inv patiala

8/13/2019 Inv Patiala

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PROJECT REPORT

ON

Inventory management system

CONDUCTED AT:

FEDERAL MOGUL GOETZE (INDIA LIMITED!

"A#ADURGAR#! PATIALA


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CONTENT$

A%&no'e)gement

De%arat*onCert*+*%ate

An Intro),%t*on

$ECTION-A: A "RIEF O.ER.IE/ OF FEDERAL MOGUL

GOETZE (INDIA LIMITED! PATIALA

An Introduction to GILImportant Products

History Milestones

Members of Management Body

A Chronological ie! of product Information

"ocial Acti#ities

Mar$et "hare

"ignificance of Logo

Primary and "econdary %b&ecti#es

ision

MissionImportant Customers

'apanese Practices of ()" %rgani*ational "et up %rgani*ational Chart

$ECTION 0 ": INTRODUCTION TO IN.ENTOR1 MANAGEMENT AND

IN.ENTOR1 MANAGEMENT IN FMGIL

Introduction to In#entory Management

In#entory Management +echni,ues

In#entory Management in -MGIL Categori*ation

Codification

arious procedure adopted for In#entory Management in -MGIL


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$ECTION 0 C: RE$EARC# MET#ODOLOG1

/esearch %b&ecti#es

/esearch Methodology

$ECTION 0 D: CONCLU$ION

$ECTION 0 E: FINDING$ AND $UGGE$TION$

$ECTION 0F: LIMITATION$

$ECTION 0 G: "I"LIOGRAP#1


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AC2NO/LEDEMENT

othing concrete can be achie#ed !ithout optimum combination of inspection and perspiration

Li$e All other studies3 this !or$ is also result of the interaction of a number of minds !ho directly

or Indirectly ha#e contributed for completing this pro&ect

I o!e a lot to many for the inspection partIt is #ery difficult to ac$no!ledge so precious a dept as that of learning as that of learning as it4s

the only debt that is difficult to repay e5pect through gratitude

It is great honor and pri#ilege and pleasure to e5press deep since of gratitude to my pro&ect guide

to placing complete faith and confidence in my ability to carry out this study and for pro#iding me

their inspiration3 encouragement3 help3 #aluable guidance3 constructi#e criticism and constraint

interest

+hey too$ personal interest in spite of their numerous commitment and busy schedule to help me

complete my pro&ect my pro&ect !ould not ha#e seen the light of day !ithout their masterly

guidance and o#er!helming help

It gi#es me tremendous pleasure in ac$no!ledging the #aluable assistance e5tended to me by#arious Personalities in successful completion of this pro&ect report

I than$s all these for helping me in spite of their busy schedules

At last but not least3 I e5tent my heartfelt gratitude to my family and friends help3 cooperation3 6

constant encouragement for successful accomplishment of my pro&ect


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CERTIFICATE 7

+he pro&ect included in the pro&ect outlined I8+%/9 MAAG8M8+ "9"+8M of

-8:8/AL M%G;L G%8+8


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C3a4ter 5

INTRODUCTION:

It is good to ha#e good!ill

It is good to ha#e enthusiasm

But it is essential to ha#e $no!ledge

Pt 'Lehru

+he abo#e ,uoted lines by the great soul Pt'Lehru rightly tell us learning is a #ery necessary

Part in ones life of one !ants to achie#e success 6ha#e proper $no!ledge about a particular

aspect

+hus3 the ob&ecti#e of my pro&ect report !as to get more $no!ledge and to go beyond the boo$ish

that gi#es Merely theoretical $no!ledge and to closely loo$ at the practicality of the modern

industry

+he topic of my pro&ect is 6IN.ENTOR1 MANAGEMENT7!hich !as meant to $no!

+he pro&ect !as carried at -8:8/AL M%GH;L G%8+I:IA? LIMI+8:3 Bahadurgarh3

Aspects of in#entory management li$e In#entory control system3 material planning and

purchasing3 categori*ation of items3 #aluation of In#entory etc

+he first section of the report is company profile3 !hich includes the introduction of organi*ation

Group3 a brief o#er#ie! of -8:8/AL M%GH;L G%8+


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In the se%on) se%t*on3 an introduction to in#entory management is gi#en !hich includes

In#entory control system3 material planning and purchasing3 categori*ation of items3)In#entory

management at -MGIL is been e5plained +he #arious aspects of in#entory management

li$e economic order ,uantity techni,ue3 ABC classification3

In the section)C and :3 research findings are described !hich are used to gather the

necessary information and suggestions regarding different aspects of in#entory management are

included

+he last section of the report section)8 includes Bibliography


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8stablished in 1(03 Goet* >India? Limited >GIL? is &oint enture bet!een the Anil anda group

and -ederal Mogul3 a Global supplier of ,uality products and solutions to automoti#e Industry

Goet* >India? Limited !as established in 1(0as a &oint #enture !ith Goet*e)er$e of Germany

Goet*e)er$e of Germany is no! o!ned by -ederal) Mogul Corporation3 a D=. billion global

company and %ne of the leading manufacturers of automoti#e Components in the !orld

-ederal)Mogul Goet* >India? Limited is the largest Manufacturer of pistons and piston rings in

India

-ederal)Mogul has been creating #alue through inno#ation and leading technology for More than

1EE years +oday3 the company is a $ey player in the global mar$etplace3 "er#ing industries that

range from automoti#e and commercial #ehicles to railroad and Aerospace Customers $no! they

can rely on -ederal)Mogul4s ,uality e5cellence in Products3 trusted brands and creati#e solutions

+his company started !ith a bold idea and o#er time gre! into aFORTUNE (EE

Company !ith a global !or$force thousands strong +he -ederal)Mogul team has Celebrated

countless #ictories and !or$ed hard to o#ercome the ine#itable challenges +he products bas$et

besides pistons and piston rings also includes cylinder liners3 Light alloy castings and other

sintered products

+he company has its plants located at Bangalore >pistons3 piston rings and pins?3 Bhi!adi >sintered

products? +he company Has set up its first unit at Patiala >piston3 rings3 cylinder liners and

castings? and "tarted commercial production in 1(@

GIL has installed production capacity of 11 million pistons and (. million piston /ings


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AC8UI$ITION OF E$CORT$ MA#LE LTD

8scorts Mahler Ltd !as a (E7(E &oint #enture bet!een 8scorts Ltd 6 Mahle GmbH >Mahle?

manufacturing Pistons 6 Piston Pins at Bangalore 6 Patiala Pursuant to the disengagement 6

share purchase agreement among 8scorts Ltd3 Mahle 6 8scorts FMahle Ltd

Mahle had decided to e5it from the &oint #enture 6 sell its entire share holding in 8scorts) Mahle

Ltd Ha#ing decided to e5it from this &oint #enture3 also sold its entire share holding in 8scorts)

Mahle Ltd

In #ie! of the fact that the businesses of the 8scorts)Mahle and Goet* >India? Ltd3 are closely

inter)lin$ed and ha#e ob#ious financial and technical synergies due to common locations of plants3

common customers3 complementary products etc3 it !as considered ad#isable in the interest of

the company to ac,uire the share capital of the 8scorts)Mahle Ltd through the special

purpose #ehicle >1EE subsidiary? +he ne! company named 8"C%/+" PI"+%" L+: cameto e5istence on o#13 2EE2

-urther3 8scorts Pistons Ltd !as amalgamated !ith Goet* >India? Ltd on May 2=3 2EE. and

!ef 'une 2EE.3 the name of the company is G%8+


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Federal-Mogul TPR (India) Limited

-ederal) Mogul +P/ >India? Ltd >-ormerly Goet*e +P >India? Ltd? !as formed in 1@ as a &oint#enture among -ederal)Mogul Goet*e >India? Ltd3 the leading manufacturer of piston rings in India3-ederal)Mogul Corporation and +ei$o$u Piston /ing Co Ltd3 'apan3 one of the largestmanufacturers of piston rings in 'apan +he partnership pro#ides the Indian automobile industry !ithhi)tech steel compression rings and multi)piece oil rings for its ne! generation cars3 0)stro$e bi)!heeler and other high)performance engines +he plant has the capacity to manufacture 100 millionsteel rings per annum

$3are #o)*ng Pattern:

-ederal)Mogul

Goet*e>India?Limited

(1E

-ederal)Mogul ;JIn#estmentsLimited

20(

+P/ Co3Ltd

20(

+he company has a state)of)the)art plant in Bengaluru for manufacturing of

nitrided steel piston rings3 three)piece oil rings3 section steel nitrided oil ringsand other steel rings +hese products !ill be supplemented by a supply of castiron or nodular rings by -ederal)Mogul Goet*e India Ltd to form the completeset

-ederal)Mogul is a global supplier of automoti#e components3 modules and systems ser#ing

the !orldKs original e,uipment manufacturers and the aftermar$et industry +he company

utili*es its engineering and materials e5pertise3 proprietary technology3 manufacturing

s$ill3 distribution fle5ibility and mar$eting po!er to deli#er ,uality products and ser#ices3 and

leading brands -ederal) Mogul is focused on dri#ing global profitable gro!th and creating #alue

to satisfy customer3 employee and sta$eholder e5pectations

Head,uartered in "outhfield3 Michigan3 the Company3 !hich reported sales of D=. billion in

2EE(3 employs 023EEE people !orld!ide -ederal)Mogul !as founded in :etroit in 1 +he

Company4s principal customers include many of the !orld4s foremost original e,uipment

manufacturers of automoti#e3 light commercial3 hea#y)duty truc$3 agricultural3 marine3 rail and

industrial #ehicles and e,uipment as !ell as the !orld!ide aftermar$et


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-ederal)Mogul4s products are sold under a #ariety of po!er brands3 including but not limited to3

A8 engine products3 AC% !ipers3 Champion spar$ plugs and !ipers3 -ell)Pro gas$ets3

-erodo bra$e pads3 Glycol bearings3 Goet* piston rings3 Moog chassis products3 ational

!heel)end components3 eural pistons3 Pain gas$ets3 "ealed Po!er engine products and

agner lighting and bra$e products

Pro),%t*on Ca4a%*ty: P*ston r*ngs 99 M**on

T,rnover:

Net Pro+*t a+ter ta :

P*stons

A4r* ;? M**on

INR (9;9 M**on

P ro),%t Range:

P*stons!

