CHAPTER 1 INTRODUCTION

Management must be concerned wit h all aspects of the firms operat ions i n c l u d i n g p r o d u c t io n o f g o o d s a n d d e l i v e r y o f s e r v i c e s , s a l e s a n d m a r k e t i ng activities, and supporting functions, such as personal training and data processing to handle these responsibilities, most firms make extensive use of financial data and reports. As businesses become larger and more complex, finance assumed t h e r e s p o n s i b i l it y o f d e a l i n g w it h p r o b l e m s a n d d e c i s i o ns a s s o c i a t e d w i t h managing the firms assets. Inventories const itute the major element in t he working capital of many business enterprises. For instance, inventories on an average constitute 60 percent of current assets in public limited companies in INDIA. It is, therefore, necessary to manage inventories efficiently and effectively to avoid unnecessary invest ments in them .Inventories have a direct Impact on the profit s of the firm .Profit is affected by inventories in several ways. First ly, too much, or too litt le inventory affects the firms rate o f return on invest ment. Secondly, the rate at which the inventories move through the product ion o n distribut ion process also affects the cost of doing business. It is therefore, necessary to formulate and initiate inventory policies which will serve as guides in determining the correct level of inventory to maintain and the correct amount of working capital to invest in inventory. To develop adequate inventory plan, it is necessary to have thorough knowledge of the object ives of inventory management and inventory management techniques. A firm neglect ing the management of inventories will be jeopardizing it s long-run profitabilit y and may fail ult imately. It is possible for a company to reduce its levels of inventories to a considerable degree e.g., 10 to 20 percent, without any adverse effect on production and sales, by using simple inventory planning and control techniques. The reduction in excessive inventories carries a favorable impact on company profitability.

1.1INVENTORY MANAGEMENT: Inventories are goods held for eventual sale by a firm. Inventories are thus one of the major elements, which help the firm in obtaining the desired level of sales.

(1.1.1) Kinds of inventories: Inventories can be classified into 3 categories. They are a) Raw materials: These are goods, which have not yet been committed to production in a manufacturing firm. They may consist of basic raw materials or finished goods. b) Work - in - progress : This includes those materials, which have been committed to production process but have not yet been completed. c) Finished goods: These are completed products awaiting sale. They are the final outputs of the production process in a manufacturing firm. In case of wholesalers and retailers, they are generally referred to as merchandise inventory. INVENTORIES IN FLOW OF MATERIAL
SUPPLIER SUPPLIER RAW MATERIALS PURCHASED SUPPLIER

WORK-IN-PROGRESS FINISHED GOODS

WAREHOUSE

CUSTOMER

CUSTOMER

CUSTOMER

(1.1.2) BENEFITS IN HOLDING IN INVENTORIES  Avoiding losses of sales.  Reducing ordering cost.  Achieving efficient production runs. ( 1.1.3) EFFECTS OF HOLDING COST:  No service levels: Often, customer demand cannot be satisfied, leading to immediate loss of business.  Increased production control costs: An enterprise may have to rush special production runs, recognize the schedules, an unordinary high level chasing etc,.  Increased replenishment costs: When operating with low stock levels, average replenishment orders would be placed frequently.

(1.1.4)EFFECT OF HOLDING HIGH STOCK:  Increased storage costs: y Increased capital investments, which reduces the capital available for other activities and project. y Increased risk of obsolescence.

 Increased opportunities for obtaining purchases discounts by bulk ordering.  Stable production programs, which result in the maintenance of a steady  work force.  High level of service, and  Reduction in replacement costs.

( 1.1.5) Risks and costs associated with inventories:

Holding of inventories exposes a firm to a no: of risks and costs. Risk of holding inventories can be put as follows.

 Price decline  Product deterioration  Obsolescence The costs of holding inventories are as follows:  Materials cost  Ordering cost  Carrying cost

( 1.1.6) FEATURES OF INVENTORY : A comparison of inventory with other positive components of working capital would reveal it has some special features of its own.

 On an average, it accounts for share of firms investment in WC.  The risk factor is holding inventory generally is higher than that of holding other items of current assets.  Although holding of a more and more inventory may be desirable from the point of view of functional managers, it affects adversely short-term liquidity.  It involves many types of costs associated with it viz... Acquisition cost, carrying cost, short cost, etc~  It is the only item of current assets, which has direct influence on the prices, and income of a firm.

(1.1.7) MOTIVES OF INVENTORY:

Ashok Leyland ltd holds inventory to achieve the following 3 motives.

 Transaction motives: It emphasizes the Ashok Leyland its need to maintain inventories to facilitate smooth production and sales operations.  Precautionary motive: It is necessities the need to maintain inventories to guard against the risk of unpredictable changes in demand and supply forces and other conditions.  Speculative motive: It influences the decision to increase or decrease inventory levels in the Ashok Leyland ltd to take advantage of price fluctuations.

(1.1.8) OBJECTIVES OF INVENTORY MANAGEMENT:

There should be optimal levels of investment for any asset, whether it is plant, cash or inventories. Again, inadequate inventories will disrupt production and loss on sales. All this calls for an effective inventory program.

The main adjectives are:

 To ensure that materials are available for use in production and production services, as and when required.    To ensure that finished goods and available for delivery to customers to

fulfill orders. To minimize investments in inventories to maximize profitability. To protect the inventory against deterioration, obsolescence and

unauthorized use.  To enable the management to make costs and consumptions between operations and periods.  To provide continuous supply of raw materials to carry uninterrupted production
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 To reduce the wastages and loss of pilferage , breakage and deterioration.  To exploit the opportunities available and to reduce the cost of purchase  To introduce scientific inventory management techniques  To provide right material at right time from the right sources and places  To meet the demand for goods of ultimate consumer on time without creating excess stock levels  To avoid excess and adequate storing of materials  Neither to over stock nor to run out is the best policy  To protect the quality material  To reduce the order placing and receiving costs to the minimum  To ensure the effective utilization of the floor space

A good inventory management policy should balance the requirements of opposing and conflicting demands viz...  To maintain a leverage quality for smooth operations and efficient customers service.  To maintain only a min possible inventory because inventory holding costs and the opportunity cost of funds invested in inventory.

1.1.9VARIOUS STORES IN ASHOK LEYLAND STORE CODE A AC C D E EI F P PP R S GB H HA HM J K KL LH X ZA STORE NAME BOF A stores Store for shop 7 components Consumable spares Westland stores Engine store 4D engine stores Fabrication stores Production stores Engine dressing item Rough items Sheets ZFGB stores Hardware stores Assembly stores Assemble stores Rear axle stores KDC stores Pilot production Hino engine stores Parts warehouse stores Zone A stores

PROCESS FLOW CHART IN ASHOK LEYLAND Purchase of raw material

Components machined

Rough Milling

Drilling

Finish Milling

Washing

Boring

End Milling Milling

Assembly Bearing caps

Engine Assembly

Fixing of Crankshaft and Bearing Caps

Fixing of Camshaft

Fixing of Flywheel Housing

Assembly of Oil Pump

Fitting of Strainer

Compressor Fitting

Fitting of Oil Coolant

Fitting of Belt

Final Product

CRANKSHAFT:-CRANKSHAFT is attached with a gear and is fixed to the bottom of the cylinder block by bearing caps. CAMSHAFT:- CAMSHAFT is attached with a timing gear and is fixed in the required space provided in the cylinder block.

