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Inventory management
CONTENTS
_________________________________________________________________
• Acknowledgement
• Declaration
• Certificate
• An Introduction
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• An Introduction to GIL
• Important Products
• History Milestones
• Members of Management Body
• A Chronological View of product Information
• Social Activities
• Market Share
• Significance of Logo
• Primary and Secondary Objectives
• Vision
• Mission
• Important Customers
• Japanese Practices of 5-S
• Organizational Set up
• Organizational Chart
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SECTION – B: INTRODUCTION TO INVENTORY MANAGEMENT
AND INVENTORY MANAGEMENT IN FMGIL
• Research Objectives
• Research Methodology
SECTION – E: BIBLIOGRAPHY
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Nothing concrete can be achieved without optimum combination of inspection and perspiration. Like
All other studies, this work is also result of the interaction of a number of minds who directly or
Indirectly have contributed for completing this project. I owe a lot to many for the inspection part
It is very difficult to acknowledge so precious a dept as that of learning as that of learning as it’s the
only debt that is difficult to repay expect through gratitude
It is great honor and privilege and pleasure to express deep since of gratitude to MS.KAVITA
CHOPRA (project guide) to placing complete faith and confidence in my ability to carry out this study
and for providing me their inspiration, encouragement, help, valuable guidance, constructive criticism
and constraint interest. They took personal interest in spite of their numerous commitment and busy
schedule to help me complete my project .my project would not have seen the light of day without
their masterly guidance and overwhelming help.
It gives me tremendous pleasure in acknowledging the valuable assistance extended to me by various
Personalities in successful completion of this project report.
Pooja rani
CERTIFICATE
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This project report is her original piece of work & has not been
submitted for any other degree at this or any other institute to best of my knowledge
PROJECT GUIDE
KAVITA CHOPRA
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Chapter 1
Introduction
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Pt. J.L.Nehru
The above quoted lines by the great soul Pt.J.L.Nehru rightly tell us learning is a very necessary
Part in ones life of one wants to achieve success &have proper knowledge about a particular aspect.
Thus, the objective of my project report was to get more knowledge and to go beyond the bookish that
gives
Merely theoretical knowledge and to closely look at the practicality of the modern industry.
The project was carried at. FEDERAL MOGHUL GOETZE (INDIA) LIMITED, Bahadurgarh,
Inventory control system, material planning and purchasing, categorization of items, valuation of
Inventory etc.
The first section of the report is company profile, which includes the introduction of organization
Group, a brief overview of FEDERAL MOGHUL GOETZE INDIA LIMITED and finance aspects at
FMGIL.
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In the section-C and D, research findings are described which are used to gather the necessary
information and suggestions regarding different aspects of inventory management are included.
.
The last section of the report section-E includes Bibliography.
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Federal-Mogul has been creating value through innovation and leading technology for
More than 100 years. Today, the company is a key player in the global marketplace,
Serving industries that range from automotive and commercial vehicles to railroad and
This company started with a bold idea and over time grew into a FORTUNE 500
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Company with a global workforce thousands strong. The Federal-Mogul team has
Celebrated countless victories and worked hard to overcome the inevitable challenges.
The products basket besides pistons and piston rings also includes cylinder liners,
Light alloy castings and other sintered products. The company has its plants located at
Bangalore (pistons, piston rings and pins), Bhiwadi (sintered products) .The company
Has set up its first unit at Patiala (piston, rings, cylinder liners and castings). and
GIL has installed production capacity of 11 million pistons and 53 million piston
Rings.
Escorts Mahler Ltd. was a 50:50 joint venture between Escorts Ltd. & Mahle GmbH (Mahle)
manufacturing Pistons & Piston Pins at Bangalore & Patiala. Pursuant to the disengagement &
share purchase agreement among Escorts Ltd, Mahle & Escorts –Mahle Ltd. Mahle had
decided to exit from the joint venture & sell its entire share holding in Escorts- Mahle Ltd.
Having decided to exit from this joint venture, also sold its entire share holding in Escorts-
Mahle Ltd.
