A study on inventory managament of ksdl

A STUDY ON INVENTORY MANAGAMENT OF KARNATAKA SOAPS & DETERGENTS LIMITED AT BANGALORE SUBMITTED IN PARTIAL FUFILLMENT OF THE REQUIREMENTS OF BACHELOR OF BUSINESS MANAGEMENT DEGREE COURSE OF BANGALORE UNIVERSITY By

Bangalore

STUDENT DECLARATION 1

This is to certify that this project on “A comparative study on inventory management of Karnataka soaps & Detergent limited at Bangalore� is carried out independently by me under the guidance of Mr. gowrisha sir of Oxbridge business school, Bangalore and this work is an original one and has not been submitted earlier to any other university or any other Institution for the fulfillment of the requirement of a course of study.

Place: Bangalore

XYZ

Date:

Reg no.

2

ACKNOWLEDGEMENT I take this opportunity to express my gratitude towards all those who have been helpful in the completion of this project. I express my sincere thanks to Principal of Oxbridge business school and Mr gowrisha sir Department of Management for their co-operation. I would like to express at most thankfulness to Sri. P.Ravi Dy. Gen Manager [Finance], Sri N.R. Gave Gowda, Ass General manager [Accounts] Sri.Narayan swamy (HRD department), who provided me an opportunity to conduct the study at their organization. I am grateful to all the staff members of management for their constant support, help and encouragement.

My special thanks to our internal guide Mr. gowrisha sir without whom this project would not have been fully completed. And I would like to thank all the other faculty members of Management Department.

Lastly, I wish to thank my parents and friends for their co-operation and support.

Place: Bangalore Date:

XYZ

CHAPTER NO. PARTICULARS

PAGE NO

1.

INTRODUCTION

7-22

2.

COMPANY PROFILE

23-27

3.

RESEARCH DESIGN OF THE STUDY

28-51

4.

DATA ANALYSIS AND INTERPRETATION

52-68

5.

SUMMARY OF FINDINGS AND CONCLUSION

69-72

ANNEXTURE

73-74

BIBLIOGRAPHY

73-85 4

CONTENT

LIST OF TABLES TABLE NO.

TITLE

PAGE NO

1

GROWTH OF INVENTORY

49

2

PERCENTAGE OF INVENTORY TO WORKING CAPITAL

52

3

PERCENTAGE OF INVENTORY IN CURRENT ASSETS

54

4

INVENTORY TURN OVER RATIO

56

5

INVENTORY CONVERSION OF PEROID

58

6

OPERATING EXPENSES RATIO

60

7

GROSS OPERATING CYCLE

62

LIST OF GRAPHS GRAPH NO.

TITLE

PAGE NO

1

GROWTH OF INVENTORY

51

2

PERCENTAGE OF INVENTORY TO WORKING CAPITAL

53

3

PERCENTAGE OF INVENTORY IN CURRENT ASSETS

55

4

INVENTORY TURN OVER RATIO

57

5

INVENTORY CONVERSION OF PEROID

59

6

6

OPERATING EXPENSES RATIO

61

7

GROSS OPERATING CYCLE

62

CHAPTER-1 INTRODUCTION

INTRODUCTION Finance is treated as life blood of an enterprise. Finance is required to start a business, to purchase raw materials, to pay bills, any wages and for every activity of a business enterprise. The term finance was interrupted to mean the procurement of funds by corporate enterprises to meet the financing needs. The term procurements were used in a bread sense include the whole gamut of raising the funds externally.

Meaning of finance Finance is one of the major elements, which activates the overall growth of the economy. Finance is the lifeblood of economic activity. A well-knit financial system directly contributes to the growth of the economy. An efficient financial system calls for the effective performance of financial institutions, financial instruments and financial markets.

Importance of finance:ďƒ˜ ďƒ˜ ďƒ˜

Ensure that there are adequate funds available to acquire the resources needed to help the organization to achieve its objectives.

Ensure costs are controlled.

Ensure adequate cash flow

8





Establish and control profitability levels. One of the major roles of the finance department is to identify appropriate financial information prior to communicating this information to managers and decision makers in order that they may make informed judgments and decisions.

Finance also prepares financial documents and final accounts for managers to use and for reporting purposes (AGM etc…….)

Meaning of management In the present day industrial world, management has become universal. The principles of management are being applied not only for managing business concerns, but also to manage various other service sector institutions like hospitals, educational institutions, etc. It is in this context both finance and management functions gained substantial significance in the industry.

Meaning of financial management Financial management is the specialized functions directly associated with the top management. The significance of this function is not only seen in the ‘Line’ but also in the capacity of ‘Staff’ in the overall administration of a company. It has been defined differently by different experts in the field. Some of the important definitions are:

“Financial management is the operational activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operation”

By Joseph and Massie

“Financial management is an area of financial decision making, harmonizing individual motives and enterprise goals”

By Weston and Brigham

PART -A INTRODUCTION TO INDUSTRY

INDUSTRY PROFILE Soap is one of the commodities which have become an indispensable part of the life of modern world. Since it is non durable consumer goods, there is a large market for it. The whole soap industry is experiencing changes due to innumerable reasons such as government relations environment and energy problems increase in cost of raw material etc.

The changing technology and ever existing desire by the individual and the organization to produce a better product at a more economical rate has also acted as catalyst for the dynamic process of change.

More and more soap manufactures are trying to capture a commanding market share by introducing new products. The soap industry in India faces a cut throat competition with multinational companies dominate the market. They are also facing severe threat from dynamic and enterprising new entrance especially during 1991-92.

If we look back into the history of soaps & detergents, mankind knew about soaps nearly 2000 years back i.e. in 70 A.D. when Mr. Elder accidentally discovered the soap, when roasted meat over flowed on the glow in ashes. This lump like product was soap & had foaming & cleansing character. In 1192 A.D. the first commercial batch of soaps was made & marketed by M/s Bristol soap market in London, from there in 1662A.D. the first patent for making soap was taken in London. The world consumption of soap in 1884A.D. was said to be 2lakh tonnes p.a.

HISTORY OF THE SOAP 10

Soap manufacturing was started in North America. Some American companies with well known names were started 200 years ago. During middle age soap was made at various places in Italy, France, England & other countries.

France became famous & many small factories were established there.

In India the first soap industry was established by North West soap company in1897 at Meerut following the swadeshi movement. From 1905 onwards few more factories were setup.

They are, • • • • •

Mysore soap factory at Bangalore Godrej soap at Bombay Bengal chemicals Tata oil mills 1930 lever brothers company

THE INDIAN SOAP INDUSTRY SCENARIO The Indian soap industry has long been dominated by hand full of companies such as: 1. Hindustan levers limited.

2. Tata oil mills (taken over by HLL) 3. Godrej soaps private limited.

The Indian soap industry continued to flourish very well until 1967-68, but began to stagnate & soon it started to recover & experienced a short upswing in 1974. This increase in demand can be attributed due to;

1.

2.

3.

4.

Growth of population.

Income & consumption increase.

Increase in urbanization.

Growth in degree of personal hygiene.

Soap manufacture has 2 classifications, organized and unorganized sectors.

KSDL comes under organized sector.

PRESENT STATUS Market scenario: India is the ideal market for cleaning products. Hindustan liver, which towers over the cleaning business, sells in all over the cleaning business but the tiniest of Indian settlements. The 7.4lakhs tons per annum soap market in India in crawling along at 4% The hope lies in raising Rupee worth, the potential for which is high because the Indian soap market is pseudo in nature & it is amazingly complex being segmented not only on the basis of price benefits, but even a range of emotions within that outlining framework.

PROBLEMS OF SOAP INDUSTRY Soap industry faces some problems in case of raw materials. The major ingredients are soap ash, linear alkyl, benzene& sodium. Tripoli phosphate poses number of serious problems in terms of availability. The demand supply gap for vegetable oil is 1.5 to 2 lakh tons & is met through imports. In recent times, caustic soda and soap ashes in the cheaper varieties of soaps are quite high.

PART-B Introduction to inventory In financial parlance, inventory is defined as the sum of the value of raw materials, fuels and lubricants, spare parts, maintenance consumables, semiprocessed materials and finished goods stock at any given point of time. The 12

operational definition of inventory would be: the amount of raw materials, fuel and lubricants, spare parts and semi-processed materials to be stocked for the smooth running of the plant. Since these resources are idle when kept in stores, inventory is defined as an idle resource of any kind having an economic value.

