International Journal of Research in Engineering, Science and Management 388

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Analyzing Inventory Management System in

Textile Spinning Mill for Improving
Productivity
M. Shanmugaraja1, P. Manojkumar2*, K. P. Nivethan Govarthan3, R. Nandhakumar4
1
Professor, Dept. of Mechanical Engineering, KPR Institute of Engineering and Technology, Coimbatore, India
2,3,4
Student, Dept. of Mechanical Engineering, KPR Institute of Engineering and Technology, Coimbatore, India
*Corresponding author: manojkumardmrp@gmail.com

Abstract: Inventory management is a system concerned with changes (resulting from changes in inventory management
integration of information, transportation, acquisition, inspection, policy of the firm) affect the net working capital level and the
material handling, warehousing, packaging and control of supplies level of operating costs of inventory management in a firm as
and ensuring security of inventory. Inventory management aims
at discovering and maintaining optimal levels of investment in all well. These operating costs are result of storage, insurance,
types of inventories and maximizing the flow of goods, information transport, obsolescence, wasting and spoilage of inventory.
and other related resources like people and energy from the point In this process, manufacturing company situated in southern
of origin to the point of final consumption. The broad objective of part of India has been identified for case analysis. It consists of
this re-search was to establish the role of inventory management multi production cells to produce multiple products in a make-
approaches on the performance of product manufacturing to-stock fashion. Complicating factors at present for the
company. The study established that manufacturing companies
use information technology, FSN, ABC method as inventory company for planning are the stochastic demand, setup time,
management approaches. The study also concludes that there was batch processing and finite buffer capacities. The main aim of
a strong positive correlation between the inventory management this project is the development of a methodology integrating
practices and operational performance of the product production and inventory decisions which can be used for the
manufacturing company. The researcher recommends that the evaluation and optimization of a wide range of batch production
manufacturing companies should develop a policy framework to inventory systems.
facilitate faster implementation of the best inventory management
practices such as ABC and FSN. It is also recommended that such
firms should consider investing in modern technology. This will 2. Industry Overview
reduce inventory costs and improve returns and productivity. Sri Murugan Spinning Mills commenced spinning opera-
Finally, the firms should also strengthen the supplier relation to tions in the year 2008 with an installed capacity of 10,000
the level of partnerships.
spindles. The weaving division started in the year 2009 is
Keywords: ABC, FSN, Inventory cost, Inventory management, located in Coimbatore, Tamil Nadu. Weaving Wider & Nar-
Productivity, Product manufacturing companies. row width looms producing 3 lakh metres per month. They
work on 60s, 40s varieties of yarn.
1. Introduction
The batch production is a style of manufacturing which 3. Objectives of Inventory Management
compiles the different components of a product through step by 1. To analyze the ratios of different materials in inventory.
step process. This basically means that the raw material moves 2. To analyze the classification of materials in stock.
through the production line in batches, so that there is a pause 3. To propose Economic Order Quantity (EOQ) for reducing
between each step as a batch moves through. When the ordering and carrying cost in inventory.
implementing batch manufacturing there are a few 4. To make suggestions for possible improvements.
characteristics which make it both a credit and a bur-den to
itself. There are both batch production advantages and 4. Problems in Inventories
disadvantages. The first thing to consider is the amount of In the context of inventory management, the firm is faced
resources that need to be allocated for batch manufacturing. with the problem of meeting two conflicting needs,
Each batch goes back to inventory be-tween each step, which 1. To maintain a large size of inventories of raw
means that more resources have to be spent on keeping stocks. material and work-in-process for efficient and
Even if the stock doesn’t take up too much space, still it smooth production and a finished goods for
required to pay for moving it from and to inventory. Inventory uninterrupted sales operations.
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2. To maintain a minimum investment in inventories A. Inventory usage for 5 years

