civil Department
3. Paper Machine 14. Technology Development
4. Paper Finishing House 15. HRD & Personal
5. Finishing House 16. Township & Transport
6. Soda Recovery 17. Works office
7. Quality control 18. Accounts
a) Central laboratory 19. Stores & Yard
b) Pulp Paper Laboratory and 20. Sales & Stock
Pollution control
8. Mechanical Engineering 21. Security
9. Electrical Engineering 22. Dispensary
10. Instrumentation 23. Safety & Management Services
11. Planning & Designing

JK PAPER MILLS PRODUCT‟S RANGE

SURFACE SIZED MAPLITHO AND SURFACED SIZED SUPER HIGH

Super grade of writing & printing paper with high finish and brightness.

A New paper specially developed for Laser Printers called “JK Laser” was introduced for the
first time in the Country. Their Mills continue to be the largest manufacture of Copier Paper
in India.
JK PAPER MILLS PRODUCT’S
BRIGHT MAPLITHO
JK COPIER A Paper most suited in all Xerox Machines.
SURFACE SIZED PULP BOARD
Super grade of Board for Printing &
&SURFACE SIZED SUPER HIGH
Poaching with high finish and brightness.
BRIGHT PULP BOARD
CHACELLOR BOND A superior variety Bond and Writing.
JK BOND A normal grade of Bond Paper.
Writing and printing paper with good finish
WOOD FREE PRINTING
and brightness meant for export market.
A lower grammar writing & Printing paper
ARIMAIL
used for Bills Books as well as Airmail.
JK LASER PRINTING Suitable for Laser Printer.
TITANIUM DIOXIDE LOADED TISSUE
A better grade food packaging paper.
PAPER
OPAQUE PRINTING PAPER A common food packing
A high bright board supplied to Cigarette
WHITE OFFSET BOARD
Industries.
Catering labels and quality printing jobs
VARNISHABLE MAPLITH
with varnishing.
Used of Yellow Pages in Telephone
YELLOW PRINTING Directory as well as for other quality
printing.
WAX MATCH TUSSUE Used for Match Sticks of better quality.
OFFSET PRINTING (NATURAL
A paper used for Coating base.
SHADE)
BLACK CENTERED ART BOARD For Playing Cards.
INVORY BOARD A Superior Coated board used for
ENAMEL BOARD A Superior coated board used for Visiting.
A Coated Board used for Printing
CHROMO PAPER
Magazine covers.
A LOOK AT SOME OF JK BRANDS
JK PAPER PRODUCTS:
JK Copier

Suitable for any job on Office printers - Inkjet and LaserJet, Photocopiers and
Multi-functional Devices.

JK Easy Copier

Ideal for Photocopying.

JK Excel Bond

Ideal for Letterheads, Brochures, Certificate, Presentations, Project Reports,

Envelopes, Pamphlets, Manuscript writing, Corporate Stationery.

JK Copier Plus

Ideal for Quality Photocopying, Project Reports, Resumes, Inkjet & Laserjet
printers, Presentation copies or any aesthetic job.

JK Savannah

Suitable for Corporate Stationery, Reports, Certificates, Presentations,

Resumes,InvitationCards, Hotel/Airline Menu Cards, Personal Letterheads.

Sparkle Copier

Ideal for photocopying & desktop printing.

JK COPIER IS THE STRENGTH OF JK PAPER MILL.

Details of the Brand Products

JK Easy Copier

 The leading economy grade photocopying paper with excellent run

ability on all machines.
 Features
 JK Easy Copier improves the efficiency of copier operations.
 Increasing the drum life of the copier machine.
 Ensuring smooth flow of paper into the copier machine preventing jamming.
 Excellent performance on all types of copier machines- high and low speeds,
single path or multi path.
 Long lasting shade.
 Good photo imaging.
 Designed for both single and double sided copying.
 Cut and packed with automatic machines- ensuring correct sizes and number of
sheets.
 End uses
Photocopying and desktop publishing

JK COPIER
 Excellent performance on all types of laser printers.

 Features
 Designed specially for single and multicolor
prints in laser printers.
 Ensures good picture quality - great for
downloading from the net.
 Crisp print quality
 Long lasting whiteness.
JK Excel Copier
 JK Excel Copier is a super White Water mark Bond Paper.
 Features
 Superfine and ultra white 97+ brightness paper.
 Long lasting whiteness.
 Excellent whiteness.
 Ideal for resumes, Inkjet, Laser printing, corporate &
personal letterheads.

 End uses
Photocopying and non-touch printing.

JK Copier Plus
 Super white multi purpose premium grade copier paper
 Features
 Designed specially for high resulance printing..
 Ideal for Desk top multi-color printers.
 Ensure very good crisp print quality.
 Smooth surface
 Everlasting Whiteness

QUALITY ASSURANCE
First emphasis on Quality Product manufacturing is assured. All inputs are checked
for their quality as per laid down specifications. No sub-standard materials are
considered even at discount by supplier. All intermediate products are checked at
regular intervals and action is expedited in case of non-conformance. Final product is
rigorously inspected / tested to ascertain conformance to Quality Standards.

All the specifications have been evolved from statistical data analysis of actual result
and the same is subjected to alterations as per consumer‟s end. Any product no
conforming to the specifications is liable for rejections. Periodical evaluation of the
properties of the product is done in order to verify the process capabilities.

Average Outgoing Quality (AOQ) of the finished products is evaluated based on

actual checking and defects generated. This is to quantify inherent defects escaping to
the consumers. A regular checking creates an all round alertness amongst the
Finishers. For bulk consumers (Reel order) 100% checking is ensured for a better
AOQ.We have 3(three) Laboratories Viz., Central Laboratory, Pulp and Power control
Laboratories well equipped with latest testing instruments for controlling the quality
of incoming and outgoing products.
CUSTOMERS SERVICE
Regular feedback for the market is fed to the Mills by the Marketing Department. In case of
any problem, technical service is provided to overcome the problem arising at conversion/
consumer‟s end. Interaction between the technocrats of the Mills and the
Wholesalers/Consumers is the regular feature of their Organization. Arrangements are made
fodder the visit of wholesalers, Distributors and Customers to Mills for direct discussion of
the problems faced by them for further quality improvement. Technocrats are very often
deputed to the converters / consumers/ wholesalers to gain direct knowledge about the
problem arising at market. Facilities are open to their bulk consumers to be present at mills
during manufacture of their product up to their satisfaction. Interaction is also encouraged for
suppliers of the inputs and suggestions from the technocrats of their Mills with regard to
quality improvement are made for betterment of the products.

PRODUCT MIX OF JK PAPER MILLS

A Product Mix consists of all the product lines and items that a particular seller offers
for sale. J.K.P.M. being a producer of quality papers, offers varieties of papers. Here
in the machine itself the various products mixes are made.
The product mix of J.K.P.M. is as follows:

VARIETY OF PAPER BUDGETED PRODUCTION (IN A YEAR)

JK COPIER 48176
PULP BOARD 7873
SPARKEL COPIER 2043
JK COPIER PLUS 613
JK EXCEL BOND 1224
SS MAPLITHO(SHB) 25598
JK EVERVITE 3216
POSTERS 5373
JK BOND 1832

JK COPIER PULP BOARD SPARKEL COPIER

JK COPIER PLUS JK EXCEL BOND SS MAPLITHO(SHB)

JK EVERVITE POSTERS JK BOND

JK PAPER LIMITED (Formerly JK Corp Limited)
Formed in 2001 by amalgamating the JK Paper Mills at Rayagada and the Central Pulp Mills
at Songarh, Gujarat, to become India‟s 2nd largest producer of quality paper with a turn over
exceeding Rs. 650 crores.
JK PAPER LIMITED

JK PAPER MILLS CENTRAL PULP MILLS

JK MISSION
To achieve growth and leadership through the JK brand equity, customer obsession,
technology innovation and cost leadership, with a clear focus on environment, while
continuously enhancing shareholders value.

