SUMMER TRANING REPORT

CONDUCTED AT

ON

FINANCIAL POSITION OF LPS THROUGH

ANALYSIS INVENTORY LEVEL

AND

INVENTORY MANAGEMENT

Submitted In Partial Fulfilment of The Requirements

For The Award of Degree Of
Master Of Business Administration
(Session: - 2021-23)

SUBMITTED BY: -
YOGITA SHARMA
ROLL NO.: - 21/MBA/60

VAISH COLLEGE OF ENGINEERING, ROHTAK

AFFILIATED TO

MAHARSHI DAYANAND UNIVERSITY, ROHTAK

 LPS Bossard Pvt. LtdTel: 0091-1262-305161-
170 N.H. 10, Delhi Road 0091-1262-305171-
180
Kahawar Bye Pass, Fax: 0091-1262-305111-
112 Rohtak- 124001 (India)0091-1262-305133
F/HR/003 8.2/2019

TO WHOM SO EVER IT MAY CONCERN

This Certificate confirms that YOGITA SHARMA, student of MBA-2 Year Program from
Vaish College of Engineering (Class Roll No. 60) has successfully completed her two
months summer training in our Finance Deptt. From 02 August to 30 September.

Her Performance was found to be good.

We wish her good luck for her future.

For LPS Bossard Pvt. Ltd.

(Neha)
Head-HR

Dated : 16th Oct. 2022

Place : Rohtak

File No. A 9024

LPS Bossard Pvt. Ltd.
Regd. To ISO 9001
Regd. Office: A1/134, Safdarjung Enclave, New Delhi-110029 (India)

CIN: U72200DL 1997PTC090805

 DECLARATION

I YOGITA SHARMA, Student of M.B.A. 2year, 3rd semester of “Vaish College of Engineering,
Rohtak”, hereby Declare that the summer training report entitled “ANALYSIS INVENTORY
LEVEL AND INVENTORY MANAGEMENT” of “LPS BOSSARD PVT. LTD” is a
record of critical & independent work carried out by me under supervision & guidance. This
project report is not submitted to any other Institute/University for the award of degree of Master
of Business Administration.

SIGNATURE

3
 ACKNOWLEDGEMENT

It is my proud privilege to put on record my gratitude to all those who have been the source of
guidance, cooperation & help during my summer training at LPS BOSSARD PVT. LTD.

An undertaking of study like this is never the outcome of the efforts of a single person. My
project is not an exception to this. It was not possible to accomplish it without the help of others.
I would hereby take the opportunity to express my indebtedness to people who have helped me
to accomplish this task.

I wish to express my deep sense of gratitude to towards VCE for the keen interest, inspiring
guidance, continuous encouragement, valuable suggestions & constructive criticism throughout
the pursuance of his report.

Further words of thanks are expressed to all other staff members without whom help it would not
have been possible to collect information & idea. I am beholding to my parents for their
blessings & encouragement.

4
 PREFACE
Practical training constitutes an integral part of management studies. Training gives an
opportunity to the students to expose themselves to the industrial environment, which is quite
different from the classroom teachings. One cannot rely on theoretical knowledge. It has to be
coupled with practical to be fruitful. Training also enables the management students to see
themselves the working condition under which they have to work in the future. It thus enables
the students to undergone those experiences, which will help them later when they join any
organization.

After liberalization the Indian economic sense is changed. Industrial activity in India has become
a thing to watch & I really wanted to be a part of it &it is essential for me being a finance
student.

I underwent eight weeks of training at LPS BOSSARD PVT. LTD. I consider myself lucky to
get my summer training in such a big Company. It really helped me to get a practical insight into
actual business environment & provide me an opportunity to make my financial management
concepts more clear.

5
 TABLE OF CONTENTS

Chapter 1: COMPANY PROFILE

Chapter 2: INTRODUCTION
Chapter 3: RESEARCH METHODOLOGY
Chapter 4: DATA ANALYSIS & INTERPETATION
Chapter 5: FINDINGS, SUGGESTIONS &
CONCLUSION
ANNEXURE
BIBLIOGRAPHY

6
1. Overview of company

At Lakshmi Precision Screws BOSSARD PVT. Ltd. fastening technology is their core business
and customer services their guiding principle. Head quartered at Rohtak (Haryana), the LPS
works comprises of two manufacturing units spread across an area of 100,000 square meters, just
60 km from New Delhi, the capital of India. With total assets of 2380 million INR supported by
1145 highly dedicated professionals which are driven with a zeal to make a world class product
under the leadership of dynamic management team, today we are 3136 million INR company
with 17% contribution coming from exports.

The Company is a pioneer in providing fastening technology globally having Joint Ventures,
License Agreements, and Alliances with different fastening companies globally. The endeavor of
the Company is to provide high level customer satisfaction.

The Company is one of the largest exporters of fasteners in India. Whereas 35% of the total sales
is contributed from the products exported to a range of countries such as The United States of
America (USA), Australia, Canada, Denmark, Dubai, France, Germany, Hong-Kong, Indonesia,
Japan, Malaysia, Singapore, South Africa, Switzerland, Sweden etc. The Company is a partner of
the Global Fastener Alliance (GFA).