In view of the fact that the businesses of the Escorts-Mahle and Goetz (India) Ltd., are closely
inter-linked and have obvious financial and technical synergies due to common locations of
plants, common customers, complementary products etc., it was considered advisable in the
interest of the company to acquire the share capital of the Escorts-Mahle Ltd. through the
special purpose vehicle (100% subsidiary). The new company named “ESCORTS PISTONS
LTD.” came to existence on Nov.1, 2002.
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Further, Escorts Pistons Ltd. was amalgamated with Goetz (India) Ltd. on May 26, 2003 and
w.e.f. June 2003, the name of the company is “GOETZE INDIA LTD.”
About Federal-Mogul
Federal-Mogul is a global supplier of automotive components, modules and systems serving the
world's original equipment manufacturers and the aftermarket industry. The company utilizes its
engineering and materials expertise, proprietary technology, manufacturing skill, distribution
flexibility and marketing power to deliver quality products and services, and leading brands. Federal-
Mogul is focused on driving global profitable growth and creating value to satisfy customer, employee
and stakeholder expectations.
Headquartered in Southfield, Michigan, the Company, which reported sales of $6.3 billion in 2005,
employs 42,000 people worldwide. Federal-Mogul was founded in Detroit in 1899. The Company’s
principal customers include many of the world’s foremost original equipment manufacturers of
automotive, light commercial, heavy-duty truck, agricultural, marine, rail and industrial vehicles and
equipment as well as the worldwide aftermarket.
Federal-Mogul’s products are sold under a variety of power brands, including but not limited to, AE®
engine products, ANCO® wipers, Champion® spark plugs and wipers, Fell-Pro® gaskets, Ferodo®
brake pads, Glycol® bearings, Goetz® piston rings, Moog® chassis products, National® wheel-end
components, Neural® pistons, Pain® gaskets, Sealed Power® engine products and Wagner® lighting
and brake products
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Quality Policy
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GOETZE (INDIA) LIMITED commits itself to leadership in national market for all its
products and ensuring total customers’ satisfaction highest in industry. It commits to
develop and build an image in the international market to achieve a sustained annual
growth in exports.
Policy
We shall continue to manufacture all our products in conformity with accepted
international norms/ standards.
Consistent development of human resources through training at all levels will be our
major thrust area.
ANIL NANDA
(Chairman & Managing Director)
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IMPORTANT PRODUCTS
Pistons
For their original equipment, FEDERAL MOGUL Pistons is the first choice of every
discerning manufacturer like Telco, John Deere, Hindustan Motors, Mitsubishi Lancer, Tata
Cummins, Ashok Leyland, Mahindra, Escorts, Either, Maruti, Bajaj Auto, Fiat, Bajaj Tempo,
TVS, Yamaha motors, Swaraj Mazda etc.
GOETZE has state of the art test bed facilities, Design facilities for products, dies and tooling
with CAD — PRO—E and test bed facilities.
Application
• Bi-Wheelers,
• Cars,
• Jeeps,
• Tractors,
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• Light Commercial Vehicles,
• Stationary Engine
• Industrial
• 4 Stroke Engines
• 2 Stroke Engines
• Gasoline Engines
• • Diesel Engines
• CNG Engines
Features
• Autothermic
• Autothermatic
• Forged
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GOETZE Piston Rings are the first preference of OEMs & ‘after market’ in
India. GOETZE has state of the art design facilities for products, tooling with CAD—PRO-E
and test bed facilities.
• Bi-wheelers
• Tractors
• Locomotive Engines
• Stationary Engines
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• Semi-Inlaid Rings
Salient Features
• Keystone
• Napier
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Cylinder Liners
GOETZE manufactures wet and dry types of cylinder liners with honing, and sleeves for bi-
wheeler applications for our quality conscious customers.
Application
• Bi-wheelers
• Cars
• Tractors
• Stationary Engines
Features
• Thin wailed
• Plateau boned
Coating
• Phosphating
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Goetze (India) Ltd. is making a wide variety of Light Metal Castings. These include Cylinder
Blocks, Cylinder Heads, Aluminum tube castings and Aluminum crown handles for single
cylinder engines.
Goetze India Limited (Sintered Products Division), produces a wide range of sintered metal
products for varied automotive applications such as valve, trains, transmission and oil pumps
with technical assistance from manufacturing facilities and R&D centers of Federal mogul
sintered products in U.K., France and USA.