Inventories are maintained basically for the operational smoothness, which they can affect by uncoupling successive stages of production, where as the monetary value of inventory serves as a guide to indicate the size of the investment made to achieve this operational convenience. The materials management department is expected to provide this operational convenience with a minimum possible investment in inventories. The objectives of inventory, operational and financial, needless to say, are conflicting. The materials department is accused of both stock outs as well as large investment in inventories. The solution lies in exercising a selective inventory control and application of inventory control techniques.

Origin of the word inventory The word inventory was first recorded in 1601. The French term inventaire, or “detailed list of goods,� dates back to 1415.

Inventory management The most important objective or inventory control is to determine and maintain an optimum level of investment in the inventory. Most companies have now successfully installed one or the other system of inventory planning and control.

Inventory management and inventory control must be designed to meet the dictates of the marketplace and support the company's strategic plan. The many change in market demand, new manufacturing technology means many companies need to change their inventory management approach and change the process for inventory control.

Despite the many changes that companies go through, the basic principles for accomplishes and techniques are wrapped in new terminology, but the underlying principles for accomplishing good inventory management and inventory activities have not changed.

The inventory management system and the inventory control process provides information to efficiently manage the flow of materials, effectively utilize people and equipment, coordinate internal activities, and communicate with customers.

Inventory management and the activities of inventory control do not make decisions or manage operations; they provide the information to managers who make more accurate and timely decisions to manage their operations.

The basic building blocks for the inventory management system and inventory control activities are:Sales forecasting or Demand management Sales and operations planning Production planning Material requirements planning Inventory reduction The emphases on each area will vary depending on the company and how it operates, and what requirements are placed on it due to market demands. Each of the areas above will need to be addressed in some form or another to have a successful program of inventory management and inventory control.

Characteristics of inventory management •

The holding inventory is risky because of the capital investment and the potential for obsolescence.

•

Investment for inventory cannot be used to obtain other goods or assets that could improve enterprise performance.

•

Funds supporting inventory investment must be borrowed, increasing the firm’s interest expense. A second form of risk is the possibility that the product will be pilfered or become obsolete.

These factors and the relative magnitude of assets that are inventory-related contribute substantially to the riskiness of most enterprises. It is important to 14

understand that the nature and extent of risk vary depending on an enterprise’s position in the distribution channel.

Importance of inventory management:Inventory management refers to the process of managing the stocks of finished products, semi-finished products and raw materials by a firm. Inventory management, if done properly, can bring down costs and increase and increase the revenue of a firm.

How much one should invest in inventory management? The answer to this question depends on the volume and value of inventory as a percentage of the total assets of a firm. The importance of inventory management varies according to industries. For example, an automobile dealer has very high inventories, sometimes as high as 50 percent of the total assets, whereas in the hotel industry it may be as low as 2to 5 percent.

The process of inventory management is a continuous one and there are various kinds of solutions available. It is advisable to employ specialized staff for inventory management.

The inventory management process begins as soon as one has started production and ordered raw materials, semi-finished products or any other thing from a supplier. If you are a retailer, then this process begins as soon you placed your first order with the wholesaler.

Once orders have been placed, there is generally a short period of time available to a firm to put an inventory management plan in place before the supplies are delivered. Inventory management helps a firm to decide in advance where these supplies should be stored. If a firm is getting supplies of small-sized goods, it may not be much of a problem to store them, but in the case of large goods, one has to be careful so that the warehousing space is optimally utilized.

From invoices to purchase orders, there is lot of paperwork and documentation involved in inventory management. Several software programs are available in market, which help in inventory management.

Inventory management provides detailed information on inventory management, inventory management software, supply chain inventory management, inventory management system and more. Inventory management is affiliated with Eprocurement services.

Inventory control techniques Inventory control techniques are employed by the inventory control organization within the framework of one of the basic inventory models, viz., fixed order quantity system or fixed order period system. Inventory control techniques represent the operational aspect of inventory management and help realize the objectives of inventory management and control. Several techniques of inventory control are in use and it depends on the convenience of the firm to adopt any of the techniques. What should be stressed, however, is the need to cover all items of the stage of their use.

The techniques most commonly used are the following:1.

Always better control (ABC) analysis ABC analysis underlines a very important principle “Vital few: trivial many”. Statistics reveal that just a handful of items account for bulk of the annual expenditure on materials. These few items, called ‘An’ items, therefore, hold the key to business. The other items, known as ‘B’ and ‘C’ items, are numerous in number but their contribution is less significant. ABC analysis thus tends to segregate all items into three categories: A, B, and C on the basis of their annual usage. The categorization so made enables one to pay the right amount of attention as merited by attention as merited by the items.

2.

High, medium and low (HML) analysis HML analysis is similar to ABC analysis except for the difference that instead of “usage value”, “price” criterion is used. The items under this analysis are classified into three groups that are called “high”, “medium” and “low”. To classify, the items are listed in the descending order of their unit price.

16

3.

Vital, essential and designable (VED) analysis ‘V’ stand for vital, ‘E’ for essential, ‘D’ for desirable. This classification is usually applied for spare parts to be stocked for maintenance of machines and equipments based on the criticality of the spare parts. The stocking policy is based on the criticality of the items. The vital spare parts are known as capital or insurance spares. The inventory policy is to keep at least one number of the vital spare part irrespective of the long lead-time required for procurement. Essential spare parts are those whose nonavailability may not adversely affect production. Such spare parts may be available from many sources within the country and the procurement lead time many not be long. Hence, a low inventory of essential spare parts is held. The desirable spare parts are those, which, if not available, can be manufactured by the maintenance department or may be procured from local suppliers and hence no stock is held usually.

4.

Scarce, difficult and easy to obtain (SDE) SDE analysis is based on the problems of procurement namely:Non-availability Scarcity Longer lead time Geographical location of suppliers, and Reliability of suppliers, etc SDE analysis classifies the items into three groups called “scarce”, “difficult” and “easy”. The information so developed is then used to decide purchasing strategies.

5.

Fast moving, slow moving and non-moving (FSN)

FSN stand for fast moving, slow moving and non-moving. Here classification is based on the pattern of issues from stores and is useful in controlling obsolescence. To carry out FSN analysis the date of receipt or the last date of issue, whichever is later, is taken to determine the number of months which have lapsed since the last transaction. The items are usually grouped in periods of 12 months. FSN analysis is helpful in identifying active items which need to be reviewed regularly and surplus items which have to be examined further. Non-moving items may be examined further and their disposal can be considered.

6.

Seasonal-off seasonal (S-OS) Analysis S-OS analysis is based on the nature of supplies wherein S stands for seasonal items and OS stands for the off-seasonal items. This classification of items is done with the objective of determining proper procurement strategies. Agri based industries need to design their procurement policies in such a way that they procure their raw material during the harvesting season so that they get the best quality in the reasonable price. They need to have proper storing facilities in order to pressure the items till such time they are consumed.

7.

XYZ analysis for finished goods inventory XYZ analysis is based on the closing inventory vale of different items. Items whose inventory values are high are classified as X items while those with low investment in them are termed as Z items. Other items are the Y items whose inventory value is neither too high nor too low. Read made garments industry can effectively use this analysis to determine their investments in finished goods inventory.

8.

Government, ordinary local and foreign (GOLF) supplies GOLF analysis is used to identify the stock interms of government supplies, ordinary supplies, local supplies and foreign supplies. This analysis can be effectively used by industries in designing their procurement strategies.

18

9.

Economic order quantity (EOQ) Economic order quantity refers to that level of inventory at which the total cost of inventory is minimum. The total inventory cost comprising ordering and carrying costs. Shortage costs are excluded in adding total cost of inventory due to the difficulty in computation of shortage cost.EOQ also known as Economic Lot Size (ELS).

EOQ FORMUL 2 AO CC ¿ √¿

Where A = Annual usage, O =Ordering cost per order, CC= Carrying cost per unit and CC= price per unit  Carrying cost per unit in percentage.

10. Max-minimum system The maximum-minimum system is often used in connection with manual inventory control systems. The minimum quantity is established in the same way as any reorder point. The maximum is the minimum quantity plus the optimum lot size. In practice, a requisition is initiated when a withdrawal reduces the inventory below the minimum level; the order quantity is the maximum minus the inventory status after the withdrawal.

If the final withdrawal reduces the stock level substantially below the minimum level, the order quantity will be longer than the calculated EOQ. The effectiveness of a minimum-maximum system is determined by the method and precision with which the minimum and maximum parameters are established. If these parameters are based upon arbitrary judgments with a limited factual basis, the system will be limited in its effectiveness.

If the minimum are based on an objective rational basis, the system can be very effective.

11.