4*ston r*ngs!

%y*n)er *ners!

*g3t aoy %ast*ngs!

s*ntere) 4ro),%ts


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uality Policy

G%8+I:IA? LIMI+8: commits itself to leadership in national mar$et for all its products

and ensuring total customers4 satisfaction highest in industry It commits to de#elop and build an

image in the international mar$et to achie#e a sustained annual gro!th in e5ports

P o * %y

e shall continue to manufacture all our products in conformity !ith accepted international

normsN standards

e shall also continue to retain our leadership in de#elopment of products through technical

$no!)ho! from our Collaborators and in)house de#elopments

Consistent de#elopment of human resources through training at all le#els !ill be our ma&or thrust

area

CODE OF ET#IC$:

EDERAL-MOGUL GOETZE INDIA LIMITED ODE OF ONDUT FOR

DIRETOR! AND !ENIOR MANAGEMENT

I@ Intro),%t*on:

+his Code of Conduct >OCodeO? is applicable to the Board of :irectors of -ederal)MogulGoet*e India Limited >OCompanyO? and all the "enior Management Personnel that is allmembers of the management one le#el belo! the e5ecuti#e director and all functionalheads3 hereinafter referred to as Ospecified employeesO

+he specified employees of the Company ac$no!ledge and accept the scope and e5tent ofour duties e are entrusted !ith the responsibility for the o#ersight of the assets andbusiness affairs of the Company in an honest3 fair3 diligent and ethical manner e mustact !ithin the bounds of the authority conferred upon us and !ith the duty to ma$e andenact informed decisions and policies in the best interests of the Company and itsshareholders +he Board of :irectors has adopted the follo!ing Code of Conduct and all

the specified employees are e5pected to adhere to the standards of loyalty3 good faith3 andthe a#oidance of conflict of interest that follo!s7


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A specified employee !ho has concerns regarding compliance !ith this Code should raisethose concerns !ith the Compliance %fficer that is the Company "ecretary In thee5tremely unli$ely e#ent that a !ai#er of this Code for a specified employee !ould be inthe best interest of the Company3 it must be appro#ed by the Board of :irectors

"pecified employees !ill annually affirm compliance !ith this Code +he Annual /eport

of the Company !ill contain a declaration to this effect signed by the 85ecuti#e :irector

II@ Co)e o+ Con),%t:

>1? A specified employee must act honestly3 in good faith and in the best interests of theCompany as a !hole

>2? A specified employee has a duty to perform the functions of office and e5ercise thepo!ers attached to that office !ith a degree of care and diligence that a reasonable person!ould e5ercise if they !ere in the same circumstances

>.? A specified employee should consider matters ha#ing regard to7

a? Any possible material personal interest he or she may ha#e in the sub&ect

matter

b? +he amount of information appropriate to properly consider the sub&ect matterand

c? hat is in the best interests of the Company

>0? A specified employee must recogni*e that his or her dominant purpose or ob&ect must

be to ser#e the interests of the members of the Company as a !hole3 not the interests of anyparticular group of :irectors3 employees or sta$eholders or the specified employeeKspersonal or commercial interests In circumstances of insol#ency or near insol#ency3 theduty to act in the best interests of members is o#erridden by a duty to act in the bestinterests of creditors

>(? A specified employee must not ma$e improper use of information ac,uired by him togain a personal ad#antage or to cause detriment to the Company

>=? A specified employee must not ta$e improper ad#antage of his position to gain apersonal ad#antage or to cause detriment to the Company

>@? A specified employee must not place himself or herself in a position !here there is a

reasonable possibility of conflict bet!een his or her personal or business interests3 theinterests of any associated person3 or his or her duties to any other company3 on the onehand3 and the interests of the Company or his or her duties to the Company3 on the otherhand +he action !hich a specified employee !ill be re,uired to ta$e if he or she is faced!ith an actual or potential conflict of interest or duties in relation to a particular matterbeing considered by the Company !ill depend on the nature and circumstances of theconflict and may include any of the follo!ing7

a? -ully and fran$ly informing about the circumstances gi#ing rise to the conflict


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MAR2ETING ACTI.IT1:

Mar"eting Net#or"


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ORGANIZATIONAL C#ART

"oar) o+ D*re%torsDes*gnat*on Name

Chairman 6 :irector Mr J "ubramaniam

Managing :irector Mr Andreas Jolf

hole +ime -inance :irector 6 C-% Mr "achin "elot

:irector Mr "unit Japur

:irector Mr Bernhard Motel

:irector Mr Mu$ul Gupta

Cor4orate Lea)ers

Manag*ng D*re%tor Mr Andreas Jolf

/3oe T*me F*nan%e D*re%tor CFO Mr "achin "elot

D*re%tor 0 #,man Reso,r%es Mr Pritpal "ingh Jular

Genera Manager- Cor4orate Lega A++a*rs Com4any

$e%retaryMr Jhalid I Jhan

#ea) - In+ormat*on $ystemsMr arangampuram"reeni#asan

#ea) 0 AE B RD Mr "GP aidu

#ea) 0 Goa P,r%3as*ng Mr Asho$ "inha

#ea) - Or*g*na E,*4@ $aes Mr inod Hans

#ea) 0 AM $aes Mr Madhur Ane&a

#ea) 0 $CM Mr Alo$ Mana$tala


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IMP ORTAN T PR OD UCT $:

P*stons

-or their original e,uipment3 FEDERAL MOGUL Pistons is the first choice of e#ery discerningmanufacturer li$e +elco3 'ohn :eere3 Hindustan Motors3 Mitsubishi Lancer3 +ata Cummins3

Asho$ Leyland3 Mahindra3 8scorts3 8ither3 Maruti3 Ba&a& Auto3 -iat3 Ba&a& +empo3 +"3 9amaha

motors3 "!ara& Ma*da etc

G%8+


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P ro),%t s s,*t ae +or

0 "tro$e 8ngines

2 "tro$e 8ngines

Gasoline 8ngines

R :iesel 8ngines

CG 8ngines

Feat,res

Autothermic

Autothermatic

/ing Carrier N Alfin :ouble CI Groo#es -orged

"teel cap pistons

Pistons !ith cooling coil

+hin alled Pistons for Car

+hin Groo#e pistons


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GOETZE Piston /ings are the first preference of OEMs 6 a+ter mar&et in

India GOETZE has state of the art design facilities for products3 tooling !ith CADPRO-E

and test bed facilities

Goet*e is committed for Inno#ation3 introduction of ne! technology and continuous

impro#ement in its products

Production Capacity7 (. million /ings per annum

/ange7

.Emm to .EEmm :IA

GoetHe man,+a%t,res a '*)e range o+ 4*ston r*ngs +or:

Bi)!heelers

+ractors

Passenger Cars 6 'eeps

Commercial ehicles >HC4s3 MC4s 6 LC4s? Locomoti#e 8ngines

"tationary 8ngines

Industrial +5 +ype 85pander 6 Cr Plated /ails


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Coat*ng on R,nn*ng $,r+a%e

Chrome Ceramic plated rings >CJ"? Molybdenum Coated /ings

Plasma -illed /ings "emi)Inlaid /ings -erro5 -illed /ings Chrome Plated rings Chrome Plated

/ing

$a*ent Feat,res

+hin rings made from "G Iron Asymmetric profile rings "pecially honed chrome rings Lo!er

sharp edge rings /e#erse torsion rings

Conformable Chrome %il /ings

Jeystone

apier

Cy*n)er L*ners

GOETZE manufactures !et and dry types of cylinder liners !ith honing3 and slee#es for bi)

!heeler applications for our ,uality conscious customers

A44*%at*on

Bi)!heelers Cars +ractors

Light Commercial ehicles Hea#y Commercial ehicles "tationary 8ngines

/ange Production Capacity7 (E mm to 12E mm Internal :ia

Production Capacity7 E( million liners per annum


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Feat,res

+hin !ailed

Plateau boned

ith and !ithout flanges

Coat*ng

Phosphating

L*g3t Meta Cast*ng

Goet*e >India? Ltd is ma$ing a !ide #ariety of Light Metal Castings +hese include Cylinder

Bloc$s3 Cylinder Heads3 Aluminum tube castings and Aluminum cro!n handles for singlecylinder engines

$*ntere) Metas Pro),%ts

Goet*e India Limited >"intered Products :i#ision?3 produces a !ide range of sintered metal

products for #aried automoti#e applications such as #al#e3 trains3 transmission and oil pumps !ith

technical assistance from manufacturing facilities and /6: centers of -ederal mogul

sintered products in ;J3 -rance and ;"A

Goet*e >India? Limited >"intered Product :i#ision? are suppliers to most of the %8Ms in India

and abroad "ome of these are7)

Maruti ;dyog Limited


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.ave Tra*n Parts

al#e seat inserts and #al#e guides are a special category of sintered components for ne!

generation engines Goet*e India limited >"intered Product :i#ision? uses latest technology N

processes along !ith specially sourced po!der Little !onder that auto ma&ors manufacturing

engines for #aried applications such as t!oNthree !heelers3 passenger cars3 LC MC4s3 HCand tractors prefer GIL "intered Products

$yn%3ron*Her #,s

"intered "ynchroni*er Hubs offer a #ery cost effecti#e alternati#e to con#entional hubs and at the

same time3 meet the e#er)increasing performance re,uirement of automoti#e designers

O* P,m4 Rotor Gears

"intered %il pump rotor 6 gears are one of the !idest used sintered application in an automoti#e

industries Goet*e India Limited >"intered Products :i#ision? !ith support from -ederal Mogul

"intered Products4 /6: centers has de#eloped its o!n capabilities to design and manufacture oil

pump motors

#I$TOR1 MILE$TONE$

5< Incorporated as a ' !ith GoetHe /er&e

5< /ing 6 liner production Pat*aa

5Automoti#e :i#ision?