7
The Company is constantly researching to enhance its quality of the products keeping in mind
the increasing expectations of the customers and the Company’s brand. The Company is
delighted and thankful to all its customers for regular support and its guidance

2. Research Methodology
The procedure adopted for conducting the research requires a lot of attention as it has direct
bearing on accuracy, reliability and adequacy of results obtained. It is due to this reason that the
research methodology, which I used at the time of conducting the research, needs to be
elaborated upon. Research methodology is a way to systematically study & solve the research
problems.
Research problem here was to analyse the financial data of LPS BOSSARD Ltd. to come out
with some underlying facts behind the financial statements of the company.

 Research Design:
The research design implemented in this research is descriptive in nature, as it seeks to
discover facts, ideas, insight & to bring out new relationship among the data items
already existing. Research design is Hexble enough to provide opportunity for
considering different aspects of problems under study.

 Sample Universe:
Of the study is LPS BOSSARD Ltd

 Sample Population:
Is the financial statement of LPS BOSSARD Ltd.

 Sample:
Taken for the purpose of my study is the financial statement of last 3 years.

8
  Information Collection:
For the purpose of analysis, I have gone for the secondary information. As this is the base
of the study so the data which is reliable has been taken. And also annual reports of the
company & information through internet are taken

3. Significance of the Study

The significance of this study lies in the thing that it reveals some of the hidden information from
the accounts of the LPS Ltd. and also it contains the Recommendations which if taken into
considerations by the management could prove useful for the company.

Apart from the organization point of view this study is also significant for me as it gives me a
chance to under and the corporate environment & increases my analytical abilities to draw
references

4. Review of the Existing Literature

To go before the analysis of LPS Ltd. It was necessary to go through the existing literature of
finance as well as other analytical studies which could prove useful for me.
So lot of books, and reports already prepared were consulted for this purpose and
adequate help is taken from them to do this study.

5. Objectives
 The main objective of the study was to analyze the financial statements prepared
by LPS Ltd and also to understand and analyze the cash flow statement.
 Another objective was to identify the deficiencies or the weak points of the
company, if found during the analysis phase

9
6. Limitations
 Access to some information was denied by the company officials that affected the
findings to some extent.
 The sample size was limited over just four years, which may not be fully
representative of the universe. A large sample size could not be taken due to
time & cost constraints.
 Company provides only secondary data so certain type of bias is in study.
 Lack of experience in this field may have incorporated some shortfalls.

10
 COMPANY PROFILE
2022

1. Introduction to the Company

LAKSHMI PRECISION SCREWS BOSSARD PVT. LTD is one of the leading

manufacturers and suppliers of High Tensile Fasteners such as Bolts, Screws, Nuts and
similar parts for Automobile and other Industrial Sectors.

I take this opportunity to introduce themselves as a joint venture between M/s Lakshmi Precision
Screws Ltd., Rohtak and Bossard AG, Switzerland. Incorporated in November 97, this joint
venture has been christened as LPS BOSSARD PVT LTD.

They became operational in 1998 with specializing in Industrial Assembly Technology and
within a short span we are now a 120-member family serving to our customers all over India
with sales over Rs. 900 million (2009-10) with a steady growth.

11
We have a range of more than 75,000 of fasteners in Stainless steel, High tensile steel, MS,
Brass, Copper, Aluminum, Titanium Alloy, Inconel and Plastics. Our range includes standard
items (as per DIN, ISO, JIS, NFE, and other National & International Std.) and Multifunctional
fasteners like, Self drilling screw, Thread cutting, Thread Forming screws, EcoSyn, EcoFix and
many more.

We are headquartered in Rohtak, Haryana and have formed regional offices at New Delhi,
Bangalore & Pune. In an effort to be closer to our customers we also have offices in Bangalore,
Chennai, and Hyderabad & Mumbai etc.

12
13
2. Company Organization

Board of Directors

Chairman & Managing Director

Quality Management
Corporate Strategy

Marketing R&D Planning Production QA General

D S D L C P P P P P F H E
E A E A E R L L L U I R D
V L V B N O A A A R N D P
E E E O T D N N N C A
L S L R R U N T T H N
O O A A C I A C
P P T L T N I II S E

M M O I G E
E E R O
N N Y N
T T

14
3. Chronological History

1959 Established Nav Bharat Industries as small parts Manufacturer

1972 Established Lakshmi Precision Screws pvt Ltd as Socket Head Screws

1973 Technical tie-up with the German firm M/s Richard Bergner

1977 Acknowledged quality source of fastener.

1984 Declared Public Limited Company

1986 Secured self certification status from M/s Lakshmi Machine Works.

1988 Established as manufacturer-exporter

1992 Received Regional Export Award from EEPC for the second Consecutive year.

1993 Established Plant - II.

1994 Received Employment Generation Award from Director of Industries, Haryana

State.