INPUT AND OUTPUT PROCESS

INPUTS:-

Collecting information about the parts of truck and buses, which Ashok Leyland is going to produce.

y y

Production system of Ashok Leyland. Production Strategy of Ashok Leyland(Strategy for HCV and LCV is different .)

PROCESS PLANNING:-

y y

Ashok Leyland select the process for production. Study of new product which Ashok Leyland is going to produce and study of process.

Study of Machinery, which is used to produce the product.

OUTPUTS:-

y y

Final product is prepared(Product is with new technology) Hybrid features of new product. y y Hybrid engine. Hybrid model.

(1.2 ) INDUSTRY PROFILE In 1948, when independent India was one year old, Ashok Leyland was established. We were Ashok Motors then, assembling Austin cars at the first plant, at Ennore near Chennai. In 1950 started assembly of Leyland commercial vehicles and soon local manufacturing under license from British Leyland. With British Leyland participation in the equity capital, in 1954, the Company was rechristened Ashok Leyland.

Since then Ashok Leyland has been a major presence in India's commercial vehicle industry. These years have been punctuated by a number of technological innovations which went on to become industry standards. This tradition of technological leadership was achieved through tie-ups with international

technology leaders and through vigorous in-house R&D.

Ashok Leyland vehicles have built a reputation for reliability and ruggedness. The 375,000 vehicles we have put on the roads have shared the additional pressure placed on road transportation in independent India.

The share of goods movement by road rose from 12% in 1950 to 60% in 1995. In passenger transportation, the jump is equally dramatic: from 25% to 80%. At 60 million passengers a day, Ashok Leyland buses carry more people than the entire Indian rail network. In the populous Indian metros, four out of the five State Transport Undertaking (STU) buses come from Ashok Leyland. Some of them like double Decker and vestibule buses are unique models from Ashok Leyland, tailormade for high density routes.

In 1987, the overseas holding by LRLIH (Land Rover Leyland International Holdings Limited) was taken over by a joint venture between the Hinduja Group, the Non-Resident Indian transnational group and IVECO Fiat Spa, part of the Fiat Group and Europe's leading truck manufacturer.

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Global Standards, Global Markets the blue-print prepared for the future reflected the global ambitions of the Company, captured in four words: Global Standards, Global Markets (Liberalization and globalization were not yet in the air). Buoyed by the backing of the two international giants, Ashok Leyland embarked on .

The automobile industry in India is the tenth largest in the world with an annual production of approximately 2 million units - is expected to become one of the major global automotive industries in the coming years. A number of domestic companies produce automobiles in India and the growing presences of

multinational investment, too has led to an increase in overall growth following the economic reforms of 1991 the Indian growth as a result of increased competiveness and relaxed restrictions. (1.2.1)History: In 1953, the Government of India and the Indian private sector initiated manufacturing processes to help develop the automobile industry, which had emerged by the 1940s in a ascent form. Between 1940 to the economic liberalization of 1991, the automobile industry continued to grow at a slow pace due to the many government restriction. The Japanese manufacturers when entered in to the Indian market ultimately leading to the establishment of Maruthi udyog. A of number of foreign firms joint ventures with Indian companies.

(1.2.2)Indian Automobile Companies: 1. Ashok Leyland ltd A major product and process technology up gradation to world-class standards of technology. In the journey towards global standards of quality, Ashok Leyland reached a milestone in 1993 when it became the first in India's automobile industry to win the ISO 9002 certification. The more comprehensive ISO 9001 certification came in 1994. 1994 was also the year, when international technology changed the way India perceived trucks. The year when a new breed of world class trucks technologically superior and eco-friendly - rolled out on Indian roads. From our state-of-the-art manufacturing Plant at Hosur, near Bangalore. They carried the name Cargo. Cargo brought with it, a new set of values and an unmatched basket of benefits, ushering in a change.
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2. Force motors 3. Hindustan motors 4. Mahindra & Mahindra ltd 5. Maruthi Suzuki 6. Tata motors

COMPANY

MARKET SHARE

TATA MOTORS ASHOK LEYLAND OTHERS

60.2 28.4 11.4

MARKET SHARE
11.4 28.4 60.2 TATA MOTORS ASHOK LEYLAND 0THERS

MULITIPLE COMPANIES IN INDIA  Fiat  Ford motors  General motors  Honda  Hyundai  Mercedes-Ben  Mitsubishi motors

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(1.3)COMPANY PROFILE:

M/s. Ashok Leyland has been a major presence in Indias commercial vehicle industry since 1948, the year it was born. The origin of Ashok Leyland can be traced to the urge for self-reliance, felt by independent India. Pandit Jawaharlal Nehru, India's first Prime Minister persuaded an industrialist, to enter automotive manufacturing. They are one of the Indias leading manufactures of commercial vehicles and special vehicles, engines for industrial purpose, gen sets and marine requirement equipments. For over five decades, Ashok Leyland has been the technology leader in Indias commercial vehicle industry, molding the countrys commercial vehicle profile by introducing technologies and product ideas that have gone on to become industry norms. Ashok Leyland at the time of its inception was known as Ashok Motors. It was assembling Austin cars at the first plant, at Ennore, near Chennai. In 1950, the company started assembly of Leyland commercial vehicles and soon the local manufacturing under license from British Leyland, participation in the equity capital, in 1954, the company was re christened Ashok Leyland. In 1987 the overseas holding by LRLIH (LAND ROVER LEYLAND INTERNATIONAL HOLDINGS LIMITED) was taken over by a joint venture between the Hinduja group, the Non Resident Indian Transnational group and IVECO Fiat SPA part of the Fiat group and Europes leading truck manufacturing company. Ashok P Hinduja is the Chairman of the company. The Hinduja group also associated with Ennore Foundries Limited, Automotive Coaches and Components Limited, and Gulf Ashley Motors Limited. The subsidiary holdings are Ashley Holdings Ltd., Ashley Investment Ltd., and Ashok Leyland Project Services. The chief competitors of the company are y y y Mahindra Volvo Tata Motors Mr. Raghunandan Saran,

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With a commanding strength of the about 12,000 employees the company is looking Forwards to enhance the scope of its action. It is aiming at expanding its production Operation overseas to make it a more globally accessible company. It is looking to Acquire a small to medium sized commercial vehicle manufacturers in China and other developing nations, which have an established product line. An example would be the 2007 acquisition of the Czech based Avias truck business rechristened Avia Ashok Leyland Motors.

(1.3.1)GROWTH MILESTONES OF ASHOK LEYLAND:  1966 Full air brakes introduced  1967 Double Decker buses introduced.  1968 Power steering offered.  1979 Multi-axle trucks introduced.  1980 Integral bus with air suspension.  1992 Self-certification status for defence supplies.  1994 ISO 9001 Certification  1997 Indias first CNG powered bus.  1998 QS 9000 Certification  1999 CNG (Compressed Natural Gas) introduced.  2000 Euro-I, Engines/vehicles introduced.  2002 ISO 14000 Environment Management System Certification.  2002 Exclusive Machine line 2 for Hino cylinder.  2003 E-Comet launched.  2004 50,000 mark vehicle produced.  2006- ISO/TS 16949 Corporate Certification.