Two bin system

It is mainly adapted to control ‘o’ group inventories. In the two-bin system, stock of each item is separated into two bins. One bin contains stock to last till the date of placing a new order. The other bin contains a certain quantity of stock that will be sufficient to satisfy probable demand during the period of replenishment stock first issued from the 1st bin.

When the 1st bin is empty, an order of replenishment is made and the stock in the 2nd bin is utilized until the order material is received.

12.

Materials requirement planning (MRP)

MRP is a new solution to an old problem: having stock of materials always on hand when needed without carrying excess inventory. Highly dependent upon computer technology, MRP is most helpful to firms with finished goods or end products which are made from a number of components and which are also subject to uneven or lumpy demand. The technique separates the various components and co-ordinates purchasing and delivery with production. This result in materials arriving exactly when needed for production and, at the same time, reduces the length of time materials are held in stock. MRP plans and controls goods on order and generates data for determining when and what specific materials will be needed to meet previously planned production schedule.

13.

Just-in-time (JIT)

Just in time is highly discussed in materials management circles these days. The concept is alternatively known as ZIPS (Zero inventory production system), MAN (Materials as needed), NOT (Nick of time), or ZIN (Zero inventories).

As a concept, JIT means that virtually no inventories are held at any stage of production and that exact number of units is brought to each successive stages of production at the right time.

20

Objectives of inventories Inventory is as old as man. The primitive man's inventory consisted of a few tools; as a shepherd, man had to tend his flocks and herds; later, he had his granaries and warehouses; today, with industrialization, his inventories cover a very wide range. As man has progressed and his needs and activities have multiplied, the range of inventory has become larger and more diversified.

As of today inventories include, among others, raw materials, part finished goods, finished goods and operating supplies. Each of these serves specific purposes.

The following are the objectives of inventory management:1.

To facilitate smooth operation of the manufacturing process.

2.

To minimize investment in inventory.

3.

To reduce material handling costs.

4.

Reasonable utilization of people.

INVENTORY COSTS Inventories cost money. The cost factor must be considered while taking any decision regarding inventories. Inventory cost includes ordering cost, carrying cost, out of stock or shortage cost, and capacity cost. Each of these comprises several elements as shown below:1.

Ordering costs A.

Cost of placing an order with a vendor of materials:ďƒ˜

Preparing a purchase order.

ďƒ˜

Processing payments.

ďƒ˜

Receiving and inspecting the material.

B.

2.

Ordering from the plant:

Machine set-up.



Start-up scrap generated from getting a production run started

Carrying costs Costs connected directly with materials:-

A.



Obsolescence



Deterioration



pilferage

B. Financial costs:-

C.



Taxes



Insurance



Storage



Interest (As the cost of capital borrowed to acquire and maintain the inventories)

Alien elaborates the carrying costs in greater details as follows:



Capital costs •

Interest on money invested in inventory.

•

Interest on money invested in land and building to hold inventory.

•

Interest on money invested in inventory holding and control equipment.

Storage space costs •

Rent on building.

22







3.

•

Taxes and insurance on building.

•

Depreciation on building.

•

Depreciation on warehouse installation.

•

Cost of maintenance and repairs.

•

Utility charges, including heat, light and water.

•

Salaries of security and maintenance personnel.

Inventory service cost •

Taxes on inventory.

•

Labor costs in handling and maintaining stocks.

•

Clerical expenses in keeping records.

•

Employee benefits for warehouse and administrative personnel.

Handling-equipment costs •

Taxes and insurance on equipment.

•

Depreciation on equipment.

•

Fuel expense.

•

Cost of maintenance and repairs.

Inventory risk costs •

Obsolescence of inventory.

•

Insurance on inventory.

•

Physical deterioration of inventory.

•

Losses from pilferage.

Out-of-stock costs

4.

A.

Back ordering.

B.

Lost sales.

Capacity costs A.

Over time payments when capacity is too small.

B.

Layoffs and idle time when capacity is too large.

Some of the components of inventory costs are conflicting, ordering costs and carrying costs, for example. If ordering costs are more carrying costs are less and vice versa.

Inventory management and control The management of inventory is given such an importance that it is often treated synonymous with materials management. Literature wise, there are more number of books and articles written on inventory management than on materials management.

Inventory management involves the development and administration of policies, systems, and procedures which will minimize total costs relative to inventory decisions and related functions such as customer service requirements, production scheduling purchasing, traffic, etc. Viewed in that perspective, inventory management is broad in scope and affects a great number of activities in a company's organization. Because of these numerous interrelationships, inventory management stresses the need for integrated information flow and decision making, as it relates to inventory policies and overall systems.

Inventory control, on the other hand, is defined in a narrower sense than inventory management and pertains primarily to the administration of established policies, systems and procedures. For example, the actual steps taken to maintain the stock levels or stock records refer to inventory control.

24

CHAPTER-2 RESEARCH DESIGN

]

Research design

Research means a search of facts, answers to questions and solutions to problems. It is a purposive investigation; it is an “organized inquiry”. It seeks to find explanations to unexplained phenomenon to clarify the doubtful facts and to correct the misconceived facts.

Research design stands for collecting the relevant data and techniques to be used in their analysis keeping in view the objectives of the research and the availability of staff, time and money. Research study in fact, has a great bearing on the reliability of the results aimed at and such constitutes the firm foundation of the entire research.

Research design is needed because it facilitates the smooth sailing of the various research operations, thereby making research as efficient as possible, yielding maximum information with minimum expenditure of effort, time and money.

The type of research undertaken is PURE RESEARCH i.e., it is done for the sake of knowledge without any intention to apply it in practice. It is a basic or fundamental research. This research is not problem oriented.

RESEARCH METHODOLOGY DESIGN OF THE STUDY: 

Title of the study



Statement of the problem



Objectives of the problem 26



Scope of study



Limitations of the study



Methodology of the study



Research instruments

Title of the study “A study on inventory management of (KSDL) Karnataka soaps & Detergent limited at Bangalore.”

Statement of the problem Every business firm big or small has to maintain inventory and it constitute an integral part of the working capital. It has been estimated that inventory in Indian industries constitute a significant portion of current asset inventories require a significant investment not only to acquire them but also hold them investment in inventory is said to be idle but it is unavoidable in any organization manufacturing or trading so inventory cost has become necessary.

Objectives of the study 

To analyze the inventory requirements of the firm to fix various inventory levels.



To compare the inventory levels of last three years to know the improvements.



To classify the inventories according to various inventory techniques.



To offer findings, suggestions and recommendations to the firm.



To keep a track on the materials cost in the company.



To study present system of inventory management.

Scope of the study 

Study was limited only to last three years of inventory requirements



Study aims at giving a clear picture of various levels of inventory in the current year.



Study also aims at giving a clear picture of improvement in the levels from three years.



Study aims at classification of inventory according to its techniques.



The study covers all the areas of cost accounting that can be used by the stores department of the firm.

Limitations of the study 

Study restricted to three years of inventory requirements.



The overall performance of inventory is analyzed not the particular model.



Limited tools were used to analyze the inventory transactions.

The collection of data for the analysis is restricted to KS&DL only at Bangalore.

Time was major limiting factor to study.

 

METHODOLOGY OF THE STUDY:Mainly data is obtained from the annual reports of the company, and websites. Further data is collected through interviews with the personnel and concerned staff of Karnataka soaps & Detergent limited, Bangalore. A questionnaire is also appended.

Sampling techniques are not applicable to the study as it pertains to the study of a single company.

28

Media of collecting the data for this branch office of Karnataka soaps & Detergent limited, located in Bangalore.

RESEARCH INSTRUMENTS: The study period covered in this case study is 3 financial years i.e., from 20062007, 2007-2008, 2008-2009.

Overview of chapter scheme CHAPTER-1 INTRODUCTION It gives an introduction to the topics relating to finance.

CHAPTER-2 RESEARCH DESIGN It deals with the research methodology to be adopted.

CHAPTER-3 COMPANY PROFILE It focuses on profile of industry and company.

CHAPTER-4 ANALYSIS OF DATA Analysis and interpretation of inventory

management.

CHAPTER-5 FINDINGS AND CONCLUSIONS Consist of findings, suggestion and conclusion.

CHAPTER.3 COMPANY PROFILE 30

COMPANY PROFILE: HISTORY OF KS&DL Karnataka soaps & Detergents Limited, a successor to the government soap factory, which is one of the premier factories among the Indian soap industries.

After World War 1, there was a slump in the sandal wood export to the west. It dropped a blanket of gloom over business & trading in India. The Maharaja of Mysore turned this threat in to an opportunity, by sowing the budding seeds of KS & DL on the out skirts of Koti forest, near Bangalore in 1918.

