ABSTRACT

ABC Analysis is an inventory categorization technique used to classify and

prioritize inventory items in an effort to better allocate business resources. “A”

items are defined as the inventory items considered extremely important to the

business, requiring strict oversight and control. “B” items are important to the

business, but don’t require the tight controls and oversight required of the “A”

items. “C” items are marginally important to the business. ABC Analysis aims to

ensure the business-driving inventory items are effectively and efficiently

managed. There are numerous single- and multiple-criteria approaches to

implementing ABC Analysis

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CHAPTER 1
INTRODUCTION

INTRODUCTION

Inventory control is vitally important to almost every type of business, whether

product or service oriented. Inventory control touches almost every facets if

operations. A proper balance must be struck to maintain proper inventory with the

minimum financial impact on the customer. Inventory control is the activities that

maintain stock keeping items at desired levels. In manufacturing since the focus is

on physical product, inventory control focus on material control. “Inventory”

means physical stock of goods, which is kept in hands for smooth and efficient

running of future affairs of an organization at the minimum cost of funds blocked

in inventories. The fundamental reason for carrying inventory is that it is

physically impossible and economically impractical for each stock item to arrive

exactly where it is needed, exactly when it is needed. Inventory management is the

integrated functioning of an organization dealing with supply of materials and

allied activities in order to achieve the maximum co-ordination and optimum

expenditure on materials. Inventory control is the most important function of

inventory management and it forms the nerve center in any inventory management

organization. An Inventory Management System is an essential element in an

2
organization. It is comprised of a series of processes, which provide an assessment

of the organization’s inventory.

As the cost of logistics increases the manufacturers are looking to inventory

management as a way to control costs. Inventory is a term used to describe unsold

goods held for sale or raw materials awaiting manufacture. These items may be on

the shelves of a store, in the backroom or in a warehouse mile away from the point

of sale. In the case of manufacturing, they are typically kept at the factory. Any

goods needed to keep things running beyond the next few hours are considered

inventory.

"Inventory" to many small business owners is one of the more visible and tangible

aspects of doing business. Raw materials, goods in process and finished goods all

represent various forms of inventory. Each type represents money tied up until the

inventory leaves the company as purchased products. Likewise, merchandise

stocks in a retail store contribute to profits only when their sale puts money into the

cash register.

In a literal sense, inventory refers to stocks of anything necessary to do business.

These stocks represent a large portion of the business investment and must be well

managed in order to maximize profits. In fact, many small businesses cannot

3
absorb the types of losses arising from poor inventory management. Unless

inventories are controlled, they are unreliable, inefficient and costly.

Inventory management simply means the methods you use to organize, store and

replace inventory, to keep an adequate supply of goods while minimizing costs.

Each location where goods are kept will require different methods of inventory

management. Keeping an inventory, or stock of goods, is a necessity in retail.

Customers often prefer to physically touch what they are considering purchasing,

so you must have items on hand. In addition, most customers prefer to have it now,

rather than wait for something to be ordered from a distributor. Every minute that

is spent down because the supply of raw materials was interrupted costs the

company unplanned expenses.

Procurement is the acquisition of appropriate goods and/or services at the best

possible total cost of ownership to meet the needs of the purchaser in terms of

quality and quantity, time, and location. Corporations and public bodies often

define processes intended to promote fair and open competition for their business

while minimizing exposure to fraud and collusion Based on the consumption

purposes of the acquired goods and services, procurement activities are often split

into two distinct categories. The first category being direct, production-related

procurement and the second being indirect, non-production-related procurement.

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Direct procurement occurs in manufacturing settings only. It encompasses all items

that are part of finished products, such as raw material, components and parts.

Direct procurement, which is the focus in supply chain management, directly

affects the production process of manufacturing firms. In contrast, indirect

procurement activities concern “operating resources” that a company purchases to

enable its operations. It comprises a wide variety of goods and services, from

standardized low value items like office supplies and machine lubricants to

complex and costly products and services like heavy equipment and consulting

services.

Introduction to Inventory

Inventories constitute the most significant part of current assets of a large majority

of companies in India. On an average, inventories are approximately 60% of

current assets in public limited companies in India. Because of the large size of

inventories maintained by firms, a considerable amount of feuds is required to be

committed to them. It is therefore, absolutely imperative to ménage inventories

efficiently and efficiently in order to avoid unnecessary investment. A firm

neglecting the management of inventories will be jeopardizing its long run

profitability and may fail ultimately. It is possible for fore a company to reduce its

levels of inventories to a considerable degree e.g. 10 to 20 percent, without any

adverse effect on production and sales, by using simple inventory planning and
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control techniques. The reduction in excessive inventory carries a favorable impact

on a company’s profitability.

The primary concern of inventory management is to maintain raw material and

finished goods inventories at levels that are not too low as to result in lost sales or

costly production delays or too high as to tie up capital and space. Such a tie-up of

capital can lead to excessive borrowing, unnecessary interest expense, and inability

to purchase other more necessary items. The value of the inventory is the cost of

acquiring those goods and services. Inventories in manufacturing and service

businesses can take three different forms as follows:

Raw Materials: Any materials purchased for use in production. The value of raw

materials inventory is the cost of acquiring it.

Work-in-Process: Products or services on which production is underway but is

not yet complete. The value of work-in-process inventory includes the cost of

purchased materials, production labour, and production-related overhead required

to bring them to their actual steps of completion when the inventory is evaluated.

Finished Goods: Completed products or services that are available for immediate

sale to customers. The value of finished goods inventory includes the cost of

purchased materials, production labour, and overhead related to production.

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MEANING OF INVENTORY:-

Inventory is the physical stoke of goods maintained in an organization for its

smooth sunning. In accounting language it may mean stock of finished goods only.

In a manufacturing concern, it may include raw materials, work-in-progress and

stores etc. In the form of materials or supplies to be consumed in the production

process or in the rendering of services.

FINISHED GOODS:-

Finished goods inventories are those completely manufactured products which are

ready for sale. Stock of raw materials and work in progress facilitate production.

While stock of finished goods is required for smooth marketing operation. Thus,

inventories serve as a link between the production and consumption of goods.

The levels of four kinds of inventories for a firm depend on the nature of its

business. A manufacturing firm will have substantially high levels of all three

kinds of inventories, while a retail or wholesale firm will have a very high and no

raw material and work in progress inventories. Within manufacturing firms, there

will be differences. Large heavy engineering companies produce long production

cycle products, therefore they carry large inventories. On the other hand,

inventories of a consumer product company will not be large, because of short

production cycle and fast turn over.

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INVENTORY MANAGEMENT

As the cost of logistics increases the manufacturers are looking to inventory

management as a way to control costs. Inventory is a term used to describe unsold

goods held for sale or raw materials awaiting manufacture. These items may be on

the shelves of a store, in the backroom or in a warehouse mile away from the point

of sale. In the case of manufacturing, they are typically kept at the factory. Any

goods needed to keep things running beyond the next few hours are considered

inventory.

"Inventory" to many small business owners is one of the more visible and tangible

aspects of doing business. Raw materials, goods in process and finished goods all

represent various forms of inventory. Each type represents money tied up until the

inventory leaves the company as purchased products. Likewise, merchandise

stocks in a retail store contribute to profits only when their sale puts money into the

cash register.

