CHAPTER 1

INTRODUCTION OF INDUSTRY

The Foundry industry is a wide range of companies and organizations involved in the design,
development, manufacturing, marketing, and selling of S.G. IRON. It is one of the world's
largest economic sectors by revenue. The S.G. IRON Foundry industry does include
machining of s.g. iron casting following delivery to the end-user.

Hariom precision alloys pvt. Ltd. is the profound SG Iron Casting Manufacturers in
India who basically deals with SG iron casting production. With the experience of 4 long
decades and support of highly skilled, dynamic and knowledgeable personnel, we could offer
our clients with best ever SG Iron castings with utmost efficiency and durability.

We dedicate our wholehearted attention towards quality and efficiency of our product and
hence our best team of SG Iron Casting Manufacturers in India use the finest quality raw
materials followed by advanced equipment to produce SG iron castings. The SG castings are
tested thoroughly by the supervising department beforehand so as to ensure the faultless
productivity as well as the capability of product according to international market standards.

. HISTORY

Heriom Casting and Forging Ltd. located in Alwar, which is one and a half hour drive from
Jaipur Rajasthan, India was set up in the year 2006.The Company started its business with the
support of basic facilities, knowledge of the castings’ market potential and a considerable
understanding of customer requirements.

In 2010, the Company installed a full-fledged sand reclamation system with continuous
mixers and dual track induction melting furnaces with all supporting infrastructure and
expanded its operation to manufacturing castings with an installed production capacity of
18,000 tons p.a.

In 2011, the Company began producing a wide range of castings that include Cast Iron, SG
Iron and steel castings in various grades and reached production level of 5000 tons p.a

1
SAFETY

Safety is a state that implies to be protected from any risk, danger, damage or cause of injury.
In Foundry industry, safety means that users, operators or manufacturers do not face any risk
or danger coming from the molten metal or its parts. Safety for the Foundry themselves
implies that there is no risk of damage. Safety in the Foundary industry is particularly
important and therefore highly regulated. S.g. iron casting have to comply with a certain
number of norms and regulations, whether local or international, in order to be accepted on
the market. The standard ISO 9001, is considered as one of the best practice framework for
achieving Foundry functional safety.

In case of safety issues, danger, product defect or faulty procedure during the manufacturing
of the casting, the maker can request to return either a batch or the entire production run. This
procedure is called product recall. Product recalls happen in every industry and can be
production-related or stem from the raw material. Product and operation tests and inspections
at different stages of the value chain are made to avoid these product recalls by ensuring end-
user security and safety and compliance with the automotive industry requirements.
However, the Foundry industry is still particularly concerned about product recalls, which
cause considerable financial consequences.

ECONOMY

The Indian foundry industry manufacturers metal cast components for applications in Auto,
Tractor, Railways, Machine tools, Sanitary, Pipe Fittings, Defence, Aerospace, Earth
Moving, Textile, Cement, Electrical, Power machinery, Pumps / Valves, Wind turbile
generators etc. Foundry Industry has a turnover of approx. USD 19 billion with export
approx. USD 2.5 billion. However, Grey iron castings have the major share i.e. approx 68%
of total castings produced. There are approx 5000 units out of which 90% can be classified as
MSMEs.

Approx 1500 units are having International Quality Accreditation. Several large foundries are
modern & globally competitive. Many foundries use cupolas using LAM Coke. However,
these are gradually shifting to Induction Melting. There is growing awareness about
environment & many foundries are switching over to induction furnaces & some units in
Agra are changing over to cokeless cupolas.

2
General Economic Scenario

Govt. focusing on “MAKE IN INDIA”, “EASE OF DOING BUSINESS”, infrastructure &

easing FDI norms to promote investments in manufacturing & new initiatives & cooperation
in skill development

Forecasts of growth by leading institutions :-

India to become fastest growing economy >7.5% YoY as per forecasts of leading
International Institutions.

Major Foundry Clusters:-

Each cluster is known for its products. The major foundry clusters are located in Batala,
Jalandhar, Ludhiana, Agra, Pune, Kolhapur, Sholapur, Rajkot, Mumbai, Ahemdabad,
Belgaum, Coimbatore, Chennai, Hyderabad, Howrah, Kolkata, Indore, Chennai, Ahemdabad,
Faridabad, Gurgaon etc

Typically, each foundry cluster is known for catering to some specific end-use markets. For
example, the Coimbatore cluster is famous for pump-sets castings, the Kolhapur and the
Belgaum clusters for automotive castings and the Rajkot cluster for diesel engine castings,
Howrah cluster for sanitary castings etc.