>Collaboration7Mahle?

Pat*aa

5; Introduction of %3rome-%eram*% r*ngs

>; +echnical collaboration for pistons !ith Fe)era-Mog, Cor4orat*on

>; Ma&ority sta$eholding ac,uisition by Fe)era-Mog, Cor4orat*on

>;

ame changed OGoet*e >India? LimitedO to OFe)era-Mog, GoetHe (In)*a

L*m*te)O

C#RONOLOGICAL .IE/ OF PRODUCT INTRODUCTION AT GOETZE@

1(0 Piston /ings and Cylinder Liners

1=E Pistons

1=1 Assembly of +ractors

1=2 Motorcycles3 /ail!ays Couplers

1=. Automatic "hoc$ Absorbers

1=( 8scorts +ractors

1= -ord +ractors

1@1 Industrial and Construction 8,uipments

1@ 85ca#ator Loaders

11 9amaha /S)1EE3 1EE CC Motorcycles


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1( 8lectronic PABS

11 Har#ester Combines

12 "A+ "atellite Communication "ystems

1. Mobile Communications

2EE -or$lift +ruc$s


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Com4any MA/J8+ "HA/8 %- PI"+%

MA;-AC+;/8" I I:IA

Com4any Name Ma r&et $3a re (

Goet*e .=(

Perfect Circle 12E

IP /ing 1=(

"hriram Piston 22(

"AMJ/G Piston E

Menon Piston .(

22(

.

(

1

=

(

.=

(

12

Goet*e Perfect

Circle IP /ings "hriram Piston

"AMJ/G PistonMenon Piston


29/81

E P ORT DE $T INAT IO N

:ubai Bangladesh "ingapore 8gypt Mauritius ;"A Germany epal

"ri Lan$a

COLL A"OR ATION $

A G8/MA9 -aun Class

B 'APA 9amaha Jaya$a Mi$ni


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$I G N I F I C AN C E O F L OG O:

+he logo of -ederal Mogul Goet* >India? Limited has been prepared !ith certain ob&ecti#e

in mind and is symbolic in more than one !ay

"o3 o#erall3 the logo represents GIL4s concern for or$manship3 uality and +echnology

Vi si on of t he c om pany

To be one of the worldss leading automotive solutions provider

M* ss* on o+ t3e Com4any

%ur company has committed to increase shareholder #alue by aggressi#ely pursuing gro!th

and profit opportunities by pro#iding irmo#ati#e di#erse and high performance products andsolutions to meet our customers4 needs e shall pro#ide our !or$ force !ith an en#ironment that

de#elops team!or$3 continuous learning and Impro#ements that re!ards good performers e

!all support our products !ith 11 technical e5pertises at the customers end alue the

8n#ironment and the community and !ould lice to build better ftiture for our children-or our

company customer are $ing and our aim is to satisfy the need of the customers In short

6$tea)*y mov*ng to'ar)s ea)ers3*4 '*t3 4*ston '*t3 v*s*on strategy see*ng *t as t3e est

'ay to ea)ers *n ,s*ness7

C ert*+*%at*on s A %3*eve)

+he Patiala and Bangalore Plant are both I"% EE1 I " EEE certified and under I"% I +"

1=0 and I"% 10EE1 certification Bhi!adi Plant is also ha#ing the certification of I"% N +"

Q 1=0NI"% 10EEE certified


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IMPORTANT CU$TOMER$

Asho$ Leyland Ltd Ba&a&AutoLtd

Ba&a& +empo Ltd Birla 9amaha Ltd 8icher Motors Ltd 8lgi 8,uipments Ltd

8scorts Ltd >Auto "uspension :i#ision? 8scorts Ltd >-armtrac :i#ision?

8scorts Ltd >+ractor :i#ision? -ric$ India Ltd

Hero Honda Ltd

Hero Motorcycles 6 "cooter Ltd Hero Motors Ltd

Hindustan Motors Ltd

Honda "eil Po!er Products Ltd Indian /ail!ays

International +ractors Ltd Jinetic 8ngg Ltd

Jinetic Motors India Ltd

Jirlos$ar %il 8ngines Ltd

JAPANE$E PRACTICE OF 69-$7

Goet*e has adopted the 'apanese Practice of (s

+his enables the plant to ha#e better !or$ing conditions and also increase !or$ efficiency A copy

of it also displayed at each shop and depth to moti#ate the employee to!ards healthy !or$

en#ironment

Meaning and benefits of (" system are as follo!s

5@ $EIRI7 It stands for "orting

+a$e out necessary items and suitably dispose !ith them

"ene+*ts:

1 8ffecti#e "pace ;tili*ation

2 "top Material from deteroiting or getting damaged

. /educe !astage and searching items

>@ $EITON7 It stands for "et in %rder


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Arrange all necessary items in a proper order so that they can be easily pic$ed up for use

"ene+*ts:

1 /educe preparation and machine setting and machine setting timings

2 /educe time in locating or !aiting for +ool Parts and Machines

=@$IIE$O7 It stands for "hineNCompletely Clean

Clean your !or$place completely so that there is no dust any!here

"ene+*ts:

1 Promotes %rderly and "afe or$ing 8n#ironment

2 /educes Brea$do!n and Accidents

. "8IJ8+";7 It stands for "tandardi*e

Maintain a high standard of house $eeping and !or$ place organi*ational at all times

"ene+*ts:

1 uic$ /esponse through isual Management

2 Create a maintenance system of House $eeping for all the times

?@ $#IT$U2E: It stands for "elf :iscipline Attitude

+rain People to follo! Good House Jeeping :iscipline Independently

"ene+*ts:

1 "elf :i scipline

2 Impro#es Industrial "afety

. Creates Healthy Attitude and Habits


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A)vantages o+ 9$

Healthy or$ing 8n#ironment

Impro#es or$ 8fficiency

Producting Better uality Products and Higher Producti#ity

Cutting Cost :o!n 8nsuring :eli#ery on time "afe or$ing

High Morale and Better Life

ORGANI$ATION $ET UP

+he organi*ational set up of the follo!ing departments is studied in detail7

1 -inance :epartment

2 Personnel :epartment

. Purchase and "tore :epartment

0 Production :epartment

FINANCE DEPARTMENT

:GM >-inance?3 Patiala !ho is directly responsible to Plant Head >-inance and Accounts?3

one of the most reputed -unctional :epartment in G%8+I:IA? L+: CGM manage the:epartment and under him there are t!o managers3 one is -inance Manager and other is Costing

Manager +he -inance Manager is assisted by t!o super#isors one of these is responsible for cash

and ban$ balances and other is responsible for bills payable 8ach super#isor is gi#en t!o or

three assistants to !or$ under him

+he amount of in#estment to be put in current assets li$e cash in hand3 ban$ balance3 loans and

ad#ances3 in#entories3 accrued e5penses3 di#idends payable etc all are decided by -inance


34/81

:epartment

+he reali*ation of cash for the purpose of ra! materials components and spares to pay !ages and

salaries to incur day to day e5penses and o#erhead costs3 to meet selling costs to pro#ide

credit facilities to customers and to maintain in#entories is also the function of this department

+he formulation of policies !ith regard to profitability ris$ and li,uidity3 decisions aboutcomparison and le#el of current assets and liabilities3 formulation of production policy to $eep the

production steady by accumulating in#entories3 formulation and e5ecution of credit policy is

also the function of -inance :epartment

+his :epartment is responsible for handling transaction relating to purchase of ra! material as

!ell as accounts relating to sales It is also concerned !ith payment of all e5penses incurred by the

company li$e purchase of ra! material3 electricity bills3 repairs etc It is also concerned

!ith #aluation of #arious costs relating to in#entories

It deals !ith determination of monthly !ages3 salaries of employees3 fringe benefits of retirement3

pro#ident funds deduction3 incenti#es3 bonus and all the re!ards3 !hich the employees get

for rendering their ser#ices to the company

Functions of Finance Department

Cas3 Fo':

+he plant is preparing C- statements3 to be con#eyed to H% +hese include sources as !ell asapplication of funds "imilarly applications of funds related to the salary3 payment to suppliers

Ma&or e5penses >li$e 8lectricity3 +elephone Bills3 85cise duty and other personal 6 sales 6

administration e5penses?