The project took shape with the engineering skill and expertise of a top-level team with the inspection of the Diwan of Mysore Late Sir. M. Visvesvaraya & with the service of scientists late Sir S.G. Shastry, Professor Watson & Dr. Sub rough.

The entire credit goes to Sir. S.G.Shastry, who improved & made the process perfect of manufacturing of sandalwood oil & world famous Mysore Sandal Soap.

The factory was started a very small unit near K.R.Circle, Bangalore with the capacity of 100 tons p.a in 1918. Then, the factory shifted its operations to Rajajinagar industrial area, Bangalore in July 1957. The plant occupies an area of 42 acres (covering soap, detergent & fatty acid divisions) on the BangalorePune Highway easily accessible by transport services and communication. In November 1918, the Mysore Sandal Soap was put in to the market after sincere effort & experiments were undertaken to evolve a soap perfume blend using sandalwood oil as the main base to manufacture toilet soap.

RENAMING OF COMPANY On Oct 1st 1980, the Government Soap Factory was renamed as “KARNATAKA SOAPS AND DETERGENTS LIMITED”. The company was registered as a Public Limited company. Today the company produces varieties of products in toilet Soaps, Detergents, Agarbathis and Talcum powder.

KS&DL has been built up with rich tradition for the quality of its products.

Mysore Sandal Soap is the No: 1 anywhere in the world. The Karnataka state is the original home of the Sandal oil, which uses Original perfume sandalwood in the manufacturing of Mysore Sandal Soaps.

It is also known as the “FRAGRANT AMBASSADOR OF INDIA”.

TRADEMARK OF MYSORE SANDAL SOAP

The “SHARABHA”

32

The carving on the cover is the ‘Sharabha’, the trademark of KS&DL. The Sharabha is a mythological creation from the puranas and embodies the combined virtues of wisdom, courage & strength, while it is illustrated in its unusual from the body of a lion with head of an elephant. It was adopted as an official emblem of KS&DL to symbolize the philosophy of the company. The Sharabha the symbolized power that removed imperfections & impurities. The Maharaja of Mysore has his official emblem adopted it. And soon took its pride of place as the symbol of the government Soap factory, of quality that reflects a standard of excellence of Karnataka Soaps & Detergents Limited.

SLOGAN

“NATURAL PRODUCTS WITH EXOTIC FRAGRANCES”

KS & DL has a long tradition of maintaining the highest quality standard, right from the selection of raw materials to processing and packing of the end product. The reasons why its products are much in demand globally and are exported regularly to UAE, Beharen, Saudi-Arabia, Kuwait, Qatar, South America. The entire toilet soaps of KS & DL are made from raw materials of vegetable origin and are totally free from animal fats.

POLICY OF KS&DL i. ii. iii. iv.

Seek purchase of goods and services from environment responsible suppliers.

Communicate its environment policy and best practices to all its employees’ implications.

Set targets and monitor progress through internal and external audits.

Strive to design and develop products, which have friendly environmental impact during manufacturing.

Reuse and recycle materials wherever possible and minimize energy consumption and waste.

v.

OBJECTIVES OF KS&DL: I. II. III. IV. V. VI. VII. VIII.

To serve the National economy.

To attain self-reliance.

To promote purity & quality products To maintain the Brand loyalty of its customers.

To build upon the reputation of Mysore sandal soap based on pure sandal oil.

To promote and uphold its image as symbol of traditional products To maintain the brand loyalty of its customer.

To supply the products mentioned above at most reasonable and competitive price.

PRODUCT PROFILE: KS&DL is the true inheritor of golden legacy of India. Continuing the tradition of excellence for over eight decades, using only the best East Indian grade Sandalwood oil & Sandalwood soaps in the world. The products produced at KS&DL are the Soaps, Detergents, Agarbathies and Sandalwood oil.

PRODUCT RANGE FROM THE HOUSE OF MYSORE SANDAL SOAP PRODUCTS MANUFACTURED BY KSDL TOILET SOAPS nn NAME OF THE PRODUCTE PRODUCT

UNITS OF GRAMS

MYSORE SANDAL SOAP

75, 125 34

MYSORE SANDALCLASSIC SOAP

75

MYSORE SANDAL GOLD SOAP

75, 125

MYSORE SANDAL BABY SOAP

75

MYSORE SPECIAL SANDAL SOAP

75

MYSORE ROSE SOAP

100

MYSORE SANDAL HERBAL CARE SOAP

100, 125

MYSORE JASMINE SOAP

100

WAVE SOAP

100

MYSORE LAVENDER SOAP

150

MYSORE SANDAL BATH TABLET

150

MYSORE SANDALCLASSIC BATH TABLET

150

MYSORE JASMINE BATH TABLET

150

MYSORE SPECIAL SANDAL TABLET

150

MYSORE SANDAL ROSE TABLET

150

MYSORE SANDAL GUEST TABLET

75

DETERGENTS

NAME OF THE PRODUCT

UNITS IN GRAMS

MYSORE DETERGENT POWDER

1000

MYSORE DETERGENT POWDER

500

MYSORE DETERGENT CAKE

125

MYSORE DETERGENT CAKE

250

TALCUM POWDERS NAME OF THE PRODUCT

UNITS IN GRAMS

MYSORE SANDAL TALC

20, 50, 100, 300

MYSORE SANDAL BABY TALC

100, 200, 400

AGARBATHIES NAME OF THE PRODUCT MYSORE SANDAL PREMIUM MYSORE SANDAL REGULAR MYSORE ROSE NAGACHAMPA SUPRABHATHA MYSORE JASMINE PARIJATHA SIR M.V.100 BODHISATHVA VENKATESHWARW 36

DURGA AYYAPPA ALIF LAILA MEDITATION GIFT RANGE SBT 06 IN 01 SJR GOLD SIXER

VISION, MISSION AND QUALITY POLICY:

VISSION: I. II.

III.

Keeping pace with globalization, global trends & the State’s policy for using technology in every aspect of governance.

Ensuring global presence of Mysore Sandal products while leveraging its unique strengths to take advantage of the current Tech scenario by intelligent & selective diversification.

Secure all assistance & prime status from Government India all Tech alliances. Further, ensure Karnataka’s pre-eminent status as a proponent & provider of Tech services to the world, nation, & private sectors.

MISSION:

IX. X. XI. XII. XIII.

To serve the National economy.

To attain self-reliance.

To promote purity & quality products To maintain the Brand loyalty of its customers.

To build upon the reputation of Mysore sandal soap based on pure sandal oil.

ISO 9002 QUALITY POLICY: KS&DL commits to “customer delight� through Total Quality Management & continues improvement by involvement of all its employees.

ISO 14001 ENVIRONMENTAL POLICIES OF KS&DL: I. II. III. IV. V. VI. VII.

Is committed to preserve the natural environment in the production of its quality products to the satisfaction of its customer.

Will comply with all statutory & regulatory requirements pertaining to environment stipulated by both state & central authorities.

Would invite & implement action to reduce all impacts that are likely to be a source of concern to the environment.

Would strive & set an example in protection & promotion of an eco-friendly environment.

Is committed to prevent & minimize risks to the environment & conserve natural resources by waging a war against wastes.

Will motivate every employee of the company in preserving the environment by providing appropriate training.

Will make available a copy of environment policy, under environment Management system on a written request to its manager (Environment & Policy)

AN ISO-9002 COMPANY 38

KS & DL with a tradition of excellence of over eight decades is committed to customer delight, through total quality management and continuous improvement through the involvement of all employees. KS&DL has got ISO 9002 certificate.

To improve the quality management system and to facilitate TQM in the process of soap and detergent, the management took decision to obtain ISO-9002 by end of March 1999. Accordingly action plan was drawn and a committee was set up for the purpose during October 1998 with a mission statement. The company gives initial training including conducting employee’s awareness programme, document quality manual and quality system procurement.

In this direction company obtained the guidance from Consultancies, Bangalore and Bureau of Indian Standards, Bangalore. Accordingly, company standards registered for ISO 9002 by the end of March to the Bureau of Indian Standards.

Obtained the certificate by the end of March 1999 itself.

This is to project in the national and international market and also to improve quality of products offered to the consumers with the assurance of quality in the message. The Company got itself upgraded to ISO-9001-2004, Quality Systems in the year 2004-05.

ISO-14001 The company is located in the heart of the Bangalore city. The management of the company took a decision to get the ISO-14001 and become model to other public sector for the techniques used and also to other Government units to spread the message of maintenance of environment.

ISO-14001 and ISO-9001 will facilitate to improve the corporate brands in the global market and it will help the company to improve the profits, year after Year on long-term basis. The environment management system adopted in the company through this motive as follows: I. II. III.

