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TEXTILE INDUSTRY
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1.1 Textile: Meaning

The word textile mean for any artifact made by weaving or felting or knitting or crocheting
natural or synthetic fibers.

The textile industry (also known in the United Kingdom and Australia as the Rag Trade) is a
term used for industries primarily concerned with the design or manufacture of clothing as well
as the distribution and use of textiles.

1.2 Textile industry: History of growth

New innovations in clothing production, manufacture and design came during the Industrial
Revolution – these new wheels, looms, and spinning processes changed clothing manufacture
forever. The ‘rag trade’, as it is referred to in the UK and Australia is the manufacture, trade and
distribution of textiles.

There were various stages – from a historical perspective – where the textile industry evolved
from being a domestic small-scale industry, to the status of supremacy it currently holds. The
‘cottage stage’ was the first stage in its history where textiles were produced on a domestic basis.
During this period cloth was made from materials including wool, flax and cotton. The material
depended on the area where the cloth was being produced, and the time they were being made.

In the later half of the medieval period a variety of processes and innovations were implemented
for the purpose of making clothing during this time. These processes were dependent on the
material being used, but there were three basic steps commonly employed in making clothing.
These steps included preparing material fibers for the purpose of spinning, knitting and weaving.

During the Industrial Revolution, new machines such as spinning wheels and handlooms came
into the picture. Making clothing material quickly became an organized industry – as compared
to the domesticated activity it had been associated with before. A number of new innovations led
to the industrialization of the textile industry in Great Britain. Clothing manufactured during the
Industrial Revolution formed a big part of the exports made by Great Britain. They accounted for
almost 25% of the total exports made at that time, doubling in the period between 1701 and
1770. The center of the cotton industry in Great Britain was Lancashire – and the amount
exported from 1701 to 1770 had grown ten times. However, wool was the major export item at
this point of time.

Today, modern techniques, electronics and innovation have led to a competitive, low-priced
textile industry offering almost any type of cloth or design a person could desire. With its low
cost labour base, China has come to dominate the global textile industry.
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1.3 Indian textile industry:

The Indian textile industry is one of the oldest and most significant industries in the country. It
accounts for around 4 per cent of the gross domestic product (GDP), 14 per cent of industrial
production and over 13 per cent of the country's total export earnings. In fact, it is the largest
foreign exchange earning sector in the country. Moreover, it provides employment to over 35
million people.

The Indian textile industry is estimated to be around US$ 52 billion and is likely to reach US$
115 billion by 2012. The domestic market is likely to increase from US$ 34.6 billion to US$ 60
billion by 2012. It is expected that India's share of exports to the world would also increase from
the current 4 per cent to around 7 per cent during this period.

India's textile exports have shot up from US$ 19.14 billion in 2006-07 to US$ 22.13 billion in
2007-08, registering a growth of over 15 per cent.

1.4 Key facts of Indian textile:

 Indian Textile Industry is second largest industry in terms of providing vast employment
opportunities, employing around 35 million people in country after agriculture sector and
second largest after China, in terms of spindleage, and has share of 23% of the world’s
spindle capacity.

 The Textile Industry plays vital role in economic development and contributes 14% to
industrial production in the country, contributes around 4% of GDP, 9% of excise
collections, 18% of employment in industrial sector, and has 16 % share in country’s
export.

 Industry has direct and strong linkage with rural and agriculture sector, therefore it is
estimated that, one of every six households in country is directly or indirectly dependent
on this industry. Also India is evolved as a major contributor in world’s cotton sector.
Indian is the world’s third-largest producer of cotton and second-largest producer of
cotton yarns and textiles.

 India is the largest exporter of yarn in the international market and has a share of 25% in
world cotton yarn export market.

 India contributes for 12% of the world’s production of textile fibers and yarn.

 Including textiles and garments, 30% of India's export comes from this sector.

 Large and potential domestic & international market, large pool of skilled and cheap
labor, well-established industry, promising export potential etc. are few strengths of
Indian Textile Industry.
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 Highly Fragmented, High dependence on cotton sector, Lower productivity, Unfavorable

Labor Laws is few drawbacks of the industry from which it has to overcome.

 After the elimination of quota restrictions and implementation of National Textile Policy
2000, it is estimated that the industry will grow with rapid rate and help to strengthen the
Indian economy.

Exports in April- Exports in April- Share in April- Share in April-

Dec 2006-07 Dec 2007-08 Dec 2006-07 Dec 2007-08
(US$ Mn) (US$ Mn) (%) (%)
Cotton Textiles 3092.28 3375.63 28.17 28.12
Manmade Textiles 1605.76 2075.85 14.63 17.30
Woolen Textiles 63.07 64.47 0.57 0.54
Cotton Garments 4908.63 5184.66 44.72 43.20
MMF Garments 712.89 621.02 6.49 5.17
Woolen Garments 273.35 286.03 2.49 2.38
Garments Of
321.62 394.43 2.93 3.29
Other Textiles
Total Exports 10977.60 12002.60 100.00 100.00

India's Exports of Textile Products

1.6 Government Initiatives:

In an effort to increase India's share in the world textile market, the government has introduced a
number of progressive steps.

 100 per cent FDI allowed through the automatic route.

 De-reservation of readymade garments, hosiery and knitwear from the small-scale

industries sector in end-2000.

 Technology Mission on Cotton was launched in February 2000 to make quality raw
material available at competitive prices.

 Technology Upgradation Fund Scheme (TUFS) which was launched to facilitate the
modernisation and Upgradation of the textiles industry in 1999 has been given further
extension till 2011-12. A total of 18773 applications involving a project cost of US$
24.91 billion have been sanctioned under TUFS upto March 31, 2008.

 40 textile parks are being set up under the Scheme for Integrated Textile Parks (SITP)
which will attract an investment of US$ 4.38 billion.

 In current times of a global meltdown, the government has come out with an economic
stimulus package for the textile industry. This includes:
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 Additional allocation of US$ 285.66 million to clear the entire backlog in TUFS, which
would enhance cash flow of the exporters.

 Extension of interest rate subvention of 2 per cent on pre and post shipment credit

 Additional fund of US$ 224.42 million for refund of terminal excise duty

1.7 Budget 2009-10: Textiles

 The textile industry was eagerly awaiting the implementation of a comprehensive

Goods and Service Tax (GST), which will help in eliminating multiple taxes. This
demand has been met by the budget wherein the government would accelerate the
process for smooth introduction of the GST with effect from 1st April, 2010
 Customs duty on cotton waste and wool waste has been reduced from 15% to 10%
 Excise duty exemption of 4% on pure cotton would now be restored
 Excise duty on man-made fiber and yarn has been increased from 4% to 8%. This
measure was against the industry demand for a complete removal of the duty List of
specified raw materials and equipment imported by manufacturer exporters of textile
products which are fully exempt from customs duty, subject to specified conditions,
to be expanded. The inclusion of more items in this list would have a positive impact
on the sector as companies would be able to enjoy more benefits on imports of a
large variety of items
 Extension of the existing 2% interest subvention scheme for exporters till March
2010
 One handloom mega cluster each in West Bengal and Tamil Nadu and one
powerloom mega cluster in Rajasthan would be set up. New mega clusters for
carpets would be set up in Srinagar (J&K) and Mirzapur (UP)

The budget has been quite disappointing for this sector as the key demands for the sector have
not been met. The industry had been asking for removal of excise duties on all man-made fibers’
and scrapping of service tax. Also, there was demand for restoration of a 4% interest rate subsidy
on bank loans for exporters. Though the government has announced extension of the existing 2%
interest subvention scheme for exporters till March 2010, the same was not increased to 4%, as
demanded by the sector. The industry had also expected increase in duty drawback and DEPB
(Duty Entitlement Pass Book) rates to 5% from 3%, but the same has not been done. The impact
of these government moves could negatively impact companies like Century Textiles, Alok
Industries.
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A file picture of a powerloom

1.8 Impact of global recession on India’s textiles exports

India’s textiles and clothing export has observed ups and downs in recent times. It was
anticipated that India with a strong supply chain linkage from fibre to garments would be a major
beneficiary in the quota free regime and trends observed in Indian textiles exports during the first
two years of post quota period also indicated this. However, for the Indian textiles industry
which depends almost exclusively on domestic sources the strong appreciation of Indian rupee
vis-à-vis the US dollar in 2007-08 landed the textiles and clothing exports in a difficult situation.
This was established by the fact that India’s share in global textiles and clothing exports in 2007
declined to 4% and 2.8%, respectively from 4.3% and 3.3% in 2006.

The world is currently passing through a recessionary phase and the major markets like
US, EU and Japan are facing financial crisis. In this environment, the textiles and auto sectors
are the worst hit sectors, particularly as these are considered to flourish in good times. US, the
single largest importer of textiles and clothing items, has observed a negative growth of 3.34%
and 0.55% in its imports of textiles and clothing from the world and India, respectively during
calendar year 2008. Even China which occupied about 33% market share in the US, managed to
record a small growth of 0.97% during the same period. The overall US markets of textiles and
clothing has shown a decline of 14.19% in the first two months of current calendar year and
India has also recorded a decline of 13.77% in the same period.

In 2008 EU’s overall imports of textiles and clothing recorded a growth of 7.32%, India
managed to record a growth rate of 6.42%, while China, largest exporter with a share of 38.5% in
EU, recorded a growth of 20.46%. In the current calendar year, India’s growth rate has slipped
and recorded a decline of over 15% in January, 2009 over January, 2008 while EU’s overall
imports of T&C also recorded a decline of 9.96%.
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Some of the reasons attributed to this decline are the financial sector meltdown and
economic slowdown in international markets, increased cost of production due to increasing raw
material costs, power and other input costs which have affected the profitability of textiles and
garments units in India and their exports. The liquidity crunch is another factor that is affecting
the industry.

The Government introduced two packages of duty concessions, tax and interest rebates in
December, 2008 and January, 2009 to provide stimulus to the economy in general to combat the
recession.

