Description
This is approved projects.
Synopsis Of ABC Analysis
Chapter 1 : Introduction 1.1. Introduction to Procurement
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. 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.
1.2.
Introduction to Inventory
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.
1.3.
Objective :i) ii) iii) iv) v) vi) vii) viii) Understand business requirements Identify opportunities where the procurement team adds true value To develop Strong relationship with internal customer by understanding there To meet the customer requirement timely, effectively, efficiently, smoothly and 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
requirement. satisfactorily.
of inventory.
1.4.
i) ii) iii)
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
1.5.
Company Profile
1.5.1. Introduction
Hindustan Motors Mfg. Co. is one of the leading Electric Motors Manufacturers in India having ISO 9001 Certification. We have experience of over more than 28 years in Design, Development and Manufacturing of Electric Motors. Hindustan Motor Manufacturing Co. caters the need of Machine Tools, Blowers and Fans, AirConditioners, Compressors, Material Handling Equipment, Cranes and Hoist, Textile Machinery, Cement Plant, Pharmaceutical Machinery, Packaging Machinery, Construction Equipment, General Engineering Applications and wide range of Applications.
1.5.2. India’s foremost manufacturer of Motors
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 activity and quick expansions, the action towards common goal to stand out as a strong, consistent group, constantly striving for improvement have driven Hindustan Motors to attain and achieve a leading position in the Indian Motor industry. Hindustan Motors, an ISO 9001:2000 company is the leading electric motor Manufacturer in India with a proven track record of over three decades. Hindustan group is set to achieve sales turnover of Rupees 22 million FY 09 -10.
From a modest beginning with electric motor unit in Andheri, over three decades ago Hindustan Motors set up state of art manufacturing facilities at Daman & Vapi. The last 3 decades have seen the core business develop along different product lines: - Crane Duty Motors, Cooling Tower Motors, Textile Motors, Inverter Duty Motors Brake Motors & other motors for customer specific application. In the manufacture of motor, a competitive edge lies not so much in product innovation as in providing consistent quality, guaranteeing reliability and ready availability. Our expansion in Daman & Vapi was to address these key market determinants. The manufacturing set up is sourced out from the world renowned Machinery and Technology suppliers with constant upgradation and expansions.
1.5.3. Mission Statement & Quality Policy 1. Mission Statement
We will be the leading Indian producer of Premium Quality Electric Motors catering to domestic and international markets, by establishing and maintaining the growth rate of 20% every year.
2. Quality Policy
•
We are committed to the Design and Manufacture of Premium Quality Motors 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.
•
•
To We will achieve this by regularly reviewing our QMS and continually improving upon the effectiveness of QMS.
1.5.4. Objective of the Organisation Our primary focus…..customer satisfaction
Hindustan Motors 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 on going process to improve Customer Satisfaction Hindustan Motors 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
Hindustan Motors has highly experienced qualified and dedicated professionals with strong adherence to the quality management system. Hindustan Motors 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. Hindustan Motors 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. Hindustan brand Motors 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 Hindustan Motors for most critical and specific applications.
1.5.5. Products Offered by the Company
1.5.6. Product of Perfection
Once you're in, go all the way! HMMC has them all - a complete range of products to suit all kind of industrial needs. And the range is complete. Motors with standard ratings and duty cycles; 3 phase squirrel cage motors with standard speeds and various constructions.
• • • • • • • •
Three Phase Motors from 0.093 to 315.0 kW Energy Efficient Motors from 2.2 to 315.0 kW Multi Speed Motors from 0.12 to 150.0 kW Flame Proof Motors from 0.18 to 90.0 kW Multi Speed Flame Proof Motors from 0.12 to 75.0 kW Crane Duty Motors from 0.18 to 30.0 kW Inverter Duty Motors from 0.75 to 315.0 kW Various types of Geared Motors:
o o o o o o o o
Inline Helical from 0.093 to 55.0 kW Aluminium Worm from 0.18 to 15.0 kW Parallel Shaft from 0.25 to 200 kW Heli-Worm from 0.25 to 22.0 kW Heli-Bevel from 0.25 to 200.0 kW Shaft Mounted Speed Reducers from 0.75 to 110.0 kW Large Helical Gear Boxes from 3.7 to 4000.0 kW Large Heli-Bevel Gear Boxes from 3.7 to 4000.0 kW
• • • • •
Textile Motors (Ring, Loom, Carding, Ginning & Spinning) from 0.55 to 15.0 kW Torque Motors from 0.037 to 5.5 kW Cooling Tower Motor 0.37 to 37.0 kW Brake Motors from 0.18 to 37.0 kW Special Application Motors:
o o o o
Dual Voltage / Dual Frequency Motors Low Vibration Motors for Machine Tools Motors for extreme climatic conditions Motors for Import substitute
HMMC caters to the need of machine tools, blowers and fans, air-conditioners, compressors, material handling equipment, cranes and hoist, textile machinery, cement plant, pharmaceutical machinery, packaging machinery, construction equipment, general engineering applications and wide range of applications. Our list of esteemed customers includes Voltas, Blue Star, HMT, WIDIA, Bajaj Electrical, Trumac, Mihir Engineers, Telco, Relience Industries, Lohia, Kolsite, Killick Nikson, and many more.
Chapter 2 : Review literature 2. Review literature
2.1. The Benefits of ABC Analysis for Inventory Reduction by Bruce D. Caldwell, C.P.M. President, CAPM(Connecticut Association of Purchasing Management) Inventory reduction has been a constant goal for all companies over the years. The shorter the time from customer order to cash in the bank the better. The fewer dollars tied up in inventory, the more money available for capital investment and expansion. Once a company accepts inventory as waste and not a necessary evil of business, inventory investment will be reduced to levels once thought impossible. Using the "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" 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. Also, "ABC" classifications can be used to design cycle counting schemes. Count "A" items more often than "B" items and "C" items possibly not at all. The "ABC" concept allows a manager to devote resources where it will have the biggest positive impact. Management by Exception!
2.2. History of Inventory Management
It is easy to believe that mechanized inventory control is inextricably tied to the computer revolution. Computers themselves evolved partly from the advanced mechanical calculator designed by Charles Babbage in the 1820s, however, and theoretical forbears of modern checkout systems existed at least as early as the 1930s. Forty years passed between these forbears and the advent of standardized barcode reading for inventory control. During these years electronic technology caught up with the projects and dreams of specialists in the field of inventory control And what is now called Point of Sale. In 1932 a Harvard University Business Administration team led by Wallace Flint came up with the first known automatic checkout/inventory control design. Their system never got further than Flint's masters thesis, but it was in some ways superior to actual systems that see action today. The HUBA team's system would work using punch-hole cards picked out by consumers. The cards would correspond to catalog items. The idea was that a machine would read the cards and pass the information over to the store room, where the appropriate items would be mechanically removed and moved by conveyor belts up to where the customer could pick it up. Machines would then create a customer bill and update inventory records to reflect the purchase. The planned system was too expensive to go into use.
Chapter 3: Procurement
3. Procurement
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. 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.
3.1.
I. II.
Objectives of Procurement
Support Operational Requirements Manage the Procurement Process and the Supply Base Efficiently and Effectively
3.2.
I.
Steps involved in Procurement
urchase Request:-
The specifications and number/quantity and delivery of equipment, devices and materials are determined by the department(s) that will be using the product(s) or materials. The Purchasing Department conducts purchase activities based on purchase requests submitted by the/these department(s). II. Selection of Companies:-
The Purchasing Department, at its sole discretion, selects companies from which estimates will be sought. Suppliers are selected from the files of "Companies with Previously Established Business Relationships", "Companies from Which Estimates Can Be Requested" and "Products and Suppliers". Selection is made by comprehensively evaluating such factors as the quality and performance of the equipment, device(s) or materials to be purchased, compatibility with existing facilities, degree of reliability, product requirements including safety, delivery time, the scale of the order, after-sale service and the company's previous business record. As a rule, Hindustan Motors Mfg. Co. asks several companies to submit estimates. III. Estimate Request:As a rule, when requesting an estimate from a company that it has selected, Hindustan Motors Mfg. Co. will set out a specification from listing Hindustan Motors Mfg. Co. requirements in respects of quality, performance standard, size, inspection and method of inspection. The selected companies will be asked to submit cost estimates and specifications to Hindustan Motors Mfg. Co. prior to a specified date.
IV.
