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Excellence in Operations

Project Report
On

Whirlpool Inventory Management

Ex-PGDM (2015-16)Group 3
Azad Kumar (07)
Chanthy Prom(10)
Deepak Abraham (12)
Rahul Gupta (24)
Samarjit Singha (29)
Chhunhak Ven (11)

Under the guidance of


Alok Kumar Singh

Table of Contents

Sl.no
1
2
3
4
5
6
7
8
9

Contents

Page no.

Introduction
Literature Review
Problem Statement
Research methodology
Data analysis and interpretation
Result and Discussions
Conclusion
Limitations of the study
References

INTRODUCTION

3
5
7
8
9
16
17
18
19

Every organization needs inventory for smooth running of its activities. It serves as a
link between production and distribution processes. The investment in inventories constitutes the
most significant part of current assets/working capital in most of the undertakings. Thus, it is very
essential to have proper control and management of inventories. The purpose of inventory
management is to ensure availability of materials in sufficient quantity as and when required and
also to minimise investment in inventories. Raw materials, goods in process and finished goods
all represent various forms of inventory. Each type represents money tied up until the inventory
leaves the company as purchased products. Because of the large size of the inventories
maintained by firms, a considerable amount of funds is required to be committed to them. It is
therefore absolutely imperative to manage inventories efficiently and effectively in order to avoid
unnecessary investments.
In our project, we have selected to study washing machine components inventory
management of Whirlpool at Faridabad. Whirlpool Corporation is the worlds leading
manufacturer and marketer of major home appliances. Whirlpool Corporation is the worlds
leading manufacturer and marketer of major home appliances. Washing Machines, Dryer, Dishwashers, Refrigerators, Freezers, Cookers, Micro-wave Ovens, Room air-conditioners, Small
Kitchen Appliances, etc. Whirlpool of India Limited, a fully owned by Whirlpool Inc, US, ($12
billion), a leading global consumer durable player. Whirlpool of India limited manufactures and
markets refrigerators and washing machines.
Whirlpool has invested heavily in its manufacturing facilities in India. While the factories
in Faridabad and Pondicherry have been upgraded to meet the exacting world class standard of
Whirlpool, the one under the construction at Ranjangaon, Pune will set the standards as one of
the worlds front runners in environmental sensitive and eco-friendly manufacturing units.
The refrigerator facilitated at Faridabad in Haryana manufactures direct cool. Infusion of
technology and up gradation of machinery along with streamlining of processed has enhanced the
plant capacity from 7,00,000 units to 8,50,000 units annually. Whirlpools focus at this plan in on
manufacturing refrigerators that are made to suit Indian conditions and requirements, while
matching Whirlpool global quality standard. Types of Washing Machine at Whirlpool are the
below:

Semi Automatic

Fully Automatic

Horizontal Axis

Whitemagic H 70 | 7 kg

H 65 | 6 Kg

Sensation EX | 6.5 Kg

Whitemagic S 70 | 7 kg

F-65 | 6 Kg

Sensation EM | 6.5 Kg

Whitemagic Super-Soak | 6.2 Kg

FP 65 | 6 Kg

Whitemagic E 65 | 6.2 Kg

FP 60 DLX | 6 Kg

Whitemagic S60-Buzz | 6 Kg

FP Splash | 5 Kg

Whitemagic SI 60 | 6.2 Kg
Every organization needs inventory for smooth running of its activities. It serves as a link
between production and distribution processes. The investment in inventories constitutes the most
significant part of current assets/working capital in most of the undertakings. Thus, it is very
essential to have proper control and management of inventories. The purpose of inventory
management is to ensure availability of materials in sufficient quantity as and when required and
also to minimize investment in inventories. So, in order to understand the nature of inventory
management of the organization, we took this Inventory Management as a topic for my project, to
give findings and suggestions by adopting and analyzing different inventory control techniques.