Goetze (India) Limited (Sintered Product Division) are suppliers to most of the O.EMs in India
and abroad. Some of these are:-
• Eicher Motors
• Mahindra & Mahindra
• Escorts
• Swaraj Mazda
• Ashok Leyland
• Hero Honda
Valve seat inserts and valve guides are a special category of sintered components for new
generation engines. Goetze India limited (Sintered Product Division) uses latest technology /
processes along with specially sourced powder Little wonder that auto majors manufacturing
engines for varied applications such as two/three wheelers, passenger cars, LCV MCV’s, HCV
and tractors prefer GIL Sintered Products.
Synchronizer Hubs
Sintered Synchronizer Hubs offer a very cost effective alternative to conventional hubs and at
the same time, meet the ever-increasing performance requirement of automotive designers.
Sintered Oil pump rotor & gears are one of the widest used sintered application in an
automotive industries. Goetze India Limited (Sintered Products Division) with support from
Federal Mogul Sintered Products’ R&D centers has developed its own capabilities to design
and manufacture oil pump motors.
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HISTORY MILESTONES
MEMBERS OF
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MANAGEMENT BODY
Chairman (Non-Executive) Mr. Charles B. Grant
Vice Chairman, Managing Director
Mr. Arun Anand
& C.E.O.
Director Mr. Rainer Jueckstock
Director Mr. Charles H. Polzin
Director Mr. Mukul Gupta
Director Mr. Vishvjeet Kanwarpal
Management
Managing Director and Chief Executive Officer Mr. Arun Anand
Corporate Leaders
Executive Director - Sales, Marketing & Applications Mr. Mohan Narayanan
a. Original Equip. Sales Mr. Yogesh Choudhary
b. Aftermarket & Sales Mr. Sanjeev Singh
c. Exports Mr. G. S. Arshi
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1954 Piston Rings and Cylinder Liners
1960 Pistons
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Goetze 36.5
Perfect Circle 12.0
IP Ring 16.5
Shriram Piston 22.5
SAMKRG Piston 9.0
Menon Piston 3.5
Goetze
9 3.5
Perfect Circle
36.5
22.5 IP Rings
Shriram Piston
SAMKRG Piston
16.5 12
Menon Piston
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EXPORT DESTINATION
♠ Dubai
♠ Bangladesh
♠ Singapore
♠ Egypt
♠ Mauritius
♠ U.S.A
♠ Germany
♠ Nepal
♠ Sri Lanka
COLLABORATIONS
A. GERMANY
♠ Faun
♠ Class
B. JAPAN
♠ Yamaha
♠ Kayaka
♠ Mikni
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C. UK
♠ JCB (Goetze)
♠ Ford
D. USA
♠ HUGHES
E. FRANCE
♠ Bosch
♠ Dynapal
SIGNIFICANCE OF LOGO
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The logo of Federal Mogul Goetz (India) Limited has been prepared with certain
So, overall, the logo represents GIL’s concern for Workmanship, Quality and Technology.
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“Steadily moving towards leadership with piston with vision strategy seeing
it as the best way to leaders in business”
Certifications Achieved
The Patiala and Bangalore Plant are both ISO 9001 I QS 9000 certified and under ISO I TS
16949 and ISO 14001 certification. Bhiwadi Plant is also having the certification of ISO / TS
— 16949/ISO 14000 certified.
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IMPORTANT CUSTOMERS
• BajajAutoLtd
• Indian Railways
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• Kirloskar Oil Engines Ltd.
This enables the plant to have better working conditions and also increase work efficiency. A
copy of it also displayed at each shop and depth to motivate the employee towards healthy
work environment.
Benefits:
Arrange. all necessary items in a proper order so that they can be easily picked up for use
Benefits:
Maintain a high standard of house keeping and work place organizational at all times
Benefits:
Benefits:
1. Self Di scipline
Advantages of 5S
• Safe Working
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• High Morale and Better Life
ORGANISATION SET UP
1. Finance Department
2. Personnel Department
3. Purchase and Store Department
4. Production Department
FINANCE DEPARTMENT
D.G.M. (Finance), Patiala who is directly responsible to Plant Head (Finance and Accounts), one of
the most reputed Functional Department in GOETZE (INDIA) LTD. C.G.M. manage the Department
and under him there are two managers, one is Finance Manager and other is Costing Manager. The
Finance Manager is assisted by two supervisors one of these is responsible for cash and bank balances
and other is responsible for bills payable. Each supervisor is given two or three assistants to work
under him.