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1.3.2 ASSOCIATE COMPANIES:  Automotive Coaches & Components Ltd (ACCL)  Lanka Ashok Leyland  Hinduja Foundries  IRIZAR TVS  Ashok Leyland Project Services Ltd  Gulf Ashley Motors Ltd  Ennore Foundries

(1.3.3)FACILITIES:

The company has seven manufacturing locations in India

1) Ennore, Tamilnadu 2) Hosur: Unit 1 unit 2,and unit 2A, Tamilnadu 3) Alwar, Rajasthan 4) Bhandara, Maharastra 5) Patnanagar, Uttarakhand

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(1.3.4)OTHER COUNTRY LOCATION

 China  Lanka Ashok Leyland , Srilanka  Ashok Leylands Technical Centre, at Vellivoyalchavadi in the outskirts of  Chennai, is a state-of-the-art product development facility, that apart from modern test tracks and component test labs, also houses Indias one and only Six Poster testing equipment.  The company has an Engine Research and Development facility in Hosur.

 The new plant in the North Indian state of Uttarakhand at Patnanagar is set up at an investment outlay of Rs.1200 cores. This plant is expected to go on stream in the year 2010 to cater mainly to the North Indian market taking advantage of the excise duty and other tax concessions. The facilities have been so designed as to accommodate further expansion in terms of capacity and future models. At full capacity utilization, 75000 vehicles will roll out of the Patnanagar plant.

 The company has signed an agreement with Ras Al Khaimah Investment Authority (RAKIA) in UAE for setting up a bus body building unit in the Middle east.

(1.3.5)CLIENTS (Not exhaustive):  Indian Army.  US Army.  Honduras Armed Forces (HAF).  Tamilnadu State Transport Corporation (TNSTC).  Mtropolitain Transport Corporation (MTC), Chennai.  State Express Transport Corporation (SETC), Tamilnadu.  Kerala State Road Transport Corporation.  Maharashtra State Road Transport Corporation (MSRTC).  Andhra Pradesh State Road Transport Corporation (APSRTC).  Praveen Travels.  Sharma Transport.
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(1.3.6) VISION

Achieving leadership in the medium/heavy duty segments of the domestic commercial vehicle market and a significant presence in the world market through transport solutions that best anticipate customer needs, with the highest value -to-cost ratio.

(1.3.7)MISSION

Identifying with the customer. Being the lowest cost manufacturer. Global benchmarking our products, processes and people, against the best in the industry.

(1.3.8)The Five AL Values are:

 International  Speedy  Value Creator  Innovative  Ethical

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(1.3.9)CUSTOMER BASE AND SEGMENTATION Ashok Leyland, over five decades in the transport solution industry, offering a world class range of trucks, buses, special application vehicles, and engines, touching millions across 40 countries worldwide Ashok Leyland has a good customer base most of the customer who comes to Ashok Leyland become a loyal customer . Ashok Leyland is Brand name with the flagship of Hinduja group. To sell is to know your customers. Ashok Leyland has built-up a data base of 130,000 customers. The information captures the business nuances of the customers and shows Ashok Leyland precisely where and how the customer would use trucks. The company today knows much more about its customers today than earlier. Ashok Leyland has a large customer base for public transport buses, commercial vehicles,

defense and special vehicles for special purpose. It caters to different class of society which includes individual buyer, industrial buyer, government buyer and defense also.

Segmentation of Ashok Leyland can be done on the basis of its user:Segmentation

Industrial user Public user Government user

Defense user

INDUSTRIAL USER:- Industrial user includes transport, logistics company, coal and mining industry and other industries etc. PUBLIC USER:-Public user includes individual or passenger transport . GOVERNMENT USER:- Government user include state and central transport like DTC,UPSRTC and other. DEFENSE USER:- Defense user include Indian army trucks, tanks and transport buses.

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(1.3.10)COMPETITION OF ASHOK LEYLAND WITH OTHER AUTOMOBILE SECTOR COMPETITION WITH TATA MOTORS:Ashok Leyland Ltd. will introduce 15 new truck models as India's biggest truck makers by sales seek to beat growing competition from Tata motors. The new truck models under its new U-Truck platform by March 2011,The trucks will be between 16 tonners and 49 tonners. To Compete with Ashok Leyland Tata motors will also introduce three new heavy trucks in India by March from its Prima range of so-called world trucks, as we had seen that Ashok Leyland low floor buses giving tide competition to Tata motors low floor buses in Delhi. COMPETITION WITH EICHER:Eicher is also one of competitor of Ashok Leyland,Eicher began its business operation in 1959 with Tractor, but now Eicher had expanded itself with Trucks, Buses, Gear box, etc. Eicher is giving competition to Ashok Leyland with Trucks and Buses, Eicher small trucks are making there good market in India. COMPETITION WITH MAHINDRA:Mahindra had also launched a truck in collaboration with Navistar Inc. USA on Indian roads known as Mahindra Navistar, which is going to give tuff competition to Ashok Leyland. With a commanding strength of the about 12,000 employees the company is looking forwards to enhance the scope of its action. It is aiming at expanding its production operation overseas to make it a more globally accessible company. It is looking to acquire a small to medium sized commercial vehicle manufacturers in China and other developing nations, which have an established product line. An example would be the 2007 acquisition of the Czech based Avias truck business rechristened Avia Ashok Leyland Motors.

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1.3.11SUPPLY CHAIN MANAGEMENT AT ASHOK LEYLAND It has been found that the Automobile Giant Ashok Leyland Ltd, Chennai, has got one of the very successful Supplier development Program as part of its World-Class Supply Chain Management. Mission Statement of the Company: "Our Vendors are our valued partners in our business development and we shall work with them in a spirit of mutual co-operation to meet our business objectives." Vendor Development and Strategic Sourcing are handled by Corporate Materials Department (CMD). - CMD identifies the vendors, rates the vendors based on feedback received from Supplier Quality Assurance Cell, sends drawings / specifications, calls for quotes with detailed break-up of operation-wise costs, and negotiates the price at which the parts will be supplied.

- In addition to CMD at Ennore, and the two Units at Hosur, there are Materials Management Departments (MMDs) Vendor for scheduling Development based of on unit Strategic production plan. Sources

- Strategic Sourcing is central to the integrated Materials Management function. Ashok Leyland's policy is to develop a vendor base committed to continuous improvement to meet quality, cost and delivery standards. - Ashok Leyland considers its vendors as partners in progress and believes in establishing mutually beneficial relationships. Ashok Leyland provides necessary technical assistance in the form of Project and Production Engineering, to maintain quality levels. In addition, where required, Ashok Leyland also helps vendors financially. SCM one of the important task to improve, because some time before, the company was facing the huge task of integrating its entire supply chain and at the same time it had to reduce its costs, inventory, and improve customer satisfaction. Rising raw material cost was a serious concern for the company. Therefore, Ashok Leyland decided to streamline its supply chain process and the company started its SCM project Oscars to optimize its supply chain and rationalize its sources. The project Oscars Inbound included supplier partnership, vendor base rationalization, tearing of suppliers and cluster information, inventory optimization through JIT and LCL, total cost management, logistics initiatives, esourcing and global sourcing.

