COMPANY INFORMATION
THIS IS SIEMENS
Over 150 years of innovation have made Siemens a world leader in electrical engineering and electronics. Today, Siemens is on its way to becoming a worldwide leading e-business company with the help of networked know-how of their nearly 460,000 employees in over 190 countries to benefit their customers and win new business - and live up to the motto:
Siemens - global network of innovation.
Like in other countries, Siemens also has a subsidiary in India called Siemens India Ltd. It is a leading electrical and electronics engineering company. Established in 1922, it was incorporated as a company in 1957 and in 1962 was converted into a public limited company with 51% of its equity held by Siemens AG and the remaining 49% held by Indian shareholders. It operates in the energy, industry, health care, transportation, information, communications and components business segments. It also operates joint ventures in the fields of telecommunications and information technology. In addition, Siemens Group in India has presence in the field of Power Design, Renovation & Modernisation of existing power plant, Lighting, and Household goods. The Siemens Group in India has a widespread marketing and distribution network in addition to multiple manufacturing facilities in India. It also has a well-organised up-market value addition in Engineering, Software, System Integration, Erection, Commissioning and Customer Services.
Siemens has played an active role in India’s technological progress. Siemens provides both indigenously manufactured and imported products and systems. By harnessing innovative technologies and comprehensive know-how, Siemens helps its customers meet their business and technical needs. It also has an advantage of access to latest global technologies on account of its close association with its parent companies Siemens AG.
As know by now, Siemens Germany promotes this company. India has a Managing Director taking care of the working of the company. Also the parent company is 51% Stakeholder of Siemens India Ltd.
PRODUCTS: -
As such Siemens covers wide variety of electrical and engineering products. In India it operates in
a) Energy;
b) Industry;
c) Health Care;
d) Transportation;
e) Information;
f) Communications; and
g) Components business segments.
We have covered the Industry sector, which has various divisions under it. They are as follows:
(i) Industrial Solutions and Services;
(ii) The Standard Products;
(iii) Automation and Power Electronics;
(iv) Industrial Products and System and Sales;
(v) Lower Voltage Distribution System ;
(vi) Power Transmissions and Distribution Systems.
Within the Industry sector too we have covered Power Transmission and Distribution System Division. It manufactures an entire range of Switchboards and Relay & Control Panels at their factory in Joka, Calcutta. The factory in Mumbai at Thane-Belapur Road has 3 units within it Switchboard, Switchgear and Motor Units.
PROFIT CENTRE CONCEPT: -
The company follows Profit Centre Concept. It’s actually divisional Profit Center Concept. The Parent company doesn’t ask for anything else but profit from all its subsidiaries.
For Siemens India its 1 unit is a Profit Centre.
Here if 1 division has some extra material and is usable by other division, then material is given to the unit. The Divisional Head is informed about it and together with the Strategic purchase manager they decide whether profit is to be made on such transaction or not. The main aim is to earn Profit.
Also profit earned by a unit is profit earned by company and incase any 1 unit makes loss then it is covered under the profits made by the other units that year.
One important fact to be noted about Siemens is that the whole company works on ERP system.
Siemens makes use of SAP and feels it is important in a company as it makes their work easier and systematic.
Everything is computerised from purchase to payment. Each and every action noted in the computer. This in a way joins the company units- as in any unit in any part of the country can access to what is happening in the other units.
MRP & INVENTORY CONTROL
MRP-Material Requirement Planning is technique used to determine the quantity and timing requirements “dependent demand” materials used in the manufacturing operations. The material can be purchased externally or produced in-house. The important characteristic is that their use be directly dependent on the scheduled production of larger component or finished product-hence the term “dependent demand”. As said everything is computerised so is MRP.
MRP TECHNIQUE IN SIEMENS: -
Market forecast
Broken into required
amount of materials.
Stock and inventory
level checked.
Order placed.
Explanation: -
The company forecasts for the purpose of manufacturing.