The amount of investment to be put in current assets like cash in hand, bank balance, loans and
advances, inventories, accrued expenses, dividends payable etc. all are decided by Finance
Department.
The realization of cash for the purpose of raw materials components and spares to pay wages and
salaries to incur day to day expenses and overhead costs, to meet selling costs to provide credit
facilities to customers and to maintain inventories is also the function of this department.
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The formulation of policies with regard to profitability risk and liquidity, decisions about comparison
and level of current assets and liabilities, formulation of production policy to keep the production
steady by accumulating inventories, formulation and execution of credit policy is also the function of
Finance Department.
This Department is responsible for handling transaction relating to purchase of raw material as well as
accounts relating to sales. It is also concerned with payment of all expenses incurred by the company
like purchase of raw material, electricity bills, repairs etc. It is also concerned with valuation of
various costs relating to inventories.
It deals with determination of monthly wages, salaries of employees, fringe benefits of retirement,
provident funds deduction, incentives, bonus and all the rewards, which the employees get for
rendering their services to the company
Cash Flow:
The plant is preparing C.F. statements, to be conveyed to HO. These include sources as well as
application of funds. Similarly applications of funds related to the salary, payment to suppliers. Major
expenses (like Electricity, Telephone Bills, Excise duty and other personal & sales & administration
expenses).
Costing:
The costing is being done for all the products manufactured at the plant. These relate to Piston, Ring,
Cylinder Liners and Light Alloy Products. The Historical base is being followed for costing purposes.
Consumption:
Every item being received in the plant for consumption. Input is being accounted for at the plant. The
ledgers are maintained for every receipt and issue.
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Mr. Ramesh
Kumar
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PERSONNEL DEPARTMENT
Personnel department advises the management on all matters relating to personnel administration. The
top management takes into account its advice before arriving at final decisions on personnel and
administrative matters. Personnel Policies in GOETZE (INDIA) LIMITED have been divided into
three parts:
Purchase and Store are two Departments, which go hand in hand. It is very essential that there should
be proper synchronization between Purchase Department and Store Department.
In GOETZE (INDIA) LIMITED, the main responsibility of Purchase Department is to receive orders
from other Departments, do the market survey, list the potential sellers and the rates, choose the best
and go ahead with purchase. The purchase order is placed only with approved contractors. The
Purchase Department scrutinize the following aspects:
a) Quality and Technical specifications
b) Delivery
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c) Prices
Once the purchase order has been placed, it is sent to stores where the store gets ready to receive the
incoming material. When the material is received, a notification is sent to the Finance Department.
Stores deal with an array of material, which can be divided into:
a) Raw materials
b) Components
c) Standard items or patent items
d) Miscellaneous items
PRODUCTION DEPARTMENT
The Department is responsible for production of various items fixed on basis of production budget,
which includes:
a) Raw material budget
b) Labor budget
c) Plant utilization budget
GOETZE (INDIA) LIMITED turns out a wide variety of Piston Rings for Bi-Wheelers, Heavy Light
Commercial Vehicles and Motor Cars etc. The Company has maintained steady growth in Piston
Rings in view of ready acceptability of its products. Form modes production of 22517 rings in 1957 it
touched a figure of 28 million in 2009-10
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INTRODUCTION TO INVENTORY
MANAGEMENT
Inventory management refers to the process of managing the stocks of finished products,
Properly, can bring down costs and increase the revenue of a firm. How much one should
Invest in inventory management? The answer to this question depends on the volume and
Inventory Management involves the control of assets being produced for the
purposes of sale in the normal course of the company's operations. The goal of
indirect - that are associated with holding inventories. However, the importance
inventory.
The task of inventory planning can be highly complex in manufacturing environments. At the
same time, it rests on fundamental principles. The system used for inventory must tie into the
operations of the firm. Inventory planning and management must be responsive to the needs
of the firm. The firm should design systems, including reports that allow it to make proper
business decisions
The.