Submission Estimate:Specification sheets submitted by potential suppliers at their own expense are checked by the Purchasing Department and the department(s) that will be using the product(s), in order to determine whether the required standards are met by the product(s). All products must pass this examination. During this process, Hindustan Motors Mfg. Co. may request additions or changes to the specifications.
V.
Negotiation:After valid cost estimates and specifications have been comprehensively evaluated in respect of price, technical requirements, etc. Hindustan Motors Mfg. Co. will commence negotiation with the company with the most attractive proposal to discuss the amount of the contract and other terms and conditions. The selection of such a company shall be made by Hindustan Motors Mfg. Co. at its sole discretion. Contract terms and conditions will be decided upon mutual agreement.
VI.
Contract Conclusion:-
The business will be established upon conclusion of a contract, in the form of a written document if necessary. The obligations and liabilities of Hindustan Motors Mfg. Co. arise only when such contract is concluded. VII. Delivery and Inspection:-
Delivery dates specified in the contract must be strictly observed. Precise details of the delivery schedule will be agreed between the supplier and the relevant department(s) of Hindustan Motors Mfg. Co. Delivered equipment, device(s) or materials must pass inspections conducted by the relevant department(s) of Hindustan Motors Mfg. Co. When deemed significant, an interim inspection may be conducted during the manufacturing process. VIII. Payment:-
Payment will be made according to the payment terms specified in the contract.
3.3.
Study Of The Procurement Process
3.3.1. Vendor Registration
One of the most important part of a procurement process is the Vendor ? The Company finds a list of vendors for the products which the company is seeking. ? The Assessment of the vendor is done. Example:• • Capacity to supply within required schedule Capability to meet Quality Requirements.
? The Department gets the catalogue of the product from the company to get the price of their products and negotiates on the discount offered or the company asks for the Quotation from the Vendor for the product. ? The Price decision is taken by the Purchase Manager in consultation with the Top Management. ? A contract is prepared which mentions the Lead time, Price, Credit Period and other aspects. ? A Trial Order is placed with the vendor. ? The quality of the order is checked by the quality department whether the order is as per the company’s standard. ? The company does this order checking for a maximum of 5 orders after which the quality is not checked and the vendor is added to the vendor list maintained for that particular product. ? The company always maintains a list of 2- 3 vendors at a time for a particular product(s). ? The List of the Vendors (also known as Approved Supplier’s List (ASL)) with the Product they offer is updated in SAP (Companies Database).
3.3.2. Material Ordering
? The Stores Manager takes stock of material every day. ? Whenever, the Stock goes below the minimum level (currently 1.5 months stock), the Stores Manager gives purchase requisition of Raw Materials/Tools/Parts to the Purchase Manager. ? The Purchase Manager then looks up in the SAP Module to find the list of vendors for a particular product and orders according to the lead time. ? In case of emergency i.e. urgent requirement of the materials the vendor is intimated and the Purchase Order is released mentioning the Lead time also. ? The Order processing i.e. methodology of sending the purchase order to the vendor is by email/fax/courier. ? The order received at the plant is verified by the Purchase order No. accompanying the order. ? The Material received goes to the Quality Control Department which inspects and gives the approval to the Stores Manager who prepares a Goods Receipt Note for the same. ? The same is intimated to the account department, so that the Account can process the payment details.
Chapter 4 : Inventory Management
4. Inventory Management
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.
4.1.
Controlling Inventory Levels
You can control the inventory levels in your business and provide a suitable supply for sales and production needs while minimizing the risk of excessive investment by: • • Maintaining clear, correct, and current records. Replenishing inventory through purchases or production in controlled quantities that will maintain suitable inventory levels with adequate safety stocks without permitting excesses to develop. • Reducing excessive inventories so that the dollars realized from clearing overstocks can be put to use elsewhere.
4.2.
Need for Prompt Action
Inventory problems require prompt corrective action. In many businesses, the market life of inventory is short and if inventory is insufficient when market demand peaks, sales and profits are lost. If inventory is excessive when demand declines, the excess must be cleared, often at sharply reduced prices, again affecting profits.
4.3.
Inventory
In a manufacturing or service business, the concept and valuation of inventory is a little more complex than in a merchandising business. But, the basic definition and valuation remain the same. Inventory consists of goods or services acquired for resale to customers. The value of the inventory is the cost of acquiring those goods and services. But 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.
4.4.
Features of an Inventory Control System:
The Inventory Control application captures information needed to provide analysis of inventory as it pertains to turnover ratios, accuracy, excess and obsolescence and transaction activity for inventory investment. The Inventory Control application also provides the ability to monitor inventory transactions, analyze inventory levels, classify (ABC) inventory for positive control and maintain a history of inventory use as a guide for better planning. 4.4.1. Specific features of the Inventory Control application include: • • • ABC Analysis and report. Inventory gross usage maintenance. Inventory re-order quantity maintenance including reorder quantities, reorder point & Safety Stock.
• •
Economic Order Quantity Processing. Stock Status Report.
Chapter 5 : Research Methodology
5. Research Methodology
Methodology of study refers to the methods used to collect the required data. The data required has been collected from the following sources:
5.1.
Primary Sources
Discussions with the concerned managers for details regarding the items to be procured and the executives in-charge of purchasing and store department.
5.2.
Secondary Sources
• • • The secondary data of the organization helped me a lot. I have collected all the figures from the SAP System and the database available. Records of the company: This helped me to get details in case of past data Standard Operating Procedures Manual.
Chapter 6: Data Analysis and Data Interpretation 6.1. Data Analysis
6.2.
ABC Analysis