After the future demands are known then the company tries to work out on how much material would be required for manufacturing purpose.
The stock level and inventory level is checked.
Only then does the Purchase manager place order.
Due to the computerised system it’s easy because as and when stock is taken out or refilled entry is made by the stores person in the computer. This entry can be accessed by anyone and its better than manual inspection every time material is taken out or added.
INVENTORY: -
They try to keep minimum inventory and with the current economic situation it has become a necessary action in every company. Though Siemens has been following this since the beginning.
Due to uncertainities in manufacturing, they are forced to keep minimum inventory for their items. Uncertainites are:
(i) Fluctuating demand for end product;
(ii) Indeterministic manufacturing;
(iii) Frequently changing Make or Buy decisions.
Lately they also have been trying to cut costs so they are planning to introduce JUST IN TIME (JIT) very soon.
The inventory carrying cost (ICC) is somewhere between 4%-5% of the total manufacturing costs.
The total inventory cost is somewhere between 8-9% of the total cost.
There are no Inventory Norms as such that the company has to follow. Norms are only for some specific material like ‘A’ category items.
ABC & EOQ
Once inventory is identified, the manager must determine the importance and the rupee value of each individual item. This means study of each item in terms of its price or cost, usage and lead-time, as well as specific procurement or technical problems. Without the data provided by such study the manager does not have enough information to determine the best allocation of departmental effort and expenses to the tasks of controlling thousands of inventory items. This study is done by basic analytical management tool ABC analysis or also known as Always Better Control approach. This approach help material manager to exercise selective control and focus his attention only a few items when he is confronted with huge amount of store items.
In Siemens, ABC analysis isn’t followed rigidly. It is done once in 5-6 years.
The ‘A’, ‘B’, & ‘C’ category items are as follows:
‘A’- category items:
Steel sheets;
Alumni Castings;
Copper busbars;
Vaccum tubes;
Digital relays;
Meters.
B’ – category items:
Machine components;
Alluminum busbars;
Fabrication items;
Insulating materials;
Bonded parts.
‘C’ – category items:
Hardware;
Paints;
Chemicals;
Rubber;
Plastic;
Components.
The ‘A’ category items are ordered frequently and are also checked on daily as they are very important and are the basic raw material.
The ‘B’ category items are ordered something like once in 6 months are verified monthly.
The ‘C’ category items ordering depends on the requirement as such they are bought in bulk and stocked to last for a year. Their verification is also done once in 6 months.
ABC analysis is not followed rigidly because doing it again and again means expenses and right now Siemens is into cost cutting i.e. they are trying to come down on their costs. Also ABC analysis is time consuming, it needs people to sit and do it manually. So it’s not practical for them to do it on yearly or mthly basis.
EOQ also know as Economic Order Quantity. As the name suggests, this concept holds that the appropriate quantity to order may be the one that tends to minimise all the costs associated with the order i.e. carrying costs, acquisition costs and the material costs itself.
According to Siemens India Ltd. , Large companies whose production is very high like 10,000 pieces per day follow EOQ. The production is constant hence they have to keep fixed amount of inventory for smooth flow of production.
In Siemens the production isn’t constant, it varies with demand. Also they believe that EOQ is sort of more theoretical than practical, so it is not followed.
OUR OPINION: -
According to us the company is doing right.
Not doing ABC analysis rigidly really helps the company on saving costs. It’s not necessary for a company to do it again and again. When done once it knows what are it’s A, B and C category items. So it really is not important for the company to do it again and again. Yes doing it once in 4-5 years is necessary as the demand keeps changing, some product might have demand and some not. Inventory for a product has to be managed according to the demand for that product. So doing it every 4-5 years helps the company know relevant information.
EOQ is moreover a theoretical concept. It is not easy for all companies to follow this concept. Yes they can definitely keep it for some items, which are really important, like ‘A’ category items.