Conservation of energy Conservation of Surrounding Conservation of resources.

Equipped with latest technology and backed by full-fledged quality control and R&D support, KS&DL is marching confidentially ahead in the new millennium.

The Company is developing new products to meet the changing preferences of its customers.

BIRDS EYE VIEW OF KS&DL 191 8

Government Soap Factory was started by Maharaja of Mysore and the Mysore Sandal Soap was introduced into the market for the first time.

195 0

The factory output rose to 500 M. Tons with the following modifications.

1. Renovating the whole premises.

2. Installing new boiler soap building plant and drying chamber.

195 4

Received license from Government to manufacture 1500 tons of soap and 75 tons of glycerin per year.

195 7

Factory shifted its operation to Rajajinagar industrial area.

197 4

Mysore sales international limited was appointed as the sole selling agent, for marketing its products.

197 5

Rs.4 Crores synthetic detergent plant was installed based on Italian technology by Ballestra SPA. 40

198 0

On 1st October 1980 the Government Soap Factory was converted into a public sector enterprise and renamed as “Karnataka Soaps & Detergents Limited�.

198 1

a) Production capacity increased to 6000 tons.

198 4

Manufacturing of premium quality of Agarbathies at Mysore division.

198 5

Production capacity was raised to 26,000 M. Tons Per Annum. A large variety of toilet soaps at attractive shapes, colors and fragrances introduced to meet the varieties & tastes of consumers.

199 2

The company was registered with the Board for Industries and Financial Reconstruction (BIFR), New Delhi in December for rehabilitation, as the company suffered losses continuously since 1980 at its net worth fully eroded.

199 6

The BIFR approved the rehabilitation scheme in September & the Company started making Profits.

199 9

ISO-9002 Certificate for quality assurance in production, installation and servicing.

200 0

ISO-14001 certificate pertaining to environmental management system.

200 3

The entire carried forward loss of Rs.98 Crores wiped out and in May BIFR, declared the company to be out of its Purview. The Company is making profit continuously; It is only State Public Sector unit that has come out of BIFR.

200 4

The ISO-9002 was upgraded to ISO-9001-2004, Quality Systems.

b) Rs.5 Crores Fatty Acid Plant was installed.

WORK FLOW MODEL: SILOS (Silos are closed chambers)

Soaps Noodles

Container Mixer

Simplex Plodder

It becomes NOODLES

Milling

It becomes soap ribbons

Duplex plodder

Cutting Machine

42

Cakes are led to

Stamping Machine

Wrapping machine

Led through the conveyor belt

KS&DL follows the following distribution Channel AREA OF OPERATION:

GLOBAL FAVOURITES FOR THEIR NATURAL GOODNESS KS&DL has a long tradition of maintaining the highest quality standards, right from the selection of raw materials to processing and packaging of the end

product. The reason why its products are much in demand globally & are exported regularly to UAE, Bahrain, /Saudi Arabia, Kuwait, Qatar, South East Asian countries as well as North America & South America. The sandalwood oil, of course, is much sought after by the leading perfume houses of the world. All the toilet soaps of KS&DL are made from oils & fats of vegetable origin & totally free from animal fat.

OWNERSHIP PATTERN: “Wholly owned by Government of Karnataka”.

COMPETITORS INFORMATION AND THEIR MARKET SHARE: HLL

70%

Godrej

04%

Procter and gamble

10%

KSDL

11%

Other

05%

STRENGTHS 44

     

Only soap in India that contains pure sandal & almond oil.

Certified by ISO World’s largest production of sandal wood oil.

Brand name from decades in soap market.

It has very good dealership network in south which ensures that the products reach every customer.

Diversified product range helps the company to maintain stability.

WEAKNESSES     

Distribution network weak in north and east.

Absence of television advertisement Neglecting freshness aspect.

High oriented cost due to excessive labour force.

Low turnover resulting in low profit.

OPPORTUNITIES    

Traditional benefits that sandal is good for skin.

Skin care is just gaining importance among consumers.

Government of being in the industry for a long time.

Existence of vast market and huge demand.

THREATS     

Other competitors products such as rexona, moti santoor etc.

There is a need for renovation of plant and machinery.

Government policy may reduce growth potential.

Other sandal soaps in the market.

Entry of new multinationals in soap business. SYSTEMS:

A. Accounting System:

Financial statements are prepared under the historical cost convention on an accrual basis and comply with the accounting standards refer to sec 211 (3c) of the companies Act 1956.

B. Costing System: Process costing.

C. Inventory Control System ABC analysis for stock control.

FIFO method for issuing materials.

Computerized accounting system for stores.

D. Remuneration System: 1.

2.

Time rate system is followed to employees.

Government fixes the remuneration to executives.

E. Performance Appraisal System: Confidential report is prepared by heads of various departments for systematic judgment of the subordinate by authority to assess the standard of work & overall performance.

F. Inventory Control System: STAFF: As any employer, KS&DL follow ethical employment standards wherever it operates with a goal in mind company guarantees.

1.

2.

To fulfill its entire legal obligation in terms of employment payments and benefits practices.

Adequate and timely training for every one for the job for which they are employed.

46

3.

Career advancement related to performance and experience.

STAFF:

Benefits provided by KSDL: Monetary benefits are basic wage allowances, employee’s contribution to PF. Employee state insurance, bonus, pension gravity etc.

Fringe benefits like housing, food canteen, education to children, medical facility, holiday pay, recreation etc.

Allowances: The gross salary includes basic pay and DA 2. City compensatory allowance 5% of basic pay.

3. HRA 20% of B.P who resides in rented house.

4. Conveyance allowance, Rs.595/- per month for workers.

Family Travel Allowance: Rs.1000/- per year for an employee.

1.

5.

Shift allowance: 3 shifts, 1st: 6-2p.m 2nd: 2-10p.m Rs.15/- per shift.

3rd: 10pm – Security Rs.25/- per shift.

Regularly the administrative is 9.30am to 5.30p 6. Leave allowance: 18 days privilege leave 7 days casual. Leave 15 days of sick leaves.

7. Canteen facility 8. Bonus: It is declared within 8 months after closing the accounts the management has declared 20% bonus for the current year.

9. Increments 10. P.F

Medical benefit: Workmen card: Domiciliary Rs, 400/- per month is given along with wages & group insurance policy for self & family.

Office card: the co, gives actual cost over & above the entitlement for major diseases.

STYLE OF MANAGEMENT: Decision-making is centralized with the head office. Authority is given to unit in-charge to take decision in day-to-day minor matters & other urgent matters.

Decision-making depends on the authority & responsibility conferred on each individual & thus it’s distributed based on designation & position held.

In important matters, meetings are held to seek opinions of top management & various department manager & the decisions are taken & implemented.

Decision-making is co-ordinate & done with wide consultations of top management of department manager’s consultation which gives best possible gains.

STRATEGY: Strategic planning is about asking questions, more than attempting to answer them. Strategy formulation entails a search for a different frame of reference. It is the quest for a new business paradigm. There are two types of paradigms that apply to management, namely the business and the organizational 48

or managerial paradigms. The business paradigms define a company’s position in the market place with respect to customers, technology and products.

Strategy is a choice of direction and action; the company adopts to achieve its objectives in a competitive situation. Any statements on overall of functional strategy that the company may wish to share are:

Improvement in the existing products.

• • • •

Their future plans include launching of new products.

The cost control exercise is in consolidation.

Introduction of cost effective substitutes without compromising on quality Development of new perfumes, soaps detergents, agarbathis, creams and shampoos.

Highlights for the year 1.

The companies has set an ambition sales target of Rs 220 crores for the year 2009-10 & have plans to achieve the sales target.

2.

The company introduced multi –variants in the brand name of “wave soap” namely “wave lime” for the long run like Mysore sandal soap & wave lime soap in public distribution system through Karnataka food & civil suppliers new liquid body wash in the name of ‘wave’ ,’rose’ & ‘Mysore sandal gold’ , in the liquid soap segment. Wave body spray etc., during the financial year.

Future prospects 1.

Put up new plant & machinery with latest technology to improve the quality & also to reduce the cost of production.

2.

The competition in the FMCG sector is raising day by day & almost all competitors are offering heavy consumer offers to capture market share, incentives & trade schemes to the traders & consumers.

3.

Non supply of sandal wood by the Karnataka state forest department has necessitated sourcing sandal wood from public auction at very exorbitant rates.

4.

Due to the non availability of sandal wood & also the exorbitant cost of sandal wood, the company is developing on promotion of popular soaps.

5.

During the current year, the company launches wave talcum powder with cologne perfume, liquid soaps, herbal anti septic hand wash, to increase its sales column substantially in the days ahead.