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. 6.2.1. Usage of ABC Analysis • 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. • If A 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 Senior Executives of the company. B may be moderately controlled. Very little control can be exercised while issuing C class item.
6.2.2. ABC Analysis on Quantity of Raw Materials
Cumulative Description Polyester Woven Tape CRNGO Coil Fibre Glass Sleeve Total Ball Bearing Copper Wire Fibre Glass Cable Total Copper Rod Aluminum PVC Cable & Sleeve Aluminum Ingot Wire Assembly Flat, MS, 8x40 Bracket Round Bar Insulation Paper Fixon Tape Silicon Rubber Cable Sheet Pipe Magneto Bearing Angular Contact Ball Bearing Total Qty 803,500.00 499,463.89 191,560.00 1,494,523.89 145,426.00 118956.52 81,956.00 346,338.52 68,599.00 31,896.00 25,264.53 18,783.00 13,058.00 10,714.60 8,730.00 4,151.40 3473.62 2,640.00 1,320.00 953 17.5 2 1 189,603.65 Percent 39.57 24.60 9.43 7.16 5.86 4.04 3.38 1.57 1.24 0.93 0.64 0.53 0.43 0.20 0.17 0.13 0.07 0.05 0.00 0.00 0.00 Cumulative Percent 39.57 64.17 73.60 80.77 86.63 90.66 94.04 95.61 96.86 97.78 98.42 98.95 99.38 99.59 99.76 99.89 99.95 100.00 100.00 100.00 100.00 Class of tem
A A A
B B B C C C C C C C C C C C C C C C
6.2.3. ABC Analysis on Value of Raw Materials
Cumulative Description CRNGO Coil Copper Rod Copper Wire Total Ball Bearing Aluminium Aluminium Ingot Insulation Paper Value in Rs. 27,508,886.50 19,892,124.05 14,233,666.88 61,634,677.43 9,100,281.09 3,297,004.41 1,934,390.00 1,212,629.04 Percent 33.58 24.29 17.38 11.11 4.03 2.36 1.48 Cumulative Percent 33.58 57.87 75.25 86.36 90.38 92.74 94.22 Class of Item A A A B B B B
Fibre Glass Sleeve Total Wire Assembly Fibre Glass Cable Round Bar Flat, MS, 8x40 Polyester Wooven Tape Fixon Tape PVC Cable & Sleeve Sheet Bracket Silicon Rubber Cable Pipe Angular Contact Ball Bearing Magneto Bearing Total
1,049,111.84 16,593,416.38 1,044,650.88 834,525.74 678,942.21 425,360.00 305,330.00 178,526.47 116,871.40 41,752.29 36,957.14 16,849.10 1,662.50 575 214.2 3,682,216.93
1.28 1.28 1.02 0.83 0.52 0.37 0.22 0.14 0.05 0.05 0.02 0.00 0.00 0.00
95.50 96.78 97.80 98.63 99.15 99.52 99.74 99.88 99.93 99.98 100.00 100.00 100.00 100.00
B C C C C C C C C C C C C C
6.2.4. ABC Analysis of the Raw Materials
Class of Item A B C Quantity 1,494,523.89 346,338.52 189,603.65 Value 61,634,677.43 16,593,416.38 3,682,216.93
6.2.5. ABC Analysis on Quantity of Consumable Items
Class Cumulative Description Label Plastic Bag Earthing Sticker Operation & Maintenance Manual Routine Test Certificate Total Thinner PTFE Teflon Cable Varnish Paint Connection Diagram Sticker Total Paper Cord BOPP Tape Gasket Qty 51,010.00 49,233.20 34,540.00 26,265.00 22,000.00 183,048.20 10,631.00 10,500.00 7,878.00 7,570.00 7,200.00 43,779.00 5,000.00 3,570.00 2,556.00 Shellack 1,230.00 880 580 502 375 185 180 150 100 85 80 45 28 15 10 0.51 0.36 0.24 0.21 0.15 0.08 0.07 0.06 0.04 0.04 0.03 0.02 0.01 0.01 0.00 98.66 99.03 99.27 99.47 99.63 99.70 99.78 99.84 99.88 99.92 99.95 99.97 99.98 0.01 0.01 C C C C C C C C C C C C C C C Percent 21.04 20.31 14.25 10.83 9.08 4.39 4.33 3.25 3.12 2.97 2.06 1.47 1.05 Cumulative Percentage 21.04 41.35 55.60 66.43 75.51 79.89 84.22 87.47 90.60 93.57 95.63 97.10 98.16 of Item A A A A A B B B B B C C C
Compound Emery Paper Oil Cotton Mask Hand Gloves Anti Rust Liquid ZAM TRP MP Grease Straping Tape PVC NC Putty Brazing Rod Primer Locktite Thermal transfer ribbon Adhesive Delivery Challan
Material Issue Slip Tape BELT Nylon Lifting Belt Total
10 7 2 2 15,592.00
0.00 0.00 0.00 0.00
0.02 0.02 0.02 0.02
C C C C
6.2.6. ABC Analysis on Value of Consumable Items
Class Cumulative Description Paint Varnish Thinner Total Plastic Bag PTFE Teflon Cable Brazing Rod Oil Straping Tape PVC BOPP Tape Total Operation Value in Rs. 1,029,768.44 1,021,315.25 781,106.68 2,832,190.37 293,122.50 156,357.00 84274.66 81,218.78 80,364.00 78,216.00 773,552.94 & 53,685.76 48,669.85 28,517.60 28,227.20 19,860.87 19,675.60 1.38 1.25 0.73 0.72 0.51 0.51 0.50 0.43 0.28 0.25 0.19 0.18 0.09 0.07 0.07 0.04 0.04 0.04 0.03 93.99 95.24 95.97 96.69 97.20 97.71 98.21 98.64 98.92 99.17 99.36 99.53 99.63 99.70 99.77 99.81 99.85 99.88 99.91 C C C C C C C C C C C C C C C C C C C Percent 26.45 26.23 20.06 7.53 4.02 2.16 2.09 2.06 2.01 Cumulative of Percentage 26.45 52.68 72.74 80.27 84.28 86.45 88.53 90.60 92.61 Item A A A B B B B B B
Maintenance Manual Cord Label MP Grease Primer Routine Test Certificate Gasket Shellack
Compound 19,347.90 Anti Rust Liquid ZAM TRP Thermal transfer ribbon Hand Gloves Emery Paper NC Putty Paper Tape Adhesive Earthing Sticker Connection Diagram Sticker Delivery Challan Nylon Lifting Belt 16,920.00 10,800.17 9,706.72 7,473.80 6,819.05 3,570.00 2,800.28 2,645.55 1,662.10 1,440.00 1,404.00 1,242.35
Locktite Cotton Mask Material Issue Slip BELT Total
1220.8 1,077.90 728 360 287,855.50
0.03 0.03 0.02 0.01
99.94 99.97 99.99 100.00
C C C C
6.2.7. ABC Analysis of Consumable Items
Class of Item A B C Quantity 183,048.20 43,779.00 15,592.00 Value 2,832,190.37 773,552.94 287,855.50
6.2.8. ABC Analysis on Quantity of Hardware Items
Class Cumulative Description Washer - Plain Washer - Spring Nut Connecting lug Slotted Cheese Head Screw Staples Total Screw - Slotted Ch. Hd. Yellow plated 6.6 Name Plate Hex Bolt Yellow plated F/T 4.6 Allen bolt Washer - Wavy Earthing Bolt Conduit Plug Rubber Gasket Shaft Ext. Cover Key Total Cotter Pin Rubber Cord (Octagon) External Circlip Oilseal - Double lip type Eyebolt Stud Wiper Seal Resilient Mounting Base & Clamp Water Reflector Rubber Groumet Drain plug Dowel pin Resilient Ring Rubber Pad Capacitor mounting clamp Qty 1,151,360.00 1,081,500.00 977,083.00 870,400.00 505,725.00 460,030.00 5,046,098.00 316,150.00 239,941.00 181,816.00 141,797.00 83,805.00 79,771.00 77,900.00 71,360.00 67,705.00 66,589.00 1,326,834.00 56,600.00 52,030.00 48,500.00 43,083.00 33,600.00 32,940.00 32,235.00 29,498.00 28,250.00 25,834.00 25,000.00 19,465.00 16,128.00 7,676.00 6,584.00 Percent 16.85 15.83 14.30 12.74 7.40 6.73 Cumulative Percent 16.85 32.68 46.98 59.71 67.11 73.85 of Item A A A A A A
4.63 3.51 2.66 2.08 1.23 1.17 1.14 1.04 0.99 0.97 0.83 0.76 0.71 0.63 0.49 0.48 0.47 0.43 0.41 0.38 0.37 0.28 0.24 0.11 0.10
78.47 81.98 84.64 86.72 87.95 89.11 90.25 91.30 92.29 93.26 94.09 94.85 95.56 96.19 96.68 97.17 97.64 98.07 98.48 98.86 99.23 99.51 99.75 99.86 99.96
B B B B B B B B B B C C C C C C C C C C C C C C C
Dovetail Stator Rivet Total
1797 1122.2 460,342.20
0.03 0.02
99.98 100.00
C C
6.2.9. ABC Analysis on Value of Hardware Items
Class Cumulative Description Value Resilient Mounting Base & Clamp Name Plate Connecting lug Hex Bolt Yellow plated F/T 4.6 Eyebolt Oil seal - Double lip type Allen bolt Key Resilient Ring Washer - Wavy Rubber Cord (Octagon) Rubber Gasket Total Shaft Ext. Cover Washer - Plain Stud Nut Wiper Seal Earthing Bolt Rubber Groumet Water Reflector Washer - Spring Total Slotted Cheese Head Screw Staples Stator Rivet External Circlip Screw - Slotted Ch. Hd. Yellow plated 6.6 Conduit Plug Rubber Pad Capacitor mounting clamp Dowel pin Cotter Pin 665,017.43 644,099.49 622,996.69 389,115.15 379,870.40 370,486.93 273,569.89 258,719.37 218,536.61 200,609.31 194,134.73 193,550.29 4,410,706.29 181,925.45 180,791.68 146,348.82 143,078.31 133,918.33 132,095.96 116,454.45 105,616.62 93,354.27 1,233,583.89 89,938.05 77,125.30 75,921.22 65,443.45 63,982.95 56,596.50 53,263.36 41,005.76 32,566.96 30,954.75 Cumulative Percent Percent 10.65 10.32 9.98 6.23 6.09 5.93 4.38 4.14 3.50 3.21 3.11 3.10 2.91 2.90 2.34 2.29 2.15 2.12 1.87 1.69 1.50 1.44 1.24 1.22 1.05 1.02 0.91 0.85 0.66 0.52 0.50 10.65 20.97 30.95 37.18 43.27 49.20 53.59 57.73 61.23 64.44 67.55 70.65 73.57 76.46 78.81 81.10 83.25 85.36 87.23 88.92 90.41 91.86 93.09 94.31 95.36 96.38 97.29 98.14 98.80 99.32 99.81 of Item A A A A A A A A A A A A B B B B B B B B B C C C C C C C C C C