---- Source : International Trade Section Updated on 11-05-09

1.9.1 Major Challenges in Textile:

Business Challenges:

 Outperforming foreign competition

 Maintaining high quality standards and productivity

 Cost competitiveness

 Investment in new and efficient technologies

 Flexibility in labour laws

 Energy conservation and Environmental Protection

 Product innovation

 Cost effective supply chain management

 Modernization
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Managerial Challenges:

 Operational excellence

 Motivated work environment

 Effective strategy formulation and implementation

 Managerial and technical expertise

 Transparency in managerial practices and work systems

 Improving organizational performance

1.10 Indian Textile Industry and its Global Position:

 The Indian Textile Industry is the second largest in the world.

 It has the largest cotton acreage (9 million hectares).

 It is the third largest cotton producer.

 It ranks fourth in terms of staple fibre production, and sixth in filament yarn production.

 India accounts for (circa) 25% of the Global trade in cotton yarn.

 It is the largest producer of Jute, the second largest producer of silk and the 5th largest
producer of synthetic fibre / yarn.
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COMPANY PROFILE

2.1 Introduction to vardhman:

Vardhman is a major integrated textile producer in India. The Group was setup in 1965 at
Ludhiana, Northern India. Since then, the Group has expanded manifold and is today, perhaps,
the largest textile conglomerate in India. The Group portfolio includes manufacturing and
marketing of Yarns, Fabrics, Sewing Threads, Fibre and Alloy Steel.

Vardhman Textiles Limited manufactures and markets textile products in India. The
company involves in producing various types of yarns, including cotton, manmade fibers, and
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blends, as well as yarn processing activities. It also produces sewing and industrial threads to use
in clothes, furnishings, wallets, hand bags, suitcases, shoes, car upholstery, tents, kite-flying, and
various industrial applications, as well as offers grey and processed fabric. In addition, the
company provides steel ingots, steel billets, and various rolled steel products. Further, it produces
fibre for various applications, such as hand knitting yarns; machine knitting yarns for jerseys and
sweaters; sarees; dress materials; upholstery; furnishings; velvets; blankets; and carpets. The
company was formerly known as Mahavir Spinning Mills Limited and changed its name to
Vardhman Textiles Limited in September, 2006. VARDHMAN stands as a symbol of our
strength, performance and reliability and we pledge to cater you the same for many years to
come

Today, the Vardhman Group combines the following companies:

Listed Vardhman Textiles Ltd [VTXL] (formerly Mahavir Spinning Mills Ltd.)
companies Vardhman Acrylics Ltd. (VAL)

Vardhman Holdings Ltd [VHL] (formerly Vardhman Spinning & General Mills
Ltd.)

Unlisted VMT Spinning Company Ltd. (VMT)

companies Vardhman Threads Ltd. (VTL)

2.2 Mission:

Vardhman aims to be world class textile organization producing diverse range of

products for the global textile market. Vardhman seeks to achieve customer delight through
excellence in manufacturing and customer service based on creative combination of state-of-the-
art technology and human resources. Vardhman is committed to be responsible corporate
citizen.

2.3 Philosophy:

 Faith in bright future of Indian textiles and hence continued expansion in areas "which we
know best".
 Total customer focus in all operational areas
 Products to be of best available quality for premium market segments through TQM and
zero defect implementation. all functional areas.
 Global orientation targeting - at least 20% production for exports.
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 Integrated diversification/product range expansion

 World class manufacturing facilities with most modern R&D and process technology.
 Faith in individual potential and respect for human values.
 Encouraging innovation for constant improvements to achieve excellence in all functional
areas.
 Accepting change as a way of life

 Appreciating our role as a responsible corporate citizen.

2.4 History:
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The industrial city of Ludhiana, located in the fertile Malwa region of Central Punjab is otherwise known
as the "Manchester of India". Within the precincts of this city is located the Corporate headquarters of the
Vardhman Group, a household name in Northern India. The Vardhman Group, born in 1965, under the
entrepreneurship of Late Lala Rattan Chand Oswal has today blossomed into one of the largest Textile
Business houses in India.

At its inception, Vardhman had an installed capacity of 14,000 spindles, today; its capacity has increased
multifold to over 5.5 lacs spindles. In 1982 the Group entered the sewing thread market in the country
which was a forward integration of the business. Today Vardhman Threads is the second largest producer
of sewing thread in India. In 1990, it undertook yet another diversification - this time into the weaving
business. The grey fabric weaving unit at Baddi (HP), commissioned in 1990 with a capacity of 20,000
meters per day, has already made its mark as a quality producer of Grey poplin, sheeting, and shirting in
the domestic as well as foreign market. This was followed by entry into fabric processing by setting up
Auro Textiles at Baddi, which currently has a processing capacity of 1 lacs meters/day.

In the year 1999 the Group has added yet another feature to its cap with the setting up of Vardhman
Acrylics Ltd., Bharuch (Gujarat) which is a joint venture in Acrylic Fibre production undertaken with
Marubeni and Exlan of Japan. The company also has a strong presence in the markets of Japan, Hong
Kong, Korea, UK and EU in addition to the domestic market. Adherence to systems and a true dedication
to quality has resulted in obtaining the ISO 9002/ ISO 14002 quality award which is the first in Textile
industry in India and yet another laurel to its credit.

The company emphasized in the area of productivity, quality, cost effectiveness and energy conservation.
The philosophy of Vardhman is to focus on use of all resources in achieving perfection in operational
performance, standards of productivity, work norms, cost per/kg and spindle/shift , These have been
appreciated by the various textile institutes in their comparative surveys of industries. The performance is
reflected in the balance sheet of the company in the area of energy as per unit product basis.
Apart from this we have a training center at Ludhiana where training programs are being conducted for
staff and officers. For workers a MANAV VIKAS KENDER is established since 1984 inside the mill
premises for training & development of workers. We have also adopted the concept of Quality Circle and
Total Productivity Management (TPM) in our mill. We have KAIZEN Scheme to get suggestion on
energy savings, improvement in work culture, increase in production & productivity, safety, waste
minimization and cost reduction etc.

Companies Detail Address:

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Chandigarh Road, Ludhiana

India, 141010

Phone: 91 16 1266 2543

Fax: 91 16 1266 2543

www.vardhman.com

2.5 Logo of the Vardhman Group:

The “FLAME” signifies Growth i.e. growth of the company along with the growth of each and every
individual associated with it whether he/she is a worker, an employee, an employer, a shareholder or a
customer.

The “STICK” symbolizes Cotton i.e. the basic raw material of the core product of Vardhman.

The “V” stands for the Vardhman group.

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Organization chart _VSGM

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2.6.1 BOARD OF DIRECTORS

 Sh. Shri Paul Oswal - Chairman & Managing Director

 Sh. Arun Kumar Purwar - Director
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 Sh. Ajay Kumar Chakraborty - Nominee Director

 Sh. Sachit Jain - Executive Director
 Smt. Suchita Jain - Executive Director
 Sh. D.L Sharma - Director
 Sh. Vinod Kumar Saxena - Nominee Director
 Dr. T.N Kapoor - Director
 Sh. Prafull Anubhai - Director
 Sh. S.K Bansal - Director
 Sh. S.K Bijlani - Director

2.6.2 CORPORATE GENERAL MANAGER

 Sh. Neeraj Jain - (Chief Executive, Operations)

2.6.3 COMPANY SECRETARY

 Sh. Vipin Gupta - Company Secretary

2.6.4 BANKERS

State Bank of Patiala Allahabad Bank

ICICI Bank Ltd. Punjab National Bank
State Bank of India Bank of Baroda
Corporation Bank Bank of America
Union Bank of India Canara Bank
Standered Chartered Bank Banque Nationale De Paris

2.6.5 REGISTRAR & TRANSFER AGENT

Alankit Assignments Limited, New Delhi

2.7 Portfolio:
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The group portfolio includes Yarn, Fabrics, Sewing Thread, Fibre and Alloy Steel.

Yarn:

Yarn Manufacturing is the major activity of the group accounting for 65 percent of the group
turnover. Vardhman is virtually a supermarket of yarns, producing the widest range of cotton,
synthetics and blended, Grey and Dyed yarns and Hand Knitting Yarns, in which Vardhman
is the market leader in India. Technical tie-ups with the world class leaders from Switzerland,
Germany, Japan and Korea have provided state-of-the art machinery that has ensured a range
of products admired across the globe for their impeccable quality and service.

The group has nine production plants with a total capacity of over 8.5 lacs spindles, spread
all over the country. In many of the yarn market segments, Vardhman holds the largest
market share. Vardhman is also the largest exporters of yarn from India, exporting yarns
worth more than USD 90 million.

Catering to the diverse requirements of the local and global clients, Vardhman offers a wide
range of specialized grey, dyed and a variety of blended yarns in cotton, polyester and
acrylic. Latest technology, sourced from best available around the world, combined with
dexterous hands has made Vardhman a “Super Market of High Quality Yarns”

1994 was another milestone towards its mission to supply quality products. Vardhman further
improved the value addition to its existing range of tops, fibre dyed and cone dyed yarns.
This was result of new phenomena that emerged on the horizons of Vardhman and also of
Indian Textiles. A fully integrated dyeing plant was commissioned with technology from
Nihon Sanmo Dyeing Co. Ltd., Japan, and the leader in dyeing technology in the world. It
has a capacity of processing 22 tones fibre/tops and 10-tonnes of yarns per day.

Today Vardhman Group has over 50 tones of dyeing capacity per day, spread over various
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plants.