REVIEW OF LITERATURE

Inventory generally refers to the materials in stock. It is also called the idle resource of a
company. Inventories represent those items which are either stocked for sale or they are in the
process of manufacturing or they are in the form of materials which are yet to be utilized. It also
refers to the stockpile of the products a firm would sell in future in the normal course of business
operations and the components that make up the product. Inventory management is the integrated
functioning of an organization dealing with supply of materials and allied activities in order to
achieve the maximum co-ordination and optimum expenditure on materials. Inventory control is
the most important function of inventory management and it forms the nerve center in any
inventory management organization. An Inventory Management System is an essential element in
an organization. It is comprised of a series of processes, which provide an assessment of the
organizations inventory.
A manufacturing firm generally carries the following types of inventories:

Raw Materials.

Bought out parts.

Work-in-process inventory (WIP).

Finished goods inventories.

Maintenance, repair and operating stores.

Tools inventory.

Miscellaneous inventory.

Goods in transit.

Goods for resale.

Scrap Material.

REASONS FOR HOLDING INVENTORY

To stabilize production.

To take advantage of price discounts.

To meet the demand during the replenishment period.

To prevent loss of orders.

To keep pace with changing market conditions.

COSTS ASSOCIATED WITH INVENTORY

Capital cost.

Ordering cost.

Carrying cost.

Shortage cost.

INVENTORY CONTROL
The main objective of inventory control is to achieve maximum efficiency in production &
sales with minimum investment in inventory. Inventory control is a planned approach of
determining what to order, when to order and how much to order and how much to stock, so that
costs associated with buying and storing are optimal without interrupting production and sales.
The benefits of inventory control are:

Improvement in customers relationship because of the timely delivery of goods and


services.

Smooth and uninterrupted production and hence, no stock out.

Efficient utilization of working capital.

Economy in purchasing.

Eliminating the possibility of duplicate ordering.

PROBLEM STATEMENT
To analyze the efficiency of Inventory Management of Whirlpool of India Ltd.
We will be using inventory management tools for studying the efficiency of Inventory
Management of Whirlpool. This will help us to identify optimum level of inventory which
minimizes the cost, identify the safety stock level for various components & classify the various
components based on its value and movements.

RESEARCH METHODOLOGY
The research design used in this project is Analytical in nature the procedure using, which
researcher has to use facts or information already available, and analyze these to make a critical
evaluation of the performance.
Primary Sources
1.

Data are collected through personal interviews and discussion with Executives.

Secondary Sources
1.

The data are collected from the annual reports maintained by the company for the

past six years viz., 2002-2007


2.

Data are collected from the companys website.

3.

Books and journals pertaining to the topic.

TOOLS USED IN THE ANALYSIS

Economic Order Quantity.

Safety Stock.

ABC Analysis.

FSN Analysis.

PERIOD OF STUDY
The period of the study at Whirlpool of India Limited, Puducherry is for one month.

DATA ANALYSIS AND INTERPRETATION


ECONOMIC ORDER QUANTITY (EOQ)
Economic Order Quantity is the Inventory management technique for determining
optimum order quantity which is the one that minimises the total of its order and carrying costs.
The quantity to be purchased should neither be small nor big because costs of buying and
carrying materials are very high. Economic order quantity is the size of the lot to be purchased
which is economically viable. This is the quantity of materials which can be purchased at
minimum costs.
FORMULA FOR CALCULATING ECONOMIC ORDER QUANTITY (EOQ)

SL.N

Components

Demand
Per
Year

ReOrder
Cost/
order

Holding
Cost/unit/y
ear

EOQ

No. of
units
Ordered

No of
order per
year

Bearing - Ball
Sealed 6006
Driven Pulley NBO - China
(Same pulley)
Wash timer Eco Dlx
(Ningbo) - With
buzzer (S60)
Heater (WW)
Pig tail
connector-3.0
Seal drive tube Swift
WW Motor Welling