PURCHASE MANAGEMENT
Purchase manual is very necessary for every company. It provides the company with basic guidelines about how purchasing of materials should be done and also gives idea of purchase procedure. Siemens has and elaborate Purchase Manual formed by the MD and the directors. This manual helps the purchase manager in easy purchasing. It gives detailed explanation of purchase procedure. Besides all this the Purchase manual talks about “Ethics in Purchasing”. It informs the purchase manager about not taking bribes, gifts given by suppliers as it affects the negotiation power during vendor selection, rejection, rating, pricing etc. The most important thing the manual talk about is not taking advantage of suppliers regarding traffic i.e. it sends its own transportation for getting goods from suppliers godowns.
Siemens has no C&F department but it does have good logistic department as they have to get material from supplier with their own transport and not depend on supplier.
PURCHASE CYCLE/PROCEUDRE:-
Marketing
Forecasting
Broken into material
required- the stocks are
verified.
Decision of Price, Terms
& Conditions i.e. lead-time
ordering cost, vendor
selection by the Strat.
Purchase Dept.
Fed into the
Computer
Seen by all resp.
Purchase Mgrs.
& on that basis
quotations invited.
The best quotation is
considered.
Tallied with the Computer i.e. the info. is put in the computer and checked.
Rate contract for a year is made.
Order placed.
Fed into the computer.
The suppliers and resp. depts. receive purchase order copy.
When the order is recd. a GRN is made against P.O.
Goods are Inspected.
GRN is fed into the Computer
Computer verifies with the order placed.
Automatically sends copy to other dept. like accounts, stores purchase etc.
Order is rejected.
No Payment.
Explanation: -
The purchase cycle/procedure is fully computerised. At each step the system is there. Everything works according to the system, hence no one can skip steps, everyone has to work according to the policies laid down.
The above figure represents the Purchase cycle and Procedure.
The whole procedure starts with Market Forecasting. The market is studied and on basis of earlier demands future demands are predicted.
Once the production amount is known the amount of materials required is calculated (MRP). Stocks are verified. Inventory is checked.
Then the Strategic Purchase Department takes over. They make decisions regarding prices, terms and conditions and vendor selection.
All these decisions are fed into the computer. All units are made available of this decision due to the system.
The Unit Purchase manager on this basis calls for quotations from the vendors selected by Strategic purchase department.
All quotations are checked and the best one is selected. All the information of the selected quotation is again fed into the computer.
The computer checks if the quotation is according to the terms and conditions or not.
If it agrees then order is placed , if not then another vendor has to be selected and had to go again through the computer.
Once order is placed the information is fed into the computer and a purchase order is made, copies of which are send to all concerned departments.
All departments know that order has been placed and all will be ready for the arrival of the material.
On arrival a GRN (Goods Receipt Note) is made against the purchase order. Goods are inspected and on satisfactory note by inspection department the GRN is fed into the computer.
The computer again tallies with the Purchase order and if tallied it sends notice of satisfaction to other departments and if not then the order is rejected.
CREDIT & PAYMENT SYSTEM: -
There is a proper payment system, which is computerised too. The Credit period is 90 days from delivery. But then they can change it whenever required.
Arrival of Materials
Goods inspected & GRN copy sent to concerned depts.
If condition of COD, according to Terms and conditions Computer prepares Bill and asks to give cheque
If on credit terms then the computer keeps the bill ready after 90
.
Days warns the the accountantabout payment.
Immediately cheque is given out.
EXPALANATION: -
When the GRN is received, it is keyed into the computer.
The computer audits by comparing the item, the quantity and the price with corresponding information recorded in the updated purchase order files.
The computer also verifies the price extension.
Any discrepancies are noted on an output error list. If no discrepancies are found then the unit signals the accountant to prepare cheque for the amount specified less any applicable discounts.
This is the usual format for COD. Also for COD 1.5% cash discount is taken by Siemens from the suppliers.
In case of Credit payment the above procedure of verification is done and after 90days the computer signals the accountant to make payment.
STORES MANAGEMENT
Stores department is responsible for appropriate physical storage of all production materials, some in-process inventory, and finished goods. Storage provides both service and control functions.