Products Applications

Cotton Hosiery Yarn All kinds of knitted garments for kids,

ladies ,gents, socks, t-shirts

Woven Yarn Shirts and Trousers

Tyre Cord yarn Manufacturing of Tyres

Acrylic Yarn Sweaters and Shawls

Hand Knitting Yarn Knitting


Sewing Thread:

Vardhman’s journey into sewing threads dates back to the year 1982. Vardhman Threads
launched a range of sewing threads in a highly competitive market dominated by
transnational. Within a short span of a decade, Vardhman Threads became the second
largest brand of specialized threads in the country. The sewing thread manufacturing
capacity is being expanded from present 17 tons per day to 22 tons per day in its sewing
thread plants located at Hoshiarpur, Baddi and Ludhiana. Sewing threads contributes 12
percent of the group turnover. Vardhman threads are now made of 100% Azo-free dyes
that are accepted the world over.

 Fabrics:

Vardhman ventured into the manufacture of acrylic fibre in 1999. The Joint Venture,
Vardhman Acrylics Ltd., was s et up together with two leading Japanese business houses
namely Japan Exlan company Ltd. and Marubeni Corporation, Japan. Varlan fibre has
achieved a high order of recognition in the Indian market for its use in a wide variety of
applications such as dress material, blankets, carpets, upholstery, furnishing fabrics etc.
The group has created state-of-the-art fabric weaving and processing facilities in its plant
at Baddi, Northern India. The group has installed 208 shuttles less looms and a fabric
processing capacity of 30 million meters per annum in collaboration of Tokai Senko of
Japan. Fabrics business contributes 8 percent to the group turnover. Today, Vardhman
Acrylics ltd. produces consistent superior quality fibre marketed under the brand name
VARLAN.

 Fibre:
The group has recently set up an Acrylic Staple Fibre plant at Bharuch in Gujarat in
collaboration with Marubeni and Japan Exlan of Japan. The plant has annual capacity of
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18000 tons per annum. Fibre contributes 8 percent to the total turnover of the group.

 Steel:

The Group is also present in upper-end of the steel industry. The group has manufacturing
capacity of 100000 tons of special and alloy steel. The group supplies its steel products to
some of the most stringent quality steel buyers like Maruti and Telco. It contributes 6
percent to the total turnover of the group.

2.8 HOLDINGS:

Vardhman Group consists of 5 SBUs spread across 9 manufacturing locations

 Spinning Business

 Domestic Trade Area Units

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2.22 Group quality policy:

Quality shall be built into the company’s products not only meet customer requirements
continuously but also exceed them. The company shall achieve this through an interface with the
market place, access to state-of-the-art technology, R&D, process development and adoption of
innovative manufacturing and marketing strategies. The quality policy shall be implemented
through a network of systems and procedures understood and followed throughout the company.

The quality policy shall be integrated with the company’s main objectives:-

 To remain the market leader in quality.

 Increase market share with focus on niche segments.
 Improve productivity.
 Cost reduction.
 Reduction in percentage of seconds.

2.23 Adoption of Modern Management Practices:

 Quality Circles

 Quality Councils

 Cross Functional Group

 Human Resource Development

 Staff Development Programs

 Officers Workshop

 Workers Development Program

2.24.1 TPM Policy of Vardhman Group:

It aims to create a corporate system that maximizes the efficiency of the production system. TPM
is based on Participation of all members, ranging from the top management to front line
employees. Maximize overall effectiveness and reliability of the plant and machinery by aiming
at “Zero Break down”, “Zero Defects”, “Zero Accident” through nurturing team work and
continuous development of all employees, following TPM road map for implementation of
“Total Preventive Maintenance” (TPM) in the company.
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2.25 Vardhman belief:

 The fact that change the way of life.

 Absolute market orientation for quick and positive response to customer’s needs.

 An uncompromising commitment to a flexible, professional and personalized service from

with a stimulating result oriented environment.

 Delivery to a constant standard and on time.

 Response approach to benefits of R&D and modern technology.

 Having faith in individual potential and respect for human values.

 Being a responsible corporate citizen with due respect to the laws of the land and its
environment.

 Product to be the best quality for premium market segment.

 These underline the corporate philosophy which has shaped Vardhman of yester years into
Vardhman of today.

 Encouraging innovation for constant improvement to achieve excellence in all functional

areas.

2.26 Corporate social responsibility:

 Sri Aurobindo Socio-Economic and Management Research Institute is engaged in the

promotion of education, research and publications highlighting social and economic issues
facing the society.
 Sprung from a keen desire to set up an educational institution in Ludhiana and inspired by the
writings of Sri Aurobindo and the Mother, the Trust has set up a college - Sri Aurobindo
College of Commerce and Management (affiliated to the Punjab University)
 A Vardhman initiative to improve the yield of cotton in Punjab in 2001 when the State had
suffered a shock of crop devastation and area under cotton cultivation was dwindling, led to
the experiment to adopt villages and see whether concerted efforts in bringing knowledge to
farmers could improve the yield of cotton.
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 Vardhman is actively engaged in the activities of Nimbua Greenfield Punjab Limited formed
by a consortium of Industries of Punjab for developing a common facility for storage,
treatment and disposal of hazardous wastes generated by the Industry with a Government of
India grant)

 2.27 Achievement:

It's an overwhelming feeling when the efforts and hard work put in are recognized and
felicitated. The Vardhman Group became India's first textile company to be awarded ICO9002/
ISO 14002 Certification. It is the largest producer and exporter of yarns and Grey woven fabrics
from India. Vardhman is also the largest producer of tyercord yarns and the second largest
producer of sewing threads in India. The Vardhman Group vision of excellence is matched by a
dedication and sincerity to be the best and excel in every industry it has a presence.

 Won Gold trophy in EOU/EPZ for export of cotton yarn, Textile Export Promotion
Council 2003-04

 Won Bronze trophy in mill fabric exporter category, Textile Export Promotion Council
2003-04

 Won Gold Trophy in EOU/EPZ for export of cotton yarn, Textile Export Promotion
Council 2002-03

 Silver Trophy in Textile Export Promotion Council 1998-99

 Bronze Trophy, Textile Export Promotion Council 1997-98

 Won Silver Trophy, Textile Export Promotion Council 1996-97

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 Award of Merit from Govt. of India Award 1994-5, 1995-96

 Bronze Trophy, Textile Export Promotion Council 1993-94 (Merchant Export Category
for Fabrics)

 Won Gold Trophy, Textile Export Promotion Council 1993-94 (Merchant Export
Category for Fabrics)

 Gold Trophy, Textile Export Promotion Council 1990-00

3.2 Trend analysis for profit earned by VSGM ltd.

Year Profit X X2 XY Yc trend value

(in Cr.) (in Cr.) (in Cr.) (in Cr.) (Yc = a + bX)
2004 19.61 1 1 19.61 8.39
2005 (4.00) 2 4 (16.00) 7.87
2006 12.03 3 9 108.27 7.47
2007 5.44 4 16 87.04 7.01
2008 4.23 5 25 105.75 6.55
Total 37.31 15 55 304.67

In the above figure, the values’ of “a” and “b” are identified by solving the following two
equations,

∑y = Na + b∑x …………………………… eqn.1

∑xy = a∑x + b∑x2 ………………………… eqn. 2

By putting the values from the above figure, we get the value of

“a” as “8.85” and “b” as “-0.46” and then we found the trend equation [Yc = 8.85 – X *
0.46]; and the respective values of trend line.
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Graph: Trends of profit earned by VSGM ltd.

3.3 Trend analysis for net profit earned by Vardhman textile ltd.
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INTRODUCTION
OF
THE PROJECT
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4.1.1 Title of the project:

Study on the inventory management system followed in VSGM ltd. with special focus on
the raw material section.

4.1.2 Objective of the study:

The following are the objectives of the study conducted on Vardhman Spinning and
General Mills ltd.

 To study the inventory management system followed in VSGM ltd.

 To evaluate the inventory control mechanisms of VSGM ltd and also to find out
the different levels of inventory to be maintain by the company.

 To identifies cost and suggestions to reduce such cost.

 To give suggestion in the material handling process of VSGM ltd.

4.1.3 Need and scope of the research:

The project will study the dynamics of different factors affecting the production
and operations of VSGM ltd, Ludhiana. It is intended that these study will provide better
insights of managing inventories by taking different factors into consideration in
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purchasing, issue, storage etc., and will be helpful to find out the optimum inventory
management system into the organisation.

Inventory management has become a crucial point for any business firm, as the
company need to maintain some of its inventories for smooth operation of its business or
manufacturing process. It will also reduce the cost and help in earning better
revenue/incomes by maintaining better flow of its business activities. VSGM ltd. which
deals with manufacturing different types of Yarn and sewing thread, with large volume of
production definitely need to conduct such research work for the betterment of the firm.

For the investigator’s research work the scope of the research work is restricted
within the limit of the commercial department, VSGM ltd. There also exists future scope
of doing the same as it will help the company to increase its manufacturing and managing
its inventories effectively.

4.2 INTRODUCTION: 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 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.

4.2.1 Inventory Classification:

Inventory includes the following:

 Raw material: Direct materials used in manufacturing a product. The purpose of having
such inventories is to ensure uninterrupted production in the event of delaying delivery. The
amount of raw materials to be kept by a firm depends on various factors such as speed with
which raw materials are to be ordered and procured and uncertainty in the supply of these
raw materials.

 Work-in-progress: it includes partly finished goods and materials held between

manufacturing stages. It can also be stated that those raw material which are used in
production process but are not finally converted into final product are work-in-progress.
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 Consumable: Consumables are those products that consumers buys recurrently, i.e., items
which “get used-up” or discarded. As an example, consumable office supplies are such
products as paper, pens, file folders, computer disks, etc. It has to be kept in mind that
consumable does not includes goods of capital in nature like computer, fax machine and
other business machines or office furniture.

 Finished goods: they are those goods which are ready for sale or distribution. All goods
which fall under the above will come under this class. It helps to reduce the risk associated
with stoppage in output on account of strike, breakdowns, storage of materials, etc.

 Stores and spares: These categories include those products, which are accessories to the
main products produces for the purpose of sales. For examples, stores and spares items are
bolt, nuts, clamps, screws, etc. these spares parts usually bought from outside or sometimes
they are manufactured in the company also.