1995 Accredited in Mechanical & Chemical Testing by A2LA, USA to meet

Fastener Quality Act of US.

1995 Accredited in Mechanical Measurement, Mechanical & chemical Testing by

National Accreditation Board for Calibration & testing
Laboratories (NABL). Government of India.

15
1996 Certified to ISO-9002.

Licensed
1999 Manufacturers of TORX Screw from Camcar Co. –USA.

QS 9000
2000 Certification.

2001 ISO/TS-16949 Certification.

- ISO-14001 Certification.

2005 DOL ( Direct On Line ) Certificate

- Hero Honda Motors.

2006 Udyog Ratna Award

- Haryana Govt.

2008 Achieved export excellence award from EEPC India

2012 Purchase land in Khrawar for rs. 70 crore

16
4. Certificates & Achievements
 Certificates

 NABL

 ISO / TS 16949: 2002 certified organization for product design and development.

 ISO 14001: 1996 certified organization for environment management system.

 An ISO 9001: 2000 certified organization for quality management.

 Volvo Global Supplier Certificate

 OHSAS

17
  Achievements
 Extended business to new horizon of the world.
 Getting order from Maruti and Suzuki in this financial year.
 The equity share of LPS is listed in Delhi and Mumbai Stock Exchange.
 The turnover of company has increased by 25% with export sales charting an
increase of 30%. The net profit and earnings per share has increased by amazing
95% in the current year.

5. Vision & Mission Statement

 Vision
 Be a Growth orientated professional organization promoting high standards of
business ethics.

 Establish strong R&D Facility and innovate continuously.

 Make each member of the organization feel proud and empowered.

 Strive to achieve 6σ (Six Sigma) Quality levels.

 Maximize shareholder’s wealth.

 Mission
 Continue to retain market leadership in Indian marketplace and
established LPS as a Global brand by creating value for customer
through Technology, Quality, Cost Competitiveness and innovation.

 Be recognized by our customers as their best and preferred supplier of

fasteners and components.

 Exceeding customer expectations and striving for excellence.

18
6. Departments
 The company has following different departments

Human resource development-Personnel and administration

Design

Research and development

Laboratory

Tool room and CNC (Computerized Numerically Controlled)

Quality Assurance(Q.A.)

Materials and purchases

Finance, accounts and secretarial

19
7. List of Major Plant & Machinery

SN PROCESS PLANT & MACHINERY SPECIFICATION NOs.

1 Drawing Pointing Machine Dia 5 - Dia 30 2

Wire Drawing Machine Dia 8 x 55 2
Wire Phosphating Plant 1
2 Heading 2D - 2B
2D - 3B Dia 8 x 70 1
3D - 3B Dia 6 x 55 - Dia 12 x 250 6
4D - 4B Dia 6 x 40 Dia 25 x 200 11
5D - 5B Large Stroke Bolt Former 1
5D - 6B Parts Former 1
3 Nut Forming 4D 6 - 12 mm 1
5D 4 - 10 mm 3
4 Rolling Roller Type Dia 6 - Dia 25 13
4 Rolling Rotary Type Dia 8 x 55 1
Flat Type Dia 3 x 10 - Dia 25 x 200 17
5 Washer Assembly 1
6 Heat Treatment Series Type 2
Batch Type 10
Dehydrogen HT 1
Pit Heating 5

20
8. Main Markets
Domestic (User Industries) International (Countries)

Automotive Australia

Aviation Germany
Heavy & Light Machinery Holland
Hydraulic/Pneumatic Pumps Hong Kong

Machine Tools, Jigs & Fixtures Japan

Railways Singapore

21
9. Main Products
A wide range of standard cold forged high tensile fasteners over 7,000 varieties covering the
diameter range of M1.3 to m30 and the length range of 6mm to 300mm.

Standard products cover most of international standards ISO, ANSI/ASME, BS, JIS, DIN etc.
and engineered as per respective standards.

These standard products covers a very wide range of industries viz. Automobile sectors,
standard/special m/c building sectors, textile sectors, printing machineries etc.

 Categories of products

Standard Products

Bolts & Screws Pins Nuts Allen key

22
Special Products

Wind Energy Automotive Defence Electronic & Communication

Construction Agriculture Tool & Die

Oil n gas

Major Products

Division Products
Precision Cold Forming parts for Automobile
Engine Parts ( Con Rod, Cylinder Studs,
Counter Weights, Cylinder Head, Rocker Arm,
Engine Mounting, Main Bearing etc.)
Bolts & Nuts Chassis Parts (Wheel Bolts, Wheel Hub Bolts &
for Nuts, Axle Bolts/Pin, Flanged Bolts, Collar Bolt,
Automobiles Shock Absorber Mounting Pins etc.)