to maximize profitability. Table 1
Inventory usage for the period of 2014-2015 is taken
Components In Lakhs Percentage
5. Scope of the Study
Raw material 103.75 44
Inventory is actually „money‟ kept in the storeroom and Work in progress 69.92 29.2
inventory management is the technique of maintaining the size Finished goods 39.07 16.4
Stock of packing materials 4.23 2
of the inventory at some desired level keeping in view the best Stock of consumable spares and stores 20.25 8.4
economic interests of an organization. Hence good inventory Total 238.26 100
management is good financial management. The researcher had
tried to find the efficiency in inventory management; number of Interpretation
days needed for stock clearance and also proposed the material The major share of total inventory of manufacturing
requirement planning. The analysis of the value of stock left at company comprises of Raw materials and work in pro-gress.
the end of the financial year and the forecasting of inventory From this table it is clear that raw materials from the largest
consumption and weighted average price had been done. This proportion of total inventory (44%) and (29%) of work in
research would help the firm to avoid future shortages, to progress, finished goods are (16.4%), packing ma-terials and
purchase the materials advance and at most economical price, consumable spares are very essential for pro-moting smooth
to improve stock as per EOQ, POQ, Inventory turnover ratio, operation. In 2014-15 table shows that five major components
Stock level (Cotton and Polyester). Efficient inventory of inventories are balancing their pro-duction.
management ensures reasonable utilization of equipment and
labour and the industry would be able to build up reputation and Table 2
better relationship with customers. Inventory usage for the period of 2015-2016 is taken
Components In lakhs Percentage
Raw material 79.06 39
6. Research Methodology Work in progress 64.19 32
The study was confined to the Textile Spinning Mill, for a Finished goods 46.22 23
Stock of packing materials 6.08 3
period of 2014 - 2019. Research is a systematic effort to gain Stock of consumable spares and stores 6.67 3.2
knowledge. It can be referred to as the search of knowledge. Total 202.22 100

7. Data Collection Interpretation

Data collection method is an important task in every research The major share of total inventory of manufacturing
process; the data collected in research process were based on company comprises of raw materials and work in progress.
primary and secondary data. The data used for the study is From this table it is clear that raw materials from the largest
secondary data, which are collected from various inventory proportion of total inventory (39%), and (32%) of work in
records maintained by the finance, purchase and store progress, finished goods are (23%), packing materials and
department, computer database, profit and loss account, consumable spares are very essential for promoting smooth
magazines, periodical pamphlets and from the books of operation. In 2015-16 table shows that five major components
renowned authors of inventories are balancing their production

8. Analysis and Interpretation Table 3

Inventory usage for the period of 2016-2017 is taken
Analysis Components In lakhs Percentage
Analysis is the process of placing the data in an or-dered Raw material 73.90 35.4
form, combining them with existing information there by Work in progress 48.45 23.2
Finished goods 51.66 25
finding out its implication. Only analyzing brings out Stock of packing materials 6.67 3.2
information from the data. Analysis involves organizing the Stock of consumable spares and stores 27.73 13.3
data in a manner, while interpretation is what which explains Total 208.41 100
the facts of figures.
Interpretation Interpretation:
Interpretation is the process of relating various factors with The major share of total inventory of manufacturing
other information. It brings out the relation between the finding company comprises of raw materials and work in progress.
to the research objective and hypothesis framed for the study From this table it is clear that raw materials from the largest
beginning. proportion of total inventory (35.4%), and (23.2%) of work in
progress, finished goods are (25%), packing materials and
consumable spares are very essential for promoting smooth
operation. In 2016-17 table shows that five major components
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of inventories are balancing their production. Economic order quantity of year 2015-2016 has been taken