Drain plug Dovetail Total
8,155.20 3,428.63 598,382.13
0.13 0.05
99.95 100.00
C C
6.2.10. ABC Analysis of the of Hardware Items Class of Item A B C Quantity 5,046,098.00 1,326,834.00 460,342.20 Value 4,410,706.29 1,233,583.89 598,382.13
6.2.11.ABC Analysis on Quantity of Machined Component
Class Cumulative Description Delta Link Endshield NDE Thermocol Pack Terminal block Terminal box cover Body Corrugated Box Total Terminal box Fan cover Fan Total B5 Flange Wound Stator Shaft Pulley Clitted Stator B14 Face Bearing Cover Casting-Body Electrical Fitting Wooden Box Total Qty 164,500.00 111,860.00 101,370.00 59,367.00 58,874.00 57872 56,325.00 610,168.00 56,213.00 54,597.00 49,379.00 160,189.00 27,762.00 13,663.00 8287 6,906.00 6,457.00 4113 2,564.00 1,500.00 644 50 71,946.00 Percent 19.53 13.28 12.03 7.05 6.99 6.87 6.69 6.67 6.48 5.86 3.30 1.62 0.98 0.82 0.77 0.49 0.30 0.18 0.08 0.01 Cumulative Percent 19.53 32.81 44.84 51.89 58.88 65.75 72.44 79.11 85.60 91.46 94.75 96.38 97.36 98.18 98.95 99.44 99.74 99.92 99.99 100.00 of Item A A A A A A A B B B C C C C C C C C C C
6.2.12.ABC Analysis on Value of Machined Component
Class Cumulative Description Body Endshield NDE B5 Flange Value 24,809,017.91 8,398,200.27 5,459,497.14 Percent 45.66 15.46 10.05 Cumulative Of Percent 45.66 61.12 71.16 Item A A A
Total Thermocol Pack Corrugated Box Fan cover Pulley Wound Stator Shaft Total Terminal block B14 Face Clitted Stator Terminal box Fan Terminal box cover Casting-Body Delta Link Bearing Cover Electrical Fitting Wooden Box Total
38,666,715.32 2,767,103.90 2,547,357.63 1,947,538.55 1,897,282.08 1,484,186.00 1,227,779.39 11,871,247.55 993,958.27 512692.55 503,319.70 487,691.50 398,932.51 310,655.75 301,726.50 145,759.50 98,302.06 31,754.91 11,250.00 3,796,043.25
5.09 4.69 3.58 3.49 2.73 2.26 1.83 0.94 0.93 0.90 0.73 0.57 0.56 0.27 0.18 0.06 0.02
76.26 80.95 84.53 88.02 90.75 93.01 94.84 95.79 96.71 97.61 98.34 98.92 99.47 99.74 99.92 99.98 100.00
B B B B B B C C C C C C C C C C C
6.2.13. ABC Analysis of the Machined Components Class of Item A B C Quantity 610,168.00 160,189.00 71,946.00 Value 38,666,715.32 11,871,247.55 3,796,043.25
6.2.14. ABC Analysis on Quantity of Tools Type of Item
Cumulative Description Mop Wheel Parallel shank Twist drill Hammer Wire Stripper Total Tungsten Carbide Tipped Tools Painting Brush FILES Crocodile Pin Scissors Hacksaw Blade Hand Tapp Set Total Wire Brush Grinding Wheel Plier Continuity Tester Recoil Hose Pipe Allen Key Bit Finder Spanner Screw Driver Die Grinder Spray Gun Allen Socket Paper Cutting Machine Chisels Hand Crimping Tool Revolving Center Carbide Dead Center Drill Chuck Drill Machine Impact Wrench Measuring Tape Stamping Tool Total Qty 1,250.00 323 231 197 2,001.00 139 135 104 48 44 40 39 549.00 34 26 23 22 15 12 10 10 7 6 5 4 4 2 2 2 1 1 1 1 1 1 190.00 Percent 45.62 11.79 8.43 7.19
Cumulative Percent 45.62 57.41 65.84 73.03
Class of Item A A A A
5.07 4.93 3.80 1.75 1.61 1.46 1.42 1.24 0.95 0.84 0.80 0.55 0.44 0.36 0.36 0.26 0.22 0.18 0.15 0.15 0.07 0.07 0.07 0.04 0.04 0.04 0.04 0.04 0.04
78.10 83.03 86.82 88.58 90.18 91.64 93.07 94.31 95.26 96.09 96.90 97.45 97.88 98.25 98.61 98.87 99.09 99.27 99.42 99.56 99.64 99.71 99.78 99.82 99.85 99.89 99.93 99.96 100.00
B B B B B B B C C C C C C C C C C C C C C C C C C C C C C
6.2.15. ABC Analysis on Value of Tools Type of Material Cumulative Description Stamping Tool Mop Wheel Hammer Total Die Grinder Tungsten Carbide Value 346,800.00 71,535.00 47,399.98 465,734.98 46,215.80 Tipped 33,711.58 18,748.46 17,654.00 14,537.99 12,180.94 9,235.69 7,569.72 159,854.18 6120 5,133.52 5,037.83 4,514.62 4,242.03 3792.67 2,861.10 2,550.00 2,492.74 1828.64 1,401.28 1,302.54 646.05 519.34 363.04 302.16 288 288 284.85 234.6 181.3 60 44,444.31 5.03 2.80 2.63 2.17 1.82 1.38 1.13 0.91 0.77 0.75 0.67 0.63 0.57 0.43 0.38 0.37 0.27 0.21 0.19 0.10 0.08 0.05 0.05 0.04 0.04 0.04 0.04 0.03 0.01 81.44 84.24 86.87 89.04 90.86 92.24 93.37 94.28 95.05 95.80 96.47 97.11 97.67 98.10 98.48 98.85 99.12 99.33 99.53 99.62 99.70 99.76 99.80 99.84 99.89 99.93 99.96 99.99 100.00 B B B B B B B C C C C C C C C C C C C C C C C C C C C C C Percent 51.76 10.68 7.07 6.90 Cumulative Percent 51.76 62.43 69.51 76.41 Class of Item A A A B
Tools FILES Wire Brush Hand Tapp Set Impact Wrench Parallel shank Twist drill Spray Gun Total Bit Finder Wire Stripper Recoil Hose Pipe Grinding Wheel Scissors Plier Revolving Center Drill Machine Paper Cutting Machine Painting Brush Hand Crimping Tool Hacksaw Blade Continuity Tester Drill Chuck Screw Driver Carbide Dead Center Chisels Crocodile Pin Allen Key Allen Socket Spanner Measuring Tape Total
6.2.16. ABC Analysis of Tools Type of Material Class of Item A B C Quantity 2,001.00 549.00 190.00 Value 465,734.98 159,854.18 44,444.31
6.3.
Data Interpretation
Total Quantity A 183048.2 5046098 1494523.89 610168 2001 B 43779 1326834 346,338.52 C 15592 460342.2 189603.65
6.3.1. ABC analysis Summary of Material (Quantity) Item Category Consumable Hardware Raw Materials Machined Components Tools Consumed 242419.2 6833274.2 2030466.06 842303 2740
160,189.00 71946 549 190
6.3.2. ABC analysis Summary of Material (Value) Total Value of
Item Category Consumable Hardware Raw Materials Machined Components Tools
Consumables 3893598.81 6242672.31 81910310.74 54334006.12 670033.47
A 2832190.37 4410706.29 61634677.4 38666715.3 465734.98
B 773552.94 1233583.89 16593416.38 11871247.55 159854.18
C 287855.5 598382.13 3682216.93 3796043.25 44444.31
Chapter 7: FINDINGS AND RECOMMENDATION:
7.1. 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 The Quality Inspection is done by the Store Department on getting material this
which will help in reducing the Inventory in the company. ? 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.
7.2. Inventory
?
The Company maintains a stock of about 1.5 months of Inventory at any given The Company has not performed any analysis on the value front of material,
Point of time because of which large capital is locked in the same.
?
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.
?
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.
7.3. Miscellaneous
?
The Organization uses SAP but there are many employees who have not been The Plant Layout is also one area where the organization can have a look into
given any formal training on the same.
?
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.
Bibliography
• • • • • Technical Specifications Catalogue of HEM: Cat.: D03, print : 01/2010 www.hindmotors.comhttp://en.wikipedia.org/wiki/ABC_analysis Inventory Report exported from SAP system of HEM industries. Operation research – V. K. Kapoor
doc_491757532.doc
This is approved projects.