JK VISION
To be a dynamic benchmark and leader in the Indian Paper Industry.

JK QUALITY POLICY
“To provide „customer Delight‟- both internal and external through products and
services at lowest cost by continuous Improvement in processes, productivity, quality
and management systems”

JK CORE VALUES
 Integrity
 Trust
 Caring for people.
 Commitment to excellence

PERFORMANCE REVIEW OF THE J.K. PAPER MILLS LTD 2010.

During the year under review, the company achieved a hues turnover then the
previous year. The operating profit (PBIDT) increased by 14.8% to Rs.133.39 crores,
accompanied by a healthy growth of 42.6% in cash profit at Rs. 97.26 crores.
Production of paper of market pulp at 1.71,849 tones (previous year 1, 64,972tones),
was the highest ever achieve by the company. The overall capacity utilization
improved further to 115%. During the year the company paid interim dividend on
preference shares amounting to Rs. 15.59 crores at specified rates.
CHAPTER III
LOGISTICS AND DISTRIBUTION SYSTEM
OF J.K.P.M.
INTRODUCTION :
Logistics is the all-important link between a manufacturer and his customer. The
concern is for designing a distribution strategy to facilitate the smooth physical flow
of products from the manufacturer to the place from the customer can buy them.

Logistics channel of distribution :

Manufacturer Manufacturer Manufacturer Manufacturer

Or Or Or Or
Producer Producer Producer Producer

Retail Wholesale Agents

Retailer Wholesaler

Retailer

Consumer Consumer Consumer Consumer

( direct ) ( indirect ) ( indirect ) (indirect )

LOGISTICS (SELLING AND DISTRIBUTION) AT J.K.P.M.

The word with dynamic environment is increasingly depended upon the communication
information, and its transfer. Hence paper play upon a vital role as a media of it. One can
easily imagine what sort of jeopardy this world would have been if by some celestial magic
paper just vanishes.

In present scenario of Market. Selling and Distribution channel has to be given more
importance. It is one of the broad decision areas of the marketing strategy.

Distribution channel is usually understood as the channel in which the title of the goods
(ownership) flows from the manufacturer to the consumer of goods. This is different from
“physical distribution “which signifies the “Physical flow of goods”.

Distribution channel is a set of interdependent organization involved in the process of making

a product or services available for a product or service available for use or consumption by
the consumer or business user. These are the simplest collection of firms tied together by
various flows.

The distribution channel moves the goods and services from producer to consumers. It
overcomes the major time, place, and possession gaps that separate goods and services from
those who would use them.

In J.K.P.M. they don‟t have the separate provision for the Marketing department the
functions related to marketing is been taken care by the Sales Department. The following are
the some of the functions of marketing which is been performed or discharge by the Sales
Department.

 Receipt of order and execution.

 Production programme.
 Manufacturing and packaging.
 Dispatches.
 Arranging for the selling and distribution.
ORDER PROCESSING AND EXECUTION SYSTEM:-

DIRECT INDENT DIRECT INDENT DIRECT INDENT

FROM FROM FROM
WHOLESALER WHOLESALER WHOLESALER

MILL

SCRUTINY AS PER
LAID DOWN
PROCEDURE
ACCEPTANCE OF
ORDER

ORDER CONFIRMATION

PRODUCTION
PROGRAMS

MANUFACTURING
AND

DISPATCHES

DIRECT TO CONSUMER TO
TO THE THROUGH BRANCHES WHOLESALER
CONSUMER AMD CPMSOGMEMT
PRODUCTION PROCESS:
After the orders are been scrutinized the next step of the process is to issue production letter
containing the order‟s size, specification etc.

The production department now manufacturers the product as per the specifications by the
sales department. The following is the Production Process of the J.K.P.M.

First the raw material (Bamboo and Hardwood ) are introduced in the Chipper Plant. The
raw-material are come out in chips of different sizes. The chips are graded into acceptable
and unacceptable chips. The unacceptable chips are recycled back to the chipper plant and the
acceptable chips are stored in the silos. From the silos chips are introduced to the digester
where chips are cooked by addition of chemicals. Here the chips are reduced to raw-pulp
which is introduced into the blow tank where the washing, bleaching, screening is done to get
the pulp. Then the pulp is sent to the stock preparation where it is refined and desired colors
are added to the pulp. Than it is introduced in to the paper machine to get different type of
papers.

FLOW DIAGRAM:-

Raw-materials Chipping Digesting Screning

Washing

Bleaching

Passed to paper Addition of Refined Pulp

machine Chemical

Screening

PACKAGING:-
Packaging is the activities of designing and producing important tool. Packing is required to
protect the products form damages and to place the product in a right and sage condition. It
performs many sales task from attracting attention to describing the product, to making better
sale of the product. JKPM adopted the following method of packaging for safe delivery of the
product.
PACKAGING MATERIAL:
 Wrapping paper use for Reams packing.
 Reinforced plastic Fabric pieces used for Bundle packing.
 Plain HDPE cloth used for Reels and Bundle packing.
 Laminated wrapping paper used for copier packing
 Cartoons used for packets of copier packing.
 Bop tape for cartoon packing.

TYPES OF PACKING :-
The types of packing varies according to different variety.

 For copier paper 500 sheets are packed by a laminated wrapping paper. JKPM printed
(or modi Xerox printed in case of goods going to the modi Xerox company) then
packets of 5 or more are again packed in a cartoon according to the size of the
cartoon.
 For other large size writing, printing and packing paper are primarily packed by a
wrapping paper which is called reams. The number of sheets in a ream may be
150/250/400/500. Then number of reams is again packed by a plastic fabric pieces
which is called bundle.
 But in case of goods going for export, reams are packed into pallets made of wood.
Then a polythin cover round the palettes.
 In case of Reels they are packed by plain HDPE cloths.

MODE OF PACKING:
For packing of paper both the system Manual and Automation are exist in the company.
Automation system used for the packing of copier paper. All the reams, Bundles, Reels are
packed by manually.

SUPPLY OF PACKING MATERIAL:

Except wrapping paper all the other packing materials are supplied by outside agency on
contract basis. Wrapping paper are produced by the company itself.

The information mart on Reams and bundles:

 Identification of the mark of mills

 Commodity name
 Variety name
 GSM
 Size of sheets
 Date of packing
DISPATCHES:
Creating a customer and creating a product do not complete the process of marketing.
Delivering the product is an equally important part of the process. Once the paper are ready
after packing the next step is to plan for the dispatches as per the specification received at the
time of receipts of orders. while planning for dispatches the most important decision is to be
considered is the distribution channel.

Logistics & distribution channel are the means and way by which the product moves from
the producer to the consumer. The physical distribution system is an important marketing
devise which calls for planning, implementing, and controlling the physical flow of goods
and services from the points of origin to the points of consumption in order to satisfy the
consumer at a profit.

The dispatch planning can be for sale propose or for branch depots transfers. Since paper is a
mass consumption item usually mass distribution strategy are employed in paper industry.
JKPM has a distribution net work employing 118 odd wholesaler and 5 consignment agents
having numerous dealers and retailers under their fold.
Depending upon the purchasing pattern consumers are divided into 5 categories.

1. Direct consumer.
2. Wholesaler.
3. Consignment agent.
4. Branch/depots
5. Dealers
6. Retailers
7. Export Buyers

Transportation :

JKPM follows 3 modes of transportation for shifting of its products to its warehouse.

 Rail
 Road
 Water(pots)

For delivering goods to branch office consignment agent and wholesaler, company needs
transportation facility. Trucks and rail are two way to transportation. Among these two the
cost incurred by rail is less than the road transportation. But the process of railway is very
lengthy. They take much more time to deliver goods to destination. On the other hand unless
and there is a big quantity to export is is meaningless to contact railway. So maximum
wholesalers, consignment agent prefers the road transport by trucks.
The water way are used only for the export purpose.
Since the road transportation is the most preferred mechanism for physical distribution any
commission and commission on the part of the transporters will have fare reaching
consequences. Hence JKPM identifies transporters and enters into formal agreement for
ensuring performance guarantees and commitment. For induction as approved transporters
the following criteria have to be fulfilled.