(1) It generally organises and controls the flow of materials into the production operation
(2) It acts as a custodial and controlling agency. It is responsible for the safety and physical control of a substantial portion of a firm’s current asset.
(3) For many items the existence of stores operation permits quantity buying and the attendant savings in price, paperwork and handling.
RECIEPT, STORAGE and ISSUE PROCEDURE: -
When an order is received, the conventional receiving information is directly put into the computer records after inspection.
Reports are generated in multiple copies for concerned departments.
Materials are taken to Stores. The amount of materials is entered into the computer. So as and when materials is taken out the computer keeps updating making it easier for the stores person to know.
When material is required for production line, it is issued in a systematic form.
The person requiring the material has to get a requirement letter that the materials are required and should be having authorised signature. Usually Production manager’s signature is required.
Only then is the stores incharge allowed to remove materials.
On removing the stores person has to feed in the proper data of how much was removed.
This helps in proper maintenance of materials and avoids wastage. It also helps in easy stock verification, as all the stores incharge has to do is just check on computer. On an average it is checked every month. Though it is different for ‘A’, ‘B’ and ‘C’.
Storage is done on basis of:
(i) Physical size;
(ii) Fragility;
(iii) Cost;
(iv) Usage.
Siemens has some Principles regarding Storage. They are:
(1) Minimum effort for storing and retrieval.
(2) Minimum spoilage.
(3) Good visibility and control.
(4) Flexible.
FACILITIES: -
There is adequate facilities given for storing purpose.
• The layout is perfect. The stores are very much within the production premises.
• The distance between the production line and stores is minimum, so as to avoid costs on forklifts and other equipment’s of such type.
• Also the finished goods stores is also near the production line.
• Also there is sufficient space available so as for free movement of employees, materials and finished goods.
• There’s no sort of confusion and the operating cycle is less too.
• The whole premise is kept clean and neat at all times.
• There’s proper ventilation, lighting facilities and safety measures for the good of employees.
According to us the facilities are very much appropriate because they have taken care of all possible needs.
They do make Stock Statements. But since everything is under the system so is the Stock statement. It is done very time after stock is verified. The data in the computer is updated. So at any time correct information is available.
Siemens has following storage system
(1) 2-Bin System: Siemens has this system for ‘C’ category items. They have 2 bins on top of the other, 1 bin has amount filled to order quantity and other is filled with the rest. From the top bin material is removed as it comes to order quantity store persons reorder.
(2) Corosal system: This is a new sort of storage by Siemens. In this system there are bins hung up, like on conveyor belts. As and when material is required the bin is pulled down and material is taken out. This system is also connected to the computer. The required amount is specified and only whatever is needed is given by the system. Not a bit more, not a bit less. This helps in reducing wastage and also saves space in the premises. This system is there only in some units.
Besides this they have normal racks and shelves and bins for storage.
VENDOR SELECTION.
A good Supplier is and invaluable resource to the organisation requiring it’s product or service. Such suppliers make direct contribution to a firm’s success. They can assist their customers with product development, value analysis and timely delivery of the desired level of quality. Good buyer seller relationship facilitates the buyer’s efforts to gain superior performance, extra service, cooperation on cost reduction programs and a willingness to share in processes and procedures.
At Siemens, the Strategic Purchase department does selection of Vendors. Initially, basic information regarding the vendor is found out. Then if necessary factory visits are made. With the help of necessary information the company comes down to few vendors. Then the routine quotations are invited and then final vendor is selected.
Siemens follows Weighted Rate method. Under this method the vendors are rated on several basis like Quality, Price, Reliability and Service.
At Siemens vendors are rated on Quality and Reliability. Where, Quality rating is 60% and Reliability is 40%.
After calculating Quality and Reliability through the specific formulae, the found answers are multiplied by 0.6 and 0.4 respectively. And then added up to get total rating.
The vendors are monthly rated and every 3 months its published so as to inform the vendors.