Synopsis Of ABC Analysis
Chapter 1 : Introduction 1.1. Introduction to Procurement
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. 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.
1.2.
Introduction to Inventory
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.
1.3.
Objective :i) ii) iii) iv) v) vi) vii) viii) Understand business requirements Identify opportunities where the procurement team adds true value To develop Strong relationship with internal customer by understanding there To meet the customer requirement timely, effectively, efficiently, smoothly and 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
requirement. satisfactorily.
of inventory.
1.4.
i) ii) iii)
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
1.5.
Company Profile
1.5.1. Introduction
Hindustan Motors Mfg. Co. is one of the leading Electric Motors Manufacturers in India having ISO 9001 Certification. We have experience of over more than 28 years in Design, Development and Manufacturing of Electric Motors. Hindustan Motor Manufacturing Co. caters the need of Machine Tools, Blowers and Fans, AirConditioners, Compressors, Material Handling Equipment, Cranes and Hoist, Textile Machinery, Cement Plant, Pharmaceutical Machinery, Packaging Machinery, Construction Equipment, General Engineering Applications and wide range of Applications.
1.5.2. India’s foremost manufacturer of Motors
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 activity and quick expansions, the action towards common goal to stand out as a strong, consistent group, constantly striving for improvement have driven Hindustan Motors to attain and achieve a leading position in the Indian Motor industry. Hindustan Motors, an ISO 9001:2000 company is the leading electric motor Manufacturer in India with a proven track record of over three decades. Hindustan group is set to achieve sales turnover of Rupees 22 million FY 09 -10.
From a modest beginning with electric motor unit in Andheri, over three decades ago Hindustan Motors set up state of art manufacturing facilities at Daman & Vapi. The last 3 decades have seen the core business develop along different product lines: - Crane Duty Motors, Cooling Tower Motors, Textile Motors, Inverter Duty Motors Brake Motors & other motors for customer specific application. In the manufacture of motor, a competitive edge lies not so much in product innovation as in providing consistent quality, guaranteeing reliability and ready availability. Our expansion in Daman & Vapi was to address these key market determinants. The manufacturing set up is sourced out from the world renowned Machinery and Technology suppliers with constant upgradation and expansions.
1.5.3. Mission Statement & Quality Policy 1. Mission Statement
We will be the leading Indian producer of Premium Quality Electric Motors catering to domestic and international markets, by establishing and maintaining the growth rate of 20% every year.
2. Quality Policy
•
We are committed to the Design and Manufacture of Premium Quality Motors 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.
•
•
To We will achieve this by regularly reviewing our QMS and continually improving upon the effectiveness of QMS.
1.5.4. Objective of the Organisation Our primary focus…..customer satisfaction
Hindustan Motors 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 on going process to improve Customer Satisfaction Hindustan Motors 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
Hindustan Motors has highly experienced qualified and dedicated professionals with strong adherence to the quality management system. Hindustan Motors 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. Hindustan Motors 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. Hindustan brand Motors 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 Hindustan Motors for most critical and specific applications.
1.5.5. Products Offered by the Company
1.5.6. Product of Perfection
Once you're in, go all the way! HMMC has them all - a complete range of products to suit all kind of industrial needs. And the range is complete. Motors with standard ratings and duty cycles; 3 phase squirrel cage motors with standard speeds and various constructions.
• • • • • • • •
Three Phase Motors from 0.093 to 315.0 kW Energy Efficient Motors from 2.2 to 315.0 kW Multi Speed Motors from 0.12 to 150.0 kW Flame Proof Motors from 0.18 to 90.0 kW Multi Speed Flame Proof Motors from 0.12 to 75.0 kW Crane Duty Motors from 0.18 to 30.0 kW Inverter Duty Motors from 0.75 to 315.0 kW Various types of Geared Motors:
o o o o o o o o
Inline Helical from 0.093 to 55.0 kW Aluminium Worm from 0.18 to 15.0 kW Parallel Shaft from 0.25 to 200 kW Heli-Worm from 0.25 to 22.0 kW Heli-Bevel from 0.25 to 200.0 kW Shaft Mounted Speed Reducers from 0.75 to 110.0 kW Large Helical Gear Boxes from 3.7 to 4000.0 kW Large Heli-Bevel Gear Boxes from 3.7 to 4000.0 kW
• • • • •
Textile Motors (Ring, Loom, Carding, Ginning & Spinning) from 0.55 to 15.0 kW Torque Motors from 0.037 to 5.5 kW Cooling Tower Motor 0.37 to 37.0 kW Brake Motors from 0.18 to 37.0 kW Special Application Motors:
o o o o
Dual Voltage / Dual Frequency Motors Low Vibration Motors for Machine Tools Motors for extreme climatic conditions Motors for Import substitute
HMMC caters to the need of machine tools, blowers and fans, air-conditioners, compressors, material handling equipment, cranes and hoist, textile machinery, cement plant, pharmaceutical machinery, packaging machinery, construction equipment, general engineering applications and wide range of applications. Our list of esteemed customers includes Voltas, Blue Star, HMT, WIDIA, Bajaj Electrical, Trumac, Mihir Engineers, Telco, Relience Industries, Lohia, Kolsite, Killick Nikson, and many more.
Chapter 2 : Review literature 2. Review literature
2.1. The Benefits of ABC Analysis for Inventory Reduction by Bruce D. Caldwell, C.P.M. President, CAPM(Connecticut Association of Purchasing Management) Inventory reduction has been a constant goal for all companies over the years. The shorter the time from customer order to cash in the bank the better. The fewer dollars tied up in inventory, the more money available for capital investment and expansion. Once a company accepts inventory as waste and not a necessary evil of business, inventory investment will be reduced to levels once thought impossible. Using the "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" 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. Also, "ABC" classifications can be used to design cycle counting schemes. Count "A" items more often than "B" items and "C" items possibly not at all. The "ABC" concept allows a manager to devote resources where it will have the biggest positive impact. Management by Exception!
2.2. History of Inventory Management
It is easy to believe that mechanized inventory control is inextricably tied to the computer revolution. Computers themselves evolved partly from the advanced mechanical calculator designed by Charles Babbage in the 1820s, however, and theoretical forbears of modern checkout systems existed at least as early as the 1930s. Forty years passed between these forbears and the advent of standardized barcode reading for inventory control. During these years electronic technology caught up with the projects and dreams of specialists in the field of inventory control And what is now called Point of Sale. In 1932 a Harvard University Business Administration team led by Wallace Flint came up with the first known automatic checkout/inventory control design. Their system never got further than Flint's masters thesis, but it was in some ways superior to actual systems that see action today. The HUBA team's system would work using punch-hole cards picked out by consumers. The cards would correspond to catalog items. The idea was that a machine would read the cards and pass the information over to the store room, where the appropriate items would be mechanically removed and moved by conveyor belts up to where the customer could pick it up. Machines would then create a customer bill and update inventory records to reflect the purchase. The planned system was too expensive to go into use.
Chapter 3: Procurement
3. Procurement
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. 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.
3.1.
I. II.
Objectives of Procurement
Support Operational Requirements Manage the Procurement Process and the Supply Base Efficiently and Effectively
3.2.
I.
Steps involved in Procurement
urchase Request:-The specifications and number/quantity and delivery of equipment, devices and materials are determined by the department(s) that will be using the product(s) or materials. The Purchasing Department conducts purchase activities based on purchase requests submitted by the/these department(s). II. Selection of Companies:-
The Purchasing Department, at its sole discretion, selects companies from which estimates will be sought. Suppliers are selected from the files of "Companies with Previously Established Business Relationships", "Companies from Which Estimates Can Be Requested" and "Products and Suppliers". Selection is made by comprehensively evaluating such factors as the quality and performance of the equipment, device(s) or materials to be purchased, compatibility with existing facilities, degree of reliability, product requirements including safety, delivery time, the scale of the order, after-sale service and the company's previous business record. As a rule, Hindustan Motors Mfg. Co. asks several companies to submit estimates. III. Estimate Request:As a rule, when requesting an estimate from a company that it has selected, Hindustan Motors Mfg. Co. will set out a specification from listing Hindustan Motors Mfg. Co. requirements in respects of quality, performance standard, size, inspection and method of inspection. The selected companies will be asked to submit cost estimates and specifications to Hindustan Motors Mfg. Co. prior to a specified date.
IV.