FINANCE, ACCOUNTS, AUDITING DEPARTMENTS:ACCOUNTING It is the life blood of every organization. It is concerned with managerial decision making. This department is concerned with proper utilization of cash. It identifies the source of finance where to borrow i.e. ICICI, IRBI, IDBI, Corporation bank etc.

It has abundant of function which can be enumerated as follows: • • • • • • • • •

Effective funds management which is inverted in beneficial projects.

Decision making regarding fixing of cash account.

Obtaining trade credit.

Profit Maximization.

Wealth Maximization.

Preparation of cash budgets.

Systematic approach to working capital management.

Pricing of raw materials & valuation of stores.

To protect financial interest of the company

AUDIT DEPARTMENT:

50

KSDL audit wing is headed by interval auditor. Auditing is vital for the company as it facilitates verifying of all the books of a/c by trial balance, it also comply with requirements for central excise & income tax purposes.

After the Auditor’s monitor everything they give report which is helpful to the company.

COSTING: When a company does costing it ensures proper fixation of selling price of the product, cost control it also help in taking decision. KSDL use process costing as the production mechanism is systematic it involves addition of a lot of ingredient in the manufacturing.

Finance Department Chart GENERAL MANAGER (Finance) AGM (Finance) AGM (Costing) / AGM (Bills) MGR A/C’s MGR

MGR (PR&PF) Junior Officer Supervisor Senior Assistant / 52

Stenographer Junior Assistant Junior Officer Supervisor Senior Assistant / Stenographer Junior Assistant MGR (LS) Junior Officer Senior Assistant / Stenographer Junior Assistant

ACHIEVEMENTS / AWARD: 1.

Government of Karnataka Dept of Industries and commerce State Export Promotion Advisory Board. “EXPORT AWARD” 1974-75

2.

Detergent Plant M/s Chemical Bombay have given 1st price for the year 1980-81

3. Geographical Indication GI-2005 4. ISO 9001-2000 in the year 1999 5. ISO 14001-2004 in the year 2000 54

SIZE OF INVENTORY Inventory means stock of goods. It covers the stock of raw materials, stores and spares, work in progress and finished goods.

Table No. 1 Table showing the progressive base year percentage growth of inventory for the period 2006-09 Rs. in Crores Year 2006-2007

Inventory 35.0855

Growth of inventory 33.27%

2007-2008

29.6012

28.07%

2008-2009

40.7452

38.64%

Percentage growth of total inventory =

Inventory

Total Inventory

x 100

CHAPTER-4 DATA ANALYSIS AND INTERPRETATION

56

ANALYSIS The above table shows the percentage growth of total inventory. Year 2006-07is taken as the base year.20.71% during the year of 2006-07 33.27% and decrease of 28.07% in 2007-08, and 33.64% in the year 2008-09. There is increase in the current year2008-09.

CHART SHOWING GROWTH OF INVENTORY Graph No. 1

INTERPRETATION The position of inventory and its percentage growth were in increasing stage but during 2007-08.Inventory and percentage growth are in downward trend due to decrease in production resulting to decrease in sales during the year 2007-08.

PERCENTAGE OF INVENTORY TO WORKING CAPITAL:Working capital is the amount of funds used in current operation of business, working capital need not be in cash, and it can be in form of asset that can be converted into cash within one year.

Working capital = Current assets - Current liabilities

Table No. 2 Table showing the Percentage of Inventory to Working Capital for the period 2006-09 Years

Inventory

Working capital

Percentage

2006-07

35.08

40.80

85.98%

2007-08

29.60

40.62

72.87%

2008-09

40.74

63.98

63.67%

PERCENTAGE OF INVENTORY TO WORKING CAPITAL = Inventory X 100 Working Capital

As per standard or idle inventory to working capital, the inventory should not observe more than 75% of working capital.

ANALYSIS From the above table shows the percentage of inventory to working capital, year 2006-07 is taken as base year. 85.98%, in 2006-07 and decreases of 72.87% in 2007-08 and then it decrease to 63.67% in the following current year 2008-09.

CHART SHOWING PERCENTAGE OF INVENTORY TO WORKING CAPITAL

Graph No. 2

INTERPRETATION 58

Inventory to working capital, which helps to measure the short term solvency of a company. The inventory to working capital is sufficient but during 2006-07 it is above the standard 85%. This shows it is not good situation for the company. This may be due to much of inventories is locked up in working capital

PERCENTAGE OF INVENTORY IN CURRENT ASSETS Inventory generally means stock of good involved in current assets.

Current asset is those assets which change their form and substances and which are converted into cash during the normal operating cycle of business.

Table No. 3 Table showing the Percentage of Inventory in Current Assets for the period 2006-09

Years

Inventory

Current assets

Percentage

2006-07

35.0855

81.6621

42.96%

2007-08

29.6012

88.1689

33.57%

2008-09

40.7452

109.1372

37.33%

PERCENTAGE OF INVENTORY TO CURRENT ASSETS = Inventory x 100 Current Assets

The above table shows the percentage of inventory in current assets.

Year 2006-07 is taken as a base year, 42.96% in 2006-07, and thereafter it decreases to 33.57% in 2007-08 and it is increasing 37.33% in 2008-09

CHART SHOWING PERCENTAGE OF INVENTORY IN CURRENT ASSETS

Graph No.3

INTERPRETATION It shows amount of inventory in 2006-07, in 2007-08 there was an decrease in inventories, which is locked up, where as in year 2006-08 there is decrease in inventories and the amount of inventory is locked up in current asset again. In the year 2008-2009 there is increase in inventories.

INVENTORY TURN OVER RATIO OR STOCK TURN OVER RATIO :It indicates the number of times the stock is turned over (sold) during the year. It is a ratio between net sales and average inventory.

60

Table No. 4 Table showing the percentage of Inventory Turnover Ratio for the period 2006-09(Rs. In Crores) Years

Net sales

Avg. inventory

Turnover times

2006-07

104.4374

35.0855

2.97

2007-08

128.6462

29.6012

4.34

2008-09

153.3703

40.7452

3.34

Inventory Turnover Ratio ANALYSIS =

Net Sales Average Inventory

The above table shows the inventory turnover ratio. Year 2006-07 is taken as base year 2.97 times in 2006-07 and there is increase of 4.34 times in 2007-08 and there is decrease of 3.76 times in 2008-09

CHART SHOWING INVENTORY TURN OVER RATIO

Graph No.4

INTERPRETATION The inventory turnover ratio is increasing over the years. In the year 2007-08 there is improvement in control over inventories than the previous years from 2007 to 2008.but it decrease in 2008-09.

INVENTORY CONVERSION OF PEROID This represents the number of days of which inventories remain before they are issued for production.

Table No. 5 Table showing the Inventory turnover Conversion in number of days For the period 2006-09

Years

No. of Days

Inventory Turnover

No. of

in a year

Ratio

Days

2006-07

365

2.97

122

2007-08

365

4.34

84

2008-09

365

3.76

97

62

Inventory Conversion period =

Number of Days

Inventory Turnover Ratio

ANALYSIS The above table shows the inventory conversion period. Year 2006-07 is taken as base year 122 days. In 2007-08 84days and 2008-09 97 days.

CHART SHOWING INVENTORY CONVERSION OF PEROID

Graph No.5

INTERPRETATION The inventory conversion period shows decreasing trend in 2007-08 & in base year 2006-07 it is good for inventory management.

Operating expenses ratio Table No: 6 Table showing Operating expenses ratio for the period 2006-09

Years

Operating cost

Total income

Ratio (in %)

2006-07

1,06,26,82,573

1,11,06,88,113

95.68

2007-08

1,15,85,36,413

1,28,09,80,587

90.44

2008-09

1,54,03,40,291

1,66,47,01,541

92.53

Source: Records of the KS&DL Annual Reports Operating cost OPERATING EXPENSES RATIO: x100 Total Income

Analysis The KS&DL has 95.68, 90.44 & 92.53 as operating expenses ratio for the years 2006-07, 2007-08 & 2008-09 respectively. This shows KS&DL operating expenses position through over all income of the industry.

CHART SHOWING OPERATING EXPENSES RATIO Graph No.6 Inference:The above graph represents the constant increase. In the operating expenses through total income the years 2005-2009.

Gross Operating Cycle (GOC) The firm’s gross operating cycle can be determined as inventory conversion period plus debtor’s conversion period. The debtor’s conversion 64

period is the time required to inventory conversion period and debtor’s conversion period is referred to as gross operating cycle or the time lag between the purchase of raw materials and collection of cash for sale is Gross operating cycle. . Thus GOC is given as follows,

Formula: Gross operating cycle = Inventory conversion period + Debtors collection period.