Inventory Management system and the Inventory Control Process provides information
to
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Efficiently manage the flow of materials; effectively utilize people and equipment,
coordinate
internal activities, and communicate with customers. Inventory Management and the
activities of
Inventory Control do not make decisions or manage operations; they provide the
information to
Managers who make more accurate and timely decisions to manage their operations.
The basic building blocks for the Inventory Management system and Inventory Control
activities are:
Production Planning
Inventory Reduction
TYPES OF INVENTORY
1. Raw materials Inventory: This consists of basic materials that have not yet been
Committed to production in a manufacturing firm. Raw materials that are purchased from
firms to be used in the firm's production operations range from iron ore awaiting processing
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Inventory management
into steel to electronic components to be incorporated into stereo amplifiers. The purpose of
maintaining raw material inventory is to uncouple the production function from the purchasing
function so that delays in shipment of raw materials do not cause production delays.
2. Stores and Spares: This category includes those products, which are accessories to the
main products produced for the purpose of sale. Examples of stores and spares items are
bolts, nuts, clamps, screws etc. These spare parts are usually bought from outside or some
3. Work-in-Process Inventory: This category includes those materials that have been
committed to the production process but have not been completed. The more complex and
lengthy the production process, the larger will be the investment in work-in-process inventory.
Its purpose is to uncouple the various operations in the production process so that machine
failures and work stoppages in one operation will not affect the other operations.
4. Finished Goods Inventory: These are completed products awaiting sale. The purpose of
finished goods inventory is to uncouple the productions and sales functions so that it no
• First-In-First-Out (FIFO): When a firm adopts the FIFO method to price its raw material, the
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issue of material from the stores will be in the order which it was received. Thus the pricing
• Last-In-First-Out (LIFO): In the LIFO method, the material issued will be priced based on
• Weighted Average Cost Method: The pricing of materials will be alone on weighted average
predetermined. When the material is purchased the stock account will be debited with the
standard price. The difference between the purchase price and the standard price will be
Replacement / Current Price Method: In this method material is priced at the value that is
While the total ordering costs can be decreased by increasing the size of order, the carrying
costs increase with the increase in order size indicating the need for a proper balancing of
these two types of costs behaving in opposite directions with changes in order size.
Again, if a company wants to avert stock-out costs it may have to maintain larger inventories
of materials and finished goods, which will result in higher carrying costs. Here also proper
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Thus, the importance of effective inventory management is directly related to the size of the
investment in inventory. To manage its inventories effectively, a firm should use a systems
approach to inventory management. A systems approach considers in a single model all the
2. reorder point
3. stock level
The economic order quantity (EOQ) refers to the optimal order size that will result in the
lowest total of order and carrying costs for an item of inventory given its expected usage,
carrying costs and ordering cost. By calculating an economic order quantity, the firm attempts
to determine the order size that will minimize the total inventory costs.
=$U/QXF
Where
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U = Annual usage
Q = Quantity ordered
F = Fixed cost per order
The total carrying costs = Average level of inventory x Price per unit x Carrying cost
One can adopt a much simpler formula which gives reasonably reliable results in calculating
at what point in the level of inventory a reorder has to be placed for replenishment of stock.
The formula along with its application is given below, using the notation developed earlier.
Reorder point = S x L + F ( S x Rx L)
Where
S = Usage in units
L = Lead time in days
R = Average number of units per order
F = Stock out acceptance factor
The stock-out acceptance factor, `F', depends on the stock-out percentage rate specified and
the probability distribution of usage (which is assumed to follow a Poisson distribution). For
any specified acceptable stockout percentage the value of `F' can be obtained from the figure
presented below.
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STOCK-LEVEL SUBSYSTEM
This stock level subsystem keeps track of the goods held by the firm, the issuance of goods,
and the arrival of orders. It maintains records of the current level of inventory. For any period
of time, the current level is calculated by taking the beginning inventory, adding the inventory
received, and subtracting the cost of goods sold. Whenever this subsystem reports that an
item is at or below the reorder-point level, the firm will begin to place an order for the item.