Cost*ng:

+he costing is being done for all the products manufactured at the plant +hese relate to Piston3

/ing3 Cylinder Liners and Light Alloy Products +he Historical base is being follo!ed for costing

purposes

Cons,m4t*on:

8#ery item being recei#ed in the plant for consumption Input is being accounted for at the plant

+he ledgers are maintained for e#ery receipt and issue


35/81

PER$ONNEL DEPARTMENT

Personnel department ad#ises the management on all matters relating to personnel administration

+he top management ta$es into account its ad#ice before arri#ing at final decisions on personnel

and administrati#e matters Personnel Policies in G%8+I:IA? LIMI+8: ha#e beendi#ided into three parts7

a P8/"%8L -;C+I%" to encourage the adoption and utili*ation of latest

methods and techni,ues in areas of manpo!er planning and de#elopment and $eeping a#enues of

promotion open to employees

b

P/%I"I% %- C%MM;ICA+I%3 +/AIIG A:

8L-A/8 M8A";/8"3 8MPL%988 C%MM;ICA+I% so that employees contributes their

best to company4s ob&ecti#es and also get opportunities for ad#ancement and self)de#elopment

c I:;"+/IAL /8LA+I%" bet!een employer and employee so as to promote

satisfactory relations by pro#iding channels for up!ard and do!n!ard communication and

establishing systematic procedure for redress

PUR#CA$E AND $TORE DEPARTMENT

Purchase and "tore are t!o :epartments3 !hich go hand in hand It is #ery essential that there

should be proper synchroni*ation bet!een Purchase :epartment and "tore :epartment

In G%8+I:IA? LIMI+8:3 the main responsibility of Purchase :epartment is to recei#e

orders from other :epartments3 do the mar$et sur#ey3 list the potential sellers and the rates3 choose

the best and go ahead !ith purchase +he purchase order is placed only !ith appro#ed

contractors +he Purchase :epartment scrutini*e the follo!ing aspects7

a? uality and +echnical specifications b? :eli#ery

c? Prices

%nce the purchase order has been placed3 it is sent to stores !here the store gets ready to

recei#e the incoming material hen the material is recei#ed3 a notification is sent to the -inance

:epartment "tores deal !ith an array of material3 !hich can be di#ided into7

a? /a! materials b? Components

c? "tandard items or patent items d? Miscellaneous items


36/81

PRODUCTION DEPARTMENT

+he :epartment is responsible for production of #arious items fi5ed on basis of production

budget3 !hich includes7

a? /a! material budget b? Labor budget

c? Plant utili*ation budget


37/81

In#entory management

IN T RODUC T ION T O TOPIC:

IN.ENTOR1 MANAGEMENT

In#entory management refers to the process of managing the stoc$s of finished products3 "emi)finished products and ra! materials by a firm In#entory management3 if done Properly3 can bring

do!n costs and increase the re#enue of a firm Ho! much one should In#est in in#entory

managementT +he ans!er to this ,uestion depends on the #olume and alue of in#entory as a

percentage of the total assets of a firm

In#entory Management in#ol#es the control of assets being produced for

the purposes of sale in the normal course of the

companyKs operations +he goal of effecti#e in#entory management is to

minimi*e the total costs ) direct and indirect ) that are associated !ith holding

in#entories Ho!e#er3 the importanceof in#entory management to the company depends upon the e5tent of

in#estment in in#entory

+he tas$ of in#entory planning can be highly comple5 in manufacturing en#ironments At the

same time3 it rests on fundamental principles +he system used for in#entory must tie into the

operations of the firm In#entory planning and management must be responsi#e to the needs of the

firm +he firm should design systems3 including reports that allo! it to ma$e proper business

decisions

+he In#entory Management system and the In#entory Control Process pro#ides information to

8fficiently manage the +o' o+ mater*as effecti#ely ,t**He 4eo4e an) e,*4ment!

%oor)*nate*nterna a%t*v*t*es! an) %omm,n*%ate '*t3 %,stomers In#entory Management and

the acti#ities of In#entory Control do not ma$e decisions or manage operations they

pro#ide the information to Managers !ho ma$e more a%%,rate an) t*mey decisions to manage

their operations

+he basic building bloc$s for the In#entory Management system and In#entory Control acti#ities

are7

$aes Fore%ast*ng or :emand Management

$aes an) O4erat*ons Planning

Pro),%t*on Planning

Mater*a Re,*rements Planning


38/81


39/81


40/81


Q U 8 F

here

; U Annual usage

U uantity ordered

- U -i5ed cost per order

+he total carrying costs U A#erage le#el of in#entory 5 Price per unit 5 Carrying cost

REORDER POINT FORMULA

%ne can adopt a much simpler formula !hich gi#es reasonably reliable results in calculating at

!hat point in the le#el of in#entory a reorder has to be placed for replenishment of stoc$ +he

formula along !ith its application is gi#en belo!3 using the notation de#eloped earlier

Reor)er 4o*nt $ L B F ( $ R L

here

" U ;sage in units

L U Lead time in days

/ U A#erage number of units per order

- U "toc$ out acceptance factor

+he stoc$)out acceptance factor3 V-K3 depends on the stoc$)out percentage rate specified and the

probability distribution of usage >!hich is assumed to follo! a Poisson distribution? -or any

specified acceptable stoc$out percentage the #alue of V-K can be obtained from the figure presented

belo!

$TOC2-LE.EL $U"$1$TEM

+his stoc$ le#el subsystem $eeps trac$ of the goods held by the firm3 the issuance of goods3 and

the arri#al of orders It maintains records of the current le#el of in#entory -or any period of time3the current le#el is calculated by ta$ing the beginning in#entory3 adding the in#entory recei#ed3

and subtracting the cost of goods sold hene#er this subsystem reports that an

item is at or belo! the reorder)point le#el3 the firm !ill begin to place an order for the

item

$AFET1 $TOC2


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In#entory management%nce again in real life situations one rarely comes across lead times and usage rates that are

$no!n !ith certainty hen usage rate andNor lead time #ary3 then the reorder le#el should

naturally be at a le#el high enough to cater to the production needs during the procurement period

and also to

pro#ide some measure of safety for at least partially neutrali*ing the degree of uncertainty

+he ,uestion !ill naturally arise as to the magnitude of safety stoc$ +here is no specific ans!er to

this ,uestion

Ho!e#er3 it depends3 inter alia3 upon the degree of uncertainty surrounding the usage rate and

lead)time It is possible to a certain e5tent to ,uantify the #alues that usage rate and lead)time can

ta$e along !ith the corresponding chances of occurrence3 $no!n as probabilities +hese

probabilities can be ascertained based on pre#ious e5periences andNor the &udgmental ability of

astute e5ecuti#es Based on the abo#e #alues and estimates of stoc$)out costs and carrying costs of

in#entory it is possible to !or$ out the total cost associated !ith different le#els of safety stoc$

2anan

Another highly effecti#e !ay of cutting do!n on IP is through the use of $anban3 'apanese for

sign Janban is a tagging system that is essentially a communication system designed to inform

production across the entire plant about !hat to do and !hen to do it 8ssentially this is a system

that tells people !hen to produce !hat

A"C Pro%e),re +or Categor*H*ng o+ Inventory

+he general procedure for categori*ation of items into VAK3 VBK and VCK groups is briefly outlined

belo!7

R All the items of in#entory are to be ran$ed in the descending order of their annual usage #alue

R +he cumulati#e totals of annual usage #alues of these items along !ith their percentages to

the total annual usage #alue are to be noted alongside

R +he cumulati#e percentage of items to the total number of items is also to be recorded in another

column

R An appro5imate categori*ation of items into A3 B3 and C groups can be made by comparing the

cumulati#e percentage of items !ith the cumulati#e percentage of the corresponding usage #alues


42/81


43/81


M/P systems are practical for smaller firms +he computer system is only one part of the total

pro&ect !hich is usuallylong)term3 ta$ing one to three years to de#elop

!ust"in"time *nventorymanagementis an approach !hich !or$s to eliminate in#entories rather

than optimi*e them

+he *nventoryof ra! materials and !or$)in)process falls to that needed in a single day +his is

accomplished by reducing set)up times and lead times so that small lots may be ordered "uppliers

may ha#e to ma$e se#eral deli#eries a day or mo#e close to the user plants to support this plan

$UCCE$$FUL IN.ENTOR1 MANAGEMENT

"uccessful *nventorymanagementin#ol#es balancing the costs of *nventory!ith the benefits of

*nventory Many small business o!ners fail to appreciate fully the true costs of carrying

*nventory3 !hich include not only direct costs of storage3 insurance and ta5es3 but also the cost of

money tied up in *nventory +his fine line bet!een $eeping too much

*nventoryand not enough is not the managerKs only concern %thers include7 Cost of /unning out

of Goods7

+hese are costs associated !ith the inability to pro#ide materials to the production

department and N or inability to pro#ide finished goods to the mar$eting department as there,uisite in#entories are not a#ailable In other !ords3 the re,uisite items ha#e run out of

stoc$ for !ant of timely replenishment +hese costs ha#e both ,uantitati#e and ,ualitati#e

dimensions +hese are3 in the case of ra! materials3 the loss of production due to stoppage

of !or$3 the uneconomical prices associated !ith VcashK purchases and the set)up costs3