Table 4 Raw Annual Cost of Storage cost EOQ

Inventory usage for the period 2017-2018 is taken materials consumption placing an (per unit)
Components In lakhs Percentage (unit) order
Raw material 52.63 36.3 (per unit)
Work in progress 9.60 7 Cotton 1320 65 3 239
Finished goods 49.49 34.2 Polyester 2364 45 3.1 264
Stock of packing materials 4.91 3.4
Stock of consumable spares and stores 27.65 19.12
Total 144.28 100
Economic order quantity of year 2016-2017 has been taken
Interpretation: Raw Annual Cost of placing Storage cost EOQ
The major share of total inventory of manufacturing materials consumption an order (per (per unit)
company comprises of raw materials and work in progress. (unit) unit)
From this table it is clear that raw materials from the largest Cotton 1362 66 4 212
Polyester 2736 50 3.6 276
proportion of total inventory (36.3%), and (7%) of work in
progress, finished goods are (34.2%), packing materials and
consumable spares are very essential for promoting smooth
Economic order quantity of year 2017-2018 has been taken
operation. In 2017-18 table shows that five major components
of inventories are balancing their production. Raw Annual Cost of placing Storage cost EOQ
materials consumption an order (per (per unit)
Table 5 (unit) unit)
Inventory usage for the period of 2018 -2019 is taken Cotton 1420 66 5 194
Components In lakhs Percentage Polyester 2850 52 3.9 276
Raw material 57.61 40
Work in progress 37.03 26
Economic order quantity of year 2018-2019 has been taken
Finished goods 13.84 9.6
Stock of packing materials 5.33 3.7
Stock of consumable spares and stores 29.84 20.7 Raw Annual Cost of placing Storage cost EOQ
Total 143.65 100 materials consumption an order (per (per unit)
(unit) unit)
Cotton 1500 68 6 184
Interpretation: Polyester 3000 56 4 290
The major share of total inventory of manufacturing
company comprises of raw materials and work in progress. Interpretation:
From this table it is clear that raw materials from the largest During 2014-15 the ordering quantity of cotton is 243 larger
proportion of total inventory (40%), and (26%) of work in than 2018-19 that is 184, the ordering cost is low in 2014-15
progress, finished goods are (9.6%), packing materials and than 2018-19,184. Because order placed few. In the case of
consumable spares are very essential for promoting smooth polyester, the ordering quantity of 2014-15 is 246 it is lesser
operation. In 2018-19 table shows that five major components than 2018-19, 290. The ordering cost will lesser in 2018-19.
of inventories are balancing their production Because order placed few.
B. Economic order quantity C. Period order quantity
Economic order quantity is the level of inventory that Cotton – Period order quantity
minimizes the total inventory holding cost and ordering cost.
Number of orders per year = Annual Requirement
√2𝐶𝑂 ----------------------------
𝐸𝑂𝑄 =
𝐼
EOQ
C = Annual consumption
O = Ordering cost Year Annual Consumption EOQ Number of Orders per year
I = Annual Carrying cost or storage cost per unit 2014-2015 1152 243 5
2015-2016 1320 239 6
Economic order quantity of year 2014-2015 has been taken 2016-2017 1362 212 6
2017-2018 1420 194 7
2018-2019 1500 184 8
Raw Annual Cost of Storage cost EOQ
materials consumption placing an (per unit)
(unit) order Interpretation:
(per unit) In these five years (2014-15 to 2018-19) the highest number
Cotton 1152 64 2.5 243
Polyester 1848 41 2.5 246
of orders of total cotton yarn is 2018-19 the lowest number of
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cotton is in 2014-15, the number of orders of cotton yarn is When comparing these five years (2014- 15 to 2018-19) the
increasing trend. order interval of polyester per year are same lowest in the last 3
years, 37 (2016-17 to 2018-19). The maximum number of
Polyester – Period order quantity: orders is 47 in 2014-15.
E. Inventory turnover ratio
Number of orders per year = Annual Requirement
---------------------------- Total Inventory Turnover Ratio = Cost of Goods Sold
EOQ --------------------------
Interpretation: Average Stock
When comparing these five years (2014-15 to 2018-19) the
number of orders of polyester per year are same and highest in Cost of Goods Sold = Opening Stock + Purchase – Closing
the last 3 years, 10 (2016-17 to 2018-19). The minimum Stock
number of orders is 8 in 2014-15. Average Stock = (Opening Stock + Closing Stock)
----------------------------------------------
Year Annual Consumption EOQ Number of 2
Orders per year
2014-2015 1848 246 8 Year Cost of goods Average stock Ratio
2015-2016 2364 262 9 2014-2015 188.1670089 1392.786106 7.4
2736 276 10 2015-2016 111.9184782 1403.307659 13
2016-2017
2016-2017 10.5660083 1573.103225 15
2017-2018 2850 276 10
2017-2018 108.5047831 1292.724321 12
2018-2019 3000 290 10 2018-2019 83.9250767 1026.966277 12.2
D. Order interval
Interpretation:
Cotton – Order interval:
In this five years period the inventory turnover ratio is 15
higher in 2015-16, it indicate that the materials are fast moving,
Order interval = 12 or 365
lower obsolescence and material losses etc. In this period
----------------------
(2014-19) the lower inventory turnover ratio is 7.4 in 2014-15.
No. of Orders per Year
It indicates that materials are slow moving, & highest
obsolescence.
Year Annual EOQ No. of Orders Order
consumption per year interval F. Inventory conversion period
2014-2015 1152 243 5 73
2015-2016 1320 239 6 61 Inventory Conversion Period = Number of days in a year
2016-2017 1362 212 6 61 ------------------------------
2017-2018 1420 194 7 52.14 Inventory turnover ratio
2018-2019 1500 184 8 46