4.2.2 Motives behind holding inventories:

There are three main purposes of motive for holding inventories in the organisation. These are:

 Transactional motive: Every firm has to maintain some level of inventory to meet the day to
day requirements of sales, production process, customer demands, etc. this motives makes
the firm to keep the inventory of finished goods as well as raw materials. The inventory level
will provide smoothness to the operations of the firm.

 Precautionary motives: A firm should keep some inventory for unforeseen circumstances
also. For example, the fresh supply of raw material may not reach the factory due to strike by
the transporter or due to natural calamities in a particular area. There may be labor problem
in the factory and production process may halt. So, the firm must maintain some of its
inventories of raw materials as well as finished products for meeting such emergencies.

 Speculative motive: The firm may be tempted to keep some inventory in order to capitalized
an opportunity to make profit e.g., sufficient level of inventory may help the firm to earn
extra profit in case of expected shortage in the market.
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4.3 Inventory costs:

In determining an optimum inventory policy, the criterion most often is the cost function. The
classical inventory analysis identifies four major cost components, which are as followed:

 Purchase costs: these refer to the nominal cost of inventory. It is the purchase price for the
items that are bought from outside sources, and the production cost if the items are produced
within the organisation. This may be constant per unit, or it may vary as the quantity
purchased/produced increase or decrease. Quite often, situations are found when it may be
stipulated that for example, the unit price is Rs.20 for an order upto 100 units and Rs.19.50 if
the order is more than 100 units.

 Ordering or set-up cost: ordering cost is said to be incurred whenever the inventory is
replenished. It also includes cost associated with the processing and chasing of the purchase
order, transportation, inspection for quality, expending overdue orders and so on. It is also
known as the procurement cost.

Parallel to the ordering cost when units are produced within the organisation is the set-up
cost. It refers to the cost incurred in relation to developing the production schedules, the
resources employed in making the production system ready and so on.

 Carrying cost: Also known as the holding cost or the storage cost, carrying cost represents
the cost that is associated with storing an item in inventory. It is proportional to the amount of
inventory and the time over which it is held. The element of carrying cost includes the
opportunity cost of the capital invested in stock, the cost directly associated with storing
goods (like storemens’ salary, rates, heating and lighting, racking and pelletization, protective
clothing, store’s transport, etc. ), the obsolescence cost (includes scrapping and possible
rework), deterioration cost and cost incurred in preventing deteriorations and fire and general
insurance, etc.

The carrying cost is usually expressed as rate per unit or as a percentage of the inventory
value. It is taken to be fixed for each unit of a certain items of inventory held for a unit time.

 Stock out cost: Stock out cost means the cost associated with not serving the customers.
Stock out implies shortage. If the stock out is internal (i.e., in the production system) it would
imply that some production is lost, resulting in idle time for men and machinery, or that the
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work is delayed which might attract some penalty. While if the stock out is external, it would
result in a loss of potential sales and/or loss of customer goodwill. A shortage can evoke
different reaction from customers. It would result in a backorder or lost sales. In case of
backorder the sales are not lost, they are only delayed.

4.4 Objectives of inventory management:

 Operating objectives:

Availability of raw material

Minimizing the wastage

Promotion of manufacturing efficiency

Better service to customers

Control of production level

Optimum level of inventory

 Financial objectives:

Economy in purchasing:

Optimum investment and efficient use of capital:

Reasonable price:

Minimizing cost:

4.5 Factors affecting inventory management:

Inventory management in a organisation has an impact on the whole system. There are a number
of factors which can affect the inventory decisions. These can be …

 Degree of specialization and differentiation of the products at various stages

 Process capability and flexibility

 Production capacity and storage facility

 Quality requirement

 Nature of the production system

 Change in size and frequencies of orders

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 Unpredictability of sales

 Physical and economic structure of distribution pattern.

 Costs associated with failure to meet demands

 Accuracy, frequency and detail of demand forecasts

 Breakdown

 Labor relation policies

 Amount of capital available for stock

 Opportunity cost

 Uncertain environmental factor (inflation, strike, wars, etc.)

4.6 Techniques of inventory control:

Inventory control techniques represent the operational aspect of inventory management and help
in realizing the objectives of the inventory management and control system. These techniques are
employed by the respective firm within the framework of one of the basic inventory models, viz.,
fixed order quantity system or fixed order period system.

Several techniques of inventory control are used and it depends on the convenience of the firm to
adopt any of the techniques. What should be stressed is however, is the need to cover all items of
inventory and all stages, i.e., from the stage of receipt from suppliers to the stage of their use.

The techniques most commonly used are the following:

 Economic order quantity (EOQ)

 Re-ordering level

 Always better control (ABC) classification.

 High, medium and low (HML) classification.

 Vital, essential and desirable (VED) classification.

 Scarce, difficult and easy to obtain (SED)

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

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4.6.1 Economic order quantity (EOQ) model: EOQ is an important factor in

controlling the inventory. It is a quantity of inventory which can reasonably be ordered
economically at a time. It is also known as “standard order quantity”, “economic lot size” or
“economic order quantity”. In determining this point ordering cost and carrying cost are taken
into consideration. Ordering costs are basically the cost of getting an item of inventory and
includes cost of placing an order. Carrying cost includes cost of storage facility, property
insurance, and loss of value through physical deterioration, cost of obsolescence. Either of these
two costs affects the profits of the firm adversely and management tries to balances these costs.
The balancing or reconciliation point is known as Economic Order Quantity.

These can also be determined with the help of a graph. Assuming that inventory is allowed to fall
to zero and then immediately replenished, the average inventory becomes EOQ/2. EOQ model
can be presented in figure below

In the figure aside, it can be seen that ordering cost of an

item is decreasing as the size of the order is increased. This happens because total number of
orders for a particular item will decrease resulting in decrease in total order cost. As a result,
carrying cost is increasing because firm keeps more items in stock. The trade-off of these two
costs is attained at a level which annual cost is least. At this level, order size is designated as
economic order quantity.

The quantity may be calculated with the help of the following formula:

EOQ = √2AD/h

Where, A = Annual quantity used (in unit)

D = cost of placing an order (fixed cost)

h = cost of holding 1 unit.

Economic order quantity model work with the following assumptions

 Supply of goods is satisfactory and can be purchase whenever is required.

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 The quantity to be purchased by the concern is certain

 The prices of the goods are stable. It results to establish carrying costs.

Economic order quantity models suffer from the following:

 Erratic usage

 Faulty basic assumption

 Costly calculation

 No formula is substitute for commonsense

 EOQ ordering must be tempered with judgment.

4.6.2 Re-ordering level: The concept of re-ordering point is basically related with lead-
time demand. The problem is that demand can never be accurately projected over the lead-time.
There are a number of methods of demand forecasting. Once we know the demand in lead-time,
re-order level can be easily determined. Mathematically it can be calculated with the formula:

Re-order level = lead-time + safety stock

It is observed that supply situation for replenishment is essentially dynamic, changing at all the
time. Therefore, re-order level, safety stock and re-order quantity should be regularly reviewed.
The same values for any system should not be used for long period of time.

4.6.3.1 Always Better Control (ABC) analysis: It's basic assumption is that
not all stock is equally valuable, therefore doesn't need the same kind of attention. So it
categorise all available stock according to its cost and quantity - and create a graph with cost
shown on Y axis and quantity shown on X. From left to right, we place this stock from highest
value to lowest. Typically, we see that a small portion of stock is the most valuable, and therefore
needs maximum attention and resources - that's called 'A'. The next most valuable section of
stock is B, the next is C and so on.

Basically it shows which stocks need more attention and which need less. It helps in utilising
resources for stock management more effectively.

As discussed above, the material is divided into a number of categories for adopting a selective
approach for material control. It is generally seen that in manufacturing concern, a small
percentage of items contribute a large percentage of value of consumption and a large percentage
 P a g e | 34

of items of material contribute a small percentage of value. In between these two limits there are
some other items, which have almost equal percentage of value of materials. Here under A-B-C
analysis, the material is divided into three categories viz., A, B and C. past experience has shown
that almost 10% of the item contribute to 70% of the value consumption and this category is
being called as “A category”. About 20% of the items contribute about 20% of the vale
consumption and is categories as “B category” materials. Category C covers about 70% of the
items of materials, which contribute only 10% of the value consumption. (This percentage may
vary according to the industry).

A-B-C analysis helps to concentrate more efforts on

category A since greatest monetary advantage will come from these items. Attention should be
paid on the estimating requirement, purchasing, maintaining safety stocks and properly storing of
“A” category materials. These items are kept under constant review so that a substantial material
cost may be control. On the other hand, the control of “C” category items may be relaxed and
these stocks may be purchased for the year. A little more attention should be given towards “B”
category items and their purchase should be undertaken at quarterly or half-yearly intervals.

While doing the analysis, following point should be kept in mind

 Items which are substitute of each other should be treated as one item

 More emphasis should be given to value consumption and not to the price of the unit of
item

 All the items consumed by an organisation should be considered together for classifying
as A, B or C instead of taking them as spares, raw-materials, semi-finished and finished
items and then classifying as A, B and C.

 There can be more than three classes and the period of consumption need not necessarily
be one year.
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4.6.3.2 Application of ABC analysis:

ABC analysis can be effectively used in material management. The various stages where it can
be applied are:

 Information of item which require higher degree of control

 To evolve useful re-ordering strategy

 Stock records

 Priority treatment to different items

 Determination of safety stock items

 Stores layout

 Value analysis

4.6.4 VED analysis: In VED analysis, the items are classified on the basis of their
criticality to the production process or other services. In the VED classification of materials, V
stands for vital items without which the production process would come to a standstill. E in the
system denotes Essential items whose stock out would adversely affect the efficiency of the
production system. Although the system would not altogether stop for want of these items, yet
their unavailability might cause temporary losses in, or dislocation of, production. The D items
are the Desirable items which are required but do not immediately cause a loss of production.
VED analysis is done mainly in respect of spare parts.