 Sound financial position

 Past experience with sister concerns
 I.B.A approval ( Indian banker association )
 Net work of braches
 Infrastructure facilities at the transshipment points station
 Execution of bank Guarantee worth 1.5 lakhs retailer deposit of equipment
amount in ash.
 The transporter have to deposit an amount of Rs. 4,00,000 as security. Which the
transporters will entitled to a interest @ of 8% p.a. ( if transporter deposit the
security in cash ).

The transportation agreement apart form selling out the operational norms reflect a carrot
and stick approach to ensure better services to out terms and condition.

Evaluation of performance :
Performance of transporters are periodically reviewed and they are given business as
per the vendor rating given to them. While doing so customer preferences are kept in
mind. Occasionally visits to the transshipment point are paid to assess the
infrastructure facilities required for safe and damage free delivery of consignment.

SUGGESTIONS :
Containerization may be opted as a better option when the quantity or volume of
production is too high and at the same time where the time and safety is of utmost
important. The other option for transportation is creation of hubs to minimize the
transit time. The hubs will also provide the following benefits :

1) Better supervision of material

2) Minimization of damages of finished goods
3) Improve the customer satisfaction
WAREHOUSING AND INVENTORY

Every company must store its goods while they wait to be sold. The company must decide on
the best number of stocking locations. JKPM had 5 branches and 5 consignment agent and
they hold stock with them. Company has its own warehouse. These stocking helps JKPM to
deliver goods more quickly to customer.

JKPM has the provision of verifying the stock at the end of each day. And the concerned the
person is required to check the physical balance in hand with that shown by the books of
account and rectify the books of accounts.
The documents maintained with regard to the warehousing are :

 Stock card / bin card

 Receipt / godown check
 Physical verification of the stock
 Stock account

Whenever any stock is shifted to the warehouse it is to be recorded in the stock care or also
called as bin card. Record in the bin cards are made lot wise or size wise. Bin card shows the
quantity received dispatched and balance in hand. The stock here refers to the finished
production but not the raw- materials nor the work-in-progress. The account book maintained
with relation to the warehouse is known as “stock account”, which is to be maintained by the
company as per the requirement of the central excise rules.
The requirements for a warehouse are:-
 It should be properly located.
 The warehouse must be properly insured.
 The warehouse must have sufficient fire fighting equipment.
 Sufficient storage apace.
 The stocks are need to be properly placed in a proper order.

EXPORT BUYERS :
Normally buyers from the outside countries place orders through Head Office, New Delhi.
After receiving the dispatch advice the procurement is been send to the overseas buyers from
chennai port. JKPM export around 12% to 15% of the total production to other countries.
There are almost 20 to 25 countries who purchase paper product from the mill. The number
of such parties are : 453. selected parties has to deposit a sum of money as a security in favor
of company.

Quantity of Export:-
In the financial year 2005-06 JKPM exports 7877 Metric Ton of paper.
In the financial year 2006-07 JKPM exports 6329 Metric Ton of paper.
In the financial year 2007-08 JKPM exports 8323 Metric Ton of paper.
In the financial year 2008-09 JKPM exports 11299 Metric Ton of paper.
In the financial year 2009-10 JKPM exports 10296 Metric Ton of paper.
The name of the countries who are often buyer of the company are as follows :

SRILANKA, BANGALADESH, JORDAN, MALAYASIA, SOUTH AFRICA, NIGERIA,

SUDAN, GERMANY, SPAIN, UAE, EGYPT, KENYA, AUSTRALIA, MALTA,
UGANDA, SINGAPORE, NETHERLAND, CYPRUS, YAMEN, TANZANIA, JAPAN,
SURIA, GHANA, MORROCO, MORITIOUS.

Abu Dhabi S o u th A fric a A u s tra lia A u s tria

B a n g la d e s h B ra z il Dubai E gypt
E th io p ia G hana Ira n J o rd a n
K enya Lebanon L ib y a M a la y s ia
M a ld iv e s M a u ritiu s Nepal N ig e r ia
O m an S h a rja S in g a p o re S o u th K o re a
S ri L a n k a S y ria T u rk e y Uganda
Yem en

THE ABOVE WORLD MAP SHOWS THE COUNTRIES TO WHICH JK PAPER IS EXPORTED.
CHAPTER IV
THEORETICAL ASPECT OF INVENTORY
MANAGEMENT
INTRODUCTION:
Inventories constitute the most significant part of current Assents of a large majority of
companies on India. On an Average Inventories are approximately 60 percent of current
Assets in public Ltd. Companies. Because of the large size of the Inventories maintained by
the firm it is requested to efficiently & effectively management over Inventories. A
„Excessive‟ Inventory carries a unfavorable impact on a company‟s profitability.

NATURE OF INVENTORIES:
The various forms in which Inventories exist in a manufacturing companies. They are:
 Raw material.
 Work-in-process.
 Finished goods.
 Stores & Spares.

Raw Material: These are the basic inputs that are converted into finished product through
the manufacturing process. These are those units which have been purchased and stored for
future production.

Work-in-process: These are the semi finished product. They represent the products that need
more work before they become finished goods.

Finished goods: These are the completely manufactured products which are saleable.

Stores & Spares: These are the material which don‟t enter directly in the production but are
necessary for the production process. Ex. - Soap, brooms, oil, fuel, jute, bulbs, etc.

NEED TO HOLD INVENTORIES:

Maintaining inventories involves with many costs & also it causes to blocking of
companies fund. So there may be a question arise that why do company hold
inventories?
There are three general motives for holding inventories:
Transactional motive: To facilitate smooth production & sales operation.
Precautionary motive: To guard against the risk of unpredictable changes in demand
and supply forces & other factors.
Speculative motive: Influences the decisions to increase or reduce inventory levels to
take advantage of price fluctuations.
OBJECTIVE OF INVENTORY MANAGEMENT:
The objective inventory management should be to excessive inadequate levels of inventories
& to maintain sufficient inventory for the smooth operation of sales & production. So the aim
of the inventory management is

 To maintain a large size of inventory for efficient & smooth Production &
uninterrupted sales operations.
 To maintain a minimum investment in inventories to maximize profitability.

An effective inventory management should-

 Insure a continuous supply of raw material to facilitate uninterrupted

production.
 Maintain sufficient stocks of R.M. in period of short supply &anticipate price
change.
 Maintain sufficient finished good inventory for smooth sales operation &
efficient customer service.
 Minimizing the carrying cost & time.
 Control investment in inventories & Keep it at an optimum level.

COST & RISK ASSOCIATED WITH INVENTORIES:

The costs associated with inventories are mainly divided in to 2 costs.

I. Capital cost: maintaining of inventory results the blocking of the financial

resources. These resources may be arranged from the own or out side
resources. In the case of sawn resources there is an opportunity cost in the axes
of out side resources the firm has to pay interest to the outsiders.

II. Storage or handling cost: Cost incurred for manufacture a given level of
inventory is called carrying or handling cost.
The storage or handling or carrying cost includes warehousing, handling, clerical,
insurance, deterioration and obsolescence.
Risks associated with inventories are mainly divided in to 3 risks:

1. Risk of price decline.

2. Risk of obsolescence.
3. Risk deterioration quantity.
QUESTIONS INVOLVED WITH “TO MANAGE INVENTORIES
EFFICIENTLY”.
The two important questions for effective inventory management are-
1. How much should be ordered?
2. When it should it be ordered?
st
The 1 question, How much to ordered, relates to the problem of determining economic
ordered quantity i.e. EOQ.

The 2nd question, when to ordered, relates to the problem of determining re-ordering point.