THIS IS SIEMENS
Over 150 years of innovation have made Siemens a world leader in electrical engineering and electronics. Today, Siemens is on its way to becoming a worldwide leading e-business company with the help of networked know-how of their nearly 460,000 employees in over 190 countries to benefit their customers and win new business - and live up to the motto:
Siemens - global network of innovation.
Like in other countries, Siemens also has a subsidiary in India called Siemens India Ltd. It is a leading electrical and electronics engineering company. Established in 1922, it was incorporated as a company in 1957 and in 1962 was converted into a public limited company with 51% of its equity held by Siemens AG and the remaining 49% held by Indian shareholders. It operates in the energy, industry, health care, transportation, information, communications and components business segments. It also operates joint ventures in the fields of telecommunications and information technology. In addition, Siemens Group in India has presence in the field of Power Design, Renovation & Modernisation of existing power plant, Lighting, and Household goods. The Siemens Group in India has a widespread marketing and distribution network in addition to multiple manufacturing facilities in India. It also has a well-organised up-market value addition in Engineering, Software, System Integration, Erection, Commissioning and Customer Services.
Siemens has played an active role in India’s technological progress. Siemens provides both indigenously manufactured and imported products and systems. By harnessing innovative technologies and comprehensive know-how, Siemens helps its customers meet their business and technical needs. It also has an advantage of access to latest global technologies on account of its close association with its parent companies Siemens AG.
As know by now, Siemens Germany promotes this company. India has a Managing Director taking care of the working of the company. Also the parent company is 51% Stakeholder of Siemens India Ltd.
PRODUCTS: -
As such Siemens covers wide variety of electrical and engineering products. In India it operates in
a) Energy;
b) Industry;
c) Health Care;
d) Transportation;
e) Information;
f) Communications; and
g) Components business segments.
We have covered the Industry sector, which has various divisions under it. They are as follows:
(i) Industrial Solutions and Services;
(ii) The Standard Products;
(iii) Automation and Power Electronics;
(iv) Industrial Products and System and Sales;
(v) Lower Voltage Distribution System ;
(vi) Power Transmissions and Distribution Systems.
Within the Industry sector too we have covered Power Transmission and Distribution System Division. It manufactures an entire range of Switchboards and Relay & Control Panels at their factory in Joka, Calcutta. The factory in Mumbai at Thane-Belapur Road has 3 units within it Switchboard, Switchgear and Motor Units.
PROFIT CENTRE CONCEPT: -
The company follows Profit Centre Concept. It’s actually divisional Profit Center Concept. The Parent company doesn’t ask for anything else but profit from all its subsidiaries.
For Siemens India its 1 unit is a Profit Centre.
Here if 1 division has some extra material and is usable by other division, then material is given to the unit. The Divisional Head is informed about it and together with the Strategic purchase manager they decide whether profit is to be made on such transaction or not. The main aim is to earn Profit.
Also profit earned by a unit is profit earned by company and incase any 1 unit makes loss then it is covered under the profits made by the other units that year.
One important fact to be noted about Siemens is that the whole company works on ERP system.
Siemens makes use of SAP and feels it is important in a company as it makes their work easier and systematic.
Everything is computerised from purchase to payment. Each and every action noted in the computer. This in a way joins the company units- as in any unit in any part of the country can access to what is happening in the other units.
MRP & INVENTORY CONTROL
MRP-Material Requirement Planning is technique used to determine the quantity and timing requirements “dependent demand” materials used in the manufacturing operations. The material can be purchased externally or produced in-house. The important characteristic is that their use be directly dependent on the scheduled production of larger component or finished product-hence the term “dependent demand”. As said everything is computerised so is MRP.
MRP TECHNIQUE IN SIEMENS: -
Market forecast
Broken into required
amount of materials.
Stock and inventory
level checked.
Order placed.
Explanation: -
The company forecasts for the purpose of manufacturing.
After the future demands are known then the company tries to work out on how much material would be required for manufacturing purpose.