Washer Assemblies Bolts

23
 The other critical & safety parts bolts
Construction parts (Friction Grip)
Bolts & Nuts for Agriculture Industry
FASTENERS Bolts & Nuts for Industrial Machinery
Cold formed parts for Automobile (Piston Pins, Switch Body,
Ball Joints, Gear Blanks, Rocket Shaft, Ball Pins, Plunger etc.)
Pins for Hydraulics & Pumps
Bolt for Refrigeration Compressor
Friction Grip Bolts & Nuts for Construction Industry
Socket Head Cap Screw
Low Head Socket Bolt
Shoulder Bolt
Button Head
CSK
Standard Set Screws
Fasteners Hex Wrench Keys
Hex Head Bolt
Dovel Pin
Nuts
Friction Grip Bolts
Track Shoe Bolts
Stainless Steel Hex Head
Stainless Steel Socket Head Cap Screws

24
10. Major Clients

Heavy Commercial Vehicles

Light Commercial Vehicles

Tractors

Cars

25
Two Wheelers

Textile Machinery

Machine Tools

26
 OBJECTS OF THE
STUDY

OBJECTIVE OF THE STUDY

Main Objective: -
The project is designed to give an overview of inventory management.

Sub Objective: -
The study on inventory is very important for a firm. The objectives of this study are as
follows:
 To determine the changes in the inventory position of the company.
 To determine the increase or decrease in inventory level.
 To determine the various ratios for analyzing the inventory level of the company.
 To spot out strengths & weaknesses of business.
 To determine the absolute figures for the last three years.

27
 INTRODUCTION
ABOUT
INVENTORY
MANAGEMENT
INTRODUCTION:-

Inventories constitute the most significant part of current assets of a company like in India. On
an average, inventories are approximately 60% of current assets in public Ltd. companies in
India. A firm neglecting the management of inventories will be jeopardizing its long run
profitability and may fail ultimately. It is possible for a company to reduce its level of
inventories to a considerable degree. The reduction in “excessive” inventories carries a
favourable impact on a company’s profitability.
Inventory is composed of assets that will sell or used in future in the normal course of business
operations. The assets, which firms store as inventory in anticipation of need, are :- 1. Raw
material. 2. Work in Progress 3. Finished Goods.

28
NATURE OF INVENTORY:-
Inventory are stock of the company is manufacturing for sale and components that make up
the product. The various forms in which inventories exist in a manufacturing company are:
 Raw Material: Raw Material is those basic inputs that are converts into finished
goods through manufacturing process. Raw Material inventories are those units,
which will purchase & stored for future production.
 Work in progress: Work in progress inventories are semi-manufactured products.
They represent products that need more work before they become finished products
for sale.
 Finished goods: These are completely manufactured products which are ready for
sale. Stock of raw materials and work in progress facilitates production while stock
of finished goods is required for smooth marketing operations.
 Consumables: These are the material which is needed to smooth the process of
production. These materials do not directly enter production but they act as
catalysts. These classified based on their consumption & critically.

 Spares: Spares also form a part of inventory. The stocking policies of spares are
different from industry to industry. Spare parts like engines, maintenance etc. All
decisions about spares based on the financial cost of inventory.

PURPOSE OF HOLDING INVENTORY:-

A firm also needs to maintain inventories to reduce ordering costs and avail quantity
discounts. There are three main purposes or motive:
 Transactions motive: It emphasizes the need to maintain inventories to facilitate
smooth production & sales operations.

29
 Precautionary motive: It necessitates holding of inventories to guard against
the unpredictable changes in demand & supply force & other factors.
 Speculative motive: It influences the decisions to increase or reduce inventory
levels to take advantage of price fluctuations.

OBJECTIVE OF INVENTORY
MANAGEMENT:-
Inventory Management consist various counter-balancing parts:
 To meet the demand of the product by efficiently organizing the firm’s
production and sale operations.
 To minimize the firm’s investment in inventory.
 To ensure continuous supply of materials spares and finished goods so that
production should not suffer at any time & the customer demand should also
be meeting.
 To avoid both over-stock and under-stock of inventory.
 To eliminate duplications in ordering or replenishing stocks.
 To minimize losses through deterioration, pilferage, wastages & damages.
 To ensure perpetual inventory control.
 To design proper organization for inventory management.
 To ensure right quality goods at reasonable prices.
 To facilitate furnishing of data for short-term & long-term planning & control
of inventory.

30
 VALUATION OF INVENTORY:-
The price of materials and income of a concern is directly proportional to each
other. So it is necessary that a method of pricing materials should be such that it gives a
realistic value of stocks.
To safe guard public interest, the Government of India has instituted statutory
controls to prevent frequent change of material valuation method for at least three
years.
The following material pricing methods are generally used:

a) First in First out (FIFO Method)

b) Last in First out (LIFO Method)
c) Average Price Method

Simple average method Weighted average method

d) Base Stock Method

e) Market Price Method
f) Standard Price Method

BENEFITS OF HOLDING INVENTORY:-

The major benefits of holding Inventory are the basic functions which are of crucial importance
in firm’s production &marketing strategies.
The basic function of Inventory is to act as a buffer to decouple or uncouple the various activities
of a firm so that all do not have to be pursued at exactly the same rate.

The key activities are:

1. Purchasing.
2. Production.

31
3. Selling.