!hich can be ,uantified in monetary terms !ith a reasonable degree of precision

As a conse,uence of this3 the production department may not be able to reach its target in

pro#iding finished goods for sale Its cost has ,ualitati#e dimensions as discussed belo!7

hen mar$eting personnel are unable to honor their commitment to the customers in ma$ing

finished goods a#ailable for sale3 the sale may be lost +his can be ,uantified to a certain

e5tent Ho!e#er3 the erosion of the good customer relations and the conse,uent damage

done to the image and good !ill of the company fall into the ,ualitati#e dimension and elude

,uantification


44/81

In#entory management8#en if the stoc$)out cost cannot be fully ,uantified3 a reasonable measure based on the loss

of sales for !ant of finished goods in#entory can be used !ith the understanding that the

amount so measured cannot capture the ,ualitati#e aspects

T#E PURC#A$ING PLAN

%ne of the most important aspects of *nventorycontrol is to ha#e the items in stoc$ at the moment

they are needed

+his includes going into the mar$et to buy the goods early enough to ensure deli#ery at the proper

time +hus3 buying re,uires ad#ance planning to determine *nventoryneeds for each time period

and then ma$ing the commitments !ithout procrastination

-or retailers3 planning ahead is #ery crucial "ince they offer ne! items for sale months before theactual calendar date for the beginning of the ne! season3 it is imperati#e that buying plans be

formulated early enough to allo! for intelligent buying !ithout any last minute panic purchases

+he main reason for this early offering for sale of ne! itemsis that the retailer regards the calendar

date for the beginning of the ne! season as the merchandise date for the end of the old season -or

e5ample3 many retailers #ie! March 21 as the end of the spring season3 'une 21 as the end of

summer and :ecember 21 as the end of !inter

Part of your purchasing plan must include accounting for the depletion of the *nventory Before a

decision can be made as to the le#el of *nventoryto order3 you must determine ho! long the

*nventoryyou ha#e in stoc$ !ill last

-or instance3 a retail firm must formulate a plan to ensure the sale of the greatest number of units

Li$e!ise3 a manufacturing business must formulate a plan to ensure enough *nventoryis on hand

for production of a finished product

#O/ TO CONTROLL 1OUR IN.ENTOR1

+o maintain an in)stoc$ position of !anted items and to dispose of un!anted items3 it is necessary

to establish ade,uate controls o#er *nventoryon order and *nventoryin stoc$ +here are se#eral

pro#en methods for *nventorycontrol +heyare listed belo!3 from simplest to most comple5


45/81

In#entory managementVisual control enables the manager to e5amine the *nventory#isually to determine if additional

*nventoryis re,uired In #ery small businesses !here this method is used3 records may not be

needed at all or only for slo! mo#ing or e5pensi#e items

Tickler controlenables the manager to physically count a small portion of the *nventoryeach day

so that each segment of the *nventoryis counted e#ery so many days on a regular basis

Click sheet controlenables the manager to record the item as it is used on a sheet of paper "uch

information is then used for reorder purposes

Stu control>used by retailers? enables the manager to retain a portion of the price tic$et !hen the

item is sold +he manager can then use the stub to record the item that !as soldAs a business gro!s3 it may find a need for a more sophisticated and technical form of *nventory

control +oday3 the use of computer systems to control *nventoryis far more feasible for small

business than e#er before3 both through the !idespread e5istence of computer ser#ice

organi*ations and the decreasing cost of small)si*ed computers %ften the &ustification for such a

computer)based system is enhanced by the fact that company accounting and billing procedures

can also be handled on the computer

#oint"of"sale terminals relay information on each item used or sold +he manager recei#es

information printouts at regular inter#als for re#ie! and action

Off"line point"of"sale terminals relay information directly to the supplierKs computer !ho uses the

information to ship additional items automatically to the buyerN*nventorymanager

+he final method for *nventory control is done by an outside agency A manufacturerKs

representati#e #isits the large retailer on a scheduled basis3 ta$es the stoc$ count and !rites the

reorder ;n!anted merchandise is remo#ed from stoc$ and returned to the manufacturer through a

predetermined3 authori*ed procedure

A principal goal for many of the methods described abo#e is to determine the minimum possible

annual cost of ordering and stoc$ing each item +!o ma&or control #alues are used7 1? the order

,uantity3 that is3 the si*e and fre,uency of orders and 2? the reorder point3 that is3 the minimum

stoc$ le#el at !hich additional ,uantities are ordered +he 8conomic %rder uantity >8%?

formula is one !idely used method of computing the minimum annual cost for ordering and

stoc$ing each item +he 8% computation ta$es into account the cost of placing an order3 the


46/81

In#entory managementannual sales rate3 the unit cost3 and the cost of carrying *nventory Many boo$s on management

practices describe the 8% model in detail

TIP$ FOR "ETTER IN.ENTOR1 MANAGEMENT

At time of deli#ery erify count )) Ma$e sure you are recei#ing as many cartons as are listed on

the deli#ery receipt

Carefully e5amine each carton for #isible damage )) If damage is #isible3 note it on the deli#ery

receipt and ha#e the dri#er sign your copy

After deli#ery3 immediately open all cartons and inspect for merchandise damage

hen damage is disco#ered

/etain damaged items )) All damaged materials must be held at the point recei#ed

Call carrier to report damage and re,uest inspection

Confirm call in !riting))+his is not mandatory but it is one !ay to protect yourself

Carrier inspection of damaged items Ha#e all damaged items in the recei#ing area )) Ma$e certain

the damaged items ha#e not mo#ed from the recei#ing area prior to inspection by carrier

After carrierNinspector prepares damage report3 carefully read before signing

After inspection Jeep damaged materials )) :amaged materials should not be used or disposed of

!ithout permission by the carrier

:o not return damaged items !ithout !ritten authori*ation from shipperNsupplier


47/81


IN.ENTOR1 MANAGEMENT IN FEDERAL MOGUL GOETZE INDIA LTD

ABC Analysis is being used to manage the in#entories A category items contain high #alue items

and important material directly lin$ed !ith production It includes one product ie CIM"+A/

MB=2C B Category includes items3 !hich are directly lin$ed !ith production but are ha#ing

less #alue than items It includes three products ie "8/% "9"+8M = H9P"I 8P)=3

Cutting oil3 Arc light Category C includes items products such as mobile oil3 $erosene oil3

po!er oil3 ser#o system 1213 ser#o C;"3 ,uenching oil3 pre#enting oil etcIn stores computers are being used to store ma5imum3 minimum3 re)order le#els of each item

/ecently the firm has started using 'I+ techni,ue

+he purchases of -MGIL are centrali*ed and authority lies !ith the purchase department

Ma&or purchase is done by head office but local purchase is also for certain items

Procedure of ac,uiring in#entories starts !ith the receipt of material hen the material

reaches the main gate it needs to be inspected and only after inspection of in#oices materials is

sent to the store department +hen the material is inspected and is appro#ed or re&ected as the case

may be

MATERIAL PLANNING AND PURC#A$ING

Purchasing in -MGIL is centrali*ed and authority lies !ith purchase department o body is

allo!ed to ma$e purchase himself3 directly -or purchasing purpose a meeting is held at held

office in !hich planning is done on basis of last year4s consumption After the ra! material

planning has been made3 purchase is done by the head office itself and planning report is sent to

sub)offices Although ma&or purchase is done by head office but local purchase can also be done

for certain items

+he items3 !hich can be locally purchased3 are di#ided into t!o types7)


48/81


+9P8 W04 +98 W(4

>Locally purchasable? >Head office purchase stoc$ items?

-or local purchase as !ell as for head office purchase le#els ha#e been fi5ed as7)

RECEIPT OF MATERIAL

As the material reaches the main gate of the factory3 security person puts stamp on bac$side of

in#oice or challan After this the material reaches the "tore department

IN$PECTION OF MATERIAL

%nce the material has been recei#ed by store then it is the duty of either inspection department or

store department to inspect the material Here it is chec$ed out that the material is according to

specification and the material ,uantity is neither greater nor lesser in number then the order placed

if it is according to specification3 then GI/ is accepted

According to the type of material3 either physical #erification is done or composition of

material recei#ed is chec$ed out In physical #erification3 the ,uantity of material3 the !or$ing

order to material and specification fulfillment is ta$en into account eg for electronic goods -or

chec$ing composition of the material eg in case of alloy or sand it is seen out3 !hether the

recei#ed material has proper composition as per re,uirements of the company

I$$UE OF MATERIAL

In -MGIL the material is issued for t!o purposes7)

1 :irect purpose 7 for manufacturing of components

2 Indirect 7 generally in the nature of store and spares3 tools etc


49/81

In#entory management"tore department has t!o types of items7)

1 "toc$

2 on)stoc$

+he material as$ed by #arious departments can either be stoc$ items or non)stoc$ items If a

department has to as$ for stoc$ items it prepares material indents form of the items re,uired in

!hich description of material is thoroughly pro#ided -our copies of indents are prepared F

Blue3 /ed3 9ello! and hite

+he department $eeps !hite copy3 itself for record and other three copies are sent to store

department here3 /ed copy is $ept by store for record purposes Blue copy is sent to -inance

:epartment for e#aluation !hile 9ello! copy is sent to Purchase department

If the material is being purchased for first time3 then purchase department3 as$s for ,uotationsfrom the supplier According to these ,uotations3 the purchase department Purchase the material

If it is routine material3 then the material can be purchased from routine supplier !ithout