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1.4 PRODUCT PROFILE PRODUCT PROFILE (Not Exhaustive): Ashok Leyland offers a comprehensive product range with trucks from 7.5 tons GVW to 49 tons GVW(Gross Vehicle Weight). From 19 to 80 seaters in passenger transport, a host of special application vehicles and diesel engines for industrial gensets and marine application. Product profile can be broadly split into five categories viz. Buses, Trucks, defence vehicles, special Vehicles and Engines. BUSES LYNX BS-II Viking BS-II 12 M Bus-BS II Cheetah (Front engine) Viking BS-III Viking AL Airport Tarmac Coach Vestibule Bus Panther (Rear engine) Cruiser Viking CNG BS-III Falcon (Front engine) Stag BS-II Double Decker TRUCK 4x2 Haulage models Ecomet 4x2 and Multi-axle Tipper Tractor Multi Axle vehicles

DEFENCE VEHICLES Short Chassis Bus Field artillery tractor Comet 4x4 Topchi field Artillery tractor Long Chassis Bus Stallion 6x6 Stallion truck fire fighting

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SPECIAL VEHICLES Hippo tractor Stallion Mk III Tipper Hippo Tipper Beaver tractor Rapid Intervention Vehicle Beaver Haulage Hippo Haulage

ENGINES Genset application Marine application Industrial application DG sets for exports Achievements:
y y y

Ashok Leyland buses carry 60 million passengers a day, more people than the entire Indian rail network Ashok Leyland has a near 85% market share in the Marine Diesel engines markets in India In 2002, all the vehicle-manufacturing units of Ashok Leyland were ISO 14001 certified for their Environmental Management System, making it the first Indian commercial vehicle manufacture to do so.

In 2005, received the BS7799 Certification for its Information Security Management System (ISMS), making it the first auto manufacturer in India to do so.

In 2006, received the ISO/TS 16949 Corporate Certification, making it the first auto manufacturer in India to do so.

It is one of the leading suppliers of defense vehicles in the world and also the leading supplier of logistics vehicles to the Indian Army.

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(1.4.1)PRODUCT RANGE

Ashok Leyland products come with a promise of durability and economics of operations throughout its product life. A comprehensive customer care support right from consultancy to after the market support is always there.

Ashok Leyland offers comprehensive product range with trucks from 7.5T GVW to 125T GTW, buses from 19 to 80 seats, a host of special application vehicles and diesels engines for industrial, Genset and marine applications. The traditional of technology innovation and reputation for ruggedness, reliability and operational; economy has created a market preference for Ashok Leyland Vehicles.

Product Range PRODUCT RANGE

Passenger ICV y Stag MDV y Viking AL y Viking Hino y Cheetah AL y Cheetah Hino Rear Engine Bus
y Panther y Cruiser

Goods

Special

Engines Industrial

Cargo
Haulage
Comet 1611 Comet super Comet CG1613 Tusker Super 1616 Bison Comet 4x4

Heavies
Haulage Defence
Hippo Beaver Stallion 4x4 Yak 4x4 HMV 6x6 FAT 6x6 LRV 4x4

LCV / ICV Haulage

Cargo 759 Cargo 909 Cargo 100.12

Marine

Tractor MDV Haulage

Cargo 1512 Cargo 1614 Hippo Beaver

Tipper
Comet C03/3 Comet C03/10 Bison Taurus 6x4

Dumper/Tipper Tipper
ALRD 20 Cargo 909 Cargo 1614

Fire Fighter
RIV 4x4 CFT F23 6x6

CNG Bus
y Viking Super y Double Decker

Tractor
Comet 2614 Tusker 3516

Multi-axle
y Vestibule Bus Tusker Super 6x2 Taurus 6x2 Taurus Turbo 6x4

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(1.5 )INTRODUCTION OF THE STUDY:

This study is mainly focused on reducing the investment in inventory and to minimize the scrap level that is raised from the stocks that is stored for a long time. Since the organization has number of raw materials, it is difficult to maintain the inventories, so by classifying on the basis of requirement of individual ware houses it will be easier to control the inventory level. The raw material will be classified by using various analyses and the most important items are in terms of necessity and value will be identified with this techniques. By identifying these materials it will be a lot easier to maintain these materials more efficiently and avoid any scrap arising out of these materials. Hence the inventory in the organization will be maintained and controlled more efficiently with minimal cost giving maximum output (1.6 )OBJECTIVE OF THE STUDY PRIMARY OBECTIVE To study the overall inventory management in ASHOK LEYLAND

SECONDARY OBJECTIVE  To analyze the inventory management system of the company through various ratios involved in inventory management  To analyze the components that are used in the inventory management  To classify the material used in various stores department based on ABC analysis  To identify the movement of stock using FSN analysis  To study the performance of the company and thus provide suggestion if any on the basis of the analysis and interpretation of data

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(1.7)NEED OF THE STUDY Inventories are asset of the company and require investment; therefore the company should have a control towards investment in inventories. The inventories need not be viewed as idle assets rather these are an internal part of firms operations. If the inventories list is too big, they become a strain on the resources however, if they said list is too small, the production or the distribution schedule of the company is affected. Therefore the company must have an optimum level of inventories. The basic financial problem is to determine the proper level of investment in the inventories and to decide how much inventory must be acquired during each period to maintain the level. The inventory may include raw material, work in progress and finished goods. (1.8) SCOPE OF THE STUDY The study deals with the analysis and control of the inventory. The study is made to analyze the financial implication on inventory rejected items, non moving items and excess inventory constituted idle inventory stock recipient items. The study will enable the firm to concentrate on the high value item and fast moving item since the classification is made for each vehicles it will be easy to locate the important item and will be helpful to maintain those materials more carefully as well as efficiently. This will reduce the amount invested in the inventory and will be helpful to avoid high scrap materials. The study will calculate the economic order quantity which is required to manufacture each vehicle, by this way optimum level of stocks can be purchased and utilizes to produce a vehicle without arising much scrap. (1.9 )LIMITATION OF STUDY  The study is based on the secondary data  Since the most of the information were confidential, data availability was constraint  Time is the major constraints

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CHAPTER 2

(2.1)REVIEW OF LITERATURE DEFINITION Inventory management is the Management of the flow of materials into an organization to the point where, those materials are converted into firms end product (s)(bailey and framer) Inventory management is The function responsible for the coordination of planning, sourcing, purchasing, moving, storing and controlling materials in an optimum manner so as to provide a pre-determine service to the customers minimum cost. (P.Goplakrishanan and M. Sundaresan) Articles related to inventory management .A review of inventory management research in major logistics journals Article 1 Brent D. Williams, (Department of Marketing and Logistics, Sam M. Walton College of Business, University of Arkansas, Fayetteville, Arkansas, USA), Travis Tokar, (The Ohio State University, Fisher College of Business, Marketing and Logistics, Columbus, Ohio, USA) Brent D. Williams, Travis Tokar, (2008) "A review of inventory management research in major logistics journals: Themes and future directions", International Journal of Logistics Management, The, Vol. 19 Iss: 2, pp.212 23 Purpose The purpose of this paper is to provide a review of inventory management articles published in major logistics outlets, identify themes from the literature and provide future direction for inventory management research to be published in logistics journals. Findings Two major themes are found to emerge from logistics research focused on inventory management. First, logistics researchers have focused considerable attention on integrating traditional logistics decisions, such as transportation and warehousing, with inventory management decisions, using traditional inventory control models. Second, logistics researchers have more recently focused on examining inventory management through collaborative models Article 2
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G. Reza Nassir, Hamid Davoudpour, Behrooz Karimi, (2010) "The impact of integrated analysis on supply chain management: a coordinated approach for inventory control policy", Supply Chain Management: An International Journal, Vol. 15 Iss: 4, pp.277 289 Purpose Effective inventory management is very critical to market success. The purpose of this paper is to formulate an integrated model for the location of warehouse, the allocation of retailers to the opened warehouses, and finding the perfect policy for inventory control to managing order quantity and safety stock level. The goal is to select the optimum numbers, locations, capacities of the opening warehouses and inventory policy so that all stochastic customer demands can be satisfied. Findings The model was developed as a non-linear mixed integer programming and solved using Lagrange relaxation and sub-gradient search for the location/allocation module and a procedure for the capacity planning module. The results for the randomly selected problems show that the average duality gap ranges are between 0.51 and 1.58 percent. Also, from the CPU time point of view, the performance of the proposed algorithm was very good Article 3 TITLE: The storage constrained, inbound inventory routing problem Jennifer Stacey, (Department of Information Systems, Statistics, and Management Science, University of Alabama, Tuscaloosa, Alabama, USA), Malini Natarajarathinam, (Department of Information Systems, Statistics, and Management Science, University of Alabama, Tuscaloosa, Alabama, USA), Purpose This paper aims to describe the storage constrained, inbound inventory routeing problem and presents bounds and heuristics for solutions to this problem. It also seeks to analyze various characteristics of this problem by comparing the solutions generated by the two proposed heuristics with each other and with the lower bound solutions. Findings The storage space clearly has a significant effect on both the routeing and inventory decisions, and there are complex and interesting interactions between the problem factors and performance measures.