Benefits in Purchasing:-
If the purchasing of raw material and other goods is not tied to production/sales, i.e. a firm
can purchase, several advantages would become available. In the first place, a firm can purchase
larger quantities than is warranted by usage in production or the sales level.
In the second, firms can purchase goods before anticipated or announced price increase. This will
lead to a decline in the cost of production. Thus Inventory, serves as a hedge against price
increases as well as shortages of raw materials. This is highly desirable inventory strategy.

Benefits in Production:-
Finished goods inventory serves to uncouple production and sale. This enables production at a
rate different from that sale. That is production can be carried on at a higher or lower than the
sales rate. This would be of special advantage to firms with a seasonal sales pattern. In their case,
the sales rate will be higher than the production rate during the part of the year (peak season) and
lower during the off-season. The choice before the firm is either to produce at a level to meet the
actual demand. In brief, since inventory permits least cost production scheduling, production can
be carried on more efficiently.

Benefits in Sales:-
The maintenance of inventory also helps a firm to enhance its sales effort. For one thing, if there
are no inventories of finished goods, the level of sales will depend upon the level of current
production. A firm will not be able to meet demand instantaneously. There will be a lag
depending upon the production process. If the firm has inventory, actual sales will not have to
depend on lengthy manufacturing process.
Thus, inventory serves as a bridge gap between current production and actual sales. A related
aspect is that inventory serves as a competitive marketing tool to meet customer demands.

32
 INVENTORY CONTROL SYSTEM

INVENTORY CONTROL:-
Effective inventory management requires an effective control system for the inventories. In
managing inventories, the firm’s objective should be in consonance with the shareholders, wealth
maximization principle. To achieve this, the firm should determine the optimum level inventory.
Efficiently controlled inventories make the firm flexible. Inefficient control results in unbalanced
inventory and inflexibility – the firm may sometimes run out of the stock and sometimes may
pile up unnecessary stocks. This increases the level of investment and makes the firm
unprofitable.
To manage inventories efficiency, answers should be sought to the following two questions:
 How much should be ordered?
 When it should be ordered?
The first questions, how much to order relates to the problem of determining economic order
quantity (EOQ), and is answered with an analysis of costs of maintaining certain level of
inventories.
The second question, when to order arises because of uncertainty and is problem of determining
the reorder point.

ECONOMIC ORDER QUANTITY:-

One of the major inventory management Problem is to be resolved is how much inventory
should be added when inventory is replenished. If the firm is buying raw materials, it has to
decide lots in which it has to be purchased on each replenish. If the firm is planning a production
run, the issue is how much production to schedule. These problem, are called order quantity
problems, and the task of the firm is to determine the optimum or economic order quantity.

33
Determining an optimum level of inventory level involves two types of costs:
(a) Ordering costs and (b) Carrying cost

(A) ORDERING COST:-

This category of cost is associated with the acquisition or
ordering of inventory. Firms have to place orders with suppliers to replenish inventory of raw
material. The expenses involved are referred to as ordering costs. Included in the ordering costs
are involved in
1. Preparing a purchase order or requisition form.
2. Receiving, inspecting and recording the goods received
Ordering costs increase with the number of orders; thus more frequently inventory
is acquired, the higher the firm’s ordering costs. On the other hand, if the firms maintain large
inventory levels, there will be few orders placed and ordering costs will be relatively small.
Thus, ordering costs decrease with increasing size of inventory.

(B) CARRYING COST:-

Costs incurred for maintaining a given level of inventory
are called Carrying costs. They include: Storage, Insurance, Taxes, Deterioration and
Obsolescence. Carrying costs vary with inventory size. This behaviour is contrary to that of
ordering costs which decline with increase in size of inventory. The economic size of inventory
would thus depend on trade-off between carrying costs and ordering costs.

The optimum inventory size is commonly referred to as economic order quantity. It is that order
size at which annual total costs of ordering and holding are the, minimum. We can follow three
approaches – the trial and error approach,

34
The formula approach and the graphic approach – to determine the economic order

quantity (EOQ).

2AO
EOQ = -------
C

Where, A is annual requirement.

O is Ordering cost.
And C is Carrying cost.

RE-ORDER POINT:-
The problem, how much to order is solved by determining the economic order
quantity, yet the answer should be sought to the second problem, yet the answer should be sought
to the second problem, when to order. This is a problem of determining the re-order point. The
re-order point is that inventory level at which an order should be placed to replenish the
inventory. To determine the re-order point under certainty, we should know: (a) lead time,
(b) average usage, and (c) economic order quantity.
Lead time is the time normally taken in replenishing inventory after the order has been placed.
By certainty we mean that usage and lead time do not fluctuate. Under such a situation, re-order
point is simply that inventory level which will be maintained for consumption during the lead
time. That is:

Re-order point = lead * Average usage.