SELECTIVE INVENTORY CONTROL:

The inventory of a firm consists of a large number of items of various nature, size &
value. It is not possible to exercise the same degree of control over each and every
item of inventory. To get optimum benefits for the firm we have to select all the items
and to categories them into different classes.

For this purpose, there are different methods of selective control which are
enumerated as under:

1) ABC Analysis (Always Better Control Analysis).

2) VED Analysis (Vital, Essential & Desirable items Analysis).
3) FNSD Analysis (Fast moving, Normal moving, Slow moving &
Dead moving item Analysis)
4) HML Analysis (High, Medium, Low volume Analysis)
5) SDE Analysis (Scarce, Difficult & Easily available items
Analysis)
6) GLF Analysis (Govt., Local or Foreign suppliers Analysis)
7) VIR Analysis (Vital, Important, Routine Analysis)
8) MTR Analysis (Material, Turn over, Rate Analysis)
9) SOS Analysis (Seasonal & Off Seasonal Analysis)

Of the above methods of selective control, the following are the most popular ones,
which are explaining as under.
ABC Analysis:
This method of selecting the items of stock for control is known as Always Better Control
method. In this method, various types of goods are classified into three classes.

i.e. „A‟ class

„B‟ class
„C‟ class
„A‟ class goods
Goods constituting higher percentage of value but lower percentage of items are included in
„A‟ class.

„B‟ class goods

Goods of the medium nature are both the respects of the value & items are grouped under „B‟
class.

„C‟ class goods

Goods constituting lower percentage of value but higher percentage of items are included in
„C‟ class.

After classification, control is exercised over them. Here „A‟ class goods find more attention,
„B‟ class goods normal and „C‟ class goods find attention. By doing so the cost of inventory
control is minimized.

Characteristics of different classes:

„A‟ class:
 It requires strict control.
 It needs frequent control.
 It needs frequent review at short interval.
 It requires very low level of safety stock.
 It needs centralized purchasing.

„B‟ class:
 It requires moderate control.
 It needs moderate lead time.
 It requires low safety stock.
 It needs both centralized & decentralized purchasing.

„C‟ class:
 It deserves loose control.
 It can manage with long lead time.
 It requires more amount of safety stock.
 It needs de centralized purchasing.
VED Analysis:
In this method of selective control, inventory items are classified in descending order of their
criticality as under-
 Vital items.
 Essential items.
 Desirable items.
Vital Item:
The items, the stock out of which even for a moment hampers production for a considerable
and the cost of stock out of which in very high are considered as vital items.
Essential item:
The items, the shortage of which cannot be managed for more than a day on two & the cost of
stock out of which is higher are known as essential item.
Desirable item:
The items, the absence of which for even a week dose not hamper the production work & and
the cost of Stock act is not very much are known as desirable items.

SDF Analysis
We classified the item in 3 categories.
 Scarce or „S‟ item.
 Difficult or „D‟ item.
 Easily available or „E‟ item.
In this analysis scarce items need more attention as compared to other two items.

TECHNIQUES OF INVENTORY CONTROL:

After the items are classified into various classed under any of the method of
selective control mentioned above, various techniques are applied for proper
control of inventories.
The techniques are:
 Measurement of different levels of the inventory.
 Inventory turn over ratio.
 Measures of Economic order quantity i.e. EOQ.
 Selection of Replenishment system.
 Codification.
 Standardization.
 Simplification or variety reduction.
 Computerization
 Theory of probability of demand forecasting.
 Review of surplus& dead stocks.
 Reporting.
 Perpetual inventory system.
 JIT control system.
MEASURES OF DIFFERENT LEVELS OF INVENTORY:

There are different levels of stocks which are to be carefully ascertained for effective
inventory control under different situation.

 Minimum stock level:

It is the level below which the stock of an item should not be allowed to fall. It is
minimum quantity of the material which must be kept in store at all time.
For determination of the minimum level of stock, the following model is to be applied.

Minimum stock level = Re-ordering level – (Normal use X normal re-order period)

 Maximum stock level:

It is the quantity beyond which the stock of particular item should not be allowed to
stand

Maximum stock level = (Re- ordering level + Re-ordering quantity) –

(minimum use X minimum re-ordering period)

It is the maximum quantity of an item which be held at store at any time to avoid the
over stocking & unnecessary blockage of capital are avoided.

 Ordering level:
It is the level of stock at which the production cycle is taken to be complete & fresh
orders are made for replenishment of the stock for starting with an other production
cycle

Ordering level = minimum level + consumption during the lead time

 Re-order level:
It is the level of stock at which an order to be placed when stock reaches a particular level.

Re-ordering level = maximum consumption X maximum re-order period

Or
Re-ordering level = safety stock + (avg. daily usage X avg. lead time (in days)
  Danger level:
This refers to that level of stock at which normal issues of the material to the
production center are stopped.

Danger level = avg. consumption X maximum re-ordering period for emergency purchases.

 Avg. stock level:

It is the level at which the stock of an item ordinarily remains throughout a production
cycle.

Avg. stock level = minimum level + ½ re-order quantity

Or
(Minimum level + maximum level)/2.

 Safety level:
It is the level of stock at which there will be no danger for the firm an account of
sudden rise in the demand for the goods.

Safety level = maximum demand during the maximum lead time – avg. demand during the avg. lead
time.

INVENTORY TURN OVER RATIO (ITR):

I.T.R. is calculated to indicate whether inventories have been used efficiently or not.
I.T.R indicates the No. of times the stock has been turn over during the period &
evaluates the efficiency with which a form is able to manage its inventory.

I.T.R. = Cost of goods sold or Net sales a

Avg. inventory at cost Avg. inventory at cost

 Inventory conversion period is calculated to see avg. time taken for clearing the
stocks.

Inventory period = 365 / ITR

MEASURES OF ECONOMIC ORDER QUANTITY:
One of the measure problem is “how much inventory should be added?” When inventory is
replenished?
This problem is called order quantity problem & the task of the firm is to determine the
optimum or economy order quantity or economic lot size.
Determining an optimum inventory level involves two types of cost i.e.-
 Carrying cost.
 Ordering cost.
Carrying cost:
Costs incurred for maintaining a given level of inventory are carrying cost. This includes:
 Warehousing
 Handling
 Clerical & Staff
 Insurance
 Deterioration & Obsolescence.
Carrying costs vary with the inventory size.
Order size increases carrying cost increases.

Ordering cost:
Costs incurred for acquiring inventory from suppliers are called ordering cost. This includes:-
 Requisition
 Order placing
 Transportation
 Receiving, inspecting & storing
 Clerical & staff
When order size increases the ordering cost decreases.
The economic inventory quantity is that inventory level which minimizes the total of ordering
into carrying cost.

Approaches to determine EOQ

To determine the EOQ we can follow two approaches.
 Order formula approach.
 Graphical approach.

Order formula approach:

Suppose the ordering cost per order „O‟ is fixed, „A‟ be the annual demand and „Q‟ be
the order size. Then the No. of orders will be A/Q & the total order cost will be
 TOC = AO/Q
Let us further assume that carrying cost per unit, „C‟ is constant. the total carrying cost will
be the product of the avg. inventory units & the carrying cost per unit, if „Q‟ is the order size
the average inventory will be –
Average inventory = Q/2
& total carrying cost will be = Average inventory X per unit carrying cost
T.C.C. = (Q/2) X C
The total inventory cost, then, is the sum of the total carrying & ordering costs:
Total cost = T.C.C + T.O.C
Total cost = ((Q/2) X C) + (AO/Q)
This show, for a large order quantity the carrying cost will increase, but the ordering cost will
decrease on the other hand, the carrying cost will be lower & the order cost higher in the
lower order quantity.
So to obtain a formula for EOQ the total cost equation is differentiated with respect to Q &
setting the derivative equal to zero, we get-
Economic Order Quantity =

2 X quantity required X ordering cost

Carrying cost

i.e EOQ = 2AO

C
Where,
A = Annual demand
O = Ordering cost
C = carrying cost

GRAPHICAL APPROACH:
The EOQ can also be finding out graphically. In the following graph the cost i.e. carrying
cost, total cost & ordering cost are floated on vertical axis & horizontal axis are used to
represent an order size.
We note that total carrying cost increases as the order size increases because a large inventory
to be maintained.
On the other case the ordering cost curve declines because as the order size increases the No.
of order decreases, the total cost curve behave definitely. The total cost declines in the first
instance, but they start rising when the ordering cost decreases & the carrying cost increases.
So the economic order quantity occurs where the total cost is minimum i.e. Q. The following
graph indicates how EOQ is determined by using graph method.

ost
Total Cost
arrying C
C

Costs
Ordering Cost

Q O rder Size

Economic order Quantity Graph

CLASSIFICATION & CODIFICATION OF INVENTORY:

For proper recording & control of inventory proper classification of various items are
essential. The inventory should be classified & coded respectively as per there
identification. The coding may be done alphabetically or numerically.