,uotations "toc$ items re,uired by #arious departments from the store are issued as such and no

yello! copy is sent to purchase department but both red and yello! copy are $ept by store

department itself hile blue copy is definitely sent to finance department for e#aluation of stoc$

item

CLA$$IFICATION$ OF IN.ENTOR1

-MGIL in#entory can be classified under follo!ing three main categories7)

1 /a! material

2 or$ in progress

. -inished goods

+he ra! material in#entory can be further classified and maintained under follo!ing t!o

headings7)

1 "tores and spares

2 +ools3 &igs and dies


50/81


CATEGORI$ATION OF ITEM$

In -MGIL categori*ation of items is done according to the follo!ing categories7)

5@ A"C CLA$$IFICATION

;nder this system items are classified according to their #alue and usage rate An item consists of

items ha#ing ma5imum #alue but minimum consumption B items consist of items of

moderate #alue and moderate consumption C item consists of items ha#ing minimum #alue and

ma5imum consumption

ITEM NO@ OF ITEM$ IN AGE APPROIMATE

A 5; ;

" >; >;C ; 5;

>@ 1Z CLA$$IFICATION

+his classification is based on the #alue of in#entory at the end of a gi#en period of time3 normally

closing date of a financial year S items are those !hose in#entory #alue is high3 9 items are those

!hose in#entory #alue is medium and < items are those !hose in#entory #alue is lo! or

minimum

=@ $DE CLA$$IFICATION ($%ar%e! D*++*%,t an) Easy Cass*+*%at*on

+his classification is based on the problems that a company may face !hile purchasing of the

material from the mar$et due to short supply or una#ailability "carce items are those3 !hich are in

short supply in the mar$et and are not easily a#ailable :ifficult items may be termed as those3

!hich are not scarce but are difficult to arrange and deli#ery period is long 8asy items are normal

standard items stored by #endors and are routinely supplied as per orders

?@ GOLF CLA$$IFICATION (Govt@! O4en! Lo%a! Fore*gn Cass*+*%at*on

+his classification is based on the source from !hich the suppliers are to be a#ailed "ome of

the items may be go#ernment controlled or a#ailable through go#ernment)canali*ed agencies

"ome items are easily a#ailable at central and local le#el and some items may be imported from

other countries

9@ F$N CLA$$IFICATION


51/81

In#entory management+his classification is based on the pattern of mo#ement of items ie issue from stores -ast

mo#ing3 slo! mo#ing and non)mo#ing items -ast mo#ing items are regular items and are to be

$ept mostly for regular supply

CODIFICATION OF ITEM$

In -MGIL there are many items of in#entory3 due to such large number3 codes ha#e been assigned

to e#ery item Ho!e#er code assigned to e#ery item follo!s a specification order3 so that easy

identification of e#ery item can be done 8mphasis on codification is considered #ery much

essential in -MGIL

( /A MA+8/IAL

( -%;:A/9 -L;S8"3 %IL" A: L;B/ICA+"

( PACJIG MA+8/IAL"

( G/I:IGNAB/A"I8 MA+8/IAL"( :/ILL

( C;++8/

( CA/BI:8 +%%L"

( M"""NB/A""NPH%"PH%/%;" MA+8/IAL"

= B8A/IG

= )BL+

= CIIL A: PIP8 -I++IG MA+8/IAL

= /;BB8/ A: A8H8: P/%:;C+"

= ;+"3 B%L+"3 A"H8/" 6 "PAC8/"

= HA:NI"P8C+I% +%%L"

= 8L:IG A: -I/8 -IGH+IG MA+8/IAL= 8L-A/8 I+8M"

= CA"+IG" A: -AB/ICA+%/"

. AR IOU $ PR OC EDURE$ AD OPT ED F OR IN.ENT OR1MANAGE MENT

IN F MGIL

PROCEDURE FOR CONTINUOU$ IMPRO.EMENT

%b&ecti#e7)

+o define procedure for continuous impro#ement "cope7) "tores /esponsibility

Head "tores

"uper#isor "tores


52/81

In#entory managementPro%e),re:-

1? Continuous impro#ement is adopted across the board in stories

2? "uitable areas of continuous impro#ement and techni,ues shall be identified by Head

"tores and listed do!n in continuous Impro#ement Plan Head stores shall prioriti*e pro&ects

and appropriate actions shall be initiated

.? Impro#ementNde#elopment obser#ed in one area is suitably adopted in other areas

0? Impro#ement acti#ities shall be managed by using follo!ing steps7)

i :eciding ob&ecti#es for impro#ement

ii +eam information

iii Action identification

i# "ystem implementation3 #erification3 documentation and training

(? +he progress on continuous impro#ement pro&ects shall be re#ie!ed during

Management /e#ie! Meeting +he continuous impro#ement plan shall be re#ie!ed and updated3

if necessary

=? /esults of #arious functional continuous impro#ement acti#ities shall be communicated and

displayed in respecti#e areas

Re+eren%es:-

Continuous Impro#ement Plan

Management /e#ie! /eport

PROCEDURE FOR INTRA-DEPARTMENT TRAN$FER

%b&ecti#e7)+o define the procedure for intra)plant transfer

"cope7) Items as per initial material list for purchase Patiala Plant and initial materialist for Head

%ffice materials

/esponsibility7) Chief Head %ffice materials Head Incoming material Head Laboratory

Head "tores

Head Purchase)Patiala Plant

Head ;ser :epartment


53/81


Pro%e),re:-

1? -or re,uisition of materials from other plants3 a re,uest for itnra)plant transfer is sent in the

format /e,uest for "toc$ +ransfer

2? %n receipt of material the inspection of stoc$ transferred material is done as per

procedure for inspection and +esting of Incoming Material and the Patent Materials are inspected

as per procedure for inspection of Patent Materials

.? It is the material re,uired by other plants3 depending upon the a#ailability of stoc$3

raising :ispatch Ad#ice cum Performa In#oice for Mod#at Material or :ispatch Ad#ice cum

Performa In#oice for stoc$ transfer transfers the item in stoc$

Re+eren%es:-

Procedure for inspection of patent material Initial material list for purchase)Patiala Plant :ispatchAd#ice cum Performa for Mod#at Material /e,uest for stoc$ transfer

Procedure for Inspection and +esting of incoming material

IN.ENTOR1 ACCOUNTING AND .ALUATION ANAL1$I$


54/81


IN.ENTOR1 TURNO.ER RATIO

In#entory turno#er ratio indicates the number of times the stoc$ has been turn o#er during the

period and e#aluates the efficiency !ith !hich a firm is able to manage its in#entory

Inventory T,rnover Rat*o In#entoryage"toc$NA#erClosing

soldGoodsof"alesNCost

In GIL

In#entory +urno#er /atio U "alesNClosing "toc$

IN.ENTOR1 CON.ER$ION PERIOD

In#entory con#ersion period indicates time ta$en for clearing the stoc$ as it measures the #elocity

of con#ersion of stoc$ management of in#entory because more fre,uent the stoc$s are sold the less

amount of money is re,uired to finance the in#entory and #ice)#ersa

Inventory Convers*on Per*o) /atio+urno#erIn#entory

:aysor$ing%fo

ACCOUNTING AND .ALUATION OF IN.ENTOR1

I8+%/9 A" A P8/C8+AG8 %- C;//8+ A""8+"

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9

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>< >; =5 >= >?


55/81

In#entory management-rom the abo#e data it can be analy*ed that out of total in#estments in current assets

appro5imately 2( is in#ested in the in#entory in 2E11) 2E12 +he reason behind this is that

the company is a manufacturing unit +here has been a fluctuation in percentage of in#entory of

total current assets from 2EE@) 2EE In#entory amounted to =(. in 2EE@)2EE3 then increased

to ( in 2EE)2EE3 = in 2EEE) 2E1E3 and @= in 2E11 Hence it is crucial for -MGIL to

ensure proper in#entory management in the organi*ation

$AP

To)ay %om4an*es are %ont*n,ay %3aenge) to *n%rease t3e veo%*ty an) trans4aren%y o+

t3e*r s,44y net'or&s $AP an Inter-net-ase) so+t'are t3at +,+*s t3ese nee)s!

g*v*ng,s*ness an) *ts s,44y-net'or&4artners easy an) seamessa%%ess to *nventory *n+or-

mat*on@

-ortunately one can a#oid many of those problems !ith the$AP +he $APis Internet based and

is designed to help enhance #isibility3 collaborate more effec)ti#ely !ith suppliers3 and increase

the o#erall speed3 accuracy3and adapti#eness of supply net!or$ $AP3lets an organi*ation and its

supply net!or$ partners share*nventoryinformation easily and seamlessly

It gi#es supply net!or$ partners a central3 secure#ehicle for collaborating and responding to

changes in demandBased on the e5change infrastructure platform3 the $APallo!s to share

information and trac$ and audit the full range of transactions and communica)tions !ith suppliers

F all #ia the Internet

And !ith its open3scalable design3 it can be implemented as a stand)alone solution3 or ,uic$ly andeasily integrated !ith "AP Business "uite

"AP is designed to let an organi*ation)

In%,)e a '*)e range o+ s,44*ers *n net'or&

Use aerts to en3an%e res4ons*veness@

Eas*y s3are *nventory *n+ormat*on '*t3 4ann*ngan) transa%t*on systems@

De*ver targete) *n+ormat*on to s,44y %3a*n 4artners@

A%3*eve ra4*) res,ts

ith increased #isibility3 partners across the supply net!or$ can collaborate around *nventory

information to dri#e a rangeof business benefits

-or e5ample3 the solution can help to cut costs through

A reduction in ra!)material *nventorybuffers

Lo!er unplanned o#ertime as !ell as costs for setup and brea$do!n

Lo!er premium freight costs >e5pediting?