35
SAFETY STOCK:-
It is difficult to predict usage and lead time accurately. The demand for material
may fluctuate from day to day or from week to week. Similarly, the actual delivery time may be
different from the normal lead time. If the actual usage increases or the delivery of inventory is
delayed, the firm can face a problem of stock-out which can prove to be costly for the firm. To
guard this problem, the firm may maintain a safety-stock --- some minimum or buffer inventory
as cushion against expected increased usage and / or delay in delivery time.

SELECTIVE INVENTORY CONTROL:-

ABC ANALYSIS:-
Usually a firm has to maintain several types of inventories. It is not desirable to
keep the same degree of control on all of the items. The firm should pay maximum attention
to those items whose value is the highest. The firm should, therefore, classify inventories to
identify which items should receive the most effort in controlling. The firm should be
selective in its approach to control investment in various types of inventories. This analytical
approach is called ABC analysis and tends to measure the significance of each item of
inventories in terms of its value. The high value items are classified as ‘An items’ and would
be under the tightest control. ‘C items’ represent relatively least value and would be under
simple control.
‘B items’ fall in between these two categories and require reasonable attention of
management. The ABC analysis concentrates on important items and is also known as
control by importance and exception (CIE). As the items are classified in the importance
of their relative, this approach is also known as proportional value analysis (PVA).

The following steps are involved in implementing the ABC analysis:

36
 Classify the items of inventories, determining the expected use in units and the
price per unit for each item.
 Determine the total value of each item by multiplying the expected units by its
unit price.
 Rank the items in accordance with the total value, giving first rank to the item
with highest total value and so on.
 Compute the ratios of number of units of each item to total units of all items and
the ratio of total value of each item to total value of all items.
 Combine items on the basis of their relative value to form three categories - A, B
and C.
The data in the following table illustrate the ABC analysis.

CLASS NO. OF ITEMS % VALUE OF ITEMS %

A 15 70

B 30 20

C 55 10

120
percentage of costs

100 100
90
80
70
60 Series2
40
20
0 00
percentage of units
37
 RESEARCH
METHODOLOGY
NATURE OF RESEARCH:-

The research methodology adopted during the project is

Descriptive in nature. A characteristic of research studies in business management is their
reliance on secondary data source in particulars and primary data in general.

RESEARCH PROBLEMS:-
The following are the general problems of the research:
 The Inventory Level Analysis of the Company.
 The system of holding various Inventories.
 Cost effectiveness in various operations of the company.
 The coordination of Inventory management objectives with organizational
objective.

RESEARCH DESIGN :-
The research design is formulated for the above problem is descriptive. The
information is obtained from the primary as well as secondary sources.
Primary sources are the working staff of the company and secondary sources
are the information contained in the files of Company and other subject
related books and journals. The time period available for the research of is 2
months.

38
DATA :
The data collected for the above problem is generally secondary in nature. The analysis
has been done on the basis of past financial statements of the company. The primary data has
been collected after interviewing the officials of the company at various stages. The judgment
sampling has been used, as the sample size is limited in case of different problems. The
following methods are adopted for collecting information’s:
1. Observation.
2. Survey.
3. Questionnaire.
4. Interviewing.

39
 ANALYSIS
OF
INVENTORY
MANAGEMENT

ANALYSIS OF INVENTORY MANAGEMENT:

As inventory is very important term because it may be defined as current assets which
will be sold or used in future for the smooth & normal course of business operations. These
assets may be in the form of raw-materials, work-in-process, finished goods. Adequate
amount of inventory is very much important.
The inventory level is analyzed by internal and external parties. In the external parties are
suppliers and others etc. & exiting and prospective of analysis of inventory is to evaluate the
smooth and balanced functions of the business.
It helps to finds out whether inventory level of the company is adequate or not, whether it is
being used efficiently or not.
We can use following methods for analysis of inventory level:
1. SCHEDULE OF CHANGES IN INVENTORY LEVEL.
2. RATIOS.

40
1.) SCHEDULE OF CHANGES IN
INVENTORY LEVEL:
(INVENTORY = RAW-MATERIAL + WORK-IN-PROCESS + FINISHED
GOODS + OTHERS.)
According to this schedule change in inventory level during the year are ascertained. It is found
out at the end of the year how much inventory level has increased or decreased in comparison to
the inventory level in the beginning of the year.
a) Schedule of Raw–Material.
b) Schedule of Work In Progress.
c) Schedule of Finished Goods.
d) Schedule of changes in Inventory in the form of (others).
e) Schedule of change in Stock level.

LPS has vertical integrated manufacturing plant with a production capacity of more than
25,000 metric tonnes per year.

A). SCHEDULE OF CHANGES IN INVENTORY IN THE

FORM OF (RAW-MATERIAL) FOR LAST FIVE YEARS:-
RAW – MATERIAL

Years Amount in Rs. (IN LACS)

2007-2008 752.80
2008-2009 1190.38
2009-2010 1411.09

41
 1600
1400
1200
1000 2007-2008
amount

800 2008-2009
600 2009-2010

400
200
0
year

The diagram is showing that is regular increase in raw material consumption. It shows that
there is regular increment in the production of finished goods.