360500

18300

57433.2

39000

6.3

240100

2550

40

5532.9

26000

43.4

30000

2550

5531.7

3250

5.4

21700
360250

7050
9300

3
3

10099.0
47260.4

2340
39000

2.1
7.6

43000

9300

12

8163.9

4550

5.3

90100

9300

18

9649.0

9750

9.3

2
3

4
5
6
7

8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23

Splash Motor
Clamp tub
Suspension
Spring Assly FLT
70 (Fimstud)
Door Lock - High
End
Ball BearingOuter, FLT70
Heating Element
, High/Mid
End,FLT70
Pressostat,
FLT70
Timer T2EC6018-FLT
Water
Distribution
Actuator, FLT70
Shock Absorber
Assy, FLT70
Universal Motor
Assy, Mid&High
End,FLT70
Window
Glass,FLT70
Drain Pump, FLT
On / Off Switch
Low end (Push
button switch)
Thermostat
Variable, Low
End, FLT70
Tub Sealing,
FLT70

50000
66700
7300

9300
15150
15000

18
4
3

7188.0
22477.8
8544.0

4550
7215
780

7.0
3.0
0.9

1900

23100

6625.0

195

0.3

3700

12600

6827.9

390

0.5

1900

12600

3459.8

195

0.5

3700

12600

4318.3

390

0.9

1900

13350

4112.2

195

0.5

1900

11850

3874.3

195

0.5

7300

14700

10359.1

780

0.7

1900

73800

19

3841.9

195

0.5

3700

34650

13

4441.2

390

0.8

1900
1900

30150
11550

2
4

7568.7
3312.5

195
195

0.3
0.6

1900

12750

3480.3

195

0.5

3700

2550

3071.6

390

1.2

ANALYSIS & INTERPRETATION:


In the above table the EOQ & the no. of orders purchased per year for various
components are calculated. The calculated EOQ is compared with the no. of units of each
component purchased in the organization. It is found that, there is a variation in the EOQ & no. of
unit purchased. It is understood that the company is not following EOQ for purchasing the
materials & therefore the inventory management is not satisfactory.

SAFETY STOCK

Safety stocks are the minimum additional inventory which serves as a safety margin to
meet an unanticipated increase in usage resulting from an unusually high demand and an
uncontrollable late receipt of incoming inventory. If the level of safety stock is maintained is
high, it locks up the capital and there is a possibility of risk of obsolescence. On the other hand, if
it is low, there is a risk of stock out because of which there may be stoppage of production. When
the variation in lead time is predominant, the safety stock can be computed as:
Safety Stock = (Maximum Lead time- Normal Lead time) * Demand

SL.No
1
2
3

4
5
6
7
8
9
10
11
12
13
14
15
16
17

Components

Max. Lead Time

Bearing - Ball Sealed


6006
Driven Pulley - NBO China (Same pulley)
Wash timer - Eco Dlx
(Ningbo) - With buzzer
(S60)

1.27

Normal
Lead Time
0.166

Demand
3,60,500

Safety
Stock
3,97,992

Re-order
Point
1254

0.25

0.166

2,40,100

20,168

164

0.27

0.166

30,000

3,120

22

Heater (WW)
Pig tail connector-3.0
Seal drive tube - Swift
WW Motor - Welling
Splash Motor
Clamp tub
Suspension Spring Assly
FLT 70 (Fimstud)
Door Lock - High End
Ball Bearing-Outer,
FLT70
Heating Element ,
High/Mid End,FLT70
Pressostat, FLT70
Timer T2-EC6018-FLT
Water Distribution
Actuator, FLT70
Shock Absorber Assy,
FLT70