Year Inventory turnover ratio Inventory conversion period

Interpretation: 2014-15 7.4 49.3
The order interval of cotton in the year 2014-15 is 73. It is 2015-16 13 28
higher than the other four years. The lowest interval is 46 in 2016-17 15 24.3
2017-18 12 30.4
2018-19, the order interval is in increasing trend. 2018-19 12.2 30

Polyester – Order interval Interpretation:

In the year 2014-15, inventory conversion period 49.3 is
Order interval = 12 or 365 higher than 2017-18, 30. Because the higher inventory turnover
---------------------- ratio is reducing the inventory conversion period and the lower
No. of Orders per Year inventory turnover ratio increase the inventory conversion
period.
Year Annual EOQ No. of Orders Order
consumption per year interval G. Stock level
2014-2015 1848 246 8 47
2015-2016 2364 262 9 41 Maximum level = Reorder quantity – (minimum
2016-2017 2736 276 10 37 consumption × minimum reorder period)
2017-2018 2850 276 10 37 Minimum level = Reorder level – (normal consumption ×
2018-2019 3000 290 10 37
maximum reorder period)
Reorder level = Maximum consumption × maximum re-
order period
Interpretation:
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Average stock level = minimum level + ½ reorder quantity. 19. Roller Bearing (for secoloyel Ring Twist)
20. Spindle for Sac R. Twist O/D 3/4” Pitch 6-1/2
Year Maximum Minimum Reorder Average 21. Spindle for Sac R. Twist O/D 5/8” Pitch 6-1/2
level Level Level stock level
2014-2015 2699 2304 3456 2426
2015-2016 3879 3360 5040 3480 B CLASS (MODERATE VALUE ITEMS)
2016-2017 3232 2880 4320 2986 1. Bearing Socket – 1306K
2017-2018 4729 4289 6435 4386 2. Brass conductor 2-5/8×15/8
2018-2019 4354 4080 6120 4172
3. Felt Bob Clip
4. C I Stop Motion Weight Lever L/H 4-3/4 SD
Interpretation: 5. C I Stop Motion Weight Lever R/H 4-3/4 SD
When comparing the stock level of cotton in 2014-15 and 6. Gun Metal Bush 1-3/4X2-1/4X2-3/4 (Half Round).
2015-16 the maximum level of cottons is 3879 in 2015-16, it is 7. Helical pinion 21TX8DP
higher than 2699 in 2014-15. When comparing the stock level 8. M S Chain S Sprocket 18TX5/8”×1”
of cotton in 2016-17 and 2017-18, the maximum level of cotton 9. Right Angles 12”
is 4729 in 2016-17. It is higher than 4354 in 2018-19. The 10. Tension Pulley 4-1/4” AD
minimum level of cotton is 2304 in 2014-15 is lower than 4289 11. Gauge Meter
in 2017-18. The reorder level of stock level (cotton) is 6435. It 12. Hammer 2-1/2 LBS
is the highest level of the comparing in these 5 years. When 13. Hand Top 1/2” BSW
comparing the average stock level in this 5 years the maximum 14. Yarn guide curls
average stock lev-el is 4386 in 2017-18. The minimum average
stock level is 2426 in 2014-15. C CLASS (LOW VALUE ITEMS)
H. ABC analysis 1. Ampere Tube No.: 01
The ABC system is widely used classification technique to 2. Card Pin 0.092×1”
identify various items of inventory for purposes of inventory 3. Card Pin 0.071×1-3/8”
control. On the basis of unit cost involved, the various items are 4. Ring Traveler Medium
classified into 3 categories: 5. Gill Pin 0.072×1 – 5/8”
1) A, Consisting of items with the large investment. 6. G I Screw 1/4×1/2
2) C, with relatively small investments but fairly large 7. PVC Socket 3/4”
number of items. 8. Nylon Clip
3) B, which stands mid-way between cate-gory A & C.
Categories Total No Items in classes Percentage
Category A needs the most rigorous control, C requires A 22 50
minimum attention and B deserves less attention than A but B 14 31.82
more than C. C 8 18.18
Total 44 100
A CLASS (HIGH VALUED ITEMS)
Interpretation:
1. Ball bearing RMS-14 The above table shows the classification of various
2. Bloster for Ring Twist Sceolowell components as A, B & C classes using ABC analysis techniques
3. Faller Bar 11/12 Pin 6 Gill based on unit value. From the classification A classes are those
4. Jukypully 2×4” whose unit value is more than Tk. 100 and constitutes 50% of
5. Lifter bracket 4-3/4 AD total components. B Classes are those whose unit value is