B). SCHEDULE OF CHANGES IN INVENTORY IN THE

FORM OF (WORK IN PROGRESS) FOR LAST THREE YEARS:-

WORK IN PROGRESS
Years Amount in Rs. (IN LACS)
2007-2008 1324.70
2008-2009 1373.26
2009-2010 1285.83

42
 change in Inventory in the form of work in
progress

1400
1350
amoount

2007-2008
1300 2008-2009
1250 2009-2010
1200
year

The diagram is showing the decrease in work in progress in 2004 as compare with 2003.
It is good sign for company to reduce the inventory of work in progress because it reduce
the blocking of working capital.

C). SCHEDULE OF CHANGES IN INVENTORY IN THE

FORM OF (FINISHED GOODS) FOR LAST THREE YEARS:-

FINISHED GOODS
Years Amount in Rs. (IN LACS)
2007-2008 1656.07
2008-2009 1893.00
2009-2010 1924.00

43
 1950
1900
1850
1800
amount

2007-2008
1750
2008-2009
1700
2009-2010
1650
1600
1550
1500
year

Finished goods as well as raw material are increase with a regular growth.
This shows the increasing capacity of company also the growth of company.

D). SCHEDULE OF CHANGES IN INVENTORY IN THE

FORM OF (OTHERS) FOR LAST THREE YEARS:-

OTHERS

Years Amount in Rs. (IN LACS)

2007-2008 1414.12
2008-2009 1768.13
2009-2010 1841.33

44
 2000

1800

1600

1400

1200 2007-2008
amount 1000 2008-2009
800
2009-2010
600

400

200

year

Other inventory is also increasing and the growth of company.

E). SCHEDULE OF CHANGES IN STOCK FOR LAST THREE

YEARS:-

Inc(Dec) IN STOCK
Years Amount in Rs. (IN LACS)
2007-2008 5147.68
2008-2009 6224.69
2009-2010 6462.24

45
 7000
6000
5000
2007-2008
4000
amount 2008-2009
3000
2009-2010
2000
1000
0
year

Closing stock of company is also increasing as compare in 2004 as compare with earlier
Years. This shows the little the little increment in the supply of finished goods so more
stock remains in the company’s stores.

46
RATIOS:-
Ratios are basically used for analysis of short-term financial position or test of the
stock level. The short term obligations of a firm can be met in time only when it is having
sufficient current assets. So to win the firm & the efficient use of current assets (inventory)
position must be strong. But a very high degree of inventory level is not good for a firm being
tied up in the current assets

A. INVENTORY TURNOVER RATIO:-

This ratio establishes the relationship between costs of goods sold and average inventory. This
ratio indicates the efficiency of the firm in producing and selling its product. It is calculated by
dividing the cost of goods sold by the average inventory:
COST OF GOOD SOLD
INVENTORY TURNOVER RATIO = ---------------------------------------------
AVERAGE INVENTORY

COST OF GOOD SOLD(in 2009-10 2008-09 2007-08

lacks)
Raw material & components consumed 615.62 359.19 249.77
Electricity fuel & water 573.44 502.55 484.03
Job work charges 1616.70 1216.38 1259.10
Excise duty 248.74 237.98 --
Repair to machinery 40.36 33.91 35.98
Packing Exp. 278.46 185.12 141.06
Testing charges 13.38 6.86 3.97
R & D Exp. 0 0.83 3.96
Tech. know - how fee 5.17 5.48 6.22

47
TOTAL 3153.89 2548.30 2184.08
Add : Purchase 3531.37 3264.76 2768.39
Add : Freight & cartage 109.39 77.98 78.73
Add : Opening stock 4481.00 3579.10 3113.77
TOTAL 11275.65 9470.14 8144.97
Less : Closing stock 4648.82 4480.96 3579.10
COST OF GOOD SOLD 6636.86 4999.18 4565.87

Cost of good sold

Inventory turnover ratio = ----------------------------------
Average stock of inventories

Year 2009-2010 2008-09 2007-08

Opening stock 44813.20 3579.10 3113.77
Closing stock 4648.82 4480.96 3579.10
Total 9129.82 8060.06 6692.87
AVERAGE = (total/2) 4564.91 4030.03 3346.44
Inventory turnover ratio 1.45 1.24 1.36

365
Holding period of inventory = ------------------------------------
Inventory turnover ratio

Holding period 252 294 268

48
B. RAW MATERIAL TURNOVER RATIO:-
With the help of this ratio, it can be ascertained how many times the stock of raw material
converted into sales during the year.

Cost of goods sold

RAW MATERIAL TURNOVER RATIO = ------------------------------------------

Average stock of raw material

Year 2009-10 2008-09 2007-08

Opening stock 1190.38 752.80 509.75
Closing stock 1411.09 1190.38 752.80
Total 2601.47 1943.18 1262.55
AVERAGE = (total/2) 1300.73 971.59 631.27
Raw-material - 5.09 5.15 7.23
Turnover ratio
365
Holding period of raw material = --------------------------------------
Raw material turnover ratio

Holding period 72 71 50

49
 C. WORK IN PROGRESS TURNOVER
RATIO:-
With the help of this ratio, it can be ascertained that how many times the stock of work in
progress material converted into sales during the year.