4.6.5 HML analysis: This is similar to the ABC analysis except that, in this analysis, the
items are classified on the basis of unit cost rather than their usage value. The items are classified
accordingly, as their cost per unit is H - high, M - medium or L - low. This type of analysis is
useful for keeping control over materials consumptions at the departmental level.

4.6.6 SDE analysis: This uses the criterion of the availability of item. In this analysis,

S stands for scarce items which are in short supply.

D refers to the difficult items- meaning the items that might be available in the indigenous
market but cannot be procure easily.

E stands for easily available items, from the local market may be.
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4.6.7 FSN analysis: Based on the consumption pattern of the items, the FSN
classification calls for classification of items, as Fast-moving, Slow-moving and Non-moving.
Some analysis classifies the item as FNSD; Fast, Normal, Slow and Dead moving items. This
speeds classification helps in the arrangement of stocks in the stores and in determining the
distribution and handling pattern.

4.7 Benefits of inventory management and control:

Proper management and control of inventories will result in the following benefits to an
organisation

 It ensures an adequate supply of material and stores minimizes stock-outs and shortage
and avoid costly interruptions in operations.

 It keeps down investments in inventories, inventory carrying costs and obsolescence

losses to the minimum.

 It facilitates purchasing economies through the measurements of requirements on the

basis of recorded experiences.

 It eliminates duplication in ordering or in replenishment stocks by centralizing the

sources from which purchase requisition emanate.

 It permits a better utilization of available stock by facilitating inter-departmental transfer

within a company

 It provide a checked against loss of materials through carelessness or pilferage

 It facilitates cost accounting activities by providing a means for allocating material costs
to products, departments or other operating accounts.

 It enables the management to make cost and consumption comparison between

operations and periods.

 It serves as a means for the location and disposition of inactive and obsolete items of
stores.

 Perpetual inventory values provide a consistent and reliable basis for preparing financial
statements.

4.8 Limitation of the research study:

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Some of the limitations which the investigator has faced during the survey are as follows:

 Time is a constraint to the research survey, as we undergone the training for 6 weeks.

 The product and store materials are too vast and it was not possible to cover each and
every item for analysis in the available period.

 Generally the respondents were busy in their work and due care was taken so that they
don’t get disturbed.

 The study was conducted within the boundaries of mentioned areas only.

 The research was conducted in present prevailing conditions. There can be some
fluctuations in the market which can offset and findings.

 The biases of response might have crept in while conducting the survey as the company’s
employees are not ready to share the confidential information with us.

 The results of the survey might not be generalized and may not hold good for the whole
population as they are based on the sample collected from specific areas only.

These limitations were faced as they were an integral part of the research. However, they did not
affect the quality of analysis and presentation of the findings.
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Research methodology

5.1 Research: Meaning

Research in common parlance refers to searching for knowledge. It’s a scientific and systematic
search for pertinent information on a specific topic. It is the pursuit of truth with the help of
study, observation, comparison and experiment. The outcome of such studies reaches clinicians
 P a g e | 39

through various publications which are helpful for the management or any other parties
interested in the research outcome e.g. Management, manufacturer, investor, etc. such outcome
may be negative or positive, depending upon the performance of the researcher, knowledge,
methods adopted, etc.

5.2 Research methodology:

“Research Methodology is the way to systematically solve the research problem. It may
be understood as a science of studying how research is done scientifically.”

- Dr. C.R. Kothari.

Research methodology is a logical and scientific technique to solve a problem. It may be

understood as a science of studying how research is done scientifically. In it, we study various
steps that are generally adopted by a researcher in studying his research problem along with the
logic behind them. It is necessary for the researcher to know not only the research methods but
also the methodology. It is not concerned with the decision of the fact, but also building up to
data knowledge and to discover the new facts involved through the process of dynamic change in
the society.

A research methodology thus defines what the activity of research is, how to proceed, how to
measure progress, and what constitutes success. It can be of the following nature

- Historical,

- Descriptive,

- Experimental,

- Exploratory, etc.

In investigator study, the current chapter will give details about the Research Methodology
adopted for the present study. It indicates the research design, selection of sample, respondents,
collection of data, data analysis & interpretation, etc.

5.3 Research Design:

Research Design states the conceptual structure, an arrangement of the system/conditions for
collection and analysis of data in a manner that aims to combine relevance to the research
purpose with the economy in procedure. The research problem having been formulated in clear-
cut terms helps the researcher to prepare a research deign.

Under this project, research design carried out is descriptive in nature, which aims describing the
nature & reasons for the problem and finding the inventory management system followed in
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VSGM Unit-I, Ludhiana. Formal interviews and observation process is being carried out of the
employees working in the organisation in the respective position. Since the research was to be
performed from employee’s point of view which would help me in finding prevailing inventory
management system ultimately, this finding was correlated to make investigator findings crystal
clear.

The following is the sampling plan adopted by the investigator in his research work:

- Research design: Design for investigator research is descriptive in nature as the

research is being carried out to know the system of inventory management followed
in VSGM, Unit-I Ludhiana.

- Universe: All those business firms manufacturing or dealing with the textile related
products.

- Population: All individuals carrying out textile related business activities in

Ludhiana.

- Sampling Unit: A single unit of the whole population. For investigator study
sampling unit is restricted upto VSGM ltd., Unit-I Ludhiana.

- Sampling Technique: Convenience & judgmental technique with respect to customer

of organised retail outlets of Ludhiana is being used as sample was taken as per
investigator easy access and convenience.

- Sample Size: For the investigator study, the scope is being restricted with to the
commercial department of the VSGM ltd., Unit-I, Ludhiana, which is dealing with the
management of inventory (including raw material, stores and spares, finished goods)

5.4 Data Collection:

For the purpose of investigator study data are collected by both Primary and Secondary sources.

- Primary Data: Investigator adopted primary data collection techniques during the course
of doing research as an experimental research. The investigator have visited and
interviewed every employee in the department dealing with the inventories.

- Secondary Data: Secondary data means data that are already available i.e., they refer to the
data which have already been collected and analyzed by someone else. In investigator
 P a g e | 41

research, secondary data were collected from the past records (annual reports of the
company, company’s library material, etc.), magazines, journals, internets, etc. which
definitely help me in solving out the problem of investigator research.

5.5 Sampling procedure:

The respondents were approached and briefed on the objective of the survey and then the
questioning session is followed (formal questioning which is strictly focused on the scope of the
research work). The questioning was done in a very comfortable environment so that the
respondents can give their maximum inputs. Anticipating the requirements of an efficient data
processing, customers were motivated to respond through greater introspection and plumbing of
memory.
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INVENTORY MANAGEMENT IN VSGM

 P a g e | 43

6.1 Inventory at VSGM ltd:

In textile industry inventories play a pivotal role. There is a need of proper management of
inventory. If the inventories are not properly managed it will affect the production as well as the
sales of the company.

Here at VSGML the concentration is mainly on following inventories:

 Raw Materials

 Finished Goods

 Stores and Spares

Managing these inventories is the work of the commercial department of VSGM ltd. The
functions of the commercial department include the following:

 It shall be the responsibility of the Commercial department to ensure that all type of raw
material i.e. Cotton, Synthetic Fibre, and Filaments are made available to the production
department to ensure smooth production.

 Ensuring that all dispatch advice received from CMY and branches for dispatch of
finished goods are dispatched on the same day through proper documentation and
transport arrangements.

 Ensuring compliance of all applicable laws, rules related to Central Excise. Filing all
statuary returns in time and maintenance of all records as per requirements of central
excise.

 Preparation of tallies by 02 of the month so that the profit and loss statements is prepared
by accounts department in time.
 P a g e | 44

 Dispatch of waste regular basis in coordination with corporate raw material department.
Ensure that there is no accumulation of waste at the waste section.

 Regularly appraise CMY and branches regarding non-moving and slow-moving stocks.

 Ensuring that short capacity for Carding, Seydel is processed through outside side job
work so that production target is met.

 Timely filing of all benefit related schemes related to Excise and Customs i.e. Rebate
Claim, Duty Drawback, installation certificates. Ensuring that cheques are received in
time from the excise department.

To manage these inventories in effective and efficient way, there are two departments. They are:

 Raw material department, and

 Material department

Both of the departments are controlled by the commercial department. There is detailed
discussion on both of the departments.
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6.2.1 The Objective of Raw Material deptt:

 Raw Material planning

 Storage of Raw Material

 Availability of Raw Material

 Proper receipt and issue of Raw Material

6.3.1 Raw material:

Vardhman takes two types of major inputs as a raw material

 Raw cotton
 Synthetic fibre
Raw cotton includes different qualities like
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Type of raw cotton quality Imported from

J-34 Punjab, Haryana, Rajasthan
Shankar-6 (S-6) Gujarat
AHH South
NHH South
LRA South

A maximum portion of raw material contributing about a total of 90% of the total material of the
company is purchased from its holding i.e., Vardhman Acrylics Limited located at Bharuch,
Gujarat. Sometime cotton is purchase from local trader from Panipat, Baddi, etc. VSGM ltd. also
sourced its raw material from Australia, USA, Egypt, Brazil, West African Countries, Greece,
Zimbabwe and others. Cotton also imported from Greek, U.S.A. Before buying cotton from these
states raw cotton is tested in R&D Department. If they pass this then dispatching is done.

6.3.3 Suppliers of raw cotton:

We provide mainly includes cotton bales and raw cotton. Besides this, we are also engaged in
providing yarn and surgical absorbent cotton. Our cotton is widely used in the spinning and
denim mill for various purposes.

Manufactured under the stringent quality checks, our cotton is contamination free. Cotton
provided by us is in accordance to the requirements of the market and industry. Highly valued in
the quality cautious market, our cotton is in compliance with national and international quality
standards. We deliver cotton at very competitive prices and that too within the stipulated time
frame.