SAFETY STOCK
Once again in real life situations one rarely comes across lead times and usage rates that
are known with certainty. When usage rate and/or lead time vary, then the reorder level
should naturally be at a level high enough to cater to the production needs during the
procurement period and also to provide some measure of safety for at least partially
The question will naturally arise as to the magnitude of safety stock. There is no specific
However, it depends, inter alia, upon the degree of uncertainty surrounding the usage rate
and lead-time. It is possible to a certain extent to quantify the values that usage rate and
lead-time can take along with the corresponding chances of occurrence, known as
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the judgmental ability of astute executives. Based on the above values and estimates of
stock-out costs and carrying costs of inventory it is possible to work out the total cost
Kanban
Another highly effective way of cutting down on WIP is through the use of kanban, Japanese for sign.
Kanban is a tagging system that is essentially a communication system designed to inform production
across the entire plant about what to do and when to do it. Essentially this is a system that tells people
The general procedure for categorization of items into `A', `B' and `C' groups is briefly
outlined below:
• All the items of inventory are to be ranked in the descending order of their annual usage
value.
• The cumulative totals of annual usage values of these items along with their percentages to
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the total annual usage value are to be noted alongside.
• The cumulative percentage of items to the total number of items is also to be recorded in
another column.
the cumulative percentage of items with the cumulative percentage of the corresponding
usage values.
1. It ensures closer control on costly items in which a large amount of capital has been
invested.
4.The stock turnover rate can be maintained at comparatively higher level through .
The system of ABC analysis suffers from a serious limitation. The system analyses the items
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Inventory management
according to their value and not according to their importance in the production process. It
may, therefore, sometimes create difficult problems. For example, an item of inventory may
not be very costly and hence it may have been put in category C. However, the item may be
very important to the production process because of its scarcity. Such an item as a matter of
fact requires the utmost attention of the management though it is not advisable to do so as
per the system of ABC analysis. Hence, the system of ABC analysis should not be followed
blindly.
ABC Analysis is being used to manage the inventories. A category items contain high value items and
important material directly linked with production. It includes one product i.e. CIMSTAR MB62C. B
Category includes items, which are directly linked with production but are having less value than
items. It includes three products i.e. SERVO SYSTEM 68% HYPSIN EP-68, Cutting oil, Arc light.
Category C includes items products such as mobile oil, kerosene oil, power oil, servo system 121,
In stores computers are being used to store maximum, minimum, re-order levels of each item.
The purchases of FMGIL are centralized and authority lies with the purchase department.
Major purchase is done by head office but local purchase is also for certain items.
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Procedure of acquiring inventories starts with the receipt of material. When the material
reaches the main gate it needs to be inspected and only after inspection of invoices materials is sent to
the store department. Then the material is inspected and is approved or rejected as the case may be.
Purchasing in FMGIL is centralized and authority lies with purchase department. No body is
allowed to make purchase himself, directly. For purchasing purpose a meeting is held at held office in
which planning is done on basis of last year’s consumption. After the raw material planning has been
made, purchase is done by the head office itself and planning report is sent to sub-offices. Although
major purchase is done by head office but local purchase can also be done for certain items.
The items, which can be locally purchased, are divided into two types:-
For local purchase as well as for head office purchase levels have been fixed as:-
RECEIPT OF MATERIAL
As the material reaches the main gate of the factory, security person puts stamp on backside of
invoice or challan. After this the material reaches the Store department
INSPECTION OF MATERIAL
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Once the material has been received by store then it is the duty of either inspection department
or store department to inspect the material. Here it is checked out that the material is according to
specification and the material quantity is neither greater nor lesser in number then the order placed if it
material received is checked out. In physical verification, the quantity of material, the working order to
material and specification fulfillment is taken into account e.g. for electronic goods. For checking
composition of the material e.g. in case of alloy or sand it is seen out, whether the received material
ISSUE OF MATERIAL
1. Stock
2. Non-stock
The material asked by various departments can either be stock items or non-stock items. If a
department has to ask for stock items it prepares material indents form of the items required in which
description of material is thoroughly provided. Four copies of indents are prepared – Blue, Red,
Yellow and White. The department keeps white copy, itself for record and other three copies are sent
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to store department here, Red copy is kept by store for record purposes. Blue copy is sent to Finance
If the material is being purchased for first time, then purchase department, asks for quotations
from the supplier. According to these quotations, the purchase department Purchase the material. If it
is routine material, then the material can be purchased from routine supplier without quotations. Stock
items required by various departments from the store are issued as such and no yellow copy is sent to
purchase department but both red and yellow copy are kept by store department itself. While blue copy
CLASSIFICATIONS OF INVENTORY
1. Raw material
2. Work in progress
3. Finished goods
The raw material inventory can be further classified and maintained under following two
headings:-
CATEGORISATION OF ITEMS
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In FMGIL categorization of items is done according to the following categories:-
1. ABC CLASSIFICATION
Under this system items are classified according to their value and usage rate. An item consists
of items having maximum value but minimum consumption. B items consist of items of moderate
value and moderate consumption. C item consists of items having minimum value and maximum
consumption.