6. Pressing Roller Reem 4-1 / 2×8-1/2” between Tk. 25-100 constitutes 31.82% of total components
7. Top Rail L/R.H (MS) 1st Section Chain Link Type and C Classes are those whose unit value is less than Tk. 25
8. V Belt 3v-1180 (japan) constitutes 18.18% of total components. It is good that the
9. Gun Metal Bar 1-1/2” company maintains its inventories based on its value using
10. Super Enamel Wire # 18 controlling techniques.
11. Super Enamel Wire # 19 I. FSN analysis
12. Super Enamel Wire # 20
All the items in the inventory are not required at the same
13. Super Enamel Wire # 21
frequency. Some are required regularly, some occasionally and
14. Super Enamel Wire # 22
some very rarely. FSN classifies items into Fast moving, slow
15. Super Enamel Wire # 23
moving and Non-moving.
16. Super Enamel Wire # 35
17. Silver Can plate-Bottom 28×40”
F – FAST MOVING ITEMS
18. Film (Wrapping Film)
1. Axle Spindle 4-3/4” AD
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2. Ball Bearing E-15 Ball moves fastly and constitutes 50% of total components. S items
3. Bearing 810 are those which move slowly constitutes 33.33% of total
4. Ball Bearing 6203 components and N items are those which doesn’t move (Non-
5. Ball Bearing 6205 moving items) constitutes 16.67% of total components.
6. Needle Bearing 4900 According to data given, there is no Non-moving item. It is not
7. Paper Spool 10×2-3/4×1-3/4×1-1/8 good as the company maintains low percentage in moving
8. Ring Travallers Medium items.
9. Belooning Spring 3/4×3-3/4
10. Faller Bar 18/19 Pin 4 Gill Sq. Head 1stDrg 9. Findings
11. Faller Bar 26/27 Pin 4 Gill Sq. Head 2ndDrg The following findings are derived from the Sri Murugan
12. Ceramic Runner 3/4×3/4 spinning mill
13. Lenix Belt 7’-6”×5.5” 1. From the above analysis of inventory man-agement it is
14. Nylon delivery Contract 2 Hole 4-3/4 SD found that the company follows a systematic and well
15. Power Grip Belt 300L planned purchasing procedure for each material.
16. Oilet Bush ½”X5/8x5/8” 2. The component of inventory includes raw material,
17. V Belt A-33 working progress, finished goods, packing material and
18. Shuttle Guide Key consumable spares and stores.
19. V Belt A-82 V 3. The major share of total inventory of manufacturing
company comprise of raw material and working progress.
S – SLOW MOVING ITEMS In 2014-15 the percentage of raw material was 44%. It is
decreasing trend in each year, it indicates that there is raw
1. 1st Stripper Staves (SF) 5X47X010.X1-3/16” for T/C material shortage than the previous year.
2. 1st Worker Staves (SF) 5X47X103X1-1/2” for T/C 4. Economic order quantity shows a decreasing trend in case
3. Aluminum arm L/R.H for Roll Former Auto of cotton in 2014-15 economic order quantity was 243
4. Conducts 3rd Drg then it fails into 239 in 2015-16.
5. Ball Bearing LT-21 With Socket 5. In case of polyester in 2014-15 economic order quantity
6. Ball Bearing 6209 was 246 then it raise in to 290 in 2018-19. So it shows an
7. Ball Bearing 6210 increasing trend through the five years.
8. Bevel Pinion (MS) 20TX8DP with Boss B-7/8” 6. Inventory turnover ratio 7.4 in 2014-15, then it increases
9. C I Bevel Pinion 21TX6DPX1 – 5/8” 13 in 2015-16. The highest ratio of inventory turnover
10. Drawing Roller 5-1/2” SD L/H Thread 80 Spindle M/C ratio is 15 in 2014-15. In 2018-19 it reaches 12.2%.
11. Faller Block R/H, L/H Top & Bottom for 2nd Mackie 7. The maximum stock level of cotton material in 2017-18
12. Five Star Pinion (2ndDrg) is 4729, it is the largest material usage in these 5 years.
13. Relive Valve / pin/ Bush The highest reorder level of material is 2017-18 is 635.
14. V Belt CC-254 8. The maximum stock level of polyester materials in 2016-
17 is 5616. It is the largest material usage in these 5 years.
N – NON MOVING ITEMS The highest reorder level of material is 2016-17 is 7740.
1. Arm stud 9. From the classification A classes are those whose unit