Submission Estimate:Specification sheets submitted by potential suppliers at their own expense are checked by the Purchasing Department and the department(s) that will be using the product(s), in order to determine whether the required standards are met by the product(s). All products must pass this examination. During this process, Hindustan Motors Mfg. Co. may request additions or changes to the specifications.
V.
Negotiation:After valid cost estimates and specifications have been comprehensively evaluated in respect of price, technical requirements, etc. Hindustan Motors Mfg. Co. will commence negotiation with the company with the most attractive proposal to discuss the amount of the contract and other terms and conditions. The selection of such a company shall be made by Hindustan Motors Mfg. Co. at its sole discretion. Contract terms and conditions will be decided upon mutual agreement.
VI.
Contract Conclusion:-
The business will be established upon conclusion of a contract, in the form of a written document if necessary. The obligations and liabilities of Hindustan Motors Mfg. Co. arise only when such contract is concluded. VII. Delivery and Inspection:-
Delivery dates specified in the contract must be strictly observed. Precise details of the delivery schedule will be agreed between the supplier and the relevant department(s) of Hindustan Motors Mfg. Co. Delivered equipment, device(s) or materials must pass inspections conducted by the relevant department(s) of Hindustan Motors Mfg. Co. When deemed significant, an interim inspection may be conducted during the manufacturing process. VIII. Payment:-
Payment will be made according to the payment terms specified in the contract.
3.3.
Study Of The Procurement Process
3.3.1. Vendor Registration
One of the most important part of a procurement process is the Vendor ? The Company finds a list of vendors for the products which the company is seeking. ? The Assessment of the vendor is done. Example:• • Capacity to supply within required schedule Capability to meet Quality Requirements.
? The Department gets the catalogue of the product from the company to get the price of their products and negotiates on the discount offered or the company asks for the Quotation from the Vendor for the product. ? The Price decision is taken by the Purchase Manager in consultation with the Top Management. ? A contract is prepared which mentions the Lead time, Price, Credit Period and other aspects. ? A Trial Order is placed with the vendor. ? The quality of the order is checked by the quality department whether the order is as per the company’s standard. ? The company does this order checking for a maximum of 5 orders after which the quality is not checked and the vendor is added to the vendor list maintained for that particular product. ? The company always maintains a list of 2- 3 vendors at a time for a particular product(s). ? The List of the Vendors (also known as Approved Supplier’s List (ASL)) with the Product they offer is updated in SAP (Companies Database).
3.3.2. Material Ordering
? The Stores Manager takes stock of material every day. ? Whenever, the Stock goes below the minimum level (currently 1.5 months stock), the Stores Manager gives purchase requisition of Raw Materials/Tools/Parts to the Purchase Manager. ? The Purchase Manager then looks up in the SAP Module to find the list of vendors for a particular product and orders according to the lead time. ? In case of emergency i.e. urgent requirement of the materials the vendor is intimated and the Purchase Order is released mentioning the Lead time also. ? The Order processing i.e. methodology of sending the purchase order to the vendor is by email/fax/courier. ? The order received at the plant is verified by the Purchase order No. accompanying the order. ? The Material received goes to the Quality Control Department which inspects and gives the approval to the Stores Manager who prepares a Goods Receipt Note for the same. ? The same is intimated to the account department, so that the Account can process the payment details.
Chapter 4 : Inventory Management
4. Inventory Management
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.
4.1.
Controlling Inventory Levels
You can control the inventory levels in your business and provide a suitable supply for sales and production needs while minimizing the risk of excessive investment by: • • Maintaining clear, correct, and current records. Replenishing inventory through purchases or production in controlled quantities that will maintain suitable inventory levels with adequate safety stocks without permitting excesses to develop. • Reducing excessive inventories so that the dollars realized from clearing overstocks can be put to use elsewhere.
4.2.
Need for Prompt Action
Inventory problems require prompt corrective action. In many businesses, the market life of inventory is short and if inventory is insufficient when market demand peaks, sales and profits are lost. If inventory is excessive when demand declines, the excess must be cleared, often at sharply reduced prices, again affecting profits.
4.3.
Inventory
In a manufacturing or service business, the concept and valuation of inventory is a little more complex than in a merchandising business. But, the basic definition and valuation remain the same. Inventory consists of goods or services acquired for resale to customers. The value of the inventory is the cost of acquiring those goods and services. But 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.
4.4.
Features of an Inventory Control System:
The Inventory Control application captures information needed to provide analysis of inventory as it pertains to turnover ratios, accuracy, excess and obsolescence and transaction activity for inventory investment. The Inventory Control application also provides the ability to monitor inventory transactions, analyze inventory levels, classify (ABC) inventory for positive control and maintain a history of inventory use as a guide for better planning. 4.4.1. Specific features of the Inventory Control application include: • • • ABC Analysis and report. Inventory gross usage maintenance. Inventory re-order quantity maintenance including reorder quantities, reorder point & Safety Stock.
• •
Economic Order Quantity Processing. Stock Status Report.
Chapter 5 : Research Methodology
5. Research Methodology
Methodology of study refers to the methods used to collect the required data. The data required has been collected from the following sources:
5.1.
Primary Sources
Discussions with the concerned managers for details regarding the items to be procured and the executives in-charge of purchasing and store department.
5.2.
Secondary Sources
• • • The secondary data of the organization helped me a lot. I have collected all the figures from the SAP System and the database available. Records of the company: This helped me to get details in case of past data Standard Operating Procedures Manual.
Chapter 6: Data Analysis and Data Interpretation 6.1. Data Analysis
6.2.
ABC Analysis