J-34

 Khen Chand Bhadur Hand  Radha Madhav Investment

 Mahavir Swami Arketing  Arichand Cotton Processor
 Gopi Chand  Rakesh Shashi Processor
 Tilak Industries  Ashok Enterprises
 Amit Agro Traders

Shankar-6:
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This kind of cotton is generally sown in the month of June and July and can be harvested in the
period from November to February. Shankar -6 is commonly cultivated in a vast area of about
4.4 4million acres mainly in the state of Gujarat.

Fibre Properties:

 2.5% Span Length: 27.5 to 29.5  1/8 gauge- g/tex: 21 to 23(ICC)

mm
 Bundle Strength: 1000 lbs./sq.inch:85
 Micronaire: 3.5 to 4.9 to 96

 Dawinder Pukhraj  Cotton Corp. Of India Ltd

 Shah Poonnam Chand Dev Chand  Amrit Cotton Co.

Synthetic: Synthetic fibre includes Acrylic, Polyester, Nylon, Viscose, Wool, Polyester
Filament, Nylon Filament, and Viscos.

Acrylic

 Punjab  Dralon Fibre Co. (German)

 Pashupati Acrylon Ltd (Moradabad)  Marobini Corp. (Japan)
 Vardhman Acrylic Ltd.

Nylon

 Tenpow Co. (Taiwan)

Viscose

 Grasim Birla Group (Nagda, M.P)

Polyester

 Reliance  Bombay Dyeing

 Indo Rama (Nagpur, Maharashtra)  South Indian Organic
 Swadeshi Polytex (U.P)
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6.4 Production units (raw materials/finished goods)

The need for issuing Raw material arises mainly from Production Units. There are total 5
Production Units in Vardhman Spinning & General Mills, Ludhiana. The Units are differentiated
in three sectors as below

 Cotton sector

Unit Inputs (Raw-Material) Output (Finished goods)

Spinning I Raw Cotton 100% Cotton Yarn
Acrylic Fibre Acrylic/Cotton Blended Yarn
Polyester Fibre Polyester/Cotton Blended Yarn
* Cotton, Acrylic Cotton, Slub yarn and export material is prepared.
Spinning II Polyester Fibre Polyester/Cotton Blended Yarn
Raw Cotton 100% Cotton Yarn
!00% Polyester Yarn
* Cotton, Polyester, Acrylic Cotton, Acrylic Cotton is prepared

 Worsted sector

Unit Inputs (Raw-Material) Output (Finished goods)

Worsted I Acrylic Fibre 100% Acrylic Yarn
Polyester Fibre Acrylic/ Polyester Blended Yarn
Polyester /Nylon Blended Yarn
* Production of Fancy and Acrylic Yarn is done.
Worsted II Acrylic Fibre 100% Acrylic Yarn
* Acrylic, Dyed Daffodil and Export material is prepared.

 Hand-knitting sector

Unit Inputs (Raw-Material) Output (Finished goods)

H.K.S Acrylic Fibre 100% Acrylic Yarn
Nylon Fibre Acrylic/ Polyester Blended Yarn
Polyester Filament Acrylic / Nylon Blended Yarn
* Grey hand knitted yarn is prepared.
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6.5 Testing of cotton:

From a lot of Raw Cotton comprising 55 bales for J 34 (or 100 bales of S-6), 06 samples are

taken from that particular lot. 06 samples of each lot are then put in the polythenes and a slip

which mentions following information regarding alot is inserted in each polythene?

I) Lot No. ii) Quality iii) Station

The 06 samples from each lot are then handed over to the R & D Deptt within 3 days on
receipt of the cotton consignments. R & D Deptt tests the cotton samples and forward written
report regarding quality of the Cotton received. The report is forwarded to corporate raw
Material deptt, Production Deptt and Commercial deptt.

Based on the testing report the mixing is then decided and accordingly 'cotton bales' are issued to
the production deptt.

6.6 CHANNEL OF DISTRIBUTION:

Manufacturer
(VSGM)

Dealers

Brokers

Customers
 P a g e | 50

6.7.1 Procedure for receipt of raw material:

 At the time of receipt of raw material at gate, the transporter shall hand over the
following papers to the weigh bridge incharge at Weigh Bridge of the unit.
 Invoice Copy
 Copy of GR
 The weigh bridge incharge shall ensure that all papers like Invoice, GR, are in the name
of the unit. After verifying the documents the weighbridge incharge allots exclusive gate
entry number to the invoice. He shall also endorse stamp on the invoice which shall be
duly signed by him.
 He shall then carry out weighment of the loaded vehicle at the computerized
weighbridge. The weighbridge incharge enters particulars like Vehicle No, Supplier
name, Invoice No, Invoice date, Date of receipt, gate entry number and Quantity in his
'Raw Material Inward Register'
 The loaded vehicle after weighment is then guided to the commercial department for
unloading the material.
 The receipt incharge then verifies the documents and ensures that gate entry number has
been endorsed on the invoice. He then guides the vehicle to the concerned destination for
unloading the raw material.
 The cotton bales are stored at outside godowns located at 'Mundian Kalan while Acrylic
fibre is stored inside the mills premises. For vehicle related to cotton the receipt
incharge after receiving the vehicle, issues the challan in favour of Vardhman godowns
located outside at Mundian Kalan.
 The challan is given to the driver of the loaded vehicle of cotton who then takes the
vehicle from unit Vardhman godowns located at Mundian Kalan. For cotton
the unloading is then finally done at godowns located outside by the contracted labour.
 In case of Cotton the complete lot of 55 bales for J 34 cotton and 100 bales for S û6
respectively is stacked at 01 place. The face of the cotton bale showing the delivery
station and alot no. is kept outside for easy viewing and identification. This helps in easy
retrieval and issue of the bales.
 The Acrylic fibre is unloaded at the godowns located inside the mills premises.
 P a g e | 51

 After unloading of the vehicle, the empty vehicle then moves to the weighbridge for
measuring gross weight. Weighbridge incharge provides computerized slip which gives
following weights
 Gross weight (loaded vehicle)
 Tare weight (empty vehicle)
 Net Weight (After deducting weight of empty vehicle from loaded vehicle)
 The driver takes the computerized weighment slip to the receipt incharge
 The receipt incharge then tallies the 'Gross Weight' mentioned in the invoice/ challan with
the 'Net Weight' mentioned in the weighment slip.
 Any shortage of raw material received shall be deducted from transportation cost or
debited to party as the case may be, as per policy framed by the management from time to
time.
 For all receipt of cotton procured with in Punjab, the raw material Asstt. shall prepare
daily bargain wise and supplier wise receipt of material and shall send the same to the
Centralized Accounting Cell.

6.7.2 Raw material receipt chart:

Raw material consignment at gate

Gate entry

Raw material Department

Inspection (Quality & Weight)

Permission to reach particular

Unloading

Material in store

6.8 Issue of Raw Material:

 P a g e | 52

The Production Department gives Issue Slip to Raw Material Department. The issue slip is to be
filled in duplicate, one for Raw Material Department and the other for the record of Production
Department. An authorized person (as designated by unit head) shall sign the issue slip, for this
purpose. The specimen of Issue slip is attached at Annexure.

The Production Department shall mention following details on the issue slips

 Type of raw Material (i.e. Cotton, Acrylic Fibre, Polyester, Filaments, Nylon)
 Lot No/ Merge No
 No of bales

The raw material assistant shall check and verify the issue slips. He will identify the material at
the godown and shall instruct the Raw Material Contractor to issue the same material to
production deptt. The no of bales issued are filled up in the issue slip and signatures of the
recipient shall be obtained. The Raw Materials assistant shall punch the issue slip in the ERP
system and shall mention invariably the movement number generated in the ERP on the issue
slip. At the month end, Raw material consumption report shall be generated in ERP warehouse -
wise and shall sent to Accounts Department for booking of same in financial books. After
monthly closing of ledger by EDP deptt, the print out of the ledger is taken for reconciliation
with accounts department.

6.9 Storage / godowns for raw materials:

Here all raw materials from the outside sources are received. After receiving, the quality &
quantity of the material are checked. This Department receives as well as issues the raw material
to the production units. To maintain the continuous flow of production process without delay or
breakdown, different types of godowns/stores are maintained. For the best flow of materials
godowns/ stores are located near production units. It ensures the easy receipts, storage and
disbursement of the raw material.

There are separate godowns/storage for synthetic fibre and raw cotton in VSGM. These are:
 P a g e | 53

Godown Total capacity

 Synthetic fiber
Godown No. 105 A 420 TONS
Godown No. 114 952 TONS
Godown No. 105 420 TONS

 Raw cotton
Godown No. ST-I 4200 BALES
Godown No. ST-II 4300 BALES
Godown No. ST-III 4300 BALES
Godown No. ST-IV 1350 BALES
Godown No. VTEX 1 14000 BALES

6.11.1 Material Department:

Material department of VSGM are responsible for maintaining inventories related to the stores
and spares. These department deals with managing the following items

 Stationary and General items (item code begins with later “A”)

 Bearings (item code “B”)

 Belts (item code “C”)

 Electrical and mechanical items (item code “E”)

 Oil and lubricant (item code “L”)

 Packing materials (item code “P”)

 Machinery spares and ring traveler cots aprons. (item code “Y”)

With these codes, the material is being maintained in the stores. Taking these codes, the material
details are entered in the ERP system. It also performed its task in three different sections. These
are as Purchase Section, Receipt Section and Issue Section. Accordingly the task is performed.
 P a g e | 54

6.11.2 Material Department chart:

6.12.1 Purchase section:

 Ensure availability of material in time and as per desired specifications.