The stock level and inventory level is checked.
Only then does the Purchase manager place order.
Due to the computerised system it’s easy because as and when stock is taken out or refilled entry is made by the stores person in the computer. This entry can be accessed by anyone and its better than manual inspection every time material is taken out or added.
INVENTORY: -
They try to keep minimum inventory and with the current economic situation it has become a necessary action in every company. Though Siemens has been following this since the beginning.
Due to uncertainities in manufacturing, they are forced to keep minimum inventory for their items. Uncertainites are:
(i) Fluctuating demand for end product;
(ii) Indeterministic manufacturing;
(iii) Frequently changing Make or Buy decisions.
Lately they also have been trying to cut costs so they are planning to introduce JUST IN TIME (JIT) very soon.
The inventory carrying cost (ICC) is somewhere between 4%-5% of the total manufacturing costs.
The total inventory cost is somewhere between 8-9% of the total cost.
There are no Inventory Norms as such that the company has to follow. Norms are only for some specific material like ‘A’ category items.
ABC & EOQ
Once inventory is identified, the manager must determine the importance and the rupee value of each individual item. This means study of each item in terms of its price or cost, usage and lead-time, as well as specific procurement or technical problems. Without the data provided by such study the manager does not have enough information to determine the best allocation of departmental effort and expenses to the tasks of controlling thousands of inventory items. This study is done by basic analytical management tool ABC analysis or also known as Always Better Control approach. This approach help material manager to exercise selective control and focus his attention only a few items when he is confronted with huge amount of store items.
In Siemens, ABC analysis isn’t followed rigidly. It is done once in 5-6 years.
The ‘A’, ‘B’, & ‘C’ category items are as follows:
‘A’- category items:
Steel sheets;
Alumni Castings;
Copper busbars;
Vaccum tubes;
Digital relays;
Meters.
B’ – category items:
Machine components;
Alluminum busbars;
Fabrication items;
Insulating materials;
Bonded parts.
‘C’ – category items:
Hardware;
Paints;
Chemicals;
Rubber;
Plastic;
Components.
The ‘A’ category items are ordered frequently and are also checked on daily as they are very important and are the basic raw material.
The ‘B’ category items are ordered something like once in 6 months are verified monthly.
The ‘C’ category items ordering depends on the requirement as such they are bought in bulk and stocked to last for a year. Their verification is also done once in 6 months.
ABC analysis is not followed rigidly because doing it again and again means expenses and right now Siemens is into cost cutting i.e. they are trying to come down on their costs. Also ABC analysis is time consuming, it needs people to sit and do it manually. So it’s not practical for them to do it on yearly or mthly basis.
EOQ also know as Economic Order Quantity. As the name suggests, this concept holds that the appropriate quantity to order may be the one that tends to minimise all the costs associated with the order i.e. carrying costs, acquisition costs and the material costs itself.
According to Siemens India Ltd. , Large companies whose production is very high like 10,000 pieces per day follow EOQ. The production is constant hence they have to keep fixed amount of inventory for smooth flow of production.
In Siemens the production isn’t constant, it varies with demand. Also they believe that EOQ is sort of more theoretical than practical, so it is not followed.
OUR OPINION: -
According to us the company is doing right.
Not doing ABC analysis rigidly really helps the company on saving costs. It’s not necessary for a company to do it again and again. When done once it knows what are it’s A, B and C category items. So it really is not important for the company to do it again and again. Yes doing it once in 4-5 years is necessary as the demand keeps changing, some product might have demand and some not. Inventory for a product has to be managed according to the demand for that product. So doing it every 4-5 years helps the company know relevant information.
EOQ is moreover a theoretical concept. It is not easy for all companies to follow this concept. Yes they can definitely keep it for some items, which are really important, like ‘A’ category items.