Table No: 6 Table showing GROSS OPERATING CYCLE Years Inventory Debtors collection conversion period period

Gross operating cycle

2006-2007

122

148.18

2007-2008

84

32.24

116.24

2008-2009

97

37

134

26.18

Analysis The KS&DL has 148.18, 116.24 & 134 as Gross operating cycle for the years 2006-07, 2007-08 & 2008-09 respectively. This shows KS&DL Gross operating cycle position of the industry,

CHART SHOWING GROSS OPERATING CYCLE Graph No.7

INTERPRETATION

The above given table and chart shows gross operating cycle is decreasing year by year. In the year 2006-07 gross operating cycle is highest (148 days) but in the subsequent year it has decreased. But gross operating cycle is not absolute measure for amount of funds invested in working capital.

The above graph tells us that company is following good inventory policy and they are collected the debts properly in a specified time period. This will definitely help company to carry over its day transaction very easily and are able to manage inventory properly.

ABC ANALYSIS USED IN KSDL (ALWAYS BETTER CONTROL) All inventory items are categorized as ‘A’, ‘B’ & ‘C’ items. The total consumption of item materials for the previous years will be arranged in descending order and items according by the values the first 10,00,000 and above of total consumption are taken as ‘A’ class items. The items accounting for above 2,00,000 and above with n 10,00,000 value of total consumption are taken as ‘B’ class items. The items accounting for below 2,00,000 value of total consumption are taken as ‘C’ class items.

Strict control for commitment, receipt and consumption would be exercised on ‘A’ category items. The purchase budget for the budget year will be complied in detail for ‘A’ category items and under major groups for ‘B’ and ‘C’ category. The internal audit department conduct their visit strictly attempt once in a year for A items once in two to three year for B & C items respectively.

Advantages of ABC This approach helps the material manager to exercise selective control and focus his attention only on few items. ♦ By concentrative on ‘A’ class items the material manager is able to control inventories and show visible results in a short spare of time. ♦ It reduces the clerical cost and resulted in better planning and improved inventory. ♦

Disadvantages of ABC 66

As ABC analysis is based on grades of different items, this gradation may include a lot of subjective elements. ♦ The result of ABC analysis should be received and updated which is not easy. ♦

KARNATAKA SOAPS AND DETERGENTS LTD FOLLOWS THE ABC ANALYSIS TECHNIQUE OF INVENTORY MANAGEMENT ABC Analysis (Always Better Control) segregated on the basis of value in Rs. A Class Items

B Class Items

C Class Items

Consumption worth Rs. 10,00,000 & above p.a.

Consumption worth Rs. 2,00,000 below Rs.10,00,000 p.a.

Consumption worth below Rs.2,00,000 p.a.

Palms, fatty acid distillate

Solvents

Camphor

Soap nobles

Items other than solvents

Benzyl propionale

Imported aromatic chemicals

Almond oil

Common salt

Indigenous items

AB Red oil

Liquid paraffin

Rice bran acid oil

Blue colour paper

Glycerin

Clove leaf oil

Oil dark brown

White clay

Stemon

Oil green

White oil

Acid slurry

Soda ash

Sandal wood oil bottle

Silicon

Water soluble yellow

MS gold pouches

Cellophane paper

Tactaric acid

Wrappers

CLASSIFICATION AND CODIFICATION OF INVENTORIES IN KS&DL Classification of Inventory is done on group wise and codifications are directly identified. The inventories of a manufacturing concern may consist of raw materials, stores & spares; work in process, finished goods etc. The inventories are classified according to their nature/group.

VALUATION OF INVENTORIES IN KS&DL Weighted average method is used in this factory the total cost of all the materials is divided by the total number of items in stock. The price calculated in this way will be used for issue of materials up to the time a fresh purchase has not been made. After a fresh purchase, the quality will be added to the earlier balance quality and material cost will be added to the earlier cost. A fresh price is calculated by the number of units of stock after the purchase.

68

CHAPTER-5 FINDINGS AND CONCLUSION

FINDINGS AND CONCLUSION Findings The study of Inventory management at KSDL Ltd. reveals the following findings. 



  





A material planning is done based on orders obtained from different customers. The material requirement plan processed is to give exact requirements of material to be produced.

All material is stored in right condition at respective locations and the company has items which are slow moving and non-moving, which are disposed off at regular intervals.

Verification of high value material in holding store is conducted in accordance with predetermined programmers.

Vendors are related based on their performance with respect to delivery a quantity price standard.

The received materials are inspected as per standard plan is finished products are tested on 100% basis material is released and handled properly.

The inventory turnover ratio of the company is showing a decreasing trend from 3 years where as in current year there is a slight improvement in control over inventories.

The raw material turnover ratio is fluctuating. These shows there should be necessary steps taken to manage the raw materials.

70

  

Stores and spares turnover ratio is fluctuating. This show there is insufficiency in managing the stores and spares inventory.

The scrap obtained in the process is comparatively very low.

The entire department of KSDL is computerized.

CONCLUSION The following conclusion is drawn after analyzing the data collected from the company:KS&DL will remain a household name to the people of India. Their ambition has always been and will continue, to make soaps for the family of all around the country. And bringing new brands extension to suit the need of traditional and modern scenario. The organization firmly believes that giving its people the right encouragement yield in comparable rewards.

Emphasis is given to man, management and every opportunity so that people can grow with the organization. Its giant infrastructure and network people working toward a common goal to give the customer service and value that he deserve through relentless search for quality and pursuit of excellence looking toward the next century.

The performance of KS&DL in the financial year 2008-2009 was satisfactory. The profits of the company have been increased in the financial year 2008-2009. Due to this there is an increase in the turnover of the company

In KS&DL rate of inventory represents a very significant proportion of total assets. The size of the inventory is increasing year after which indicate inefficient inventory management in KS&DL The nutshell the KS&DL provides good quality of products & maintaining the good turnover and profitability position.

SUGGESTIONS After analyzing the overall performance of the present and past years working, a few short comings have been notice. Though the company is doing well overall, a little more care taken about same of the aspects of inventory management will add to the profitability of the company.

Keeping this view, the following recommendations are put forth after a detailed study was made: 







The sales department should be effective to reduce the stocking in the finished goods component of inventory. New sales technique should be activated to increase the sales.

Over stocking and under stocking of raw materials should be controlled by technical auditors, there should be coordination between production processes department and inventory handling department for efficient outcome.

The company should follow EOQ to reduce over stocking of material, purchase at competitive prices, to reduce the cost of product.

Concentrated effort will be needed to reduce stock of materials, which have not moved for years, insurance items should be 72

ď ś

monitored and made certain that they would meet their purpose when called upon to do so.

The production department should sequence the cycle of operation and stick to the scheduled dates in all areas. Speed conversion of inventory will reduce the interest burden and improve the bottom line.

RECOMMENDATIONS

Bibliography

NAME OF THE AUTHOR

TITLE & EDITION OF THE BOOK

PUBLISHER & PLACE

Reddy

Financial Management,

Himalaya Publishing House,

Second revised edition

Mumbai

Production and Operations Management

Himalaya Publishing House,

Appannaiah Satyaprasad K.Aswathappa G.Sudarsana Reddy

Mumbai

M.Krishna Reddy

INTERNET SOURCES 74

YEAR OF PUBLICATION

2009

2008

WED ADDRESS

www.google.com www.mysoresandal.co.in/ www.scribd.com

APPENDICES AND ANNEXURES

KARNATAKA SOAPS AND DETERGENTS LIMITED BALANCE SHEET AS ON 31ST MARCH 2007

PARTICULAR

Amount as at 31-03-2007

Amount as at 31-03-2006

Rs

Rs

Rs

Rs

SOURCES OF FUNDS 1. Share Holders Funds (a) Share Capital

318,221,000

318,221,000

(b) Reserves & Surplus

15,070,293

-

76

2. Loan Funds (a)Secured Loan

16,629,120

(b)Unsecured Loan

129,995,436

TOTAL

146,624,556

199,911,435

479,915,849

199,911,435 518,132,435

APPLICATIO N OF FUNDS 1. Fixed Assets (a)Gross Block

292,406,486

Less Depreciation

233,475,517

2. Investments

302,808,002 58,930,969

242,447,847

100

100

3. Current Assets, Loans & Advances (a) Inventories

350,855,723

341,214,224

(b) Sundry Debtors

80,873,641

68,837,157

(c) Cash & Bank Balances

312,345,581

195,715,651

(d) Loans & Advances

72,546,525

94,458,527

816,621,470

700,225,559

TOTAL

60,360,155

LESS: Current Liabilities & Provision (i) Liabilities

292,624,243

170,706,357

(ii) Provisions

115,943,508

98,239,572

TOTAL

408,567,751

268,945,929

Net Current Assets

408,053,719

431,279,630

12,931,061

21,166,046

4. (a) Miscellaneous Expenditure ( to the extent not written off {or adjusted]) (b) Profits & Loss A/c