COMPUTERIZATION:
A computerized inventory control system enables a company to easily track large
items of inventory. It is the automatic system of inventory, recording with drawls &
revising the balance. There is in built system of placing order as the computer notices
that the re-order point has been reached.

INVENTORY REPORT:

To know the latest stock position of different items, the inventory reports are needed to be
producing continuously. This report contains all information on required for management.
PERPETUAL INVENTORY SYSTEM

It is a system maintained by the controlling department, which reflects the physical

movement of stock & their current balance. The store ledger & bin cards are helpful in this
system because this records help in knowing the movement of store. This facilitates regular
checking of stores without closing down the plant.

Advantages:
 Quick calculations of closing stock.
 Helpful in formulating purchase policies.
 Check on stores personal.
 Helpful in production planning.
 Investment under check.
 Errors and shortage daily detected.
 Increasing efficiency of organization.

JUST IN TIME (JIT):

In JIT system material on manufactured component & parts arrive to the manufacturing sites
or stores just before few hours when they are put to use. JIT system helps to save the carrying
& other related cost to the manufacturer. The success of the system depends upon how well a
company manages its suppliers. The JIT system complements the total quality management
(TQM).

DIFFICULTIES BEING FACED IN PRACTICING INVENTORY

MANAGEMENT SYSTEM IN J.K.PAPER MILLS:

 Demand & lead times are not static & deterministic in most of the actual cases.

 RIL policy has not been followed as periodic preview system.

 Inventory norms for some of the major items could not be followed mainly raw
material, pulp, coal & m/c clothing due to Govt. control & its seasonal availability.

 Location disadvantages of J.K.Paper mills forces them to carry large inventories of

spare parts.

 Most of times user departments don‟t realize the cost involve in materials.
CHAPTER V
PRACTICAL ASPECT OF INVENTORY
MANAGEMENT IN JK PAPER MILLS.
INTRODUCTION:

Today‟s business world is highly competitive to meet the competitiveness & challenges,
organizations are forced to practice some of the scientific tools. Material management is one
of such areas. The Efficient management over material increases the profit of the
organization.

Inventory management is one of the functions of material management. This is widely

accepted by most of the Indian business organization. The objective of inventory
management is reduction of cost without interrupting the production operation.

The fundamental questions involved with inventory management system are:

a) How much quantity to be ordered.

b) When to place an order.

Both the above questions can be answered by optimizing the two main cost involved i.e.
i) inventory carrying cost
ii) Ordering cost.

ASPECT OF STUDY:

Study of inventory management covered the following aspect.

a) Codification, standardization & variety reduction in J.K.Paper

MILLS.
b) ABC Analysis in J.K.Paper MILLS.
c) Usage rate & lead time analysis.
d) Inventory replenishment policy in J.K.Paper mills.
e) Purchase requisition process in J.K.Paper mills.
f) Documentation.
CONTROL FOR PROCUREMENT:
For their own convenience the total system of procurement is divided in two parts. We
can understand that from the following diagram.

Purchase

Capital Revenue
Purchase purchase

Developmental job Annual Indent

Expansion IRP Items

Augmentation
Need based Items

Category I Annual based Items

Category II Category IV

Category III Category V

Category IV

CAPITAL PURCHASE:
These purchases are capital in nature.

DEVELOPMENTAL JOBS:
When a company undertakes any new projects for its own development, those come under
developmental jobs.
At J.K. Paper Mills, erection of wills cutters-1 in 1995 is an example of such developmental
jobs.

EXPANSION:
Increase in machine capacity, speed, etc comes under expansion activities.
AUGMENTATION:
Modifications of machineries, plant, etc. are augmentation activities for a company.

CATEGORY-I, II, III:

Category-I, II, III are the equipment and spares which are new, replacement and stand by
spares respectively.

REVENUE PURCHASE:
These purchases are regular in nature.

ANNUAL INDENT:
These are the items purchased annually which are recommended by the user department to
the planning cell.

IRP ITEMS:
These are the items under direct control of purchase department & there is no need to raise
PR for such purchase.

NEED BASED ITEMS:

These items are purchased when need for these items arises through raising PR.

ANNUAL SHUT ITEMS:

These are the lubricant items which are required at the time of annual lubrication of
machineries.

CATEGORY IV, V, VI ITEMS:

The items comes under IV, V or VI category if they have life span for „above 3 years‟,
„between 1 to 3 years‟ & „less than 1 year‟ respectively.

We will discuss in brief about IRP items and need based items i.e. PR items in next part of
this chapter.

CODIFICATION, STANDARDIZATION & VARIETY REDUCTION:

During 1973-74 the codification of material was done through „9‟ digit. But the codification
structure has been changed to „10‟ digits by Harward and Finley management consultants. All
materials have been grouped into 65 main groups but now there are 99 main groups. In this
codification all materials are grouped into 99 main groups. Each group has sub group & in
turn sub-group has sub sub-groups to show the various specifications including dimensions.
Verify reduction & standardization is an ingoing process in J.K.Paper Mills & it is being
done in regular basis whenever new codes are provided & at the time of inventory
replenishment policy formulation.
INVENTORY MANAGEMENT SYSTEM IN J.K.PAPER MILLS:
Inventory control system at J.K. Paper Mills Ltd. Is divided into two parts & the
technique is used for inventory management is –

Inventory
Management
System

Maintenance
Production
Based
Based Inventory
Inventory.

PRODUCTION BASED INVENTORY:

Inventories which are used in production process, it means without these inventories,
production is not possible. J.K. Paper Mills has kept raw material, coal, chemical & cleys
under this category.

Raw Material:
The raw material for J.K. Paper Mills are-

1. Bamboo
2. Wood
There are two types of bamboo used by J.K. Paper Mills –
I. Daba
II. Salia
And different woods are used by J.K. Paper Mills
1. Casurina.
2. DEF-Debarked Eucalyptus Fire wood.
3. Accasia.
4. Chakunda.
5. Popular.
6. Cashew.
7. SAL FW
8. Kaju, etc.

Raw materials consume 49% to 51% of total inventory cost. So proper inventory
management is needed over that. They used the material in FIFO (First In First Out) basis for
raw material. Stock holding capability for raw material is 80,000 ton. Raw material required
per day is 1200 ton. J.K. Paper Mills maintains raw material for 45 days. In the process the
minimum stock maintained by J.K. Paper Mills in case of raw material is 1200 ton X 45 days
i.e.54, 000 ton.
Coal:
Coal is a production based inventory which is a product of OMC or other state govt. product.
So the procurement of coal is constant.

Consumption of coal per day is 500 ton to 600 ton & the danger stock level is 9000 ton.
To meet the additional requirement of the plant J.K.Paper Mills depends upon Electricity.

MAINTENANCE BASED INVENTORY:

These are the inventory items which are not used for production purpose rather they are used
to ensure uninterrupted production. These inventories include spare parts, bearings, nuts,
bolts, o-rings, valves, lubricants, etc.