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. 6.2.1. Usage of ABC Analysis • 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. • If A 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 Senior Executives of the company. B may be moderately controlled. Very little control can be exercised while issuing C class item.
6.2.2. ABC Analysis on Quantity of Raw Materials
Cumulative Description Polyester Woven Tape CRNGO Coil Fibre Glass Sleeve Total Ball Bearing Copper Wire Fibre Glass Cable Total Copper Rod Aluminum PVC Cable & Sleeve Aluminum Ingot Wire Assembly Flat, MS, 8x40 Bracket Round Bar Insulation Paper Fixon Tape Silicon Rubber Cable Sheet Pipe Magneto Bearing Angular Contact Ball Bearing Total Qty 803,500.00 499,463.89 191,560.00 1,494,523.89 145,426.00 118956.52 81,956.00 346,338.52 68,599.00 31,896.00 25,264.53 18,783.00 13,058.00 10,714.60 8,730.00 4,151.40 3473.62 2,640.00 1,320.00 953 17.5 2 1 189,603.65 Percent 39.57 24.60 9.43 7.16 5.86 4.04 3.38 1.57 1.24 0.93 0.64 0.53 0.43 0.20 0.17 0.13 0.07 0.05 0.00 0.00 0.00 Cumulative Percent 39.57 64.17 73.60 80.77 86.63 90.66 94.04 95.61 96.86 97.78 98.42 98.95 99.38 99.59 99.76 99.89 99.95 100.00 100.00 100.00 100.00 Class of tem
A A A
B B B C C C C C C C C C C C C C C C
6.2.3. ABC Analysis on Value of Raw Materials
Cumulative Description CRNGO Coil Copper Rod Copper Wire Total Ball Bearing Aluminium Aluminium Ingot Insulation Paper Value in Rs. 27,508,886.50 19,892,124.05 14,233,666.88 61,634,677.43 9,100,281.09 3,297,004.41 1,934,390.00 1,212,629.04 Percent 33.58 24.29 17.38 11.11 4.03 2.36 1.48 Cumulative Percent 33.58 57.87 75.25 86.36 90.38 92.74 94.22 Class of Item A A A B B B B
Fibre Glass Sleeve Total Wire Assembly Fibre Glass Cable Round Bar Flat, MS, 8x40 Polyester Wooven Tape Fixon Tape PVC Cable & Sleeve Sheet Bracket Silicon Rubber Cable Pipe Angular Contact Ball Bearing Magneto Bearing Total
1,049,111.84 16,593,416.38 1,044,650.88 834,525.74 678,942.21 425,360.00 305,330.00 178,526.47 116,871.40 41,752.29 36,957.14 16,849.10 1,662.50 575 214.2 3,682,216.93
1.28 1.28 1.02 0.83 0.52 0.37 0.22 0.14 0.05 0.05 0.02 0.00 0.00 0.00
95.50 96.78 97.80 98.63 99.15 99.52 99.74 99.88 99.93 99.98 100.00 100.00 100.00 100.00
B C C C C C C C C C C C C C
6.2.4. ABC Analysis of the Raw Materials
Class of Item A B C Quantity 1,494,523.89 346,338.52 189,603.65 Value 61,634,677.43 16,593,416.38 3,682,216.93
6.2.5. ABC Analysis on Quantity of Consumable Items
Class Cumulative Description Label Plastic Bag Earthing Sticker Operation & Maintenance Manual Routine Test Certificate Total Thinner PTFE Teflon Cable Varnish Paint Connection Diagram Sticker Total Paper Cord BOPP Tape Gasket Qty 51,010.00 49,233.20 34,540.00 26,265.00 22,000.00 183,048.20 10,631.00 10,500.00 7,878.00 7,570.00 7,200.00 43,779.00 5,000.00 3,570.00 2,556.00 Shellack 1,230.00 880 580 502 375 185 180 150 100 85 80 45 28 15 10 0.51 0.36 0.24 0.21 0.15 0.08 0.07 0.06 0.04 0.04 0.03 0.02 0.01 0.01 0.00 98.66 99.03 99.27 99.47 99.63 99.70 99.78 99.84 99.88 99.92 99.95 99.97 99.98 0.01 0.01 C C C C C C C C C C C C C C C Percent 21.04 20.31 14.25 10.83 9.08 4.39 4.33 3.25 3.12 2.97 2.06 1.47 1.05 Cumulative Percentage 21.04 41.35 55.60 66.43 75.51 79.89 84.22 87.47 90.60 93.57 95.63 97.10 98.16 of Item A A A A A B B B B B C C C
Compound Emery Paper Oil Cotton Mask Hand Gloves Anti Rust Liquid ZAM TRP MP Grease Straping Tape PVC NC Putty Brazing Rod Primer Locktite Thermal transfer ribbon Adhesive Delivery Challan
Material Issue Slip Tape BELT Nylon Lifting Belt Total
10 7 2 2 15,592.00
0.00 0.00 0.00 0.00
0.02 0.02 0.02 0.02
C C C C
6.2.6. ABC Analysis on Value of Consumable Items
Class Cumulative Description Paint Varnish Thinner Total Plastic Bag PTFE Teflon Cable Brazing Rod Oil Straping Tape PVC BOPP Tape Total Operation Value in Rs. 1,029,768.44 1,021,315.25 781,106.68 2,832,190.37 293,122.50 156,357.00 84274.66 81,218.78 80,364.00 78,216.00 773,552.94 & 53,685.76 48,669.85 28,517.60 28,227.20 19,860.87 19,675.60 1.38 1.25 0.73 0.72 0.51 0.51 0.50 0.43 0.28 0.25 0.19 0.18 0.09 0.07 0.07 0.04 0.04 0.04 0.03 93.99 95.24 95.97 96.69 97.20 97.71 98.21 98.64 98.92 99.17 99.36 99.53 99.63 99.70 99.77 99.81 99.85 99.88 99.91 C C C C C C C C C C C C C C C C C C C Percent 26.45 26.23 20.06 7.53 4.02 2.16 2.09 2.06 2.01 Cumulative of Percentage 26.45 52.68 72.74 80.27 84.28 86.45 88.53 90.60 92.61 Item A A A B B B B B B
Maintenance Manual Cord Label MP Grease Primer Routine Test Certificate Gasket Shellack
Compound 19,347.90 Anti Rust Liquid ZAM TRP Thermal transfer ribbon Hand Gloves Emery Paper NC Putty Paper Tape Adhesive Earthing Sticker Connection Diagram Sticker Delivery Challan Nylon Lifting Belt 16,920.00 10,800.17 9,706.72 7,473.80 6,819.05 3,570.00 2,800.28 2,645.55 1,662.10 1,440.00 1,404.00 1,242.35
Locktite Cotton Mask Material Issue Slip BELT Total
1220.8 1,077.90 728 360 287,855.50
0.03 0.03 0.02 0.01
99.94 99.97 99.99 100.00
C C C C
6.2.7. ABC Analysis of Consumable Items
Class of Item A B C Quantity 183,048.20 43,779.00 15,592.00 Value 2,832,190.37 773,552.94 287,855.50
6.2.8. ABC Analysis on Quantity of Hardware Items
Class Cumulative Description Washer - Plain Washer - Spring Nut Connecting lug Slotted Cheese Head Screw Staples Total Screw - Slotted Ch. Hd. Yellow plated 6.6 Name Plate Hex Bolt Yellow plated F/T 4.6 Allen bolt Washer - Wavy Earthing Bolt Conduit Plug Rubber Gasket Shaft Ext. Cover Key Total Cotter Pin Rubber Cord (Octagon) External Circlip Oilseal - Double lip type Eyebolt Stud Wiper Seal Resilient Mounting Base & Clamp Water Reflector Rubber Groumet Drain plug Dowel pin Resilient Ring Rubber Pad Capacitor mounting clamp Qty 1,151,360.00 1,081,500.00 977,083.00 870,400.00 505,725.00 460,030.00 5,046,098.00 316,150.00 239,941.00 181,816.00 141,797.00 83,805.00 79,771.00 77,900.00 71,360.00 67,705.00 66,589.00 1,326,834.00 56,600.00 52,030.00 48,500.00 43,083.00 33,600.00 32,940.00 32,235.00 29,498.00 28,250.00 25,834.00 25,000.00 19,465.00 16,128.00 7,676.00 6,584.00 Percent 16.85 15.83 14.30 12.74 7.40 6.73 Cumulative Percent 16.85 32.68 46.98 59.71 67.11 73.85 of Item A A A A A A
4.63 3.51 2.66 2.08 1.23 1.17 1.14 1.04 0.99 0.97 0.83 0.76 0.71 0.63 0.49 0.48 0.47 0.43 0.41 0.38 0.37 0.28 0.24 0.11 0.10
78.47 81.98 84.64 86.72 87.95 89.11 90.25 91.30 92.29 93.26 94.09 94.85 95.56 96.19 96.68 97.17 97.64 98.07 98.48 98.86 99.23 99.51 99.75 99.86 99.96
B B B B B B B B B B C C C C C C C C C C C C C C C
Dovetail Stator Rivet Total
1797 1122.2 460,342.20
0.03 0.02
99.98 100.00
C C
6.2.9. ABC Analysis on Value of Hardware Items
Class Cumulative Description Value Resilient Mounting Base & Clamp Name Plate Connecting lug Hex Bolt Yellow plated F/T 4.6 Eyebolt Oil seal - Double lip type Allen bolt Key Resilient Ring Washer - Wavy Rubber Cord (Octagon) Rubber Gasket Total Shaft Ext. Cover Washer - Plain Stud Nut Wiper Seal Earthing Bolt Rubber Groumet Water Reflector Washer - Spring Total Slotted Cheese Head Screw Staples Stator Rivet External Circlip Screw - Slotted Ch. Hd. Yellow plated 6.6 Conduit Plug Rubber Pad Capacitor mounting clamp Dowel pin Cotter Pin 665,017.43 644,099.49 622,996.69 389,115.15 379,870.40 370,486.93 273,569.89 258,719.37 218,536.61 200,609.31 194,134.73 193,550.29 4,410,706.29 181,925.45 180,791.68 146,348.82 143,078.31 133,918.33 132,095.96 116,454.45 105,616.62 93,354.27 1,233,583.89 89,938.05 77,125.30 75,921.22 65,443.45 63,982.95 56,596.50 53,263.36 41,005.76 32,566.96 30,954.75 Cumulative Percent Percent 10.65 10.32 9.98 6.23 6.09 5.93 4.38 4.14 3.50 3.21 3.11 3.10 2.91 2.90 2.34 2.29 2.15 2.12 1.87 1.69 1.50 1.44 1.24 1.22 1.05 1.02 0.91 0.85 0.66 0.52 0.50 10.65 20.97 30.95 37.18 43.27 49.20 53.59 57.73 61.23 64.44 67.55 70.65 73.57 76.46 78.81 81.10 83.25 85.36 87.23 88.92 90.41 91.86 93.09 94.31 95.36 96.38 97.29 98.14 98.80 99.32 99.81 of Item A A A A A A A A A A A A B B B B B B B B B C C C C C C C C C C