56/81

In#entory management "AP enables users to manage all the items purchased3 manufactured3 sold3 or $ept in stoc$

"er#ices can also be defined as items3 although they are rele#ant only for sales

-or each item3 users enter the data rele#ant for a particular area in the system +his data is used

automatically by the system for purchasing3 sales3 production3 in#entory management3 and

accounting

It Pro#ides optimum support for business processes Helps create orders3 deli#ery notes3 and

outgoing in#oices3 automatically calculating prices3 sales units3 and gross profit 8nables complete

control o#er stoc$ ,uantities at all times and lets users analy*e the financial aspects of

stoc$holding at the same time Allo!s users to control production on the basis of the items that are

used for production and on the basis of the finished product and any by)products created

+he follo!ing ,s*ness goas an) oe%t*vescan be achie#ed through the implementation of "AP

in in#entory7

Im4rov*ng C,stomer $erv*%e

In%rease $4ee) E++*%*en%yLo'er*ng /or&*ng Ca4*ta

Re),%*ng O4erat*ng Costs In%reas*ng E++*%*en%y

+he follo!ing in#entory reports are a#ailable in "AP 7

Items L*st) 8nables the user to generate a partialNfull list of the items defined

in "AP Business %ne3 according to selection criteria defined by the user

Last Pr*%es Re4ort) "ho!s the last purchasing and sales prices of an item;sers can generate the report in general or for a specific business partner

+his report is a#ailable directly from the "alesNPurchasing documents

Ina%t*ve Items ) :isplays the items that according to the userKs selection

criteria are inacti#e -or e5ample3 an item !hich is not mentioned in a deli#ery

for the last si5 months

Item 8,ery) :isplays specific details about a selected item

Inventory Post*ng L*st y Item ) enables the user to hide transactions that

affect the cost of the items3 but ha#e no impact on their ,uantities

Inventory stat,s ) :isplays the committed3 ordered3 in stoc$ and a#ailable

,uantities of the selected items

Inventory *n /are3o,se Re4ort) :isplays the balance of the selected items

in the selected !arehouses or selected locations

Inventory A,)*t Re4ort ) pro#ides an audit trail and information regarding

the source of the posted in#entory transactions in the chart of accounts hen a

user generates this report3 a comparison bet!een the accounting #ie! >stoc$

balance accounts? and logistics #ie! >stoc$ #alues displayed by the audit


57/81

In#entory managementreport? can be made to obtain information regarding #alue changes in in#entory

accounts

"tarting from "AP Business %ne 2EE( A "PE13 !hen printing the report3 it is

possible to print the also selection criteria on a separate page

Inventory .a,at*on Re4ort) 8nables the user to #aluate allNpart of the

in#entory items in allNsome !arehouses or locations to a selected date3according to selected calculation method If the company manages a non)

perpetual in#entory system3 this report ta$es the price assigned to items in the

ANP In#oice into consideration !hen the ANP In#oice is based on a Goods

/eceipt P% "tarting from "AP Business %ne 2EE( A "PE13 !hen printing the

report3 it is possible to print the also selection criteria on a separate page

$er*a N,mers Transa%t*ons Re4ort) 8nables the user to generate a report

!hich lists the transactions related to the selected range of serial numbers

"at%3 N,mer Transa%t*ons Re4ort) 8nables the user to generate a report!hich lists the transactions related to the selected range of batch numbers

"AP arehouse Management allo!s you to manage your material flo!3 using ad#anced puta!ay

and pic$ing strategies In the standard system3 these strategies for puta!ay include random

puta!ay >ne5t empty bin?3 bul$ storage3 fi5ed bin3 or addition to stoc$ +he pic$ing strategies

include standard strategies first)in first)out >-I-%?3 last)in first)out >LI-%?3 pic$ing by shelf life

e5piration date >"L8:? 3or partial ,uantities first -or customer)specific strategies3 solutions can be

self)defined in user e5its

"AP In#entory Management manages the stoc$s of a company in ,uantities and #alues It is

integrated !ith supply chain accounting3 and is responsible for goods receipts3 goods issues and

managing different stoc$ categories >such as a#ailable3 bloc$ed stoc$ and in ,uality assurance?

and special stoc$s >including consignment stoc$ and pro&ect stoc$? "AP In#entory Management

pro#ides a compact o#er#ie! of stoc$s in the supply chain

B88-I+" %- "AP

85pand your business and customer base !ith eb)based C/M and e)commerce

capabilities A complete customer #ie! across sales3 distribution3 and financials helps you

unco#er ne! !ays to ser#e your customers faster and better

+a$e proacti#e control of your business through automatic alerts3 !or$flo!s3 and

response to $ey business e#ents and customer needs Get out of the reacti#e3 time)consuming

Ofire drillsO

"treamline your operations by seamlessly integrating $ey business processes such as

sales3 purchasing3 in#entory3 and financials together F out)of)the)bo53 eliminating redundant


58/81


data entries and errors

Adaptable to your changing needs !ith easy)to)use customi*ation tools to tailor "AP

Business %ne to fit your specific business needs and indi#idual user preferences

Implement a solution you can count on !ith "AP "AP Business %ne is offered by

"AP3 the !orldKs leader in business soft!are solutions3 and deli#ered by a global net!or$ of

certified partners that pro#ide local customer ser#ice and support


59/81


RE$EARC# MET#ODOLOG1

+his part of the report ie /esearch Methodology is intended to gi#e the details of the conecptual

frame!or$ !ithin !hich the study has been carried out +his section co#ers the follo!ing aspects7

A %b&ecti#es of the "tudy

B /esearch Methodology

A: Oe%t*ves o+ t3e st,)y

1 +o $no! the functioning of the in#entories and understand the system of procurement of

material 3 its receipt 3 inspection and its issuing

2 +o understand the accounting and #aluation of ra! material 3 !or$)in) progress and finished

goods

. +o analy*e the in#entory control techni,ues used by company and their techni,ues

0 +o study the performance of the company in relation to in#entories and thus pro#ide

suggestions if any on the basis of analysis and interpretataion of the data

" : Resear%3 Met3o)oogy

+he methodology used for the collection of data is of secondary type !hich is being e5plained

here 7)

$ECONDAR1 DATA

It is mainly based upon annual reports 3 maga*ines 3 office reports and #arious published

documents of -8:8/AL M%G;L G%8+ie financial year 2EE@)2E12? 3 then compiled and


60/81

In#entory managementthereafter statistical analysis of the information has been done3 thereafter #arious ratios relating to

the in#entories has been calculated and tables sho!ing #ariation in the in#entories for fi#e years

ha#e been made


61/81

$/OT ANAL1$I$

Pre#ious years !ere challenging !ith the company4s business constrained by unfa#orable

economic conditions +he slo! do!n in the industrial production3 in particular in the automobile

industry3 had an ad#erse impact on the company4s business

W"4 ) "+/8G+H"

W4 ) 8AJ8""8"

W%4 ) %PP%/+;I+I8"

W+4 ) +H/8A+"

5@ $TRENGT#$

+he ma&or strength of the company is that it is !ell established +he relationship bet!een

management and employees is #ery good3 as in agreement bet!een management and employees

!as signed on March 2E1E :ue to this agreement there is no fear of stri$es and loc$outs in the

company

-e! competitors

Profit ma$ing and reputed firm

A#ailability of s$illed and cheap labour

+echnical efficiency

%perating efficiency

>@ /EA2NE$$E$

+he ma&or !ea$ness of the plant is that it does not ha#e Mar$eting :epartment and it has to

depend totally on Head %fficer for mar$eting acti#ities

Lo! return of capital employed

Problem of timely a#ailability of ra! material

-acing some infrastructure problems


62/81


63/81

FINDING$

After carrying out in depth study of the system and procedure of in#entory management being

follo!ed at -MGIL

It has been found that in spite of high in#entory le#els so much care is ta$en off +here has

been a tremendous increase in the in#entory le#els

o consideration is gi#en to maintain ma5imum and minimum le#els of in#entory 8conomic%rder uantity >8%? system is not follo!ed properly Among ABC class items no special care

has been ta$e of B and C class items although in absolute #alue the amount to crores of

in#estments Crores of in#estment is becoming slo! mo#ing e#ery year3 !hich is turn is

becoming non)mo#ing !hose in#estment is already #ery high

But a good thing is found in the form of MI" reports prepared on regular basis by -inance

:epartment to manage in#entory le#el and re#ie! of slo! and non mo#ing items by all concerned

agencies

+he contract !ith suppliers for supply of ra! material is decided in ad#ance at the beginning of

the year 6 factory recei#es material at that #ery price all throughout the year

%nly ma5imum 6 re)order le#els are maintained o !eightage is gi#en to minimum le#el due to

introduction of sap pac$age

A" far as pricing of in#entory is concerned company uses !eighted a#erage cost method

In this !ay company does not ha#e to face any loss Nprofit out of mar$et price fluctuations

+he #arious items in ra! material are stored at different locations instead of one central location

according to suitability of their use near to the respecti#e departments But same are controlled >ie

recei#ed3recorded 6issued? from one central location that is from main gernal store


64/81

As 6 !hen material is recei#ed in store 3 the same is being gi#en sap code as !ell as material code

and these codes are decided in the company itself !hene#er ne! stoc$ or ,uantity of any item

is receic#ed the same is being gi#en respecti#e material 6 sap code

/e Forder le#el is being calculated in the firm by $eeping ma5imum le#el as a base

6 applying of formula ma5 le#elYma5 lead time

+he lead time is based on the distance bet!een the sending 6 recei#ing sports

More is the distance grater is the lead time far as company4s current figures are concerned I ha#e

company4s last year figure dated !hich sho!s that last year company has follo!ing stoc$s

a#ailable !ith it

Inventor*es

>alued at lo!er of cost and net reali*able #alue?