2. Ball Bearing 1209 K (Double) value is more than Tk. 100 and constitutes 50% of total
3. Ball Bearing 6001 components. B Classes are those whose unit value is
4. Ball Bearing 606 between Tk. 25-100 constitutes 31.82% of total
5. Ball Bearing 6203 components and C Classes are those whose unit value is
6. Bobbin Rail Plate 4-3/4 AD (Half Round) less than Tk. 25 constitutes 18.18% of total components.
7. C I Fork 4-3/4 AD (Tension Pulley) It is good that the company maintains its inventories based
on its value using controlling techniques
Categories Total no. of items Percentage
F 21 50
10. From the classification F items are those which moves
S 14 33.33 fastly and constitutes 50% of total components. S items
N 7 16.67 are those which move slowly constitutes 33.33% of total
Total 42 100 components and N items are that which doesn’t move
(Non-moving items) constitutes 16.67 of total
Interpretation: components. According to data given, there is no
In the above table shows the classification of various Nonmoving item. It is not good as the company maintains
components as FSN items using FSN analysis techniques based low percentage in moving items. It is not good as the
on movements. From the classification F items are those which company maintains low percentage in fast moving items
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in compared to Slowing moving inventories based on The company inventory management system is based on
movements using controlling techniques. tradition method it is not much effective to the company. Their
inventory controlling systems are manual and traditional as a
10. Suggestion big organization they can’t track inventories properly. If the
1. According to EOQ, as the company does not follow not organization creates a good inventory management system, it
follow EOQ for its purchasing, the company can be will help to in-crease the profitability of the organization
adjusted to order materials. This will reduce the cost & through reducing the unnecessary costs.
help to enhance the profit of the company. A better inventory management system will surely be helpful
2. The company is required to maintain safety stock for its in solving the problems the company is facing with respect to
components in order to avoid stock-out conditions & help inventory and will pave way for reducing the huge investment
in continuous production flow. or blocking of money in inventory. From the analysis we can
3. Under ABC analysis, the management must have more conclude that the company can follow the Economic Order
control on A than B&C, because A class constitutes more Quantity (EOQ) for optimum purchase and it can maintain
(50%) of higher values. There should be tight control safety stock for its components in order to avoid stock-out
exercised on stock levels, to avoid deterioration. This is conditions & help in continuous production flow. This would
done through maintaining low safety stock, continuous reduce the cost and enhance the profit. Also there should be
check on schedules & ordered frequently in inventories, tight control exercised on stock levels based on ABC analysis
in order to avoid over investment of working capital. of maintain high percentage in fast moving items in inventories
4. The company must not go to the Non-moving items as far as per on FSN analysis for efficient running of the inventory.
as possible, because there will be unnecessary blocking of Since the inventory Turnover ratio shows the increasing trend,
working capital. This would hinder the other activities of there will be more demand for the products in the future periods.
the organization. If they could properly implement and follow the norms and
5. The inventory turnover ratio indicates whether investment techniques of inventory management systems, they can enhance
in inventory is within proper limit or not. It also measures the profit with minimum cost.
how quickly inventory is sold. It requires maintaining a
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