2. XYZ CLASSIFICATION
This classification is based on the value of inventory at the end of a given period of time,
normally closing date of a financial year. X items are those whose inventory value is high, Y items are
those whose inventory value is medium and Z items are those whose inventory value is low or
minimum.
This classification is based on the problems that a company may face while purchasing of the
material from the market due to short supply or unavailability. Scarce items are those, which are in
short supply in the market and are not easily available. Difficult items may be termed as those, which
are not scarce but are difficult to arrange and delivery period is long. Easy items are normal standard
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Inventory management
This classification is based on the source from which the suppliers are to be availed. Some of
the items may be government controlled or available through government-canalized agencies. Some
items are easily available at central and local level and some items may be imported from other
countries.
5. FSN CLASSIFICATION
This classification is based on the pattern of movement of items i.e. issue from stores. Fast
moving, slow moving and non-moving items. Fast moving items are regular items and are to be kept
CODIFICATION OF ITEMS
In FMGIL there are many items of inventory, due to such large number, codes have been
assigned to every item. However code assigned to every item follows a specification order, so that
easy identification of every item can be done. Emphasis on codification is considered very much
essential in FMGIL.
MANAGEMENT IN FMGIL
Objective:-
Scope:- Stores
Responsibility
• Head Stores
• Supervisor Stores
Procedure:-
Stores and listed down in continuous Improvement Plan. Head stores shall prioritize projects
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Inventory management
5) The progress on continuous improvement projects shall be reviewed during
Management Review Meeting. The continuous improvement plan shall be reviewed and
updated, if necessary.
References:-
Objective:-
Scope:-
Items as per initial material list for purchase Patiala Plant and initial materialist for Head Office
materials.
Responsibility:-
• Head Laboratory
• Head Stores
1) For requisition of materials from other plants, a request for itnra-plant transfer is sent in
procedure for inspection and Testing of Incoming Material and the Patent Materials are
3) It is the material required by other plants, depending upon the availability of stock,
raising Dispatch Advice cum Performa Invoice for Modvat Material or Dispatch Advice cum
References:-
RESEARCH METHODOLOGY
This part of the report i.e. Research Methodology is intended to give the details of the conecptual
framework within which the study has been carried out. This section covers the following aspects:
B. Research Methodology
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Inventory management
1. To know the functioning of the inventories and understand the system of procurement of
their techniques .
B : Research Methodology
The methodology used for the collection of data is of secondary type which is being explained here :-
SECONDARY DATA
It is mainly based upon annual reports , magazines , office reports and various published documents of
Data has been collected for five years (i.e. financial year 2005-2010) , then compiled and thereafter
statistical analysis of the information has been done, thereafter various ratios relating to the inventories
has been calculated and tables showing variation in the inventories for five years have been made.
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Inventory management
SWOT ANALYSIS
Previous years were challenging with the company’s business constrained by unfavorable economic
conditions. The slow down in the industrial production, in particular in the automobile industry, had an
‘S’ - STRENGTHS
‘W’ - WEAKNESSES
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Inventory management
‘O’ - OPPORTUNITIES
‘T’ - THREATS
1. STRENGTHS
The major strength of the company is that it is well established. The relationship between
management and employees is very good, as in agreement between management and employees was
signed on March 2010. Due to this agreement there is no fear of strikes and lockouts in the company.
Few competitors
Technical efficiency
Operating efficiency
2. WEAKNESSES
The major weakness of the plant is that it does not have Marketing Department and it has to
3. OPPORTUNITIES
With the implementation of EURO norms, there is need for high strength material rings where
realizations are much better as compared to standard rings. In this high technology value segment the
unorganized sector cannot compete and thus there is tremendous opportunity for the company to
increase domestic competition. There are increasing opportunities for exports to.