0.26
0.27
1.3
0.27
0.98
1.3
1.4

0.166
0.166
0.166
0.166
0.166
0.166
0.166

21,700
3,60,250
43,000
90,100
50,000
66,700
7,300

2,040
37,466
48,762
9,370
40,700
75,638
9,008

15
266
153
67
134
238
28

0.27
0.25

0.166
0.166

1,900
3,700

198
311

1
3

0.27

0.166

1,900

198

0.26
0.98
0.25

0.166
0.166
0.166

3,700
1,900
1,900

348
1,547
160

3
5
1

0.36

0.166

7,300

1,416

7.2

18

Universal Motor Assy,


Mid&High End,FLT70
Window Glass,FLT70
Drain Pump, FLT
On / Off Switch Low end
(Push button switch)
Thermostat Variable,
Low End, FLT70
Tub Sealing, FLT70

19
20
21
22
23

0.27

0.166

1,900

198

1.3
1.3
0.26

0.166
0.166
0.166

3,700
1,900
1,900

4,196
2,155
179

13
7
1

0.98

0.166

1,900

1,547

0.27

0.166

3,700

385

ANALYSIS & INTERPRETATION

In the above table, safety stock for the various components calculated is shown. Actual
demand is given for each component for a period of 1 year and the lead-time is calculated at a
maximum of 100 days & normal of 60 days and these were converted into per annum. So, from
calculation of safety stock, we can able to determine how much the company can hold the
inventory in reserve stock per annum.

ABC ANALYSIS
The ABC system is a widely used classification technique to identify various items of
inventory for purposes of inventory control. On the basis of unit cost involved, the various items
are classified into 3 categories:
(1) A, consisting of items with the large investment,
(2) C, with relatively small investments but fairly large number of items and
(3) B, which stands mid-way between category A & C.
Category A needs the most rigorous control, C requires minimum attention and B deserves less
attention than A but more than C.
SL.No

Components

Demand

Unit
Cost

Annual Dollar
Volume

Percent of
Annual
Dollar
Volume

Class

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23

Driven Pulley - NBO - China


(Same pulley)
WW Motor - Welling
Pig tail connector-3.0
Bearing - Ball Sealed 6006
Clamp tub
Splash Motor
Seal drive tube - Swift
Heater (WW)
Wash timer - Eco Dlx
(Ningbo) - With buzzer
(S60)
Timer T2-EC6018-FLT
Universal Motor Assy,
Mid&High End,FLT70
Shock Absorber Assy, FLT70
Tub Sealing, FLT70
Pressostat, FLT70
Suspension Spring Assly
FLT 70 (Fimstud)
Heating Element , High/Mid
End,FLT70
Water Distribution Actuator,
FLT70
Door Lock - High End
Ball Bearing-Outer, FLT70
Drain Pump, FLT
Window Glass,FLT70
Thermostat Variable, Low
End, FLT70
On / Off Switch Low end
(Push button switch)

2,40,100

3,500

84,03,50,000

39.99%

90,100
3,60,250
3,60,500
66,700
50,000
43,000
21,700
30,000

3,500
600
500
2,500
3,000
2,500
2,200
1,200

31,53,50,000
21,61,50,000
18,02,50,000
16,67,50,000
15,00,00,000
10,75,00,000
4,77,40,000
3,60,00,000

15.01%
10.29%
8.58%
7.94%
7.14%
5.12%
2.27%
1.71%

A
A
B
B
B
B
B
B

1,900
1,900

5,750
3,500

1,09,25,000
66,50,000

0.52%
0.32%

C
C

7,300
3,700
3,700
7,300

700
1,100
1,000
300

51,10,000
40,70,000
37,00,000
21,90,000

0.24%
0.19%
0.18%
0.10%

C
C
C
C

1,900

1,100

20,90,000

0.10%

1,900

800

15,20,000

0.07%

1,900
3,700
1,900
3,700
1,900

700
350
400
200
260

13,30,000
12,95,000
7,60,000
7,40,000
4,94,000

0.06%
0.06%
0.04%
0.04%
0.02%

C
C
C
C
C

1,900

200

3,80,000

0.02%

Total

Categories
A
B
C

Total No. Items in


Classes
3
6
14
23

Percentage
13.0%
26.1%
60.9%

2,10,13,44,000

Percentage of Total
Cost
65.28%
32.75%
1.96%

ANALYSIS & INTERPRETATION:


The above table shows the classification of various components as A, B & C classes using
ABC analysis techniques based on unit value. From the classification A classes are those whose
constitutes 13% of total components. B classes constitute 26.1% of total components and C
classes constitute 60.9% of total components. It is good that the company maintains its
inventories based on its value using controlling techniques.

