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IntroductionIt deals with manufacturing of agricultural tractorsas well as supply of tractor spare partsIt has a central store at Bangalore and 8 branchesin KarnatakaIt maintains inventories of spare parts, both ofindigenous and imported modelsPurchase of spare parts is made centrally &distributed to branchesSales are made both at the centre & branches

Magi Corporation

7/31/2019 0NEW MAGI


Jayadev took over as manager of the spare partsdivision.In his opinion company is following the oldmethods but he want to introduce modernmethods(procedure improvement, inventorycontrol, forecasting techniques & computerization)

Magi Corporation

7/31/2019 0NEW MAGI


Existing SystemAt each branch there is one sales assistant andone helper, where transactions are more thenumber of the helpers will be two.In case of shortage of an item, the store keeper

makes an indent passes it on to the purchasesection, which prepares 5 copies of the purchaseorder. After the signature from the manager theyare distributed to the concerned departments.The transaction between central store & branchesis controlled through a stock transfer note(STN)which is prepared in quadruplicate every time atransaction is made.

Magi Corporation

7/31/2019 0NEW MAGI


Organization Chart for MagiManager

Purchase & Sales Engineer

Stores Assistant Purchase Assistant

SalesCounter

OutwardStation

StoreKeeper

StoresAccountant

Magi Corporation

7/31/2019 0NEW MAGI


In case of bulk sales cash bill treated as ‘invoice’ or ‘debit note’, when the bulk sale is to Govt. a ‘debit note’is used, otherwise ‘invoice’ is used In case of outside private parties a ‘delivery note’ is

usedThe branch sent information in the form cash bill, tallysheet, bank deposit notes in every weekTally sheets were prepared for cross checking

Cash bill gives the details of quantity soldMoney received will be deposited in banks every day

Magi Corporation

7/31/2019 0NEW MAGI


Inventory ControlProcedures

The organization keeps store ledger & bin card atcentral storeThe store keeper enters quantity issued in bin card& day to day status is known from these bin cards.Copies of cash bill are used by account dept. fordocumentationIn case of shortage of inventory, store attainderinforms store assistant for necessary actions,

judgment is based on his experience

Magi Corporation

7/31/2019 0NEW MAGI


Jayadev introduce a consultant - Mohan, anengineer with MBA

To bring down inventory costTo suggest whether it is feasible to computerize theinformation system

Mohan’s recommendation: Procedural improvementInventory controlForecasting and Computerization

Magi Corporation

7/31/2019 0NEW MAGI


Procedural ImprovementMohan recommended for a new sales engineer forbetter controlIntroduction of store assistant

Clerical work could be reducedPurchase order copies are reduced

Magi Corporation

7/31/2019 0NEW MAGI


7/31/2019 0NEW MAGI


Distribution of percentage number ofitems and percentage value of

consumptionGroup

NumberConsumptio

n valuerange (Rs.)

Number ofitems

Total valueof

Consumption (Rs.)

PercentNo. of Items

Percentvalue of

consumption

1 0 to 2000 456 144154.03 80 9

22001

to10000

85 373363.24 15 22.5

3. Above10000

28 1136574.3 5 68.5

Magi Corporation

7/31/2019 0NEW MAGI


Example

Nozzle-B item – lead time for procurement = 2months

Review period length = 2 monthsEOQ = 50 unitsAnnual usage = 300 units

Max. demand during lead time = 175 units

safety stock = 175 units

Magi Corporation

7/31/2019 0NEW MAGI


• The average usage during the lead timeis given as follows:

300 x 2Vd/2 = ---------------- = 25

12 x 2

Maximum Level = 175 + 50 – 25 = 200

• Hence, when the review is done, if the available inventory is less than175, place an order to bring it to a level of 200 (taking intoconsideration the inventory in hand and on order. )

Magi Corporation

7/31/2019 0NEW MAGI


Forecasting TechniquesFor total material planning some forecastingtechniques (based on seasonality index/ no. oftractor per year/ both)Mohan suggested two approaches based on

The number of tractors covered by MagiThe seasonal variation of sales.

Magi Corporation

7/31/2019 0NEW MAGI


Feasibility ofComputerization

From the purchase order data, purchase orderoutput is producedUsing transactions tape, it shows the ledger forthe period & inventory status of each itemUpdated master tape is used to generate storage& re-order listForecasting technique can be used for future stockplanningGives total financial details

Magi Corporation

7/31/2019 0NEW MAGI


Q.How do you evaluate the recommendation

of Mohan in respect of inventory control of A andB items? Do you agree with his views? If notwhy? Has he overlooked any vital aspect ofinventory management?

Magi Corporation

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Q.Do you agree with the view of manager

Dev regarding policies? If you were asked tosuggest policy measures what would you do?How would you use the information available?

Magi Corporation

7/31/2019 0NEW MAGI


Q.Comment on the computerization scheme

proposed. If instead of a punched card system amodern desktop system were used, how couldyou have handled the computerization? Supportyour answer with revised system flowcharts.

Magi Corporation

7/31/2019 0NEW MAGI


ISSUES RECEIPTS PURCHASE

FORCASTINGTECHNIQUE

CHECK LISTRUN

USAGE LISTSTORE LEDGER

FINANCIALREPORT

7/31/2019 0NEW MAGI


Thank You...

Magi Corporation

0new magi

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