 Follow up with Corporate Purchase department for making of Purchase Orders in time
 Follow up with suppliers for timely delivery of material
 Ensure procurement of quality material in time and at most competitive prices for items
to be procured at unit level.
 Ensure timely clearance of Bills/MRNs and forward the same to Accounts Department.
 Ensure timely payment to the suppliers as per the purchase order terms.
 To raise indent of Store running items and ensure maintenance of minimum stock level
for these items.
 P a g e | 55

6.12.2 Procedure of purchasing materials:

 The need for material to be purchased originates from the user department who raises the
indent containing information like TIM code of the item, Item description, Quantity
required, Buyer Code, Department Code and Delivery date. An exclusive Indent number
is generated by the ERP system which is the basis of all future follow up by the user
department.

 The indent raised by the user is forwarded through the ERP system to the HOD of the
concerned department for approval.

 After approval from the HOD the indent is then automatically forwarded to the respective
buyer as per the item requirement. Each indent has its own serial number generated
automatically by the ERP system.

 For procuring the required material selection of source from which the item is to be
purchased, quotations and making comparison on comparison chart are being done.

 After meeting the specifications as mentioned in the indent final negotiations are done
with the supplier with various terms & conditions for the purchased to be made.

While making the Purchase following information is mandatory to be fed in the purchase order

 Supplier name & address

 Item Description & specifications

 Price, Quantity & UOM

 Taxes & Duties

 Payment terms

 Price Basis (Ex works/FOR Mills

etc.)

 Cenvat applicable or not

 P a g e | 56

There are 3 copies of purchase orders, original copy for the supplier, send directly by the
corporate purchase department; second copy for the unit and the corporate projects department
retains the third copy. All other documents relating to the purchase order like Quotation, Price
List, and Comparison etc. are retained by the corporate purchase department. The purchase
orders which are made at unit level shall be jointly signed by Sr. Manager (Commercial), Vice
President (Commercial) and Chief Executive. The unit Material department after receiving a
copy of purchase order follows up with the supplier till the material is received in the unit.

6.14.1 Procedure for receipt of material:

All the material shall be received in the receipt section of the Material Department.
 The store Asstt. Receipt Section shall receive the material, inspect and tally the actual
quantity received with the quantity as per the invoice/bill of the supplier in the presence
of the representative of the supplier.
 Store Asstt. will further ensure that each invoice shall have exclusive Gate Entry
number/date, which is duly stamped and signed by the security person at the weighbridge
and gives the acknowledgement in the duplicate copy of invoice to the supplier and
makes the entry in the Material Receipt Register.
 All overhead charges paid to the supplier like Freight, Octroi, Loading/Unloading shall
be recorded in the receipt register. Apart from above information the receipt register shall
contain all information like Invoice no., Gate Entry No., Name of supplier, Invoice Value,
Quantity received, charges paid like Freight, octroi and Loading/unloading.
 The Cash Voucher along with Receipt Register shall be verified and signed by the Sr.
Manager (commercial) for making the necessary payment to the supplier on the basis of
Bill/ Invoice Material Receipt Note (MRN) shall be prepared in the ERP system and the
Receipt In charge shall sign the same.
 Intimation shall be sent to the indentor about receipt of material on the same day either
through phone or email.

Store Asst. Receipt Section shall be responsible for storage and upkeep of the material till the
same is handed over to the user department or sent to the issue section. All fragile and delicate
items shall be kept under Lock and key till the user department does approval of the same.

6.14.2 Receipt of material through transport against GR:

If the material is dispatched by the transporter a copy of GR is send to the unit intimating the
Description of Item, quantity dispatched, Name of the transporter, GR number, Date of Dispatch
etc. After receipt of the GR the store Asstt. Receipt section takes the copy of GR and collects the
material from the Transporter’s Godown. The Material is then brought to the unit and payment is
made to the transporter.
 P a g e | 57

6.15.1 Issue section:

 Responsible for issue of material from the issue section to the users

 Responsible for proper preservation of the inventory held at the issue section

 Responsible for punching of all the issue slips in the ERP system

 Responsible for maintenance of minimum stock level of all running items and raising
indents for the same
6.15.2 Procedure of issuing materials:
From receipt section all material related to running items and material kept in stores is sent to the
issue section. While issuing material from the store the following procedure is maintained

 The material issue slips, duly signed by an authorized person from the user department
are checked with respect to correctness of TIM code, Item description, Cost Center,
Department Code, Quantity issued etc.

 The store Asst. in issue section shall once again tally the material physically against the
invoice and take the material in custody.

 All issue of stores shall be made during the regular working hours, except in case of
Emergency hours with prior approval of Materials Manager.

 The issue slip is then punched in the ERP system for accounting. A monthly consumption
report is taken from the ERP system, which is forwarded, to accounts department. For the
material issued at the receipt section all issue slips along with invoices and MRNs shall
be sent to the issue for punching the same in ERP system.

6.20 Layout of VSGM ltd:

 P a g e | 58

6.21.1 Computerised inventory management system of VSGM:

ERP stands for Enterprise Resource Planning. ERP is a way to integrate the data and processes of
an organization into one single system. Usually ERP systems will have many components
including hardware and software, in order to achieve integration, most ERP systems use a unified
database to store data for various functions found throughout the organization. The term ERP
originally referred to how a large organization planned to use organizational wide resources.

Today's ERP systems can cover a wide range of functions and integrate them into one unified
database. For instance, functions such as Human Resources, Supply Chain Management,
Customer Relations Management, Financials, Manufacturing functions and Warehouse
Management functions were all once stand alone software applications, usually housed with their
own database and network, today, they can all fit under one umbrella - the ERP system.

6.21.2 Integration as a Key to ERP:

Integration is an extremely important part to ERP's. ERP's main goal is to integrate data and
processes from all areas of an organization and unify it for easy access and work flow. ERP's
 P a g e | 59

usually accomplish integration by creating one single database that employs multiple software
modules providing different areas of an organization with various business functions.

6.21.3 The Ideal ERP System:

An ideal ERP system is when a single database is utilized and contains all data for various
software modules. These software modules can include:

 Manufacturing: Some of the functions include; engineering, capacity, workflow

management, quality control, bills of material, manufacturing process, etc.

 Financials: Accounts payable, accounts receivable, fixed assets, general ledger and cash
management, etc.

 Human Resources: Benefits, training, payroll, time and attendance, etc

 Supply Chain Management: Inventory, supply chain planning, supplier scheduling,

claim processing, order entry, purchasing, etc.

 Projects: Costing, billing, activity management, time and expense, etc.

 Customer Relationship Management: sales and marketing, service, commissions,

customer contact, calls center support, etc.

 Data Warehouse: Usually this is a module that can be accessed by an organizations

customers, suppliers and employees.

6.21.4 ERP Improves Productivity:

Before ERP systems, each department in an organization would most likely have their own
computer system, data and database. Unfortunately, many of these systems would not be able to
communicate with one another or need to store or rewrite data to make it possible for cross
computer system communication. For instance, the financials of a company were on a separate
computer system than the HR system, making it more intensive and complicated to process
certain functions.
 P a g e | 60

Once an ERP system is in place, usually all aspects of an organization can work in harmony
instead of every single system needing to be compatible with each other. For large organizations,
increased productivity and less types of software are a result.

6.21.5 ERP System in VSGM:

Implementing an ERP system is not an easy task to achieve, in fact it takes lots of planning,
consulting and in most cases 3 months to 1 year +. ERP systems are extraordinary wide in scope
and for many larger organizations can be extremely complex. Implementing an ERP system will
ultimately require significant changes on staff and work practices. While it may seem reasonable
for an in house IT staff to head the project, it is widely advised that ERP implementation
consultants be used, due to the fact that consultants are usually more cost effective and are
specifically trained in implementing these types of systems.

One of the most important traits that an organization should have when implementing an ERP
system is ownership of the project. Because so many changes take place and its broad effect on
almost every individual in the organization, it is important to make sure that everyone is on board
and will help make the project and using the new ERP system a success.

Usually organizations use ERP vendors or consulting companies to implement their customized
ERP system. There are three types of professional services that are provided when implementing
an ERP system, they are Consulting, Customization and Support.

Consulting Services - usually consulting services are responsible for the initial stages of ERP
implementation, they help an organization go live with their new system, with product training,
workflow, improve ERP's use in the specific organization, etc.

Customization Services - Customization services work by extending the use of the new ERP
system or changing its use by creating customized interfaces and/or underlying application code.
While ERP systems are made for many core routines, there are still some needs that need to be
built or customized for an organization.

Support Services- Support services include both support and maintenance of ERP systems. For
instance, trouble shooting and assistance with ERP issues.

6.21.6 Advantages of ERP Systems:

There are many advantages of implementing an EPR system; here are a few of them:

 A totally integrated system

 The ability to streamline different processes and workflows

 The ability to easily share data across various departments in an organization

 P a g e | 61

 Improved efficiency and productivity levels

 Better tracking and forecasting

 Lower costs

 Improved customer service

6.21.7 Disadvantages of ERP Systems:

While advantages usually outweigh disadvantages for most organizations implementing an ERP
system, here are some of the most common obstacles experienced:

Usually many obstacles can be prevented if adequate investment is made and adequate training is
involved, however, success does depend on skills and the experience of the workforce to quickly
adapt to the new system.

 Customization in many situations is limited

 The need to reengineer business processes

 ERP systems can be cost prohibitive to install and run

 Technical support can be shoddy

 ERP's may be too rigid for specific organizations that are either new or want to move in a
new direction in the near future.

6.22.1 Codification:

Coding is a technique of assigning brief name to the items stocked in the store room. Generally
alphabets, numerical or a combination of the two is used for codification of items. In material
management terminology, it is known as “codification”

The objective of codification is to provide a common language for identification of every single
‘input’ item in the inventory for all transactions within the organisation i.e., within its constituent
units. All input material, irrespective of the source of procurement, whether from external source
or manufactured by the organisation itself, are to be codified.

6.22.2 Methods of codification:

 P a g e | 62

 Mnemonic method: in this method, alphabets closely related/associated with the name
of the items are used. E.g., MT for metallic items, PT for plastic items, etc. this method is
useful when a few type of item are to be stored.