/a! materials and components 2310=@E 230..E>including "toc$ in transit /s .1=E. lacs >Pre#ious 9ear7 /s =(2.lacs??

or$)in)progress 032E@ 03.(=2-inished goods (3.=.E 032.(2.

+raded goods =2E. 0E.1

"tores and spares including "toc$ in transit /s 0(. lacs >Pre#ious 9ear7 /s 120( lacs??

Loose tools =;@K> (((.

/eusable scrap >=@9= 2.E1

Tota 5=!=?K@;9 1.32E1=

DETAIL$ OF IN.ENTOR1

Ra' mater*a an) %om4onentsPig iron >;@K= 001Alloys 95@59 .=.2Chromic acid @ ..EE"teel strips ?@9 111(Pin steel K>9@? (=.(@"ilicon 5;@< 1.2Magnesium @ .=ic$el 5=@> 121


65/81

Iron po!der 59@K5 .10@"teel po!der 2=Copper po!der =;@!> 1.E.al#e train >K5@;5 .E10"tructural components >;;@;>@9? .0@E2al#e train K>@< 1=@"tructural components >9@=; 2011Miscellaneous ?;K@;? 1@12(

9!=K=@;< 032.(2.

Tra)e) Goo)s

Bra$e pads 59@59 1.Hea#y duty KK@K; (=E(CB 9@?= )8ngine bearings >;9@?; 2E=ECoolant 5;@>9 1E.E"par$ plugs 5=5@;; (12@Liners K@5< 0=8ngine #al#es >@=; )ipers 59@?5 2@(EPistons K=@9 )Miscellaneous >@;@= 0E.1


66/81

INTERPRETATION:

1 :o these policies and procedures support internal controlT

0

10

20

30

40

50

60

70

80

YES NO CAN'T SAY

YES

NO

CAN'T SAY

A%%@ To t3e s,rvey )one ? res4on)ents re4*e) yes! 5 res4on)ents sa*) No an)

res4on)ents sa*) %ant sa*) @


67/81

2)/3*%3 te%3n*,es ,se) y yo,r organ*Hat*on to %ontro t3e *nventoryS

0

10

20

30

40

50

60

70

EOQ STOCK

LEVEL

EOQ

REORDER POINTSTOCK LEVEL

A%%@ To t3e s,rvey K> res4on)ents say t3e %om4any ,se EO8 Te%3n*,e@ >5 say t3ey ,se

reor)er 4o*nt '3ereas ony 5 say t3ey ,se sto%& eve te%3n*,e@


68/81

=-/3*%3 met3o)s are ,se) y yo,r organ*Hat*on +or *nventory managementS

0

10

2030

40

50

60

70

FIFO LIFO WT.

AVG

COST

3D C!"#$% 1

As 4er t3e s,rvey %on),%te) t3e res4onses are as +oo':

K res4on)ents say t3e*r %om4any em4oy FIFO met3o)! '3ereas 5= say t3ey em4oy LIFO

MET#OD an) 5


69/81


70/81

()Inventory t,rnover rat*on o+ yo,r organ*Hat*onS

0

10

20

30

40

50

60

()"!* 10 (+* 10

15

,(!-) 15

()"!* 10

(+* 10 15

,(!-) 15

Most o+ t3e res4on)ents *@e@ 9? ans'er t3at t,rnover rat*o *s aove 59@ /3ereas ony =? an) 55

ans'ere) t3at *t *es et'een 5;- 59 an) eo' 5; res4@


71/81

K-Does management mon*tor an) a44rove t3e 'r*te-o++s o+ osoete an) *na%t*ve *nventor*esS

0

10

20

3040

50

60

70

80

YES NO CAN'T

SAY

YESNO

CAN'T SAY

A%%@ To ,est*on as& to t3e res4on)ents < res4on)ents sa*) 1es ! 55 res4on)ents sa*) No

an) rest >; o+ t3e res4on)ents %ant ae to s3are t3e v*e's@


72/81

@? Is your organi*ation adopt 8% model for in#entory management or control properlyT

0

5

10

15

20

25

3035

40

45

)/ %! ,%' /,

)/

%!

,%' /,

A%%@ To s,rvey ?5 o+ res4on)ents say yes to t3e +oo'*ng te%3n*,e@ ?> res4on)ents 3a) sa*)

No to te%3n*,e an) 5 %an ae to s3are t3e*r v*e's to t3e +oo'*ng s,rvey @


73/81

? Ho! your organi*ation maintain the le#el of in#entoryT

0

5

10

15

20

25

30

3540

/,/,,! ))"")%

/,/,,!

%!% /,/,!

))"")%

A%%@ To res4onse +rom t3e res4on)ents ),r*ng t3*s s,rvey = res4on)ents +ee sat*s+a%tory ! >9

res4on)ents sa*) non sat*s+a%tory an) aso = res4on)ents t3ey sa*) e%eent as 4er t3e*r

o4*n*on @


74/81

? Convers*on 4er*o) o+ *nventoryS

0

10

20

30

4050

60

70

80

0

(+*

20 30

(+*

30 40

,(!-)

40

(+* 20 30

(+* 30 40

,(!-) 40

A%%@ To s,rvey )one on t3e %onvers*on 4er*o) o+ *nventory = o+ t3e res4on)ents s3are ' >;-

=;! 55 o+ %oeag,es 3a) re4*e) ' =;-?;@an) rest ony K o+ t3e res4on)ents 3a) re4*e)

aove ?;@


75/81

5; :oes management re#ie! the reconciliation of physical in#entory counts to the in#entory recordsT

0

10

20

30

40

50

60

70

80

.)/ %! N+A

.)/%!

N+A

A%%@ To s,rvey )one y me K res4on)ents are say*ng 1es ! >? 3a) sa*) No an) rest 5; %ant res4on) to t3e ,est*on @


76/81

$UGGE$TION$

X +he company employs #ery crude methods of in#entory management3 !hich in#ol#es high

manual labour and high ordering cost

X Proper information should be a#ailable for need of components for #arious assemblies at

#arious stages If this analysis can be carried out by !ay of P8/+ and CPM techni,ues the deli#ery

schedules can staggered accordingly and lot of re#enue can be generated by !ay of sa#ing on account of

less in#entory holdings and sa#ing in in#entory carrying costs

Company should use ABC techni,ue for in#entory

X +he company should ha#e independent material engineering department or material)planningdepartment3 !hich should plan about material re,uirement3 purchases3 planning of production

X +he company should form realistic production programmed and there should not be fre,uent

changes in the same and it must be ensured that programs are made a#ailable !ell in time to all

concerned authorities along !ith data !ise se,uence of production

"uppliers should be sent schedules in time especially for critical and a class items for purchase

X Comparison data of in#entory le#el should be made a#ailable to different departments and they

should be encouraged to bring impro#ements so that in#entory le#els of company are made higher

than competitors

"till better co)ordination should be there bet!een stores3 -inance :epartment and

Purchase :epartment to ensure better control o#er in#entory

X A large part of the assets of company are tried up in this loan and ad#anced and it should

try to reduce its in#estments in this and should pool it in the capital in#estments

X It should try to promote its sales by starting their o!n mar$eting programmed at large

scale and face more competition

X "tandardi*ation of tools can help to eliminate reluctant in#entories through reduction inin#entory le#els3 !hich are increasing due to fre,uent changes in models of pistons etc

X Problems of past should be $ept under consideration and in#entory holding norms of !ell

established items should be thoroughly recei#ed3 !hile fi5ing the ne! in#entory norms

+heoretically maintained le#els should also be follo!ed practically to stop in#entory

crossing +his !ill ma$e reduction in in#entory le#els possible


77/81


78/81


L*m*tat*ons o+ t3e st,)y

8#ery pro&ect has its o!n limitations +he purpose of mentioning is to help readers form a more

accurate interpretation of the results Present study is sub&ect to the follo!ing limitations !hich

!ould be ta$en into consideration

5 @ LAC2 OF CONFIDENTIAL DATA:

+he company does not pro#ide some of the information confidential to the management +hus

constraints in a#ailability of information resources came in !ay to learn more and thus in better

compilation of pro&ect report

> @ LIMITED TIME:

Although the staff of -MGIL !as highly co)operati#e and de#oted enough of its #aluable time on

me but because of their busy schedules3 I feel I !as unable to gain complete $no!ledge -urther

more3 time alloted for the study !as limited to si5 !ee$s Both of these became the limiting

factors to get thoroughly familiar !ith entire organisation acti#ities

= @ LAC2 OF COMPARATI.E DATA FOR INTERFIRM COMPARI$ON:

Interfirm comparison of -MGIL !ith other companies has not been done due to non a#ailability ofdata regarding other enterprises in the same field


79/81


"I"LIOGRAP#1

INTERNET /E"$ITE$:

Fo,n)at*ona 'or&

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T3eor*es

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