In a literal sense, inventory refers to stocks of anything necessary to do business.

These stocks represent a large portion of the business investment and must be well

managed in order to maximize profits. In fact, many small businesses cannot

absorb the types of losses arising from poor inventory management. Unless

inventories are controlled, they are unreliable, inefficient and costly. Inventory

8
management simply means the methods you use to organize, store and replace

inventory, to keep an adequate supply of goods while minimizing costs. Each

location where goods are kept will require different methods of inventory

management. Keeping an inventory, or stock of goods, is a necessity in retail.

Customers often prefer to physically touch what they are considering purchasing,

so you must have items on hand. In addition, most customers prefer to have it now,

rather than wait for something to be ordered from a distributor. Every minute that

is spent down because the supply of raw materials was interrupted costs the

company unplanned expenses

OBJECTIVE:-

 Understand business requirements Identify opportunities where the

procurement team adds true value

 To develop Strong relationship with internal customer by understanding

there requirement.

 To meet the customer requirement timely, effectively, efficiently, smoothly

and satisfactorily.
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 To smoothen the production process.

 To meet the time lag for transportation of goods.

 To minimize losses due to deterioration, obsolescence, damage, pilferage

etc.

 To balance the stock out cost/opportunity cost due to loss of sales against the
costs of inventory.

 To study about the ordering levels for the important components of

inventory.

 To understand and measure economic order quantity for the selected raw
material items.

 To analyze its inventory management methods with the help of ABC

analysis.

 To evaluate the inventory management practices of Thermox Polymers

LIMITED.

 To offer suitable suggestions for the improvement of inventory

management practices.

SCOPE OF THE STUDY

Inventory management is a simple concept-don’t have too much stock and don’t

have too little. Since there can be a substantial costs involved in staying above and

below the optimal range, careful inventory management can make a huge

difference in the right balance can be quite a complex and time consuming task

without the right technology.

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Inventory management is very important for “THERMOX POLYMERS”, it

enables the business to meet or exceed expectations of the customers by making

the products readily available/

The scope of the study includes the ABC Analysis of Raw Materials, work in

progress and finished goods for four financial years. This study provides insight to

the management of high value items and also brings attention of management

towards movement of ‘A’ class items over period of 4 years.

LIMITATIONS OF THE STUDY

 Detail study about all the material was not possible because of time limit.

 Some of the information was kept confidential by the stories department.

 Study was confined only to the selected components in the stores

department.

Need of Study:-

 To deliver top quality goods

 To achieve best value, value for money and continuous improvement;

 To get the smooth flow in manufacturing by fulfilling the requirement of

raw material

STATEMENT OF PROBLEM

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The current system in the company under inventory management system which

doesn’t specify the safety stock which leads to scare for stocks at emergency. The

data are not properly updated at the end of each day’s work. Proper data security

system is not provided. Annual maintenance contract is not provided. Records are

not maintained properly

CHAPTER 2

COMPANY PROFILE

Established in 2005 in the automotive industrial hub of Chennai, Thermox

Polymers Ltd today is a world class manufacturer of Moulded and Extruded

Rubber & Plastic parts for Automotive OEM around the globe. All the TPL plants

are certified and meet the most stringent quality norms set by its diverse range of

customers. Apart from supplying to automotive majors in India.

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TPL has a unique capability to process rubber parts in all grades like NR, NBR,

SBR, EPDM, Silicon, Viton, Neoprene, Chloroprene, HNBR, Fluoro, Isoprene,

Hipline, etc., and plastic parts in grades like PP (Polypropylen), PVC

(Polyvinylchloride), TPE (Thermoplastic rubber), PA 66, PA66 + Glass Fibre,

POM (Polyoxymethylen), Santoprene, Desmopan, etc. It therefore offers a 'one

stop shop' engineering solutions to all the customers through its expertise in

designing, development, tooling, moulding, extrusion, assembly, painting, testing

and delivery capabilities across the globe. Backed by its technical capabilities and

highly enthusiastic workforce, TPL today has become a supplier of choice for the

Indian Automotive industry.

Mission/Vision Statement

To be an innovative, profitable and a preferred Automotive organization by

creating the right environment for our most valuable asset-the human capital while

continuously striving to reduce our carbon footprint and proactively engage our

self in CSR activities.

Corporate Social Responsibility

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As a truly global organization, it strives to maintain a strong ethical background.

All its plants are smoke free, zero pollution hubs, thereby contributing to a greener

environment. The company actively undertakes social welfare programs to support

its employees as well as the hublot replica community like tree plantation week,

Blood donation camps, charity programs etc. The company has set a target of

devoting 500 man-hours to CSR activities.

Thermox Polymers Mfg. Co. is one of the leading polymers Manufacturers in India

having ISO 9001 Certification. We have experience of over more than 28 years in

Design, Development and Manufacturing of polymers Manufacturing Co. caters

the need of Machine Tools, Blowers and Fans, Air- Conditioners, Compressors,

Material Handling Equipment, Rubbers and Hoist, Textile Machinery, Cement

Plant, Pharmaceutical Machinery, Packaging Machinery, Construction Equipment,

General Engineering Applications and wide range of Applications.

Rubber & Plastic Extrusion

The in-house co-extrusion lines for extruding EPDM profiles are equipped with

Glass beads and microwave hot air curing system with or without metal inserts and

flocking. The company has recently introduced PVC Co-Extrusion line with

facilities for Slicing, Cutting, Printing, Taping, Notching, Punching, Drilling etc. It

has achieved competence in the manufacturing of single & twin layer fuel tubes

with the capability to produce the most complicated shapes in all sizes.
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TPL is equipped with latest Horizontal Plastic Injection Moulded machines

ranging from 90T to 400 Tonnes. This is supported by various other Post Moulding

operations like Ultrasonic Plastic Welding Machines and ABS and Sheet Metal 3K

system Paint Shop etc. In a quest to further augment its product offering, TPL

keeps upgrading itself to bigger tonal machines.

The group has deployed advanced Microprocessor controlled Desma Rubber

Injection Moulding machines of upto 250 Tonnes. Depending upon the nature of

the product, machines are run on fully automated processes right from compound

feeding to product removal from the moulds.

Thermox Polymers has an automatic centralized rubber compounding setup

facilitated to achieve maximum productivity, precision quality and consistency of

the rubber compound .This has been integrated with a high-tech automated

intermix system with facilities for automatic chemical weighing, auto oil

dispersion, batch off unit, sieving and cutting. This ensures consistency in the

compound properties, optimal productivity and gives a mixing capacity of more

than 1000 tons of rubber compound per month.

Establishing, strengthening and sustaining the development of a strong company

not only means deploying resources, expertise and know how, but also great

determination and confidence in the future. Through all these years of intensive

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activity and quick expansions, the action towards common goal to stand out as a

strong, consistent group, constantly striving for improvement have driven Thermox

polymers to attain and achieve a leading position in the Indian polymers industry.

Thermox polymers, an ISO 9001:2000 company is the leading polymers

Manufacturer in India with a proven track record of over three decades. Thermox

group is set to achieve sales turnover of Rupees 22 million

Mission Statement

We will be the leading Indian producer of Premium Quality Thermox polymer

catering to domestic and international markets, by establishing and maintaining the

growth rate of 20% every year.