SELECTIVE CONTROL USED BY J.K.PAPER MILLS FOR MAINTENANCE

BASED INVENTORY:-

ABC Analysis:
In order to exercise selective control ABC analysis of all items is done annually & it has
started from 1973. This analysis is shows the items which came under „A-B‟ class
contributed about 95% of the total consumption value on the rest 5% is „C‟ class.

Class Value

„A‟ class 85% of total value

„B‟ class 10% of total value
„C‟ class 5% of total value

Current inventory of regularly consumed „C‟ class items of about 1900-2000 items and they
fall under perpetual review and annual requirements items are 800.

RELEVANT COST OF INVENTORY IN J.K.PAPER MILLS:

Two basis cost parameters involve in inventory,

Carrying Cost:
At present the inventory carrying charge is 17.64% of unit price.

Ordering Cost:

The inventory ordering cost charge is Rs.203 for imported and Rs.60 for indigenous item.
After classify the items through ABC analysis for better inventory management J.K.Paper
Mills again classify the item into FOUR categories-
 1. IRP item
2. PR-Purchase Requisition item
3. Insurance items.
4. absolute solution moving item

To know about IRP system in J.K.Paper Mills we have to know the uses rate and lead time
analysis.

USES RATE AND LEAD TIME ANALYSIS:

Consumption/uses rate and lead time are the two important parameters which play vital role
in arriving at inventory replacement policy.

During the inventory management study forecasting of future consumption was done based
on available past data and subjective opinion from stores, purchase and user department.

Presently the future demand at J.K. Paper Mills is arrived by considering past three year‟s
consumption and future requirements of departments. In case of chemicals the demand
mainly depends on production program.

Lead time analysis is also carried out time to time to formulate inventory replenishment
policy on more realistic way.

INVENTORY REPLENISHMENT POLICY (IRP):

Regularly consumed materials are categories under IRP based on consumption, usage and
lead time. Inclusion of an item as IRP is advised by the user department with due approval to
industrial engineering department.

Industrial engineering department sets the norms or parameters for the IRP item.
The norms are:-

 Safety stock
 Ordering quantity (EOQ)
 ROL/RIL

Basically four types of inventory replenishment models were suggested for inventory control
system & procurement during the inventory management study (1973-1975). Infact the same
models are being followed at present also.

1. Re-Order Level policy (ROL)

2. Replenishment Inventory Level policy (RIL)
3. As and when required policy.
4. Purchase when required policy.
RE-ORDER LEVEL POLICY (ROL):
This policy is also called as perpetual review system policy. This policy is followed for items
whose usage value is more than Rs.5000.
In this policy when the total balances (Quantity on order + cardex balance) reaches reorder
level procurement action is initiated. Items for which the lead time is large when compared to
replenishment cycle, procurement action is to be taken on the basis of replenishment cycle
until the total balance exceeds the reordered level (ROL) Every time the quantity ordered will
be equal to the ordering quantity. If by any chance safety stock is reached emergent action is
to be taken to replenish stock.

This policy is followed for A-B items.

Model
For A-B items the suggested model is-

(Ci X r (Km-Kn )
D (2Cp)+
EOQ = 24
Ci X I

SS = ((r X n-2)/48) X (Km-KA)

ROL = KA + SS

Where,
Ci = Unit price of an Item.
D = Anticipated annual demand.
Cp = ordering cost per order.
I = Annual inventory cost.
r = No. of years in which one risk of run out is permitted i.e.4(general)
Km = normal maximum consumption during normal maximum lead time.
KA = Avg. consumption during Avg. lead time.
N = No. of order per year.
EOQ = economic order quantity.
SS = safety stock.
ROL = Re-order level (Including the quantity in transit & physical stock).
Assumptions for EOQ calculation:

 One risk of run out is taken in 4 years.

 Variations in daily consumption have been restricted to 10% of
Avg. daily consumption.
 The demand of item occurs uniformly over the period of at the
known rate.
 The replenishment for stock is instantaneous.
 Lead time is zero.
 The cost to place an order and process delivery is fixed and dose
not vary with the lot size.
 The inventory carrying charges vary with directly and linearly
with the size of the inventory and it is expressed as a percentage
of inventory investment.
 The item can procured in the quantities desired, there be ing no
restriction of any kind.
 The item has long self life, there being no fear of deterioration or
spoilage.

Illustration
Calculation of EOQ, ROL, SS for V-Belt having code = 1901041620.
It is given that
D = annual demand = 18 units.
Cp = ordering cost = Rs. 203.00
Ci = unit price = 440
I = Annual inventory carrying cost = Rs. 17.64
r = No. of years of risk i.e. 4
Lead time = 30 to 45
 Tm X D 45 X 18
= = = 2.22
Km 365 365

TA X D 30 X 18
= = = 1.48
KA 365 365

(440 X 17.64 X (2.22-1.48)

18 (2 X 203) +
24
EOQ =

440 X 17.64

3.161
=

= 1.77 EA

ADD 18
= = 10.16
n = EOQ 1.77

SS =
(((r X n)-2)/48)(Km-KA)
=
(((4 X 10.16)-2)/48)(2.22-1.48)
= 0.805 X 0.74 = 0.60 EA

From the above calculation we reached the conclusion that when the inventory
level of V – Belt reaches the ROL level i.e. 2.08 EA an order has to be replaced
which has a quantity of 1.77 EA. To meet the annual demand 18 the company
has to place 10.16 No. of orders. The safety stock level is 0.60 EA.
REPLENISHMENT INVENTORY LEVEL POLICY (RIL):

Replenishment inventory level policy is followed by for „C‟ class items, i.e. items for which
annual consumption value is less than 5000. In this policy replenishment cycle time is
divided by the No. of orders per year „n‟ for these items stock position shall be reviewed is
normal course as per the cycle time. If the total balance is more than safety stock plus half of
the order quantity, then no replenishment action shall be initiated. Some time the SS may be
reached earlier to the cycle period due to manual consumption in such cases the procurement
action is to be taken for the balance quantity When the level quantity comes down to safety
stock or 20% RIL.
This policy is also called periodic review policy.

Model
For „C‟ class item the suggested model is –

OQ = 2 . Cp . D
Ci . I

SS = da X Y
RIL = SS + OQ
Where,
da = daily Avg. demand.

Y = TA + K TA
Tm = maximum lead time
TA = Avg. lead time.
K = 5 (95% level of significance)

AS & WHEN REQUIRED POLICY:

There is no regular requirement of item but one set of item shall be maintained, when ever an
item or one set of item is consumed, procurement action is to be taken to replenish the same.
This model is followed for whose consumption is less and sporadic and of cource no
availability of these items may create serious problem to plant working.

PURCHASE WHEN REQUIRED POLICY:

Normally no stock of such items shall be maintained. But if the user departments require the
items for normal maintenance jobs, they shall inform stores for procurement through a
internal departmental memo.
PURCHASE REQUISITION BASED ITEMS (PR):
Material procured upon as & when required basis fall under this category. Purchase
requisitions raised by user and dully approved are routed through stores for availability
checking. If the quantity of demanded item is more then the availability then the further
processing is done by purchase department.
PR based item category doesn‟t include raw material & IRP items.

PURCHASE REQUISITION PROCESS

User department

If demand < Availability Raising PR

Stores department
(Checking of availability)

Receiving good
received report

Purchase department

COMPUTERIZATION OF INVENTORY MANAGEMENT

SYSTEM AT J.K.PAPER MILLS LTD.:

A store, Industrial engineering & Yard‟s accounting system has been computerized during
1984. In 2005 ERP (Edwards 8.0) has implemented. The inventory management is easily
done through ERP.
Advantages:
 Faster input of data.
 Improvement in quality of work.
 Reduction in paper work.
 All services & controllers bill passed through system.
 Stock availability can be viewed by both user & stock department.
 Faster & accurate report can be obtained.
 Continuous data entry is possible.