TOTAL

5,326,504

479,915,849

78

518,132,435

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2007 PARTICULARS

Amount for the Amount for the year ending 31-03- year ending 3107 03-06

INCOME Sales

1,195,803,294

1,109,210,600

Less: Excise Duty

151,428,824

121,099,177

Net Sales

1,044,374,470

988,111,423

Other Income

19,004,300

17,220,084

19,004,300

1,005,331,507

47,309,343

-116,807,421

1,110,688,113

888,524,086

(including trading items)

507,094,583

367,238,387

Other Expenditure

551,982,974

488,735,280

Depreciation

3,605,016

3,482,932

1,062,682,573

859,456,599

Operating Profit

48,005,540

29,067,487

Interest & Finance Charges

4,648,394

5,388,868

Increase / (-) decrease in stock

EXPENDITURE Material consumed

PROFIT /(LOSS)BEFORE TAX 43,357,146

23,678,619

Provision for Taxation - Current Tax

5,200,000

3,180,000

- Deferred Tax

2,301,452

2,619,805

PROFIT /(LOSS)AFTER TAX

35,855,694

17,878,814

Prior Period Income / (-) Expenditure

6,640,866

2,367,245

Tax of Earlier Years

22,099,763

-

20,396,797

20,246,059

-5,326,044

-25,572,563

15,070,293

-5,326,504

Profit / (-) Loss brought forward from previous year Profit / (-) Loss carried to Balance Sheet

KARNATAKA SOAPS AND DETERGENTS LIMITED BALANCE SHEET AS ON 31ST MARCH 2008 80

Amount as at 31Amount as at 31-03-2008 03-2007 Rs

Rs

Rs

Rs

SOURCES OF FUNDS 1. Share Holders Funds

(a) Share Capital

(b) Reserves & Surplus

318,221,00 0

318, 221, 000

136,826,04 1

15,0 70,2 93

2. Loan Funds (a)Secured Loan

(b)Unsecured Loan

10,365,536

89,995,436

16,629,120 100,360,97 2

129,995,43 6

479, 915, 849

555,408,01 3

TOTAL

146, 624, 556

APPLICATION OF FUNDS 1. Fixed Assets (a)Gross Block

Less Depreciation 2. Investments

296,106,15 4 237,050,82 9

292,406,48 6

59,055,325 30,000,100

233,475,51 7

58,9 30,9 69 100

3. Deferred Tax Asset

32,146,548

-

4. Current Assets, Loans & Advances (a) Inventories

296,012,82 2

350,855,72 3

(b) Sundry Debtors

146,346,67 0

80,873,641

(c) Cash & Bank Balances

334,385,42 3

312,345,58 1

(d) Loans & Advances

104,944,64 0

72,546,525

TOTAL

881,689,55 5

816,621,47 0

(i) Liabilities

308,752,36 5

292,624,24 3

(ii) Provisions

166,770,64 0

115,943,508

475,523,00 5

408,567,75 1

LESS: Current Liabilities & Provision

TOTAL

406,166,55 0

Net Current Assets

82

408, 053, 719

5. (a) Miscellaneous Expenditure

( to the extent not written off

28,039,490

12,9 31,0 61

555,408,01 3

479, 915, 849

{or adjusted]) (b) Profits & Loss A/c

TOTAL

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2008 Amount for the year ending 31-0308

Amount for the year ending 31-0307

Sales

1,455,284,544

1,195,803,294

Less: Excise Duty

168,822,536

151,428,824

Net Sales

1,286,462,008

1,044,374,470

Other Income

20,985,305

19,004,300

1,307,447,313

19,004,300

PARTICULARS INCOME

Increase / (-) decrease in stock

-26,466,726

47,309,343

1,280,980,587

1,110,688,113

(including trading items)

541,433,115

507,094,583

Other Expenditure

613,525,868

551,982,974

Depreciation

3,577,430

3,605,016

1,158,536,413

1,062,682,573

Operating Profit

122,444,174

48,005,540

Interest & Finance Charges

4,508,734

4,648,394

EXPENDITURE Material consumed

PROFIT/(LOSS) BEFORE TAX 117,935,440

43,357,146

Provision for Taxation - Current Tax

18,000,000

5,200,000

- Defferred Tax

7,098,690

2,301,452

- Dividend Tax

4,596,941

PROFIT /(LOSS)AFTER TAX

88,239,809

35,855,694

Perior Period Income / (-) Expenditure

14,687,533

6,640,866

Deferred Tax Asset

32,146,548

Proposed Dividend

-27,048,785

Tax of Earliar Years

13,730,643

22,099,763

121,755,743

20,396,797

15,070,293

-5,326,044

Profit / (-) Loss brought forward from previous year

84

Profit / (-) Loss carried to Balance Sheet

136,826,041

15,070,293

KARNATAKA SOAPS AND DETERGENTS LIMITED BALANCE SHEET AS ON 31ST MARCH 2009 Amount as at 31-03-2009

Amount as at 31-03-2008

Rs

Rs

Rs

Rs

SOURCES OF FUNDS 1. Share Holders Funds

(a) Share Capital

(b) Reserves & Surplus & exchange fluaction reserve

318,221,00 0

31 8,2 21, 00 0

269,488,48 7

13 6,8 26, 04 1

2. Loan Funds (a)Secured Loan

(b)Unsecured Loan

107,204,608

83,506,504

TOTAL

10,365,536

190,711,112 89,995,436

10 0,3 60, 97 2

778,420,59 9

55 5,4 08, 01 3

APPLICATION OF FUNDS 1. Fixed Assets (a)Gross Block

Less Depreciation

296,106,15 4

309,623,620

239,847,860

2. Investments

3. Deferred Tax Asset

86

69,775,760

237,050,82 9

59, 05 5,3 25

50,000,100

30, 00 0,1 00

52,504,866

32, 14 6,5 48

4. Current Assets, Loans & Advances 407,452,487

296,012,82 2

163,529,618

146,346,67 0

255,132,909

334,385,42 3

(d) Loans & Advances

215,257,572

104,944,64 0

TOTAL

1,041,372,58 7

881,689,55 5

246,650,794

308,752,36 5

204,956,560

166,770,64 0

451,607,354

475,523,00 5

(a) Inventories (b) Sundry Debtors (c) Cash & Bank Balances

LESS: Current Liabilities & Provision (i) Liabilities (ii) Provisions TOTAL

Net Current Assets 5. (a) Miscellaneous Expenditure

589,765,23 3

40 6,1 66, 55 0

( to the extent not written off

16,374,640

28, 03 9,4 90

778,420,59 9

55 5,4 08, 01 3

{or adjusted]) (b) Profits & Loss A/c

TOTAL

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2009 Amount for the year ending 31-0309

Amount for the year ending 31-03-08

Sales

1,693,919,368

1,455,284,544

Less: Excise Duty

160,215,837

168,822,536

Net Sales

1,533,703,531

1,286,462,008

PARTICULARS INCOME

88

Other Income

60,623,797

20,985,305

1,594,327,328

1,307,447,313

70,374,213

(26,466,726)

1,664,701,541

1,280,980,587

(including trading items)

801,928,343

541,433,115

Other Expenditure

734,442,910

613,525,868

Depreciation

3,969,038

3,577,430

1,540,340,291

1,158,536,413

Operating Profit

124,361,250

122,444,174

Interest & Finance Charges

7,276,261

4,508,734

Increase / (-) decrease in stock

EXPENDITURE Material consumed

PROFIT/(LOSS) BEFORE TAX 117,084,988

117,935,440

Provision for Taxation - Current Tax

18,500,000

18,000,000

- fringe benefit tax

2,128,828

7,098,690

- Dividend Tax

---

4,596,941

PROFIT /(LOSS)AFTER TAX

96,456,160

88,239,809

Perior Period Income / (-) Expenditure

14,078,609

14,687,533

Deferred Tax Asset

20,358,318

32,146,548

Proposed Dividend

---

-27,048,785

Tax of Earliar Years

----

13,730,643

130,893,087

121,755,743

Profit / (-) Loss brought forward from previous year Profit / (-) Loss carried to Balance Sheet

136,826,041

15,070,293

267,719,128

136,826,041

90