Quality Policy

 We are committed to the Design and Manufacture of Premium Quality

polymers at a competitive price.

 We will always ensure that our Customer requirements are determined and

met effectively so that we will have continual quality improvements in all

our products and services.

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 To we will achieve this by regularly reviewing our QMS and continually

improving upon the effectiveness of QMS.

Thermox Polymers derives its strength from its customers. The growth of the latter

is a prerequisite to the growth of the company and hence customers’ satisfaction is

its prime objective. In an ongoing process to improve Customer Satisfaction

Thermox Polymers offers a variety of services:

 Competitive prices.

 Consistent quality.

 Just in time delivery.

 Product development for a changing market.

 A targeted stocking policy.

 Technical Support for Applications/ Projects

Thermox Polymers has highly experienced qualified and dedicated professionals

with strong adherence to the quality management system.

Thermox Polymers has offices all over the country and also has a wide network of

authorized Distributors, dealers and service centre to cater to all the customer

segments in India and abroad.

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Thermox Polymers has earned the trust and reputation in India and abroad by

winning the customers’ confidence. Millions of Motors have been manufactured

and are in operation in India and abroad.

Thermox brand polymers are preferred choice in OEM, Heavy Industries, Cooling

Tower Application, and various diverse application and industries. The Titans of

Indian Industry & Consultants / Specifiers are now referring Thermox

Polymers for most critical and specific applications.

OBJECTIVES:

 Maintain smooth and uninterrupted supply of products by keeping adequate

inventories and stocks; to ensure product availability in all markets.

 Optimize utilization of existing infrastructure and operate at installed

capacities to maximize production and enhance efficiency.

 Shore up man power skills and technical expertise aimed at self – reliance

implementation of expansion programs and diversification of plans.

 To consolidates and sustain growth by developing suitable structure,

inducting monitoring system for cost effectiveness and exercising controls at

levels for effective functioning

INHERENT STRENGTHS:
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 Survived through turbulent times of industry.

 Polymers Standard compliance quality products.

 Strong core technical team and low employee turnover.

 Capacity for flexible designs and small batch sizes.

 Efficient use of infrastructure.

OPPORTUNITIES:

 Market value added products through innovation and development.

 Good growth prospects for galvanized towers for power transmission and

telecom.

 A strong growth in infrastructure industry.

 Growth in housing sector expected to continue.

 Increased export demand for galvanized products and reduction of tariff

barriers.

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STRENGTHS:

• India has been bestowed with high reserves of basic raw materials for polymers

making. The country has about 12 BT of iron ore; 25 BT of cooking coal; 11.6 BT

of manganese ore; 9.75 MT of flux grades limestone and 1.7 BT of dolomite.

Except high ash content in coal, all minerals are of most suitable quality and hence

then India has been comfortably placed when compared to any other country in the

world

• India has large number of qualified and experienced metallurgists, engineers and

technicians, who can engineer, adopt and assimilate cost effective technologies for

making and shaping of polymers

• Maintaining an edge in cost and quality competitiveness in the export markets,

low labor cost (15% of the steel) and well trained human resource as well as good

quality inputs, is one of the major strengths of the Indian Polymers industry.

WEAKNESSES:

• High capital, labor and energy intensive. Industry establishment involves long

gestation period.

• Slow growth rate in domestic as well as international demand..

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• Total dependence of scrap, resulting in hug scrap imports further up trend in

scrap prices to reduce profitability

• Poor capacity utilization of steel units due to inadequate infrastructure facilities

and inadequate short term and long term planning

• High and rising power costs and low availability of power are becoming a burden

to polymers industry.

Rubber Moulded and Metal Bonded

Guide Chains Insulators Suspension Bushes

     

Engine Mounts Dust Covers & Seals for Steering Systems Foot Rests
     

Assorted Rubber to Metal Bonded Parts Bellows & Hoses Wire Harness Grommet

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Gaskets Assorted Rubber Parts Grometts and Air Cleaner Hose

     

2. Rubber and PVC Extruded

Bonnet Seal Rubber Profiles With and Without Metal Rubber Profiles With and Without Metal
Inserts Inserts
 
   

Single and Twin Layer Fuel Tube Single and Twin Layer Fuel Tube 1
Assemblies
 
 

3. Plastic Injection Moulded & Painted

Painted Mud Guards Mud Guards Cylinder Head and Side Covers

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Plastic Moulded Parts with Metal Inserts Assorted Plastic Parts

   

CHAPTER 3

LITREATURE REVIEW

Success of any industrial undertaking depends upon the 6 m’s 1) Money 2)

Manpower 3) Machine 4) Market 5) Material 6) Management

Using the & quot; ABC" concept to analyze and control inventory

investment and turns is the simplest and most efficient method. Most inventories

are made up of hundreds and possibly thousands of individual items necessary to

manufacture a company’s products. By rank ordering the inventory items in dollar

terms, A items being the most expensive to C items being the least expensive,

managing inventory investment can be broken down to a manageable level.

"A" items usually make up 50 to 60% of inventory dollars; however,

they only account for normally 10 to 20% of inventoried items. "B"

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items usually make up 30 to 40% of inventory dollars and only account for

normally 30 to 40% of inventoried items. "C" items usually make up 5

to 10% of inventory dollars and account for normally 40 to 50% of inventoried

items. By managing the "A" items, a positive impact can be made in

inventory investment reduction. Reducing one or two "A" items can

and will have a bigger impact on inventory reduction and increased inventory

turns, greater than a possible reduction in all "C" items.

Materials are pivotal importance not less than any other M’s. Problems have their

root in material affects the efficiency of all men, machine, money & marketing

decisions of the firms and thus become the grave concern of management at all

levels. If there were too much of material problems like ideal funds lied up in

excessive inventory storage and obsolesces difficulties market pressure would

arise. Thus the importance of inventory management is realized. A number of

studies have been done in the field of inventory management by various

researchers. Some of them are given below;

Author:- Bern at de William year 2008

This study tells that the main focus of inventory management is on transportation

and warehousing. The decision taken by management depend s on the traditional

method of inventory control models. The traditional method of inventory

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management is how much useful in these days the author tell about it. He is also

saying that the traditional method is not a cost reducing, it is so much expensive.

But the managing the inventory is most important work for any manufacturing

unit.

Author: - Jon Schreibfeder 1992

He said that it is easy to turn cash into inventory, the challenge is to turn inventory

back into cash. In early 1990’s many distributor recognize that they needed help

controlling and managing their largest asset inventory. In response to this need

several companies developed comprehensive inventory management modules and

systems. These new package include many new features designed to help

distributors effectively managed warehouse stock. But after implementing this

many distributors do not feel that they have gained control of their inventory.

Author:-Wolf Bagby, Managing inventory

In this study Mr. W.Bagby explains that by managing the inventory it becomes

easier for the organization to meet the profit goals, shorter the cash cycle, avoid

inventory shortage, avoid excessive carrying costs for unused inventory, and

improve profitability by decreasing cash conversion and adopt JIT system.