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Article 4 Title: An alternative analysis of inventory costs of JIT and EOQ purchasing Marc J. Schniederjans, (College of Business Administration, University of Nebraska-Lincoln, USA), Qing Cao, (Henry W. Bloch School of Business and Public Administration, University of Missouri-Kansas City, USA) Purpose: Recent models comparing inventory costs under just-in-time (JIT) purchasing plans and economic order quantity (EOQ) purchasing plans have tended to favor EOQ purchasing in situations where annual demand of inventory is moderately large. Contends that these cost models are lacking dynamic cost components inherent in virtually all JIT purchasing plans. Presents a series of inventory purchasing cost models that extend prior methodology by Fazel by including relevant physical distribution cost savings. Additional comparative models are presented to further demonstrate how other relevant costs factors can be included in a comparative EOQ/JIT model. A cost comparison with an existing problem from the literature is used to illustrate the informational efficacy of new models. Article 5 Title -Value-Based Inventory Management - EOQ modification Grzegorz Michalski Wroclaw University of Economics Wydawnictwo Uniwersytetu Szczecinskiego, 2007 Purpose Maximization of wealth of its owners is the basic financial aim in management of enterprise. Inventory management must contribute to realization of this aim. The paper presents value-based inventory management model (EOQ) modification.

28

Article 6 Title - Inventory Management with Product Returns M. P. De Brito Erasmus Research Institute of Management (ERIM)E. Van der Laan

Erasmus University Rotterdam (EUR) - Department of Decision and Information Sciences; Erasmus Research Institute of Management (ERIM)25 2003, 09

ERIM Report Series Reference No. ERS-2003-060-LIS Purpose This paper evaluates the impact of misinformation for inventory systems with product returns. If one could exactly know how much is going to be returned and when, one would certainly benefit from incorporating this perfect information a priori in the management of production, inventory, and distribution. In practice, one has to attempt to forecast the timing and the amount of product returns, by hypothesizing about the return flow properties. To do so, historic data on demanded returns can be used. The available literature on information and inventory management with product returns commonly 1) assumes known return probabilities; or 2) considers specific cases where the most informed method does not necessarily lead to the best performance, investigating the impact on inventory related costs. (2.1.2)INVENTORY CONTROL TECHNIQUES:

1. Determination of stock levels: A firm should maintain records of various levels of stocks in order to have an effective management of inventory. They are: 1. Minimum stock level 2. Maximum stock level 3. Reorder stock level 4. Danger stock level 5. Optimum stock level 6. Free stock level 7. Marginal stock level 8. Physical stock level. Ashok Leyland ltd is following these types of stock levels.
29

2. ABC analysis: ABC analysis is form of inventory control wherein different degrees of control are exercised over a different items of stores on the basis of the investment involve. Under this method the materials are managed by giving importance to items value. ABC analysis convent rates on importance and expectation. This approach is also know as proportional value analysis (PAV) it also means Always better control

Example: In the making aircraft, cryogenic engines involving high cost will be monitored closely while cost of tiers , nuts and bolts etc will be given lesser attention. Under this system the items are divided into three categories according to tier importance in terms of value and frequency of replenishment during a period. These categories are:  A categories  B categories  C categories 3. XYZ analysis: The XYZ analysis is a procedure of stock management in the management economics, with which on the basis empirical experiences, results are usually assigned to a classification by bill explosions or by the determination by variation and/or fluctuation coefficients of goods and articles concerning its turnover regularity (consumption and its predictable ). Articles, which are sold very regularly and in to some extent constant numbers of items (e.g. Bulbs), are called X-articles, while the Z-class contains such articles, whose sales runs very irregularly or even stochastically (like e.g. Spare parts). Sometimes the XYZ analysis is called also RSU analysis, with R for regular, S for and U for irregular. Classes become summarized as follows:
y y y

highly important relatively less important least important

X constant consumption, fluctuations are rather rare Y stronger fluctuations in consumption, usually for trend-moderate or seasonal reasons Z completely irregular consumption in addition, in

The XYZ analysis in the materials requirement Planning (materials requirements planning), camp planning and in the calculation is used, frequently combined with the ABC analysis
30

4. HML analysis:

H-M-L analysis is similar to ABC analysis except for the difference that instead of usage value, price criterion is used. The items under this analysis are classified into three groups that are called high, medium and low. To classify, the items are listed in the descending order of their unit price. The management for deciding three categories then fixes the cut-off-lines. For example, the management may decide that all items of unit price above Rs. 1000/-will of H category, those with unit price between Rs. 100/- to Rs.1000/- will be of M category and those having unit price below Rs. 100/- will be of L category. HML analysis helps to y y y y y y Assess storage and security requirements To keep control over consumption at the departmental head level Determine the frequency of stock verification To evolve buying policies to control purchase To delegate authorities to different buyers to make petty cash purchase 6. FSN analysis:

Under this method materials are grouped according to movement. They are fast moving items, slow moving items and non moving items. y F= fast moving item which are stored in large quantity aand close watch on the movement of such items are kept y S= slow moving items which are frequently needed by the production department accordingly moderate quantity with moderate quantity with moderate supervision will be maintained y N= non moving items which are rarely required by the production department these are non moving item should have to be reduced in production In Ashok Leyland according to FSN analysis the items are categorized as follows: 1. 0-1 = Non Moving 2. 1-3 = Crawling 3. 3-6 = Slow Moving 4. 6-9 = Moderate Fast Moving 5. 9-12 = Fast Moving
31

7.Determination of economic order quantity (EOQ):

Determination of quantity for which the order should be placed is one of the important problems concerned with efficient Inventory Management. EOQ refers to the size of the order, which gives maximum economy in purchasing in an item of Raw materials or finished products. It is fixed mainly after taking into account the following cost.

y y

Ordering cost Inventory carrying cost

Assumptions:

 The firm knows with certainly the annual usage or demand of the particular items of inventories.

 The rate at which the firm uses the inventories or makes sales is constant throughout the year.  The order for replenishment of inventory is placed exactly when inventories reach zero level. 8. Determination of optimum production quantity:

EOQ model can be extended to production runs to determine the optimum production quantity. The 2 costs involved are:

 Setup cost  Inventory carrying cost

32

9. Determination of optimum Re-order level:

For optimum production quantity, it is important to decide when to order for the new stock. New goods will arrive before the firm runs out of goods to sell. To determine Re-order level we should know about:

 The load time  The usage rate. 10. Aging Schedule Of Inventory:

By identifying the data of purchase or manufacture of each item of the inventory is known as aging schedule of inventory.