 Random method: under this method, the numerical and alphabets are used on random
basis. It is flexible as it is possible to add the new number or letter in sequence in case of
addition of new items. But this method is rather arbitrary.

 Scientific method: under this method, the total stock of item is divided into number of
groups or classes and a symbol is assigned to each group. Each groups, may be further
divided until the individual item is identified.

6.22.3 Principle of codification:

The following principle should be observed while establishing an effective codification system:

 There must be a consistency in the point of view so that, the basis of classification should
remain unchanged for all items.

 The system of classification must be cover the entire range of item for which, it is
devised and at the same time, allow reasonable scope of extension. The principle is that
of comprehensiveness.

 The third principle is that of mutual exclusiveness which means, that there must be only
one code number possible for any item.

 The system developed should be simple enough to understand and easily adopted by the
non-specialist personnel. This also means that the codification basis when one understood
the code numbers should be self-explanatory to a certain possible extent.

6.22.4 Codification method followed in VSGM:

Scientific method of codification is being followed in VSGM ltd. Codification is specially

designed by taking the whole details of the products components. It can be explain with the help
of the below giving examples,
 P a g e | 63

Reading the product code: Taking the product AA_115WE, it can be read as follows

e.g. AA_115WE
AA 1 15 W E

AA_115WE

Acrylic (Raw Export

material Coun Worsted

t (Productio
n unit)
Ply

This process is being followed for all the products while designing a product codes.

7. ABC analysis of inventories:

 P a g e | 64

Investigator has performed ABC analysis on inventories of Vardhman Spinning and General Mill
ltd. for analyzing the inventories control mechanism. The lists of items on which the investigator
have performed its analysis are given below:

STORE ITEM Unit consumed Cost Value (Rs.)

STATIONARY & GENERAL ITEMS (A)
Pencil cell 714 6 4284
Palm Broom 1048 15 15720
Bottle Brush 1821 7 12747
BEARING (B)
Ball Bearing 1210 ETN9 10 591.26 5912.6
Ball Bearing 3304 3 762.75 2288.25
BELTS (C )
V Belt A37 5 52.36 261.8
Spindle Tape 2341 * 11HS5 3300 15.58 51414
ELECTRONIC &
MECHANICAL (E)
Port land cement 1700 185 314500
Oxygen Gas 249 150 37350
OIL & LUBRICANT (L)
Petrol 2676 49.26 131819.76
Grease AP-3/AP-2 975 99.98 97480.5
Kerosene Oil 1456 42 61152
PACKING MATERIAL (P)
Bopp Tape 2.5" 6352 43 273136
HM Sheet 40*40G 895 87.81 78589.95
Paper Cone 420 Plain Low CS 6352 1.5 9528
MACHINERY SPARES AND RING TRAVELLER COTS
APRON
Weaver Scissor 1700 16 27200

RAM-MATERIALS
Cotton 6381560.95 57.98 370002904
Long Stable fibre 2516931.23 60.9 153281112
Acrylics 3345001.4 128.82 430903080
Polyester 1208346.15 67.9 82046703.6
Other Raw materials 286883.53 193.74 55580815.1
2633.8
Total 13767979.26 4 1092937999
 P a g e | 65

Table showing percentage of unit consumed and value of inventory respectively.

%age
Unit %age of Ranking
ITEM consumed Consumed Cost Value (Rs.) Value (value)
Pencil cell 714.00 0.01 6.00 4,284.00 0.00 19
Palm Broom 1,048.00 0.01 15.00 15,720.00 0.00 15
Bottle Brush 1,821.00 0.01 7.00 12,747.00 0.00 16
Ball Bearing 1210
ETN9 10.00 0.00 591.26 5,912.60 0.00 18
Ball Bearing 3304 3.00 0.00 762.75 2,288.25 0.00 20
V Belt A37 5.00 0.00 52.36 261.80 0.00 21
Spindle Tape 2341 *
11HS5 3,300.00 0.02 15.58 51,414.00 0.00 12
Port land cement 1,700.00 0.01 185.00 314,500.00 0.03 6
Oxygen Gas 249.00 0.00 150.00 37,350.00 0.00 13
Petrol 2,676.00 0.02 49.26 131,819.76 0.01 8
Grease AP-3/AP-2 975.00 0.01 99.98 97,480.50 0.01 9
Kerosene Oil 1,456.00 0.01 42.00 61,152.00 0.01 11
Bopp Tape 2.5" 6,352.00 0.05 43.00 273,136.00 0.02 7
HM Sheet 40*40G 895.00 0.01 87.81 78,589.95 0.01 10
Paper Cone 420 Plain
Low CS 6,352.00 0.05 1.50 9,528.00 0.00 17
Weaver Scissor 1,700.00 0.01 16.00 27,200.00 0.00 14
Cotton 6,381,560.95 46.35 57.98 370,002,903.88 33.85 2
Long Stable fibre 2,516,931.23 18.28 60.90 153,281,111.91 14.02 3
Acrylics 3,345,001.40 24.30 128.82 430,903,080.35 39.43 1
Polyester 1,208,346.15 8.78 67.90 82,046,703.59 7.51 4
Other Raw materials 286,883.53 2.08 193.74 55,580,815.10 5.09 5

Table showing the cumulative values and classification of inventory

 P a g e | 66

%age Cumulative value %age of Cumulative

ITEM Consumed (% consumed) Value value (% Value) Classification
Acrylics 24.30 24.30 39.43 39.43 A
Cotton 46.35 70.65 33.85 73.28 A
Long Stable fibre 18.28 88.93 14.02 87.31 B
Polyester 8.78 97.71 7.51 94.82 B
Other Raw materials 2.08 99.79 5.09 99.90 C
Port land cement 0.01 99.80 0.03 99.93 C
Bopp Tape 2.5" 0.05 99.85 0.02 99.95 C
Petrol 0.02 99.87 0.01 99.97 C
Grease AP-3/AP-2 0.01 99.88 0.01 99.98 C
HM Sheet 40*40G 0.01 99.88 0.01 99.98 C
Kerosene Oil 0.01 99.89 0.01 99.99 C
Spindle Tape 2341 * 11HS5 0.02 99.92 0.00 99.99 C
Oxygen Gas 0.00 99.92 0.00 100.00 C
Weaver Scissor 0.01 99.93 0.00 100.00 C
Palm Broom 0.01 99.94 0.00 100.00 C
Bottle Brush 0.01 99.95 0.00 100.00 C
Paper Cone 420 Plain Low CS 0.05 100.00 0.00 100.00 C
Ball Bearing 1210 ETN9 0.00 100.00 0.00 100.00 C
Pencil cell 0.01 100.00 0.00 100.00 C
Ball Bearing 3304 0.00 100.00 0.00 100.00 C
V Belt A37 0.00 100.00 0.00 100.00 C

Interpretation:

From the above analysis we came to know that the company should be more focus on the
control procedure of the Acrylic and Cotton i.e., raw material. It can be seen in the above table
that the composition of this raw-material is contribute to a total of near about 75% of the total
value but constitute a minimum portion of the total inventory consumed as compared to the other
materials. Thus, the company should give more focus on controlling it as it will affect the
production process. More focus should be given on estimating the requirement of the raw-
material, purchase and maintaining stocks of such goods so as to control cost incurred in such
items.

Long Stable fibre and Polyester items comes under B category, which falls under 75% to
90% of the total value. A moderate control system should be maintained for such item in
purchasing, storing, etc.

Other items like other raw-materials, store materials fall under “C” category of product
which has less value contribution in the total expenditure. A minimum level of stocks of such
gods should be maintained so that it does not affect the manufacturing and operational activities
of the company.
 P a g e | 67

FINDINGS AND SUGGESTION

 P a g e | 68

Findings:

From the investigators study the following details regarding inventory management is
being found in VSGM, Ludhiana:

 Godowns are well maintained in the company

 Proper procedure for purchase, receipt and issue of raw material and store items
are followed.

 Computerised inventory material system is being followed through ERP system

which maintained information for all transaction relating to raw material or store
items

 As most of the raw materials are acquired from its holding companies and local
dealers, the procurement cost of raw material is quite lower than the other firm.

 Proper stocks of raw material such as cotton, fibre and store materials are
maintained by the company. As most of these raw materials are of seasonal,
company maintain a stock for cotton of 6 months and for fibre, 2 months in
advance. Any shortage is adjusted from local or nearby dealer.

 Systematic method for codification is being followed and thus helps in easy
maintenance of the same in the ERP system or so.

 Product prices are fixed by taking the cost involved in manufacturing the product
or the market price of the item or its substitute presently available in the market
whichever is profitable to the company. But if the market price of the product is
less then company fixed its price on that so as to meet the market competitions.

 Waste material of the company is either recycle or resale in the market at a price
which is prevailing in the market.
 P a g e | 69

Suggestions:

 Computerised Inventory maintenance is itself disadvantage for the company as the

employee can easily manipulate the working of the data available in the system.

 Though there is enough warehousing facility, the methods followed in the issue
and receipts of Material (raw material, finished goods) are not so satisfactory. It
has been seen that finished goods are placed in those godowns where there is
space for the same. Proper procedure is not followed here which should be done
with due care.

 Inventory control techniques are not well adopted in the companies. EOQ, Levels
of stock and other measure for effective management of inventories should be
practice.

 Proper records for inventories should be maintained.

 Inventories are generally maintained for 2/6 months which increase the storage
cost of the concerned. The same can be reducing by studying the market
conditions, availability, term and requirements of the same.
 P a g e | 70

BIBLOGRAPHY:

 http://en.wihttp://www.economywatch.com/businessandeconomy/textileindustry.htmlkipe
dia.org/wiki/Textile_industry

 http://www.bseindia.com/xmldata/corpfiling/announcement/Vardhman_Textiles_Ltd_280
109_Rst.pdf

 http://www.vardhman.com/profile.pdf

 www.vardhmanthreads.com/

 http://vardhman.in/