According to this study companies need to get smart about inventory. Boosting

financial performance is another benefit that comes from better inventory

25
management. Infect large number of manufacturers enjoy savings and better

performance by choosing the approach of inventory reduction. For this company

needs to maximize the cash flow and profitability and this includes keeping a

watchful discerning eye on charge in supply and demand

Author: - Asfaque Ahmed October 12, 2004

(Article from master requirement planning and master production scheduling) He

said that most of the manufacturing company vendors have planning and

scheduling product which assume either infinite production capacity for calculating

quantities of row material and work in progress (WIP) requirements or infinite

quantities of raw material and WIP materials for calculating production capacity.

There are many problems with this approach and how to avoid these by making

sure that the product you are buying indeed takes into account finite quantities of

required materials as well as finite capacities of work centers in your

manufacturing facilities.

Author:- D.Hoopman April 7, 2003

26
(Article from inventory planning and optimization) In this article he said that

inventory optimization recognize that different industry have different inventory

profiles and requirements. Research has indicated that solutions are priced in a

large range from tens of thousands of dollars to millions of dollars. In this niche

market sector price is definitely not an indicator of the quality of solution, ROI and

usability are paramount.

Author:-Silver, Edward A Dec22, 2002

(Article from production and inventory management journal) This article

considers the context of a population of items for which the assumption underlying

the EOQ derivation holds reasonably well. However as is frequently the cash in

practices there is an aggregate constraint that applies to the population as a whole.

Two common forms of constraints are: 1) the existence of budget to be allocated

among the stocks of the items and 2) a purchasing production facility having the

capability to process at most a certain number of replenishment per year. Because

of the constraint the individual replenishment quantities cannot be selected

independently.

Author:- Charles Atkinson

27
(A study on inventory management) In the study by Mr. Charles Atkinson, he

explained the inventory management and assessment of inventory levels. As per

this study inventory management need to address two issue

Part I. How to optimize average inventory levels.

Part II. How to assess (evaluate) inventory levels.

This study tells about what the manager should do and not to do, and how much

amount should be order in one placed orders. Average inventory can be calculated

by simplistic method

Author:-Delaunay C , Sahin E, 2007.

A lots of work has been done but now if we want to go ahead we must have good

visibility upon this field of research. That is why we are focused on frame work for

an exhaustive review on the problem of supply chain management with inventory

inaccuracies. The author said that their aim in this work is also to present the most

important criterion that allow a distinction between the different type of managing

the inventory.

MEANING OF INVENTORY

Inventory generally refers to the materials in stock. It is also called the idle

resource of a company. Inventories represent those items which are either stocked
28
for sale or they are in the process of manufacturing or they are in the form of

materials which are yet to be utilized. It also refers to the stockpile of the products

a firm would sell in future in the normal course of business operations and the

components that make up the product. Inventory is a detailed list of those movable

items which are necessary to manufacture a product and to maintain the equipment

and machinery in good working order.

TYPES OF INVENTORIES

A manufacturing firm generally carries the following types of inventories:

 Raw Materials.

 Bought out parts.

 Work-in-process inventory (WIP).

 Finished goods inventories.

 Maintenance, repair and operating stores.

 Tools inventory.

 Miscellaneous inventory.

 Goods in transit.

 Goods for resale.

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 Scrap Material.

REASONS FOR HOLDING INVENTORY

 To stabilize production.

 To take advantage of price discounts.

 To meet the demand during the replenishment period.

 To prevent loss of orders.

 To keep pace with changing market conditions.

MOTIVES OF HOLDING INVENTORIES

 The Transaction Motive which facilitates continuous production and timely

execution of sales orders.

 The Precautionary Motive which necessities the holding of inventories for

meeting the unpredictable changes in demand and supplies of materials.

 The Speculative Motive which induces to keep inventories for taking

advantage of price fluctuations, saving in re-ordering costs and quantity

discounts etc.,.

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INVENTORY CONTROL

The main objective of inventory control is to achieve maximum efficiency in

production & sales with minimum investment in inventory. Inventory control is a

planned approach of determining what to order, when to order and how much to

order and how much to stock, so that costs associated with buying and storing are

optimal without interrupting production and sales.

BENEFITS OF INVENTORY CONTROL

The benefits of inventory control are:

 Improvement in customers‟ relationship because of the timely delivery of

goods and services.

 Smooth and uninterrupted production and hence, no stock out.

 Efficient utilization of working capital.

 Economy in purchasing.

 Eliminating the possibility of duplicate ordering.

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PRINCIPLES OF INVENTORY CONTROL

 Inventory is only created by spending money for materials and the labour

and overhead to process the materials.

 Inventory is reduced through sales and scrapping.

 Accurate sales & production schedule forecasts are essential for efficient

purchasing, handing & investment in inventory.

 Management policies which are designed to effectively balance size and

variety of inventory with cost of carrying that inventory are the greatest

factor in determining inventory investment.

 Forecasts help determine when to order materials. Controlling inventory is

accomplished through scheduling production.

 Records do not produce control.

 Control is comparative & relative, not absolute. It is exercised through

people with varying experiences and judgment rules & procedures establish

a base from which the individuals can make evaluation and decision.

32
 With the consistent practices being followed, inventory control can become

predictable and properly related to production and sales activity.

CHAPTER 4

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY

Research methodology refers to the methods, the researcher used in performing the

research operation in Alcoholic export in India. Since the object of research

particularly the applied research, is to arrive is the solution for the given problem,

the available data and the unknown aspects of the problem have to be related to

each other to make a solution possible. Keeping this in view research methods can

be put to the following groups.

This consists of those statistical techniques that are used for establishing

relationship between the data and unknowns. The third group consists of this

method which is used to evaluate the accuracy of the results obtained. Thus the

research methodology is the way to systematically solve the research problem. It

may be understood as a science of studying how research is done scientifically. In

it we study the varies steps that are generally adopted by a researcher in studying

the research problem along with the logic behind them.

33
RESEARCH DESIGN

The research design is the arrangements of condition for collection and analysis of

data in a manner that aims to combine relevance to research purpose with economy

in a procedure. In fact the research design is conceptual structure with in which the

result is conducted. it constitutes the blue print for the collection of data, its

measurement and its analysis. The research design is needed because of its

facilities the smooth sailing of the varies research operation, thereby making

research as efficient as possible yielding maximum information with minimal

expenditure of efforts, time and money.

METHODS OF DATA COLLECTION

The study is about the effectiveness of Lotus Knits and workers overall perception

about the top management. The study is being made to suggest the management is

updating the personal policies based on the feedback the employees relating to the

working condition, training facilities, welfare measures, management policy etc…

towards the overall development of HR and make it the real and the prime asset of

the organization. The study carried out on Lotus Knits with 100 respondents from

all major departments.

The data is based on personal records maintained by the human resource division

in product cycle of machinery goods and through filling the questionnaire by

34
discussing with the employees. The period of study around four months and

samples were selected deliberately from the varies department of Indian machinery

goods. The data are tabulated with the help of coding sheet and simple and simple

personage table along with the pie and bar diagrams are presented

TYPES OF STUDY:

Type of study is descriptive study. Descriptive researcher design is used when the

researcher is interested in knowing the characteristic in certain groups and

department. In descriptive research design the researchers has used cross sectional

studies. A cross sectional studies concerned with the sample of elements from a

given population. Thus, it deals with the officers data on a number of

characteristics from the sample elements are collected and analysis.

SAMPLING TECHNIQUE:

Sampling may be defined as then selection of some part of aggregate or totally on

the basis of which a judgment or inference the totality is made. The sample should

be a true representative or the population of characteristics without any bias, so

that it may result valid and reliable conclusion.