These are the advantages of the ERP system observed by JK Paper Mills after
installation of ERP on 2005.
CHAPTER VI
RESEARCH METHEDOLOGY,
DATA ANALYSIS, INTERPRETATION &
ANALYSIS OF QUESTIONNAIRE
 REASEARCH METHODOLOGY
Methodology is a systematic procedure of collecting information in order to analyze
and verify a phenomenon. The study was designed in such a way so to obtain a desired
objective. From the beginning to end of the project every thing is done on a well planned
format. In the early stage of the project my plan is to get acquainted with the organization
where I am doing the project. After that I search for the best available data in that
organization. On the basis of the available data I choose Inventory management as my topic.
In the third week I started my study on Inventory management by gathering valuable
information form different departments. I had collected information by having valuable
discussion with the managers and officer of the organization. To make my data more
reliable I took the help of direct questionnaires. This is all about the frame work of my study.
The collection of information is done two principle sources, viz
1. Primary data
2. Secondary data

Primary data.
It is the information collected directly without any references. In this study it is
gathered though interviews with concerned officer and staff, either individually or
collectively. Some of the information were verified and supplemented through
personal observation.

The data collection includes:

Conducting personal interviews with the concerned officers of finance Department of
Dredging Corporation of India.

Secondary data:
The secondary data was collected from already published sources such as, pamphlets
of annual reports, returns and internal records.
The data collection is from the following:-
 Stores
 Stores Manual
 Annual reports
 Records
 Management
The data collection includes:
 Collection of required data from annual records of dredging corporation of
India ltd.
 Reference from textbooks and journals relating to financial management.
 Electronics based data such as internet downloaded data.

INSIDE THE
COMPANY
ANNUAL
REORT /
SECONDARY
RECORDS
SOURCES
TEST BOOK/
JOURNALS/
OUTSIDE THE WEBSITE
COMPANYY
DATA
SOURCES

MANAGEMENT
PRIMARY PERSONAL
SOURCES OBSERVANCE
RESPONDENTS

Field work detail:

The project is done in the JK Paper mills Ltd a unit of JK organization. The location of JK
Paper mill is in Jaykaypur, Rayagada. All works are done in the office premises with the
guidance of expert officers. Data is collected from different departments situated in JK Paper
mill. They are,
 Accounts department

 Sales department

 Industrial engineering department

 Stores and godown department and

 Yard department
DATA ANALYSIS & INTERPRETATION
Performance appraisal of inventory management through ratio analysis:

INVENTORY TURNOVER RATIO:-

It is the ratio of cost of goods sold and average inventory. It indicates how rapidly the
inventory is turning into receivable through sales. A high ratio is an indicator of good
inventory management. A low inventory implies excessive inventory level thus warranted by
production and sales activity.
Net sales
Inventory turnover Ratio =
Avg. Inventory

Table 1

YEAR COST OF AVERAGE INVENTORY

GOODS SOLD INVENTORY TURNOVER
(RS.IN CRORES) (RS. IN CRORES) RATIO
(IN TIMES)
2000-2001 483.30 46.26 10.448
2001-2002 483.95 65.47 7.392
2002-2003 519.33 62.81 8.268
2003-2004 477.45 66.98 7.128
2004-2005 516.22 68.42 7.545
2005-2006 535.86 81.11 6.607
2006-2007 601.97 93.01 6.472
2007-2008 692.58 90.09 7.688
2008-2009 676.16 85.87 7.874
2009-2010 710.67 97.71 7.273

Inventory turnover ratio = Cost of goods sold/ Average inventory at cost

&
Average inventory at cost = opening inventory + closing inventory
2
 INVENTORY TURNOVER
12
INVENTORY TURNOVER RATIO

10

ACCOUNTING YEARS

INTERPRETATION:
It is observed that in J.K. Paper Mills stock velocity indicates efficient management of
inventory; because of more frequently the stocks are sold. Due to installation of coating plant
the inventory increased for more productions.

It may also be mentioned that there are no rule of thumbs for interpreting the inventory
turnover ratio this ratio may be different for different firm depending upon the nature of the
industry.

INVENTORY HOLDING PERIOD:

It is the period for which inventory held by a firm.

365
Inventory Turnover ratio
Inventory holding period =
The table shows the inventory holding period for the period 2000-2010
Table 2
YEAR DAYS INVENTORY INVENTORYHOLDING
TURNOVER PERIOD
RATIO (IN DAYS)
(IN TIMES)
2000-2001 365 10.448 35
2001-2002 365 7.392 49
2002-2003 365 8.268 44
2003-2004 366 7.128 51
2004-2005 365 7.545 48
2005-2006 365 6.607 55
2006-2007 365 6.472 56
2007-2008 366 7.688 47
2008-2009 365 7.874 46
2009-2010 365 7.273 50

INVENTORY HOLDING PERIOD

60
50
40
DAYS

30
20
10
0

ACCOUNTING YEAR

INTERPRETATION: It can be interpret here that the level of inventory of the

JKPM is maintained for 46-48 days averagely, for all items of inventory. However for
finished goods the inventory is maintained mostly for 6-8 days for dispatching the
items.
 Data presentation
ANALYSIS OF Questionnaire & Interpretation

Employees awareness of the company‟s “primary aim”

To ta l o f r es po nd ent s 50 100%

YE S 48 96% YES
NO
NO 2 4%

The result of the study indicates that 96% of the respondents agreed that they are aware of the
companies‟ primary aim. To a very small extent, 4% of the respondents said that they are not
aware. The percentage of respondents, who felt that they are aware, is a parameter of self-
satisfaction that the employees know the primary aim of the organization.

Proper maintenance of inventory and logistical activities helps to achieve the

primary aim, goal, objectives of the organization?

To ta l o f r es po nd ent s 50 100%
RESPONDS
YE S 38 76% YES 76%

NO 12 24% NO 24%

From the above data it can be interpreted that more than 76% of the employees agreed the
Proper maintenance of inventory and logistical activities helps to achieve the primary aim,
goal, objectives of the organization. 26% said that not only this can improve the way to reach
the goal of the organization.

Role of inventory is useful in the achievement of logistical objectives?

To ta l o f r es po nd ent s 50 100%

YE S 27 54% YES

NO 23 46% NO

From the above graph it can be interpreted that about 54% employees have an opinion that
the system helps in the achievement of logistical objectives & 46% employees viewed that
the system does not help to improve their performance.
The uncertainty in demand and lead time affects the inventory levels.
To ta l o f r es po nd ent s 48 100%

YE S 24 50% YES
NO
NO 44 50%

To the question, all the respondents said equally that it might be affected and may not
be whether 2 respondents didn‟t answer the question. According to them the system is
nothing to do with their inventory as now a days just in time is introduced.

Just in time is whether always helpful for the organization? However we know
that is very difficult to implement.
To ta l o f r es po nd ent s 50 100%

A. To a v e ry la rg e e x t . 17 34%

B .To a la rg e e xt e nt 14 28%

C. To a s ma ll e xt e nt 9 18%

D.No t a t a l l 10 20%

A B C D

When the employees were asked about JIT function, it is found that around 28%
respondents are clear about the question, to a large extent. 34% respondents were
clear about their System to a very large extent. Only 18% said that they are clear about
the system to a small extent only, where as about 20% Respondents are not at all
ready to say that JIT function is really helpful.

Is the organization always thinks about optimum utilization of its resources or

inventory

T o tal o f re sp o nd e n t s 44 100%
YES
YES 26 5 9 .0 9 %
NO
NO 18 4 0 .9 0 %

From the above graph it is clear that more than ABOUT 60% Respondents are consult
that the organization optimum utilizes the recourses available. Only 40 % respondents
viewed that they are not being agreed that about the utilization process.
How clear you are about your organization‟s priorities in maintaining the inventory

To ta l o f r es po nd ent s 50 100%

A. Fully clear 20 40%

B. Strongly clear 18 36%

C. Partially clear 12 24%

A B C

From the above data it can be interpreted that 40% of people saying that they are fully
clear about the organizations priorities in maintaining the inventory where as 36%
respondents are strongly & 24% are partially clear about this.