11. Just - In - Time (JIT) Inventory System:

Normally high inventories blocking of capital investment, insurance etc. To minimize that by keeping the inventories at the lowest possible level by JIT system. JIT inventory system means all inventories whether of raw materials, WIP & Finished goods are received in time to go into production, manufacture parts are completed into products and products are shipped to customers. In JIT

33

CHAPTER 3

(3.1) RESEARCH METHODOLOGY RESEARCH DESIGN The research design adopted in this study is descriptive and analytical in nature (3.1.2)Research type used for the study

Analytical research was used for the study. In analytical research , the research has to use fact or information already available, and analysis these to make a critical evaluation of material. (3.1.3) Data: Both primary and secondary data are used in the study Primary data The primary data required for the study was collected by interviews of the personnel in the stores department. Secondary data: Secondary data is the information obtained from the already existing sources such as where the various books ,journals , annual report, store evaluation website etc

(3.1.4)Tools used for analysis The tools used for study  XYZ analysis  Ratios analysis  FSN analysis  HML analysis

34

CHAPTER -5 DATA ANALYSIS AND INTERPRETATION TABLES AND CHARTS (4.1) XYZ ANALYSIS PROCEDURE FOR XYZ ANALYSIS STEP1: The input of the following  Total no of items  Store code, Total stock value in terms of units and unit price of each store

STEP 2: For each item compute total stock value in terms of rupees by multiplying its Stocks with is unit price.

STEP 3: Arrange the item and their details in descending order of the total stock value computed in step 2.

STEP 4: Compute cumulative values of the total stock values.

STEP5: Group the items into X,Y,Z classes by dividing the items into 60% 30% 10% of the total stock values respectively from top to bottom in the sorted list.

35

GENERAL STORES OF XYZ ANALYSIS

STORE CODE STORE NAME NO ITEMS OF STOCK VALE CUMULATIVE STOCK VALUE A J BOF A STORE REAR STORE E1 4D STORE LH HINO ENGINE 492748 STORE P PRODUCTION STORE D WESTLAND STORE GB F ZFGB STORE FABRICATION STORE E ENGINE STORE FA FRONT STORE AC STORE SHOP FOR 43609 7 36,773,365.00 775,058,964.10 AXLE 474254 40,200,543.00 738,285,599.10 1734699 41,928,725.00 698,085,056.10 653557 305652 50,226,744.00 46,975,071.00 609,181,260.10 656,156,331.10 404581 55,567,937.00 558,954,516.10 2100762 57,986,456.00 503,386,579.10 X 82,218,752.10 445,400,123.10 ENGINE 1663003 82,565,969.00 363,181,371.00 42713 168,320,623.80 112,294,778.20 168320623.8 280,615,402.00 CATEGORY

AXLES 286990

COMPONENTS H HARDWARE STORE R ROUGH ITEMS 35623.34 15,506,849.00 36 807,529,241.10 9118189 16,963,428.00 792,022,392.10

PART WAREHOUSE STORE

120

8,656,415.00

816,185,656.10

PP

ENGINE DRESSING ITEM

37762

4,710,971.00

820,896,627.10

S K1

SHEETS PILOT PRODUCTION

13066.72 2330

2,593,544.00 1,303,875.00

823,490,171.10 824,794,046.10

TOOLS WAREHOUSE

1276

568,358.60

825,362,404.70

HA

ASSEMBLY STORE

228

115,695.00

825,478,099.70

K C

KDC STORE CONSUMBALE S STORE

1636 420

24,727.82 22,482.60

825,502,827.52 825,525,310.12

TOTAL

17413219

825,525,310.12

37

SIMPLIFIED TABLE CLASSFICATION ITEM A B C OF CUMULATIVE STOCK PERCENTAGE VALUE 503,386,579.10 738,285,599.10 825,525,310.12 TOTAL VALUE 53.95% 35.48% 6.11% OF

XYZ ANALYSIS CHART FOR GENERAL STORES

XYZ ANALYSIS
6.11%

X Y 35.48% 53.95% Z

Interpretation: From above the table clearly shows the xyz analysis it can be seen that items with store code A,J,E1,LH&P are categorized under X because the aggregate of the values of the items amounts to 60% of the total value of inventory at 5-10% of units its categorized. Hence the demand for final products using these items good inventory should be maintained. The items with store code D,GB,F,E&FA is under Y category , since it amounts 30% of the total value at 10- 30% of units which have moderate control over inventory. The items with store code AC,H,,R,X,PP,S,K1,T,HA,K,C are under Z category , because it amounts to 10% of its total value with 60-80% of units which requires lesser control.

38

HML ANALYSIS OF STORES A-BOF HIGH PRICE (ABOVE 50000) COMPONENT PART DESCRIPTION CODE A4Z01800PR NO OF ITEM ITEMS RATE TRIMMED FES -1616 142 1 TIP CTTP A4Z01800PR1 TRIMMED FES - 1616 115 4 TIP CTT A4Z01800PR2 TRIMMED FES - 1618 142 8 TIP BS3 A5562500PH58 B7F00301 B7F00302 B7F00328 TRIMMED FES 3123 UDS MUFFLER ASSEMBLY UREA TANK ASSEMBLY 12 3 15 15 52290 65818.7 65530.86 65818.88 627480 197456.1 982962.9 987283.2 60391.79 483134.3 62044.75 248179 56059.8 STOCK VALUE 56059.8

MEDIUM PRICE (10000-50000) COMPONEN PART DESCRIPTION T CODE A5562500PH 40 A5558703 NO OF ITEM ITEMS RATE TRIMMED FES ASSY 3118 6 BS3 TR FES - 142 TIP H-ENG HF 7 STG A5558701 A5558701 TR. FES - CG 1613 TBC ASSY OF COWL 1 43120 39164 43120 313313.3 45730 320110 48800 STOCK VALUE 292800

12M FE 8

39

BS3 A1W03500PR TRIMMED COWL - 12M E3 A5551501 F1621300 STAG-BS2 TRIMMED FES 10 5 38551 36497 32095 385507.3 182484.4 4525395

STG GEAR - THP90 - RANE- 141 3121H

A4Z00600

ASSY OF FES - STAG BS3 2 MIGR

27147

54294

B5562201 A5551701

ASSY OF COWL

25091 22368

50182.11 22367.72

ASSY TEMP FES-812 LHD 1 BS2

B6N02501

PROPELLER FOR 12M F

SHAFT

KIT 29

20517

594987.2

B2262906

POWER STEERING KITZF 1 29 IN 10

18234

528772.7

B2269701 B1143502

STEERING KIT RADIATOR ESO715 12M

15 BUS 1

14902 13287

223524.8 13286.8

F8802140

PS PUMP - RANE - 3121H

116

10450

1212200

40

LOW PRICE BELOW(1000-10000) COMPONEN T CODE B1V00803 PART DESCRIPTION NO OF ITEM ITEMS RATE SA OF RADIATOR CAC 30 AND SHROUD 9800 STOCK VALUE 294000