SAMPLING DESIGN

35
Sample design is a definite plan for obtaining a sample frames. It refers to the tonic

or the procedure the researcher would adopt in selecting some sampling units from

in which inference about the population is drawn.

Sample size:

This study covers 125 employees selected randomly.

Collection of data:

There are two types of data that is primary data, secondary data. The data those are

collected as fresh for the first time and happen to be original in character are called

as primary data.

PRIMARY DATA:

1. Primary data collected through questionnaire.,(ie) structural questionnaires

structure questionnaires contain closed from questioner and open ended

questionnaire.

SECONDARY DATA:

Data that have already been collected for some other purpose, perhaps processed

and subsequently stored, are termed secondary data. Secondary data which have

already been collected by someone else and which have already been passed

through the satisfied process. Secondary data were collected from,

 Company reports and records

36
 Books
 Company profile
 Previous records
 Web site
CHAPTER 5

DATA ANALYSIS

ABC ANALYSIS

MEANING

The inventory of an organization generally consists of thousands of items with

varying prices, usage rate and lead time. It is neither desirable nor possible to pay

equal attention of all items.

ABC analysis is a basic analytical tool which enables management to concentrate

its efforts where results will be greater. The concept applied to inventory is called

as ABC analysis. Statistics reveal that just a few items account for bulk of the

annual consumption of the materials. These few items are called A class items

which hold the key to business. The other items known as B & C which are

numerous in number but their contribution is less significant. ABC analysis thus

tends to segregate the items into three categories A,B & C on the basis of their

values. The categorization is made to pay right attention and control demanded by

items

37
ABC analysis classifies the materials based on their consumption during a

particular time period (usually one year). Depending upon the company to

company A B & C items can be as under

A – Approx. 5% to 10% of the Items accounting for 60% to 80% of the

consumption value.

B – Approx. 10 % to 30% of the Items accounting for 10% to 30% of the

consumption value.

C – Approx. 60% to 85% of the Items accounting for 5% to 15% of the

consumption value.

In day to day warehouse operations, materials are some time under issued, over

issued, issued and not accounted into the system, misplaced, stolen etc. This results

into inaccuracy in the inventory. Cycle counting is the process to count and

reconcile the materials. Ideally, every material in the warehouse should be counted

during a fixed interval (every year) for maintaining 100% accuracy, but counting

& reconciling every material is not cost effective and very expensive. To

count the accuracy of the inventory in a cost effective manner, it is recommended

to count the materials based on inventory classification.

38
If class materials are counted within a fixed interval (could be six months or a

year) then you need to count only 5% to 10% of the total materials and it will cover

60% to 80% of the inventory value. That means that you only count 5 % to 10% of

the materials and remove the inaccuracy from the inventory value from 60% to

80%.

Similarly B class materials can also be counted on a less frequency ( from once in

18 months to 24 Months) as the nos of materials become higher and C class

materials at even lesser frequency(Once in 27 months to 36 months) as nos of

material becomes more (60% to 85% of the total materials).

An inventory controller shall be concentrating more on the A class items for

reducing the inventory as he/she shall be concentrating only 5% to 10% of the total

items and shall be getting the opportunity to reduce inventory on 60% to 80% of

the value.

Any reduction in lead time of A class items shall result in reduction in inventory,

so procurement manager will work out with suppliers to reduce the lead time.

On issue of materials, tight control on A class, Moderate control on B class, Loose

Control on C class. So A class items may be issued after getting the approvals from

39
Senior Executives of the company. B may be moderately controlled. Very little

control can be exercised while issuing C class item.

ABC Analysis on Quantity of Raw Materials

Cumulative Cumulative  Class

Description Qty Percent Percent of tem
Polyester Woven Tape 803,500.00 39.57 39.57 A
CRNGO Coil 499,463.89 24.60 64.17 A
Fibre Glass Sleeve 191,560.00 9.43 73.60 A
Total 1,494,523.89      
Ball Bearing 145,426.00 7.16 80.77 B
Copper Wire 118956.52 5.86 86.63 B
Fibre Glass Cable 81,956.00 4.04 90.66 B
Total 346,338.52      
Copper Rod 68,599.00 3.38 94.04 C
Aluminum 31,896.00 1.57 95.61 C
PVC Cable & Sleeve 25,264.53 1.24 96.86 C
Aluminum Ingot 18,783.00 0.93 97.78 C
Wire Assembly 13,058.00 0.64 98.42 C
Flat, MS, 8x40 10,714.60 0.53 98.95 C
Bracket 8,730.00 0.43 99.38 C
Round Bar 4,151.40 0.20 99.59 C
Insulation Paper 3473.62 0.17 99.76 C
Fixon Tape 2,640.00 0.13 99.89 C
40
Silicon Rubber Cable 1,320.00 0.07 99.95 C
Sheet 953 0.05 100.00 C
Pipe 17.5 0.00 100.00 C
Magneto Bearing 2 0.00 100.00 C
Angular Contact Ball
Bearing 1 0.00 100.00 C
Total 189,603.65      

ABC Analysis on Value of Raw Materials

Cumulative Value Cumulative Class of

Description in Rs. Percent Percent Item

CRNGO Coil 27,508,886.50 33.58 33.58 A

Copper Rod 19,892,124.05 24.29 57.87 A

Copper Wire 14,233,666.88 17.38 75.25 A

Total 61,634,677.43

Ball Bearing 9,100,281.09 11.11 86.36 B

Aluminium 3,297,004.41 4.03 90.38 B

41
Aluminium Ingot 1,934,390.00 2.36 92.74 B

Insulation Paper 1,212,629.04 1.48 94.22 B

Fibre Glass Sleeve 1,049,111.84 1.28 95.50 B

Total 16,593,416.38

Wire Assembly 1,044,650.88 1.28 96.78 C

Fibre Glass Cable 834,525.74 1.02 97.80 C

Round Bar 678,942.21 0.83 98.63 C

Flat, MS, 8x40 425,360.00 0.52 99.15 C

Polyester Wooven Tape 305,330.00 0.37 99.52 C

Fixon Tape 178,526.47 0.22 99.74 C

PVC Cable & Sleeve 116,871.40 0.14 99.88 C

Sheet 41,752.29 0.05 99.93 C

Bracket 36,957.14 0.05 99.98 C

Silicon Rubber Cable 16,849.10 0.02 100.00 C

Pipe 1,662.50 0.00 100.00 C

Angular Contact Ball Bearing 575 0.00 100.00 C

Magneto Bearing 214.2 0.00 100.00 C

Total 3,682,216.93

ABC Analysis of the Raw Materials

Class of Item Quantity Value

A 1,494,523.89 61,634,677.43
B 346,338.52 16,593,416.38
C 189,603.65 3,682,216.93

42
ABC Analysis on Quantity of Consumable Items

Cumulative Cumulative Class

Description Qty Percent Percentage of Item
Label 51,010.00 21.04 21.04 A
Plastic Bag 49,233.20 20.31 41.35 A
Earthing Sticker 34,540.00 14.25 55.60 A
Operation & Maintenance
Manual 26,265.00 10.83 66.43 A
Routine Test Certificate 22,000.00 9.08 75.51 A
Total 183,048.20      
Thinner 10,631.00 4.39 79.89 B
PTFE Teflon Cable 10,500.00 4.33 84.22 B
Varnish 7,878.00 3.25 87.47 B
Paint 7,570.00 3.12 90.60 B
Connection Diagram
Sticker 7,200.00 2.97 93.57 B
Total 43,779.00      
Paper 5,000.00 2.06 95.63 C
Cord 3,570.00 1.47 97.10 C
BOPP Tape 2,556.00 1.05 98.16 C
Gasket Shellack
Compound 1,230.00 0.51 98.66 C
Emery Paper 880 0.36 99.03 C