PURCHASE MANAGEMENT
Purchase manual is very necessary for every company. It provides the company with basic guidelines about how purchasing of materials should be done and also gives idea of purchase procedure. Siemens has and elaborate Purchase Manual formed by the MD and the directors. This manual helps the purchase manager in easy purchasing. It gives detailed explanation of purchase procedure. Besides all this the Purchase manual talks about “Ethics in Purchasing”. It informs the purchase manager about not taking bribes, gifts given by suppliers as it affects the negotiation power during vendor selection, rejection, rating, pricing etc. The most important thing the manual talk about is not taking advantage of suppliers regarding traffic i.e. it sends its own transportation for getting goods from suppliers godowns.
Siemens has no C&F department but it does have good logistic department as they have to get material from supplier with their own transport and not depend on supplier.
PURCHASE CYCLE/PROCEUDRE:-
Marketing
Forecasting
Broken into material
required- the stocks are
verified.
Decision of Price, Terms
& Conditions i.e. lead-time
ordering cost, vendor
selection by the Strat.
Purchase Dept.
Fed into the
Computer
Seen by all resp.
Purchase Mgrs.
& on that basis
quotations invited.
The best quotation is
considered.
Tallied with the Computer i.e. the info. is put in the computer and checked.
Rate contract for a year is made.
Order placed.
Fed into the computer.
The suppliers and resp. depts. receive purchase order copy.
When the order is recd. a GRN is made against P.O.
Goods are Inspected.
GRN is fed into the Computer
Computer verifies with the order placed.
Automatically sends copy to other dept. like accounts, stores purchase etc.
Order is rejected.
No Payment.
Explanation: -
The purchase cycle/procedure is fully computerised. At each step the system is there. Everything works according to the system, hence no one can skip steps, everyone has to work according to the policies laid down.
The above figure represents the Purchase cycle and Procedure.
The whole procedure starts with Market Forecasting. The market is studied and on basis of earlier demands future demands are predicted.
Once the production amount is known the amount of materials required is calculated (MRP). Stocks are verified. Inventory is checked.
Then the Strategic Purchase Department takes over. They make decisions regarding prices, terms and conditions and vendor selection.
All these decisions are fed into the computer. All units are made available of this decision due to the system.
The Unit Purchase manager on this basis calls for quotations from the vendors selected by Strategic purchase department.
All quotations are checked and the best one is selected. All the information of the selected quotation is again fed into the computer.
The computer checks if the quotation is according to the terms and conditions or not.
If it agrees then order is placed , if not then another vendor has to be selected and had to go again through the computer.
Once order is placed the information is fed into the computer and a purchase order is made, copies of which are send to all concerned departments.
All departments know that order has been placed and all will be ready for the arrival of the material.
On arrival a GRN (Goods Receipt Note) is made against the purchase order. Goods are inspected and on satisfactory note by inspection department the GRN is fed into the computer.
The computer again tallies with the Purchase order and if tallied it sends notice of satisfaction to other departments and if not then the order is rejected.
CREDIT & PAYMENT SYSTEM: -
There is a proper payment system, which is computerised too. The Credit period is 90 days from delivery. But then they can change it whenever required.
Arrival of Materials
Goods inspected & GRN copy sent to concerned depts.
If condition of COD, according to Terms and conditions Computer prepares Bill and asks to give cheque
If on credit terms then the computer keeps the bill ready after 90
.
Days warns the the accountantabout payment.
Immediately cheque is given out.
EXPALANATION: -
When the GRN is received, it is keyed into the computer.
The computer audits by comparing the item, the quantity and the price with corresponding information recorded in the updated purchase order files.
The computer also verifies the price extension.
Any discrepancies are noted on an output error list. If no discrepancies are found then the unit signals the accountant to prepare cheque for the amount specified less any applicable discounts.
This is the usual format for COD. Also for COD 1.5% cash discount is taken by Siemens from the suppliers.
In case of Credit payment the above procedure of verification is done and after 90days the computer signals the accountant to make payment.
STORES MANAGEMENT
Stores department is responsible for appropriate physical storage of all production materials, some in-process inventory, and finished goods. Storage provides both service and control functions.