FSN ANALYSIS
All the items in the inventory are not required at the same frequency. Some are required
regularly, some occasionally and some very rarely. FSN classifies items into Fast moving, Slow
moving and Non-moving.
FAST MOVING ITEMS
Bearing - Ball Sealed 6006
Driven Pulley - NBO - China (Same pulley)
Wash timer - Eco Dlx (Ningbo) - With buzzer (S60)
Heater (WW)
Pig tail connector-3.0
Seal drive tube Swift
WW Motor-Welling
Splash Motor

SLOW MOVING ITEMS


Clamp tub Suspension Spring Assly FLT 70 (Fimstud)
Door Lock - High End Ball Bearing-Outer, FLT70
Heating Element , High/Mid End,FLT70
Pressostat, FLT70 Timer T2-EC6018-FLT
Water Distribution Actuator, FLT70
Shock Absorber Assy, FLT70
Universal Motor Assy, Mid&High End,FLT70
Window Glass,FLT70
Drain Pump, FLT
On / Off Switch Low end (Push button switch)
Thermostat Variable, Low End, FLT70
Tub Sealing, FLT70

Categories
F
S
N

Total No. Items in


Classes
8
15
0
23

Percentage
34.8%
65.2%
0.0%
100.0%

ANALYSIS & INTERPRETATION:


In the above table shows the classification of various components as FSN items using
FSN analysis techniques based on movements. From the classification F items are those which
moves fast and constitutes 34.8% of total components. S items are those which moves slowly
constitute 65.2% of total components and N items are those which dont move (Non-moving
items). According to data given, there are no Non-moving items. It is not good as the company
maintains low percentage in moving items.

RESULT AND DISCUSSIONS


It is found that, there is a variation in the EOQ & no. of unit purchased. It is understood
that the company is not following EOQ for purchasing the materials. So, the inventory
management is not satisfactory. This will increase the cost & reduce the profit of the
company.
The company is required to maintain safety stock for its components in order to avoid
stock-out conditions & help in continuous production flow.
Under ABC analysis, the management must have more control on A than B&C, because A
class constitutes more (45%) of higher values. There should be tight control exercised on
stock levels, to avoid deterioration. This is done through maintaining low safety stock,
continuous check on schedules & ordered frequently in inventories, in order to avoid over
investment of working capital.
The company must not go to the Non-moving items as far as possible, because there will
be unnecessary blocking of working capital. This would hinder the other activities of the
organization.

CONCLUSION
A better inventory management will surely be helpful in solving the problems the
company is facing with respect to inventory and will pave way for reducing the huge investment
or blocking of money in inventory. From the analysis we can conclude that the Company can
follow the Economic Order Quantity (EOQ) for optimum purchase and it can maintain safety
stock for its components in order to avoid stock-out conditions & help in continuous production
flow. This would reduce the cost and enhance the profit. Also there should be tight control
exercised on stock levels based on ABC analysis & maintain high percentage in fast moving
items in inventories as per on FSN analysis for efficient running of the inventory.

LIMITATIONS OF THE STUDY

The entire analysis applies only to Whirlpool India Ltd, Faridabad.

The study takes into account only the quantitative data and the qualitative aspects were not
taken into account.

The assumption made in the EOQ and Safety stock formulas restrict the use of the formula. In
practice, unit cost, lead time, requirements of inventory items are not accurately predictable.
Rate of consumption varies in many cases. As such application of the formula often becomes
a difficult and complicated matter.

ABC analysis is not one time exercise and items are to be reviewed and recategorised
periodically.

REFERENCES

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