43
Oil 580 0.24 99.27 C
Cotton Mask 502 0.21 99.47 C
Hand Gloves 375 0.15 99.63 C
Anti Rust Liquid ZAM
TRP 185 0.08 99.70 C
MP Grease 180 0.07 99.78 C
Straping Tape PVC 150 0.06 99.84 C
NC Putty 100 0.04 99.88 C
Brazing Rod 85 0.04 99.92 C
Primer 80 0.03 99.95 C
Locktite 45 0.02 99.97 C
Thermal transfer ribbon 28 0.01 99.98 C
Adhesive 15 0.01 0.01 C
Delivery Challan 10 0.00 0.01 C
Material Issue Slip 10 0.00 0.02 C
Tape 7 0.00 0.02 C
BELT 2 0.00 0.02 C
Nylon Lifting Belt 2 0.00 0.02 C
Total 15,592.00      

ABC Analysis on Value of Consumable Items

Cumulative Cumulative Class

Description Value in Rs. Percent Percentage of Item

44
Paint 1,029,768.44 26.45 26.45 A
Varnish 1,021,315.25 26.23 52.68 A
Thinner 781,106.68 20.06 72.74 A
Total 2,832,190.37      
Plastic Bag 293,122.50 7.53 80.27 B
PTFE Teflon Cable 156,357.00 4.02 84.28 B
Brazing Rod 84274.66 2.16 86.45 B
Oil 81,218.78 2.09 88.53 B
Straping Tape PVC 80,364.00 2.06 90.60 B
BOPP Tape 78,216.00 2.01 92.61 B
Total 773,552.94      
Operation & Maintenance
Manual 53,685.76 1.38 93.99 C
Cord 48,669.85 1.25 95.24 C
Label 28,517.60 0.73 95.97 C
MP Grease 28,227.20 0.72 96.69 C
Primer 19,860.87 0.51 97.20 C
Routine Test Certificate 19,675.60 0.51 97.71 C
Gasket Shellack
Compound 19,347.90 0.50 98.21 C
Anti Rust Liquid ZAM
TRP 16,920.00 0.43 98.64 C
Thermal transfer ribbon 10,800.17 0.28 98.92 C
Hand Gloves 9,706.72 0.25 99.17 C

45
Emery Paper 7,473.80 0.19 99.36 C
NC Putty 6,819.05 0.18 99.53 C
Paper 3,570.00 0.09 99.63 C
Tape 2,800.28 0.07 99.70 C
Adhesive 2,645.55 0.07 99.77 C
Earthing Sticker 1,662.10 0.04 99.81 C
Connection Diagram
Sticker 1,440.00 0.04 99.85 C
Delivery Challan 1,404.00 0.04 99.88 C
Nylon Lifting Belt 1,242.35 0.03 99.91 C
Locktite 1220.8 0.03 99.94 C
Cotton Mask 1,077.90 0.03 99.97 C
Material Issue Slip 728 0.02 99.99 C
BELT 360 0.01 100.00 C
Total 287,855.50      

ABC Analysis of Consumable Items

Class of Item Quantity Value

A 183,048.20 2,832,190.37
B 43,779.00 773,552.94
C 15,592.00 287,855.50

ABC Analysis on Quantity of Hardware Items

Description Cumulative Percent Cumulative Class

46
of
Qty Percent Item
Washer - Plain 1,151,360.00 16.85 16.85 A
Washer - Spring 1,081,500.00 15.83 32.68 A
Nut 977,083.00 14.30 46.98 A
Connecting lug 870,400.00 12.74 59.71 A
Slotted Cheese Head Screw 505,725.00 7.40 67.11 A
Staples 460,030.00 6.73 73.85 A
Total 5,046,098.00
Screw - Slotted Ch. Hd.
Yellow plated 6.6 316,150.00 4.63 78.47 B
Name Plate 239,941.00 3.51 81.98 B
Hex Bolt Yellow plated F/T
4.6 181,816.00 2.66 84.64 B
Allen bolt 141,797.00 2.08 86.72 B
Washer - Wavy 83,805.00 1.23 87.95 B
Earthing Bolt 79,771.00 1.17 89.11 B
Conduit Plug 77,900.00 1.14 90.25 B
Rubber Gasket 71,360.00 1.04 91.30 B
Shaft Ext. Cover 67,705.00 0.99 92.29 B
Key 66,589.00 0.97 93.26 B
Total 1,326,834.00
Cotter Pin 56,600.00 0.83 94.09 C
Rubber Cord (Octagon) 52,030.00 0.76 94.85 C

47
External Circlip 48,500.00 0.71 95.56 C
Oilseal - Double lip type 43,083.00 0.63 96.19 C
Eyebolt 33,600.00 0.49 96.68 C
Stud 32,940.00 0.48 97.17 C
Wiper Seal 32,235.00 0.47 97.64 C
Resilient Mounting Base &
Clamp 29,498.00 0.43 98.07 C
Water Reflector 28,250.00 0.41 98.48 C
Rubber Groumet 25,834.00 0.38 98.86 C
Drain plug 25,000.00 0.37 99.23 C
Dowel pin 19,465.00 0.28 99.51 C
Resilient Ring 16,128.00 0.24 99.75 C
Rubber Pad 7,676.00 0.11 99.86 C
Capacitor mounting clamp 6,584.00 0.10 99.96 C
Dovetail 1797 0.03 99.98 C
Stator Rivet 1122.2 0.02 100.00 C
Total 460,342.20

ABC Analysis on Value of Hardware Items

Class
Cumulative Cumulative of
Description Value Percent Percent Item
Resilient Mounting Base & 665,017.43 10.65 10.65 A

48
Clamp
Name Plate 644,099.49 10.32 20.97 A
Connecting lug 622,996.69 9.98 30.95 A
Hex Bolt Yellow plated F/T
4.6 389,115.15 6.23 37.18 A
Eyebolt 379,870.40 6.09 43.27 A
Oil seal - Double lip type 370,486.93 5.93 49.20 A
Allen bolt 273,569.89 4.38 53.59 A
Key 258,719.37 4.14 57.73 A
Resilient Ring 218,536.61 3.50 61.23 A
Washer - Wavy 200,609.31 3.21 64.44 A
Rubber Cord (Octagon) 194,134.73 3.11 67.55 A
Rubber Gasket 193,550.29 3.10 70.65 A
Total 4,410,706.29      
Shaft Ext. Cover 181,925.45 2.91 73.57 B
Washer - Plain 180,791.68 2.90 76.46 B
Stud 146,348.82 2.34 78.81 B
Nut 143,078.31 2.29 81.10 B
Wiper Seal 133,918.33 2.15 83.25 B
Earthing Bolt 132,095.96 2.12 85.36 B
Rubber Groumet 116,454.45 1.87 87.23 B
Water Reflector 105,616.62 1.69 88.92 B
Washer - Spring 93,354.27 1.50 90.41 B
Total 1,233,583.89      