B6P01303

RADIATOR-1616-124KW BSIII TTRL

86

9500

817000

F4513410

REAR SPRING

94

8928

839204.9

B2167801

PROP.SHAFTKIT-GNA201CHZFGB

14

8568

119952.4

B5037801

SA OF PLASTIC FUEL 69 TANK

7660

528563.4

X3801214 F8300107

WHEEL RIM 1000 X 20

7165 6211

64488.41 1950301

POWER STEERING GEAR 314 ASSEMBLY

F1001100

POWER RANE-3121H

CYLINDER- 191

5110

976067.4

F3802814 B3207201 B3123301

WHEEL RIM B8.0X20 S/A OF REAR SPRING

1 107

4895 4255 3869

4895 455338.4 572617.3

FRONT SPRING -(I VE) 148 JPSL

B2245503

PUMP

WITH

INTEG 55

2190

120450

41

ADAPTOR PLATE B5128502 S/A OF HYBRID 25 1755 43875.28

SILENCER F7G01350 FLAPAPOLLO TYRE B5102101 S/A SILENCER-NELSON 1 1144 1144 10R20 2288 1150 2631200

MAKE-2DENG Note : All those part no the representation of that category and generally such based on that range Interpretation: From above the table shows that H items are which include TRIMMED FEE ASSY 3118, MUFFLIER ASSEML & UREA TANK have higher priced and there usage also high .The study shows that M items which contains STAG-BS2 TRIMMED FEES & PROPELLER SHAFT KIT FOR 12M are moderate and there consumption is also moderate. Below 10000 rupees items are classified under lower price such as SA OF PLASTIC FUEL TANK AND WHEEL RIM B8.0X20 S/A OF REAR SPRING are materials that are used for daily consumption.

42

CLASSFICATION OF FSN ANALYSIS FSN ANALYSIS FOR REAL AXLE ATORE(J) CATEGORY NO COMPONENTS NON-MOVING CRAWLING SLOW MOVING 103 23 30 OF TURNOVER RATIO 0-1 1-3 3-6 6-12 26.75% 5.97% 7.79% 8.83% PERCENTAGE

MODERATE FAST 34 MOVING

FAST MOVING

195

ABOVE 12

50.65%

CHART FOR FSN ANALYSIS IN REAL AXLE STORE

FSN ANALYSIS

NON MOVING 26.75% CRAWLING SLOW MOVING 50.65% 5.97% FAST MOVING 7.79% 8.83% MODERATE FAST MOVING

Interpretation: From above table shows that in a specified J store there are 195 components are fast moving items at percentage of 50.65% are daily consumed items the moderate moving items are 34 components at percentage value of 8.83% the slow and crawling items are7.79% and 5.97% the non moving items are 26.75% items which consist of 103 components.
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RATIO ANALYSIS 4.1.1INVENTORY TURNOVER RATIO Year SALES AVERAGE INVENTORY INVENTORY TURNOVER RATIO 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 72447.11 59810.74 77291.23 71681.76 52476.57 14890.77 12769.64 11471.17 9864.41 7353.21 4.87 4.68 6.74 7.27 7.14

Inventory turnover ratio= Sales/Average inventory

INVENTORY TURNOVER RATIO

I n v e n t o r y

8
T u R r a n t o i v o e r

6.74 4.87 4.68

7.27

7.14

6 4 2 0

INVENTORY TURNOVER RATIO

year

INTERPRETATION: The trend of inventory turnover ratio trend over a period of five years(2005-10) was analyzed and it was found that the inventory turnover ratio has fluctuating every year, so the company has to maintain the higher ratio , by improving the efficiency the management in moving stock.

44

INVENTORY HOLDING PERIOD YEAR DAYS INVENTORY TURNOVER INVENTORY RATIO 2009-10 2008-09 2007-08 2006-07 2005-06 365 365 365 365 365 4.87 4.68 6.74 7.27 7.14 HODING PERIOD 73.99 76.86 53.43 49.54 50.44

INVENTORY HOLDING PERIOD = DAYS or MONTH IN YEAR/INVENTORY TURNOVER RATIO

INVENTORY HODING PERIOD

I N V E N T P O E R R Y I O H D O L D I N G

80 60 40 20 0

73.99

76.86

53.43

49.54

50.44

INVENTORY HODING PERIOD

2009-10 2008-09 2007-08 2006-07 2005-06 YEAR

INTERPRETATION: The inventory turnover period was fluctuating every year and it has decreased during the financial year 200809. A higher number of days indicate that there is a lack of demand for the product being sold. A lower number of days indicate that the company is not keeping enough stock on hand to meet demands.

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RAW MATERIAL INVENTORY TURNOVER RATIO Year Raw Material consumed Average Stock Of Raw Raw Material material

inventory turnover ratio

2009-2010 2008-2009 2007-2008 2006-2007 2005-2006

52552.33 43218.57 57480.58 54081.14 40645.83

6176.05 5368.88 4563.03 3688.54 2885.18

8.51 8.05 12.60 14.66 14.09

Raw material inventory ratio =raw materials /average stock

Raw material inventory turnover ratio

8.51
R A W M A T E R R I A A T L I O T U R N O V E R

8.05

12.6

14.66

100% 80% 60% 40% 20% 0% 2009-2010 2008-2009 2007-2008 2006-2007 YEAR Raw material inventory

Interpretation: The trend of inventory turnover for raw material over a period of five years(2005-10) reveals that the ratio was fluctuating every years and has decreased during the current year 2009-10 at 8.51

46

WORK-IN-PROGRESS INVENTORY TURNOVER RATIO Year Manufacturing Cost Average Work-In- Work-in-progress progress inventory turnover ratio 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 64818.71 55116.39 69251.34 64654.91 47075.87 2203.225 1040.645 1117.77 1266.185 1174.85 29.42 52.96 61.95 51.06 40.07

Work in progress turnover ratio +cost of production /average WIP

Work-in-progress inventory turnover ratio

w o r k i n p r o g r e s s

61.95
t u r n o v e r r a t i o

80 60 29.42 40 20 0

52.96

51.06 40.07

Work-in-progress inventory turnover ratio

year

Interpretation: The WIP turnover ratio over a period of five years (2005-10) indicates that WIP turnover ratio has fluctuating every year and has declined to 29.42 during 2009-10.
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FINISHED GOODS INVENTORY TURNOVER RATIO Year Net Sales Average Finished Goods Finished Goods inventory turnover ratio 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 72447.11 59810.74 77291.23 71681.76 52476.57 6461.98 6360.11 5790.38 4909.69 3293.18 11.21 9.40 13.35 14.60 15.93

Finished goods turnover ratio =cost of goods sold /average finished goods

Finished Goods inventory turnover ratio

F I N S H E D G O O D S T U R N O V E R R A T I O

20 13.35 15 10 5 0 11.21 9.4

14.6

15.93

Finished Goods inventory turnover ratio

YEAR

Interpretation: The inventory turnover ratio for finished goods trend over a period of five year was analyzed and it was found that inventory turnover ratio was fluctuated every year compare to previous year it has been increased to 11.21% in yr 2009-10. The company has to maintain higher the ratio.
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INVENTORY TO CURRENT ASSETS RATIO Year Inventory Current assets Inventory Current Ratio 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 16382.40 13300.14 12239.14 10703.21 9025.61 41396.84 31656.16 28752.56 26977.14 22324.13 0.40 0.42 0.43 0.40 0.40 to Asset

Inventory to current asset = Inventory /current asset

Inventory to Current Asset Ratio

C U R R E R N A T T I A O S S E T

0.44 0.4 0.42 0.4 0.38 0.42

0.43 0.4 0.4

I N V E N T O R Y

Inventory to Current

YEAR

Interpretation: Inventory to current assets ratio was analyzed and it was found that inventory to current assets ratio fluctuating every year and has decreased during the current year 2009-10 0.40
49