Cost of goods sold

WORK IN PROGRESS TURNOVER RATIO = ---------------------------------------------

Average stock of work in progress

Year 2007-08 2008-09 2009-2010

Opening stock 1373.26 1324.69 1282.43
Closing stock 1285.83 1373.26 1324.69
Total 2659.09 1697.95 2607.12
AVERAGE = (total/2) 1329.54 1348.97 1303.56
Work in progress -
Turnover ratio 4.98 3.71 3.50

365
Holding period of work in progress = ------------------------------------
work in progress turnover ratio

Holding period 73 98 104

50
D. FINISHED GOOD TURNOVER RATIO:-

With the help of this ratio, it can be ascertained that how many times the stock of finished
good material converted into sales during the year.

Cost of goods sold

FINISHED GOODS TURNOVER RATIO = ---------------------------------------

Average stock of finished goods

Year 2007-08 2008-09 2009-10

Opening stock 1892.92 1656.07 1305.60
Closing stock 1924.00 1892.92 1656.07
Total 3816.92 3548.99 2961.67
AVERAGE = (total/2) 1908.46 1774.49 1480.83
Finished goods -
Turnover ratio 3.47 2.82 3.08

365
Holding period of finished goods = --------------------------------------
finished goods turnover ratio

Holding period 105 129 119

51
INTERPRETATION OF RATIOS

 Inventory turnover ratio :

The ratio in the year 2007-08 was 1.36 & in the year 2008-09 it decreased up to 1.24, so holding
period increased. But ratio rise in the year 2009-10 up to 1.45 and holding period decreased.

 Raw material turnover ratio :

This ratio has negative signs. Over the period of last three years, these are showing decreasing
trend. By such decreasing trend of ratio, the holding period is increasing.

 Work in progress turnover ratio :

The ratio in the year 2007-2008 was 3.50 and in the year 2008-09 it increased up to 3.71 and also
increased in 2009-10 up to 4.98 and there is a regular fall in holding period.

 Finished goods turnover ratio :

The ration in the year 2007-08 was 3.08 and decreased up to 2.82 in the year 2008-09
and holding period rise. But in year 2009-10 it increased up to 3.47 and holding period
decreased.

52
 FINDINGS

FINDINGS:-
 All the staffs of L.P.S. are dedicated towards the works.
 L.P.S. industry has sufficient working capital for its day to day operations.
 Its ratio analysis shows that it has still sufficient ratio.
 L.P.S. is one biggest fasteners producing industry and in export of fasteners.
 It has captured the big share of domestic market and also have sufficient share in
foreign market.
 L.P.S. provides welfare activities to its employees.
 L.P.S. has a huge capacity of manufacturing and designing the fasteners.
 L.P.S. makes the full capacity utilization more than 100% as the annual growth through
put of L.P.S. is more than installed capacity.
 It has a separate HRD section for maintaining its man power resources.
 It provides various loan facilities to its employee for different purposes.
 It has proper industrial relation sections for maintaining industrial relations.
 Intensive measures have been taken for pollution control and environment protections.
 Decision making is smooth in L.P.S. Industries Ltd.
 It provides insurance facility to its employees.

53
 SUGGESTIONS
AND
CONCLUSION
SUGGESTIONS:-

 The company should further lay more emphasis on inventory control management. It
should try to further reduce its inventories without affecting the production.
 The Company should have an effective planning.
 Company should do more innovative to its R & D department.
 Company should make effort to increase its share in foreign market as well as in
domestic market.
The Company should try to get orders from the new entrants in the automobile industry in India.
As in the last few years various multinational companies like Hyundai Motors, Toyota Motors
etc. have installed their units to manufacture automobiles, the Company should approach them to
get orders.

54
CONCLUSION:-

 Company has very good human resources but because of lack of proper control it
increases its expenses.
 Company should have to improve its medical facility for its employees.
 Company should provide time to time training to its workers that decrease a number of
accidents.

55
 ANNEXURE

ANNEXURE OF THE STUDY:-

1. Inventory have various aspects, to study all the aspects of Inventory in detail in such
a short duration is almost impossible.
2. Figures do not speak by themselves and the conclusions obtained from these figures
are affected to a great extent by the personal ability and knowledge of the researcher
so human bias is another aspect of limitation of the study.
3. Lack of proper material of study is also a limitation of my study.

56
BIBLOGRAPHY
Reports maintained by the Company:-
 33rd Annual Report of L.P.S. Ltd. 2001-2002
th
 34 Annual Report of L.P.S. Ltd. 2002-2003
 35th Annual Report of L.P.S. Ltd. 2003-2004
Other Books:-
 Financial Management (8th Edition) by I.M. Pandey.
 Financial Management by M.Y. Khan & P.K. Jain.
 Financial Management by R.K. Mittal.
 Research Methodology by C.R. Kauthri
Web site:-
 www.lpsindia.com
 www.google.com

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