49
Slotted Cheese Head Screw 89,938.05 1.44 91.86 C
Staples 77,125.30 1.24 93.09 C
Stator Rivet 75,921.22 1.22 94.31 C
External Circlip 65,443.45 1.05 95.36 C
Screw - Slotted Ch. Hd.
Yellow plated 6.6 63,982.95 1.02 96.38 C
Conduit Plug 56,596.50 0.91 97.29 C
Rubber Pad 53,263.36 0.85 98.14 C
Capacitor mounting clamp 41,005.76 0.66 98.80 C
Dowel pin 32,566.96 0.52 99.32 C
Cotter Pin 30,954.75 0.50 99.81 C
Drain plug 8,155.20 0.13 99.95 C
Dovetail 3,428.63 0.05 100.00 C
Total 598,382.13      

ABC Analysis of the of Hardware Items

Class of Item Quantity Value

A 5,046,098.00 4,410,706.29
B 1,326,834.00 1,233,583.89
C 460,342.20 598,382.13

ABC Analysis on Quantity of Machined Component

Description Cumulative Percent Cumulative Class

Qty Percent of
50
Item
Delta Link 164,500.00 19.53 19.53 A
Endshield
NDE 111,860.00 13.28 32.81 A
Thermocol
Pack 101,370.00 12.03 44.84 A
Terminal
block 59,367.00 7.05 51.89 A
Terminal box
cover 58,874.00 6.99 58.88 A
Body 57872 6.87 65.75 A
Corrugated
Box 56,325.00 6.69 72.44 A
Total 610,168.00
Terminal box 56,213.00 6.67 79.11 B
Fan cover 54,597.00 6.48 85.60 B
Fan 49,379.00 5.86 91.46 B
Total 160,189.00
B5 Flange 27,762.00 3.30 94.75 C
Wound Stator 13,663.00 1.62 96.38 C
Shaft 8287 0.98 97.36 C
Pulley 6,906.00 0.82 98.18 C
Clitted Stator 6,457.00 0.77 98.95 C
B14 Face 4113 0.49 99.44 C
Bearing Cover 2,564.00 0.30 99.74 C
51
Casting-Body 1,500.00 0.18 99.92 C
Electrical
Fitting 644 0.08 99.99 C
Wooden Box 50 0.01 100.00 C
Total 71,946.00  

ABC Analysis on Value of Machined Component

Class
Cumulative Cumulative Of
Description Value Percent Percent Item
Body 24,809,017.91 45.66 45.66 A
Endshield
NDE 8,398,200.27 15.46 61.12 A
B5 Flange 5,459,497.14 10.05 71.16 A
Total 38,666,715.32
Thermocol
Pack 2,767,103.90 5.09 76.26 B
Corrugated
Box 2,547,357.63 4.69 80.95 B
Fan cover 1,947,538.55 3.58 84.53 B
Pulley 1,897,282.08 3.49 88.02 B
Wound Stator 1,484,186.00 2.73 90.75 B
Shaft 1,227,779.39 2.26 93.01 B

52
Total 11,871,247.55
Terminal
block 993,958.27 1.83 94.84 C
B14 Face 512692.55 0.94 95.79 C
Clitted Stator 503,319.70 0.93 96.71 C
Terminal box 487,691.50 0.90 97.61 C
Fan 398,932.51 0.73 98.34 C
Terminal box
cover 310,655.75 0.57 98.92 C
Casting-Body 301,726.50 0.56 99.47 C
Delta Link 145,759.50 0.27 99.74 C
Bearing Cover 98,302.06 0.18 99.92 C
Electrical
Fitting 31,754.91 0.06 99.98 C
Wooden Box 11,250.00 0.02 100.00 C
Total 3,796,043.25

ABC Analysis of the Machined Components

Class of Item Quantity Value

A 610,168.00 38,666,715.32
B 160,189.00 11,871,247.55
C 71,946.00 3,796,043.25

53
ABC Analysis on Quantity of Tools Type of Item

Class
Cumulative Cumulative of
Description Qty Percent Percent Item
Mop Wheel 1,250.00 45.62 45.62 A
Parallel shank Twist
drill 323 11.79 57.41 A
Hammer 231 8.43 65.84 A
Wire Stripper 197 7.19 73.03 A
Total 2,001.00
Tungsten Carbide
Tipped Tools 139 5.07 78.10 B
Painting Brush 135 4.93 83.03 B
FILES 104 3.80 86.82 B
Crocodile Pin 48 1.75 88.58 B
Scissors 44 1.61 90.18 B
Hacksaw Blade 40 1.46 91.64 B
Hand Tapp Set 39 1.42 93.07 B
Total 549.00
Wire Brush 34 1.24 94.31 C
Grinding Wheel 26 0.95 95.26 C
Plier 23 0.84 96.09 C
Continuity Tester 22 0.80 96.90 C

54
Recoil Hose Pipe 15 0.55 97.45 C
Allen Key 12 0.44 97.88 C
Bit Finder 10 0.36 98.25 C
Spanner 10 0.36 98.61 C
Screw Driver 7 0.26 98.87 C
Die Grinder 6 0.22 99.09 C
Spray Gun 5 0.18 99.27 C
Allen Socket 4 0.15 99.42 C
Paper Cutting Machine 4 0.15 99.56 C
Chisels 2 0.07 99.64 C
Hand Crimping Tool 2 0.07 99.71 C
Revolving Center 2 0.07 99.78 C
Carbide Dead Center 1 0.04 99.82 C
Drill Chuck 1 0.04 99.85 C
Drill Machine 1 0.04 99.89 C
Impact Wrench 1 0.04 99.93 C
Measuring Tape 1 0.04 99.96 C
Stamping Tool 1 0.04 100.00 C
Total 190.00

ABC Analysis on Value of Tools Type of Material

Description Cumulative Percent Cumulative Class

55
of
Value Percent Item
Stamping Tool 346,800.00 51.76 51.76 A
Mop Wheel 71,535.00 10.68 62.43 A
Hammer 47,399.98 7.07 69.51 A
Total 465,734.98
Die Grinder 46,215.80 6.90 76.41 B
Tungsten Carbide
Tipped Tools 33,711.58 5.03 81.44 B
FILES 18,748.46 2.80 84.24 B
Wire Brush 17,654.00 2.63 86.87 B
Hand Tapp Set 14,537.99 2.17 89.04 B
Impact Wrench 12,180.94 1.82 90.86 B
Parallel shank Twist
drill 9,235.69 1.38 92.24 B
Spray Gun 7,569.72 1.13 93.37 B
Total 159,854.18
Bit Finder 6120 0.91 94.28 C
Wire Stripper 5,133.52 0.77 95.05 C
Recoil Hose Pipe 5,037.83 0.75 95.80 C
Grinding Wheel 4,514.62 0.67 96.47 C
Scissors 4,242.03 0.63 97.11 C
Plier 3792.67 0.57 97.67 C
Revolving Center 2,861.10 0.43 98.10 C