(1) It generally organises and controls the flow of materials into the production operation
(2) It acts as a custodial and controlling agency. It is responsible for the safety and physical control of a substantial portion of a firm’s current asset.
(3) For many items the existence of stores operation permits quantity buying and the attendant savings in price, paperwork and handling.
RECIEPT, STORAGE and ISSUE PROCEDURE: -
When an order is received, the conventional receiving information is directly put into the computer records after inspection.
Reports are generated in multiple copies for concerned departments.
Materials are taken to Stores. The amount of materials is entered into the computer. So as and when materials is taken out the computer keeps updating making it easier for the stores person to know.
When material is required for production line, it is issued in a systematic form.
The person requiring the material has to get a requirement letter that the materials are required and should be having authorised signature. Usually Production manager’s signature is required.
Only then is the stores incharge allowed to remove materials.
On removing the stores person has to feed in the proper data of how much was removed.
This helps in proper maintenance of materials and avoids wastage. It also helps in easy stock verification, as all the stores incharge has to do is just check on computer. On an average it is checked every month. Though it is different for ‘A’, ‘B’ and ‘C’.
Storage is done on basis of:
(i) Physical size;
(ii) Fragility;
(iii) Cost;
(iv) Usage.
Siemens has some Principles regarding Storage. They are:
(1) Minimum effort for storing and retrieval.
(2) Minimum spoilage.
(3) Good visibility and control.
(4) Flexible.
FACILITIES: -
There is adequate facilities given for storing purpose.
• The layout is perfect. The stores are very much within the production premises.
• The distance between the production line and stores is minimum, so as to avoid costs on forklifts and other equipment’s of such type.
• Also the finished goods stores is also near the production line.
• Also there is sufficient space available so as for free movement of employees, materials and finished goods.
• There’s no sort of confusion and the operating cycle is less too.
• The whole premise is kept clean and neat at all times.
• There’s proper ventilation, lighting facilities and safety measures for the good of employees.
According to us the facilities are very much appropriate because they have taken care of all possible needs.
They do make Stock Statements. But since everything is under the system so is the Stock statement. It is done very time after stock is verified. The data in the computer is updated. So at any time correct information is available.
Siemens has following storage system
(1) 2-Bin System: Siemens has this system for ‘C’ category items. They have 2 bins on top of the other, 1 bin has amount filled to order quantity and other is filled with the rest. From the top bin material is removed as it comes to order quantity store persons reorder.
(2) Corosal system: This is a new sort of storage by Siemens. In this system there are bins hung up, like on conveyor belts. As and when material is required the bin is pulled down and material is taken out. This system is also connected to the computer. The required amount is specified and only whatever is needed is given by the system. Not a bit more, not a bit less. This helps in reducing wastage and also saves space in the premises. This system is there only in some units.
Besides this they have normal racks and shelves and bins for storage.
VENDOR SELECTION.
A good Supplier is and invaluable resource to the organisation requiring it’s product or service. Such suppliers make direct contribution to a firm’s success. They can assist their customers with product development, value analysis and timely delivery of the desired level of quality. Good buyer seller relationship facilitates the buyer’s efforts to gain superior performance, extra service, cooperation on cost reduction programs and a willingness to share in processes and procedures.
At Siemens, the Strategic Purchase department does selection of Vendors. Initially, basic information regarding the vendor is found out. Then if necessary factory visits are made. With the help of necessary information the company comes down to few vendors. Then the routine quotations are invited and then final vendor is selected.
Siemens follows Weighted Rate method. Under this method the vendors are rated on several basis like Quality, Price, Reliability and Service.
At Siemens vendors are rated on Quality and Reliability. Where, Quality rating is 60% and Reliability is 40%.
After calculating Quality and Reliability through the specific formulae, the found answers are multiplied by 0.6 and 0.4 respectively. And then added up to get total rating.
The vendors are monthly rated and every 3 months its published so as to inform the vendors.