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Inventory management
Scope for further expansion in production of existing products and some new products has
increased.
4. THREATS
The company faces normal market competitions form other manufacturers and the unorganized
sector especially for the low value segment of industrial and bi-wheeler 2 stroke rings.
With the ongoing liberation of imports and deregulation of Indian economy, there is a major
FINDINGS
After carrying out in depth study of the system and procedure of inventory management being
followed at FMGIL.
It has been found that in spite of high inventory levels so much care is taken off. There has
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Inventory management
No consideration is given to maintain maximum and minimum levels of inventory. Economic
Order Quantity (EOQ) system is not followed properly in Escorts. Among ABC class items no special
care has been take of B and C class items although in absolute value the amount to crores of
investments. Crores of investment is becoming slow moving every year, which is turn is becoming
But a good thing is found in the form of MIS reports prepared on regular basis by Finance
Department to manage inventory level and review of slow and non moving items by all concerned
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Inventory management
SUGGESTIONS
The company employs very crude methods of inventory management, which involves high
Proper information should be available for need of components for various assemblies at
various stages. If this analysis can be carried out by way of PERT and CPM techniques the delivery
schedules can staggered accordingly and lot of revenue can be generated by way of saving on account
department, which should plan about material requirement, purchases, planning of production.
The company should form realistic production programmed and there should not be frequent
changes in the same and it must be ensured that programs are made available well in time to all
Suppliers should be sent schedules in time especially for critical and a class items for purchase.
Comparison data of inventory level should be made available to different departments and they
should be encouraged to bring improvements so that inventory levels of company are made higher
than competitors.
Still better co-ordination should be there between stores, Finance Department and Purchase
A large part of the assets of company are tried up in this loan and advanced and it should try to
reduce its investments in this and should pool it in the capital investments.
It should try to promote its sales by starting their own marketing programmed at large scale
inventory levels, which are increasing due to frequent changes in models of pistons etc.
Problems of past should be kept under consideration and inventory holding norms of well
established items should be thoroughly received, while fixing the new inventory norms.
Theoretically maintained levels should also be followed practically to stop inventory crossing.
The company needs to improve its inventory turnover ratio ensuring change of inventories to
The company should try to increase its production by bringing in new technology and reducing
its cost.
The concern should try to pay more attention on raw material conversion period because by
this they can reduce the duration of manufacturing cycle for this they should try to reduce the raw
In store and spares a part of inventory, there are certain items, which are slow moving, and
there are also certain items which are non moving. The firm should reduce the investment in these
MRIR preparations may be restricted to 8 to 15 days. So that adverse insurance coverage and
Earlier company was using wood boxes for packing finished goods, which were quite safe, and
a proper transportation. But now the company is using cardboard boxes for packing yet company has
reduced the weight of packing material per box. But quantity of rejected finished material in inventory
has increased. So company should give attention to improve packing material to maintain its
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Inventory management
BIBLIOGRAPHY
INTERNET WEBSITES:
Foundational work
• http://www.inventory management.com/inventory_management_blog.html
• http://www.inventorymanagementreview.org/2005/10/different_inventory.html
• http://www.inventorymanagement.com/labels/inventorymanagement.html
Comprehensive overview
• http://www.sageMAS_90_200_inventory_spec.pdf/22586.pdf
• http://www.sba.gov/library/pubs/mp_22pdf
• http://www.SKUflow.com/refferals.asp
• http://www.inventorymanagement.review.org/2005/10/cutting _down_on.html
• http://www.azinventory management.com/working_capital.html
• http://www.azinventorymanagement.com/planning.html
• http://www.azinventorymanagement.com/business_pages.html
• http://www.answers.com/stock keeping units/reference.jsp
Theories
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Inventory management
• Jain S.P, Narang K.L, (2001), “ materials control”, Cost Accounting, Kalyani Publishers,
Edition.16.
Name
Age
Designation
Department
3 who prepared the MIS report of inventory in your organization and which basis it prepared?
10-which is most appropriate method used by your organization for manage the inventory
Thank you
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Inventory management
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