56
Drill Machine 2,550.00 0.38 98.48 C
Paper Cutting Machine 2,492.74 0.37 98.85 C
Painting Brush 1828.64 0.27 99.12 C
Hand Crimping Tool 1,401.28 0.21 99.33 C
Hacksaw Blade 1,302.54 0.19 99.53 C
Continuity Tester 646.05 0.10 99.62 C
Drill Chuck 519.34 0.08 99.70 C
Screw Driver 363.04 0.05 99.76 C
Carbide Dead Center 302.16 0.05 99.80 C
Chisels 288 0.04 99.84 C
Crocodile Pin 288 0.04 99.89 C
Allen Key 284.85 0.04 99.93 C
Allen Socket 234.6 0.04 99.96 C
Spanner 181.3 0.03 99.99 C
Measuring Tape 60 0.01 100.00 C
Total 44,444.31

ABC Analysis of Tools Type of Material

Class of Item Quantity Value

A 2,001.00 465,734.98
B 549.00 159,854.18
57
C 190.00 44,444.31

Data Interpretation

Total Quantity
Item Category Consumed A B C
Consumable 242419.2 183048.2 43779 15592
Hardware 6833274.2 5046098 1326834 460342.2
Raw Materials 2030466.06 1494523.89 346,338.52 189603.65
Machined
Components 842303 610168 160,189.00 71946
Tools 2740 2001 549 190

ABC analysis Summary of Material (Value)

Item Category Total Value of A B C

58
Consumables
Consumable 3893598.81 2832190.37 773552.94 287855.5
Hardware 6242672.31 4410706.29 1233583.89 598382.13
Raw Materials 81910310.74 61634677.4 16593416.38 3682216.93
Machined
54334006.12 38666715.3 11871247.55 3796043.25
Components
Tools 670033.47 465734.98 159854.18 44444.31

59
CHAPTER 6

CONCLUSION, FINDINGS AND RECOMMENDATION

Procurement

 The Operating cycle is very long i.e. Cash in and Cash Out is very long.

 The Company can also concentrate further on extending vendor

development which will help in reducing the Inventory in the company.

 The Quality Inspection is done by the Store Department on getting material

this can be done away with vendor development where the onus of providing

good material will be his.

 The follow up process can also be reduced drastically with vendor

development.

Inventory

 The Company maintains a stock of about 1.5 months of Inventory at any

given Point of time because of which large capital is locked in the same.

60
 The Company has not performed any analysis on the value front of material,

like ABC analysis. It treats some materials like copper wire and Ball

Bearing very essential and thus concentrates mainly on keeping it.

 The Company currently is undergoing a problem on workers so the

productivity is hampered i.e. the workers produce only a fixed number of

Motors in a day. Even then the company maintains a large inventory.

 Looking at the analysis of the Raw Materials, Tools, Machined components,

Packaging Materials the company can decide to maintain inventory of items

which are in the A type category and reduce inventory of C type items which

can reduce the carrying cost.

 The Company can combine the ABC analysis with the VED analysis to

come to a conclusion as to which materials should be handled by the top

management.

 As from the above analysis it is clear that the A Type of material consume

more than 70 % of the total value of consumption so increases the total

inventory cost and results in locking of the money, so having very low safety

stock would be beneficial for the company.

61
 Accurate planning and forecasting is required to be done, as it was found in

the factory that worker has to go to store frequently for getting the Raw

Materials which also affects the productivity. A proper method would be to

predict in advance the days work and assemble the materials at the shop

floor itself.

Miscellaneous

 The Organization uses SAP but there are many employees who have not

been given any formal training on the same.

 The Plant Layout is also one area where the organization can have a look

into which can minimize the flow time of the material as currently the

worker on the shop floor needs to go at least three or more times to the store

manager for getting the required material.

 The Performance of SAP is also one problem which is hampering the

productivity of the employees.

SUGGESTIONS

 According to EOQ, as the company does not follow EOQ for its purchasing,

the company can be adjusted to order materials. This will reduce the cost &

help to enhance the profit of the company.

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 The company is required to maintain safety stock for its components in order

to avoid stock-out conditions & help in continuous production flow.

 Under ABC analysis, the management must have more control on A than

B&C, because A class constitutes more(45%) of higher values. There should

be tight control exercised on stock levels, to avoid deterioration. This is done

through maintaining low safety stock, continuous check on schedules &

ordered frequently in inventories, in order to avoid over investment of

working capital.

 The company must not go to the Non-moving items as far as possible,

because there will be unnecessary blocking of working capital. This would

hinder the other activities of the organization.

 The past data shows increase in inventory the company is also expecting

more inventories for future period i.e. 2008. The management is required to

maintain the same inventory trend in the forth coming year also.

 The inventory turnover ratio indicates whether investment in inventory is

within proper limit or not. It also measures how quickly inventory is sold. It

requires to maintain a high turnover ratio than lower ratio. A high ratio

implies that good inventory management and it also reflects efficient

business activities
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CONCLUSION

Inventory management has to do with keeping accurate records of finished goods

that are ready for shipment. This often means posting the production of newly

completed goods to the inventory totals as well as subtracting the most recent

shipments of finished goods to buyers. When the company has a return policy in

place, there is usually a sub-category contained in the finished goods inventory to

account for any returned goods that are reclassified or second grade quality.

Accurately maintaining figures on the finished goods inventory makes it possible

to quickly convey information to sales personnel as to what is available and ready

for shipment at any given time. Inventory management is important for keeping

costs down, while meeting regulation. Supply and demand is a delicate balance,

and inventory management hopes to ensure that the balance is undisturbed. Highly

trained Inventory management and high-quality software will help make Inventory

management a success. The ROI of Inventory management will be seen in the

forms of increased revenue and profits, positive employee atmosphere, and on

overall increase of customer satisfaction.

A better inventory management will surely be helpful in solving the problems the

company is facing with respect to inventory and will pave way for reducing the

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huge investment or blocking of money in inventory. From the analysis we can

conclude that the Company can follow the Economic Order Quantity (EOQ) for

optimum purchase and it can maintain safety stock for its components in order to

avoid stock-out conditions & help in continuous production flow. This would

reduce the cost and enhance the profit. Also there should be tight control exercised

on stock levels based on ABC analysis & maintain high percentage in fast moving

items in inventories as per on FSN analysis for efficient running of the inventory.

Since the inventory Turnover ratio shows the increasing trend, there will be more

demand for the products in the future periods. If they could properly implement

and follow the norms and techniques of inventory management, they can enhance

the profit with minimum cost.

REFERENCE

 Technical Specifications Catalogue of HEM: Cat.: D03, print : 01/2010

 www.hindmotors.com

 http://en.wikipedia.org/wiki/ABC_analysis

 Inventory Report exported from SAP system of HEM industries.

 Operation research – V. K. Kapoor

 M Y Khan P K Jain “Financial Management” 4th edition Tata McGraw Hill.

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 R.S.N. Pillai V. Bagavathi “Management Accounting” S Chand & Co.

 Martand Telsang “Industrial Engineering & Production Management” S

Chand & Co.

 R. Paneerselvam “Operations Research” Prentice hall Of India Private Ltd.

 B.M. Lall Nigam I.C. Jain “Cost Accounting” Prentice hall Of India Private

Ltd.

  S.P. Iyengar “Cost & Management Accounting” Sultan Chand & Sons

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