CURRENT RATIO Year Current assets Current Liabilities 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 41396.84 31656.16 28752.56 26977.14 22324.13 29607.57 21369.46 22719.4 17558.55 14085.16 1.40 1.48 1.27 1.54 1.58 Current Ratio

Current ratio = Current asset/Current liabilities

Current Ratio
C U R R E N T R A T I O

2 1.4 1.5 1 0.5 0 Current Ratio 1.48 1.27 1.54 1.58

YEAR

Interpretation: Current ratio trend over period of five years has analyzed and it was found that the ratio was fluctuated every year and has slightly decreased from previous ratio
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DEBTORS TURNOVER RATO Year Net Sales Average debtors Debtors turnover ratio 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 72447.11 59810.74 77291.23 71681.76 52476.57 9900.18 6669.05 4493.55 4736.06 4415.52 7.32 8.97 17.20 15.14 11.88

Debtors turnover ratio =Net sales/average debtors

Debtors turnover ratio

7.32
D E B T O R R S A T T I U O R N O V E R

8.97

17.2

15.14

100% 80% 60% 40% 20% 0%

11.88

Debtors turnover ratio

YEAR

INTERPRETATION: The trend of Debtors turnover ratio trend over a period of five years (2005-10) reveals that the ratio has fluctuating every year and has decreased during the current year 2009-10 at 7.32.

51

WORKING CAPITAL TURNOVER RATIO Year Sales Working capital Working capital

turnover Ratio 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 72447.11 59810.74 77291.23 71681.76 52476.57 11789.27 10286.7 6033.16 9418.59 8238.97 6.15 5.81 12.81 7.61 6.37

Working capital turnover ratio =Sales/working capital

Working capital turnover Ratio

12.81
W O R K I N G C A P T I A L T I R N O V E R R A T I O

15 7.61 10 6.15 5.81 6.37

5 Working capital turnover Ratio 0

YEAR

Interpretation:

Working capital turnover ratio was analyzed for a period of five years and it was found that the ratio was fluctuated every year and has decreased in 2009-10 6.15.

52

FIXED ASSETS TURNOVER RATIO Year Sales Fixed assets FixedAssets turnover ratio 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 72447.11 59810.74 77291.23 71681.76 52476.57 48110.29 43794.06 20547.95 15445.24 10846.88 1.51 1.36 3.76 4.64 4.84

Fixed assets turnover ratio =Sales/Fixed assets

Fixed assets turnover ratio

F I X E D T U R N O V E R

5 3.76 4 3 2 1 0 1.51 1.36

4.64

4.84

A S R S A E T T I O

Fixed assets turnover ratio

YEAR

Interpretation: The fixed assets turnover ratio was analyzed for five year and it was found that the ratio is low as compared for a past five years of data firm it means that sales are low or the investment in plant and equipment is too much. This may not be a serious problem if the company has just made an investment in fixed asset to modernize.

53

CHAPTER 5 5.1FINDINGS

 From the xyz analysis it can be seen that items with store code A,J,E1,LH&P are categorized under X because the aggregate of the values of the items amounts to 60% of the total value of inventory at 5-10% of units its categorized. Hence the demand for final products using these items good inventory should be maintained.

 The items with store code D,GB,F,E&FA is under Y category , since it amounts 30% of the total value at 10- 30% of units which have moderate control over inventory

 The items with store code AC,H,,R,N,PP,S,K1,NE,HA,K,C are under Z category , because it amounts to 10% of its total value with 60-80% of units which requires lesser control.

 The study shows that H items are which include TRIMMED FEE ASSY 3118, MUFFLIER ASSEML & UREA TANK have higher priced and there usage also high

 The study shows that M items which contains STAG-BS2 TRIMMED FEES & PROPELLER SHAFT KIT FOR 12M are moderate and there consumption is also moderate. Below 10000 rupees items are classified under lower price such as SA OF PLASTIC FUEL TANK AND WHEEL RIM B8.0X20 S/A OF REAR SPRING are materials that are used for daily consumption.

 The study shows in FSN analysis that in the specified J store there are totally 385 components in that 195 components are fast moving items at percentage of 50.65%. which are daily consumed items the moderate moving items are 34 components at percentage value of 8.83% the slow and crawling items are7.79% and 5.97% the non moving items are 26.75% items which consist of 103 components.

54

 The trend of Inventory turnover ratio over a period of five years(2005-10) was analyzed and it was found that it has been fluctuating every years. The company has to maintain higher ratio, by improving the efficiency of the management.

 The trend of inventory turnover for raw material over a period of five years(2005-10) reveals that the ratio was fluctuating every years and has decreased during the current year 2009-10 at 8.51.

 The WIP turnover ratio over a period of five years (2005-10) indicates that WIP turnover ratio has fluctuating every year and has declined to 29.42 during 2009-10.

 The trend of finished goods inventory over a period of five years (2005-10)was indicates that the ratio fluctuating every year , compared to previous year and it has been increased to 11.21in the year 2009-10

 Inventory to current assets ratio was analyzed and it was found that inventory to current assets ratio fluctuating every year and has decreased during the current year 2009-10 0.40

 The Current ratio was analyzed and it was found that the ratio was fluctuating every years and has slightly decreased from the previous year ratio.

 The trend of Debtors turnover ratio trend over a period of five years (2005-10) reveals that the ratio has fluctuating every year and has decreased during the current year 2009-10 at 7.32.

 Working capital turnover ratio was analyzed for a period of five years and it was found that the ratio was fluctuated every year and has decreased in 2009-10 6.15 .

 The fixed assets

turnover ratio was analyzed for five years(2005-10) and it was found that the

ratio2009-10 is low when compared to the previous years.

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5.2 SUGGESTIONS  The company has to maintain higher inventory turnover ratio . by improving efficiency of the management in moving stock  The inventory holding period consist that a higher number of days indicate that there is a lack of demand for no items product being sold. A lower number of days indicate that the company is not keeping enough stock on hand to meet demands.  The company has to improve the raw materials turnover ratio for the specific demand of sale.  The fluctuating working capital turnover ratio should be minimized by improving efficiency of the employee in the production  The company has to maintain better inventory to current asset turnover ratio to minimize cost and improve production.  Every employee of the stores as well as production department should be mandatorily told to report about the damaged material.  More attention should be paid on fixing of the data delivery of the good.  Dumping of waste materials should be avoided and they should be totally recycled.  The stores department should take regular feedback from the production department so that they can improve their supply.  Obsolete inventory should be disposed off transferred to other units at least one year.  When fresh orders are received it should be ensured that adequate material for manufacture are procure well in advance so adhered to the production.  Optimal level of A category items shall be maintained for uninterrupted product.

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5.3 CONCLUSION

Inventories constitute the most significant part of current asset of a large majority of companies. The organization faces a situation of excess in level of inventory resulting in increasing cost. The objectives of organization are to minimize the cost of inventory. Therefore the size at appoint of time and various factors contributing towards it are assuming lots of importance. It is in this contest A study on inventory management and its efficiency level in Ashok Leyland (AL) is undertaken as it is a known fact that inventory management is the least gold mine for managers. The study on inventory management in Ashok Leyland (AL) has helped in measuring the efficiency level of the concern of inventory management system.

The recommendation and suggestion given, if implemented will improve the position of the inventories in AL. Its true fact that inventory management is the least gold mine for managers.

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