How you feel about the inventory management system of your organization

To ta l o f r es po nd ent s 50 100%

A. Feel safe 15 30%

B. Feel valued & taken care of 23 46%

C. Improve loyalty & commitment 12 24%

A B C

From the above graph it can be interpreted that more than 46% Respondents agreed
that the inventory should valued and taken care of. Where as about 30% Respondents
viewed that system not at all serves this purpose they feel safe. About 24% have an
opinion that improve loyalty as per the need.
CHAPTER VII
RESULT AND ANALYSIS OF THE WORK
 FINDINGS
 CONCLUSION
 RECOMMENDATION & SUGGESTION
 BIBILOGRAPHY
 ANNEXTURE
 Questionnaire
FINDINGS:
After the study I have found some critical things in the organization in maintaining the
logistics & inventory, supply chain of raw materials and finished goods. As I have done a
research of the employees to learn something more provisions of finding the critical things in
the organization, I made a questionnaire regarding some questions on logistics and inventory
and circulated that among the JKPM employees and found. I have circulated the
questionnaires among 50 employees including managers, executives, officers, asst- officers
of JKPM, Rayagada and found the critical things from them. I met all of them personally and
got the results out from them although it is a very difficult task for me to do but the sincere
cooperation of them made my task easier however I have not found any sources from some of
the employees of here as they are too busy in their work that they have not given any time for
me. Still I found some suggestions out from the rest of them and reached to the conclusion
and finding & suggestion part.

 Inventory norms for some of the major items could not be followed mainly raw
material pulp, coal & m/c clothing due to Govt. control and its seasonal availability.
 Most of times user department don‟t realize the costs involved in materials.
 Location disadvantages of J.K.PM forces them to carry large inventories of spare
parts.
 Demand and lead times are not static and deterministic in most of the actual cases.
 RIL policy has not been followed as periodic review system.
 ABC Analysis in not applied for the raw material like Bamboo and Hardwood

CONCLUSION:
This practical study is about the “LOGISTICS & INVENTORY MANAGEMENT”. Its
purpose is to present, as clearly and vividly as possible the nature, characteristics of modern
day losistics & inventory management techniques. This task poses a major portion of the
current assets of any firm. Many appropriate techniques are employed so as to control
unnecessary wastage of money in maintaining the inventory of the firm. In spite of variety
and the pace of change in the inventory management techniques proper focus has to be made
on the use of appropriate techniques to plan the inventory levels which affecting the
production and sales of the firm because the major revenue for any firm is from its sales. The
intent of this report is to provide an insight in the application of various inventory
management techniques. It has always been important to identify and apply various
appropriate techniques of logistic inventory management. So as to, achieve high performance
in sales and thus reduce unnecessary costs.

The summer internship training was instrumental in acquiring through knowledge about the
Logistics channel of distribution and Inventory Management at JKPM. I learnt the
applicability of the study and above all I got a chance to test and enhance my knowledge in a
new field.
RECOMMENDATION & SUGGETIONS

 In my opinion the company should give more emphasis on backward integration by

inducing the local farmers to produce Bamboo and hard wood which helps the
company to be independent over inventory in raw materials

 Timely connective action to control inventory will definitely yield fruitful results.

 Much control should be exercised in procuring spare parts for old equipment due to
the fact that remaining life of these equipments will be very less and the same way be
replaced by new equipment shortly.

 Due to logistics limitation and localization of industry some time the inventory levels
effected the organization should be carefully watched.

 FIFO system should be implemented & strengthened.

 Cost reduction on inventory can achieved to a greater extent if the concerned

department like stores, purchase & user departments work in close co-ordination.

 The identification & disposal of stocks should be done on top priority basis.

 Timely connecting action to control inventory will definitely yield fruitful results.

 Much control should be exercised in procuring spare parts for old equipments due to
the fact that remaining life of these equipments will be very less & the same way be
replaced by new equipment shortly.

 Standardization in respect of equipment will greatly help in reducing inventory of

spare parts

 If ABC analysis s is applied for the materials produced it helps to reduce the
unnecessary investment and if applied for raw materials it will reduce the CC and OC.

 Perpetual system needs to be strengthened.

 Storage area for certain nature of item to be taken care & involved lively.
BIBLIOGRAPHY
BOOKS:

LOGISTICS & SUPPLY CHAIN MANAGEMENT- D K Agarwal, edition-eight imp. 2009,

Publisher- Macmillan Publishers India ltd., kolkota

MARKETING MANAGEMENT- Philip Kotlor, edition-twelve edition 2006,

Publisher- Prentice Hall of India (p) Ltd, New Delhi Branch

MARKETING MANAGEMENT- Ramaswamy v.s & s. Namakumari, 3rd edition, 2004

Publisher- Macmillan India Ltd, Kolkota

RESEARCH METHODOLOGY- C.R Kothari, edition-2004, reprint 2006

Publisher – New Age International (P) Ltd, publishers, Branch New Delhi

FINANCIAL MANAGEMENT- I M Pandey, edition- ninth edition….. 2005,

Publisher- Vikash Publishing House (p) Ltd. Noida

MANAGEMENT ACCOUNTING- Sashi K. Gupta, R.K. Sharma. Second revised edition 2009,
Publisher- Kalyani Publishers, Delhi

JOURNALS:

HINDUSTAN SURVEY OF INDIAN INDUSTRIES- A Year Book 2000

JOURNAL ON INDIAN PULP & PAPER.- JK PAPER Ltd. 2005

ANNUAL REPORTS ON J.K.PAPER MILLS LTD- JK PAPER Ltd. April 2010

INDUCTION MANUAL OF JK PAPER MILLS- JK PAPER Ltd. 2010

BROCHURES AND BOOKLET OF JK PAPER MILLS- JK PAPER Ltd. 2000-2010

INTERNET SOURCES:

http//: www.jkpaper.com – accessed on 01/06/2010 @ 07:30 PM

http//: www.wikipedia.org – accessed on 01/06/2010 @ 07:10 PM
 Questionnaires

 Employees detail
A. Name :

B. Contact :

C. Designation :

D. Age :

1. Since when you are working in the organization.

 More then 10 years
 More then 5 years
 More then 1 years
 Less then 1 year

2. Are you aware of your company‟s “primary aim”?

 Yes
 No

3. Is proper maintenance of inventory and logistical activities helps to achieve the

primary aim, goal, objectives of the organization?
 Yes
 No

4. Is the role of inventory is useful in the achievement of logistical objectives?

 Yes
 No

5. Is the uncertainty in demand and lead time effects the inventory levels?
 Yes
 No

6. Just in time is whether always helpful for the organization? However we know that
is very difficult to implement.
 Yes
 No

7. Is your organization follows the periodic inventory system for all items of raw
material?
 Yes
 No
8. Are there any recent changes in the company that might have affected the
inventory management system?
 Yes
 No

9. Is the organization follows different types of ordering systems for different kind of
raw materials?
 Yes
 No

10. Is the organization always thinks about optimum utilization of its resources or
inventory?
 Yes
 No

11. Are employee‟s goals and company goals aligned depending upon the inventory?
 Yes
 No

12. How clear you are about your organization‟s priorities in maintaining the
inventory?
 Fully clear
 Strongly clear
 Partially clear

13. How you feel about the inventory management system of your organization?
 Feel safe
 Feel valued & taken care of
 Improve loyalty & commitment

14. How involved are the employees in company‟s development through proper
maintenance of inventory?
 Fully involved
 Strongly involved
 Partially involved

15. What are the weak links of the current inventory system?

16. Any suggestions from you to improve those?

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