Drain plug Dovetail Total
8,155.20 3,428.63 598,382.13
0.13 0.05
99.95 100.00
C C
6.2.10. ABC Analysis of the of Hardware Items Class of Item A B C Quantity 5,046,098.00 1,326,834.00 460,342.20 Value 4,410,706.29 1,233,583.89 598,382.13
6.2.11.ABC Analysis on Quantity of Machined Component
Class Cumulative Description Delta Link Endshield NDE Thermocol Pack Terminal block Terminal box cover Body Corrugated Box Total Terminal box Fan cover Fan Total B5 Flange Wound Stator Shaft Pulley Clitted Stator B14 Face Bearing Cover Casting-Body Electrical Fitting Wooden Box Total Qty 164,500.00 111,860.00 101,370.00 59,367.00 58,874.00 57872 56,325.00 610,168.00 56,213.00 54,597.00 49,379.00 160,189.00 27,762.00 13,663.00 8287 6,906.00 6,457.00 4113 2,564.00 1,500.00 644 50 71,946.00 Percent 19.53 13.28 12.03 7.05 6.99 6.87 6.69 6.67 6.48 5.86 3.30 1.62 0.98 0.82 0.77 0.49 0.30 0.18 0.08 0.01 Cumulative Percent 19.53 32.81 44.84 51.89 58.88 65.75 72.44 79.11 85.60 91.46 94.75 96.38 97.36 98.18 98.95 99.44 99.74 99.92 99.99 100.00 of Item A A A A A A A B B B C C C C C C C C C C
6.2.12.ABC Analysis on Value of Machined Component
Class Cumulative Description Body Endshield NDE B5 Flange Value 24,809,017.91 8,398,200.27 5,459,497.14 Percent 45.66 15.46 10.05 Cumulative Of Percent 45.66 61.12 71.16 Item A A A
Total Thermocol Pack Corrugated Box Fan cover Pulley Wound Stator Shaft Total Terminal block B14 Face Clitted Stator Terminal box Fan Terminal box cover Casting-Body Delta Link Bearing Cover Electrical Fitting Wooden Box Total
38,666,715.32 2,767,103.90 2,547,357.63 1,947,538.55 1,897,282.08 1,484,186.00 1,227,779.39 11,871,247.55 993,958.27 512692.55 503,319.70 487,691.50 398,932.51 310,655.75 301,726.50 145,759.50 98,302.06 31,754.91 11,250.00 3,796,043.25
5.09 4.69 3.58 3.49 2.73 2.26 1.83 0.94 0.93 0.90 0.73 0.57 0.56 0.27 0.18 0.06 0.02
76.26 80.95 84.53 88.02 90.75 93.01 94.84 95.79 96.71 97.61 98.34 98.92 99.47 99.74 99.92 99.98 100.00
B B B B B B C C C C C C C C C C C
6.2.13. ABC Analysis of the Machined Components Class of Item A B C Quantity 610,168.00 160,189.00 71,946.00 Value 38,666,715.32 11,871,247.55 3,796,043.25
6.2.14. ABC Analysis on Quantity of Tools Type of Item
Cumulative Description Mop Wheel Parallel shank Twist drill Hammer Wire Stripper Total Tungsten Carbide Tipped Tools Painting Brush FILES Crocodile Pin Scissors Hacksaw Blade Hand Tapp Set Total Wire Brush Grinding Wheel Plier Continuity Tester Recoil Hose Pipe Allen Key Bit Finder Spanner Screw Driver Die Grinder Spray Gun Allen Socket Paper Cutting Machine Chisels Hand Crimping Tool Revolving Center Carbide Dead Center Drill Chuck Drill Machine Impact Wrench Measuring Tape Stamping Tool Total Qty 1,250.00 323 231 197 2,001.00 139 135 104 48 44 40 39 549.00 34 26 23 22 15 12 10 10 7 6 5 4 4 2 2 2 1 1 1 1 1 1 190.00 Percent 45.62 11.79 8.43 7.19
Cumulative Percent 45.62 57.41 65.84 73.03
Class of Item A A A A
5.07 4.93 3.80 1.75 1.61 1.46 1.42 1.24 0.95 0.84 0.80 0.55 0.44 0.36 0.36 0.26 0.22 0.18 0.15 0.15 0.07 0.07 0.07 0.04 0.04 0.04 0.04 0.04 0.04
78.10 83.03 86.82 88.58 90.18 91.64 93.07 94.31 95.26 96.09 96.90 97.45 97.88 98.25 98.61 98.87 99.09 99.27 99.42 99.56 99.64 99.71 99.78 99.82 99.85 99.89 99.93 99.96 100.00
B B B B B B B C C C C C C C C C C C C C C C C C C C C C C
6.2.15. ABC Analysis on Value of Tools Type of Material Cumulative Description Stamping Tool Mop Wheel Hammer Total Die Grinder Tungsten Carbide Value 346,800.00 71,535.00 47,399.98 465,734.98 46,215.80 Tipped 33,711.58 18,748.46 17,654.00 14,537.99 12,180.94 9,235.69 7,569.72 159,854.18 6120 5,133.52 5,037.83 4,514.62 4,242.03 3792.67 2,861.10 2,550.00 2,492.74 1828.64 1,401.28 1,302.54 646.05 519.34 363.04 302.16 288 288 284.85 234.6 181.3 60 44,444.31 5.03 2.80 2.63 2.17 1.82 1.38 1.13 0.91 0.77 0.75 0.67 0.63 0.57 0.43 0.38 0.37 0.27 0.21 0.19 0.10 0.08 0.05 0.05 0.04 0.04 0.04 0.04 0.03 0.01 81.44 84.24 86.87 89.04 90.86 92.24 93.37 94.28 95.05 95.80 96.47 97.11 97.67 98.10 98.48 98.85 99.12 99.33 99.53 99.62 99.70 99.76 99.80 99.84 99.89 99.93 99.96 99.99 100.00 B B B B B B B C C C C C C C C C C C C C C C C C C C C C C Percent 51.76 10.68 7.07 6.90 Cumulative Percent 51.76 62.43 69.51 76.41 Class of Item A A A B
Tools FILES Wire Brush Hand Tapp Set Impact Wrench Parallel shank Twist drill Spray Gun Total Bit Finder Wire Stripper Recoil Hose Pipe Grinding Wheel Scissors Plier Revolving Center Drill Machine Paper Cutting Machine Painting Brush Hand Crimping Tool Hacksaw Blade Continuity Tester Drill Chuck Screw Driver Carbide Dead Center Chisels Crocodile Pin Allen Key Allen Socket Spanner Measuring Tape Total
6.2.16. ABC Analysis of Tools Type of Material Class of Item A B C Quantity 2,001.00 549.00 190.00 Value 465,734.98 159,854.18 44,444.31
6.3.
Data Interpretation
Total Quantity A 183048.2 5046098 1494523.89 610168 2001 B 43779 1326834 346,338.52 C 15592 460342.2 189603.65
6.3.1. ABC analysis Summary of Material (Quantity) Item Category Consumable Hardware Raw Materials Machined Components Tools Consumed 242419.2 6833274.2 2030466.06 842303 2740
160,189.00 71946 549 190
6.3.2. ABC analysis Summary of Material (Value) Total Value of
Item Category Consumable Hardware Raw Materials Machined Components Tools
Consumables 3893598.81 6242672.31 81910310.74 54334006.12 670033.47
A 2832190.37 4410706.29 61634677.4 38666715.3 465734.98
B 773552.94 1233583.89 16593416.38 11871247.55 159854.18
C 287855.5 598382.13 3682216.93 3796043.25 44444.31
Chapter 7: FINDINGS AND RECOMMENDATION:
7.1. 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 The Quality Inspection is done by the Store Department on getting material this
which will help in reducing the Inventory in the company. ? 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.
7.2. Inventory
?
The Company maintains a stock of about 1.5 months of Inventory at any given The Company has not performed any analysis on the value front of material,
Point of time because of which large capital is locked in the same.
?
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.
?
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.
7.3. Miscellaneous
?
The Organization uses SAP but there are many employees who have not been The Plant Layout is also one area where the organization can have a look into
given any formal training on the same.
?
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.
Bibliography
• • • • • Technical Specifications Catalogue of HEM: Cat.: D03, print : 01/2010 www.hindmotors.comhttp://en.wikipedia.org/wiki/ABC_analysis Inventory Report exported from SAP system of HEM industries. Operation research – V. K. Kapoor
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