Auto Sector:

Auto ,Auto Components & Capital Goods Industry have drawn up ambition plans to grow
three folds in next 10 years Which will drive the demand for metal casting industry .The
Capital Goods Policy of Govt envisages the sector to grow from USD 35 Bn to USD 115 Bn
Industry by 2025 .Whereas the auto sector as per Automotive Mission plan 2016-26
envisages auto sector to grow 3.5 to 4 times of the current value of USD 74 billion to USD
260 billion to 300 billion. Even if these plans are realized by 75-80% ,it will augur well for
the Indian Foundry Industry .The casting demand for iron & Aluminium castings could grow
by 35-40 % by 2019-20 from current levels

3
 CHAPTER 2
INTRODUCTION OF ORGANIZATION

Hariom precision alloys pvt. Ltd. - Company History

Since 1990 in Castings, Hariom Group has years of successful business behind them and with
the company thriving on challenges and innovation, it is more than ready to grab future
opportunities. We have become one of the leading foundries Alwar, India, by producing Cast
Iron, Ductile (SG) Iron Casting & Machined Components. We have a production capacity
of 36000 Metric Tons per annum with our new expansion.

We are an ISO/TS 16949 certified company, supplying various parts like Housings, Front
Axle Supports, 4WD Drive Axle Parts, Counter Weights to Original Equipment
Manufacturers in Tractor, Auto & Engineering industries. At Gautam, we ensure Value
Addition and are committed to achieve total customer satisfaction by rendering best quality
components through continuous improvement in its Quality Process together with ethical
business standards and integrity.

undertaken by the company.During the year 2007-08 the company expanded the installed
capacity of Forgings by 5307 MT to 48072 MT.

Also they set up a World class Tool Room and Die shop to upgrade their operations. In
December 2007 Mahindra Stokes Holding Ltd ultimately holding Stokes Group of
Companies Mahindra Forgings Overseas Ltd ultimately holding Jeco Group of Companies
and Mahindra Forgings Mauritius Ltd ultimately holding Schoneweiss Group of Companies
were amalgamated with the company with effect from appointed date April 01 2007.During
the first quarter of 2008-09 the company commissioned three additional presses namely 2 x
4000T Presses and 1 x 6300T Press virtually doubling the capacity. In addition they re-
commissioned the 5000T Press in the last quarter of the financial year.In June 2010 the
company's direct 100% subsidiary Mahindra Forgings Global Ltd Mauritius transferred their
entire investment in Schoneweiss & co GmbH Germany to the company's 100% step-down
Auto industry grew at an average rate of 5 .4% in 2016-17 compared to previous year . The
Society of Indian Automotive Manufacturers (SIAM) forecast a 7 to 9% growth for

4
thedomestic passenger vehicle sales in the financial year 2017-18, expecting support from 7th
pay commission payout and better rabi output.

As Per SIAM, We are seeing an improvement in the economic growth and also consumer
sentiment. Factors like lower borrowing costs, pent-up demand after demonetization and a
mild budgetary support to incomes will drive consumption growth in 2017-18,”

Global Scenario:

As per 51th World casting Census published by Modern Castings USA in December 2017,
Global Casting Production Stagnant. Worldwide casting production grew by less than half a
percent for second year in a row in 2016.

In 2016, world casting production reached 104.4 million metric tons, a shade over the 104.1
million metric tons produced in 2015. The World’s top 10 casting producing nations
produced 91.6 million metric tons of the total 104.4 million metric tons.

China reported a 5.4% increase since 2015 putting its total production at 47.2 million metric
tons. India the second largest casting producers in the World reported 5.4% increase in
production to 11.35 million metric tons. the remaining 2016 top 10 casting nations are USA,
Japan, Germany, Russia, Korea, Mexico, Brazil and Italy

Role in Manufacturing Sector :

The new manufacturing policy envisages the increase in the share of manufacturing in the
GDP to 25% from current 15% & to create 100 Million additional jobs in next 10 years.
Since all engineering & other sectors use metal castings in their manufacturing, the role of
foundry industry to support manufacturing is very vital. It is not possible to achieve the above
goal without the sustainable corresponding growth of the foundry sector

The Board of Directors of Mahindra Forgings at its meeting held on 4 October 2013 noted the
transfer of 4.85 crore equity shares of Rs 10 each (Sale Shares) from Mahindra and Mahindra
Limited (M&M) aggregating to 50.81% (fifty point eighty one percent) of the paid up fully
diluted equity share capital of the company to Participaciones Internacionales Autometal Dos

5
A foundry is a workshop for manufacturing metal castings, wherein molten or liquid metal is
poured into a mold made of metal, sand, or a ceramic substance. The metal casting comprises
a hollow cavity of the desired shape to form geometrically complex parts when liquid metal
is poured into it. All major metals like iron, magnesium, aluminum, zinc, steel, and copper-
based alloys can be used to make castings. Metal castings find applications in cars, trucks,
planes, trains, mining and construction equipment, oil wells, pipes, toys, space shuttles, wind
turbines,and,nuclear,plants.
The analysts forecast the foundry market in India to grow at a CAGR of 10.08% during the
period2016-2020.Covered,in,this,report.
The report covers the present scenario and the growth prospects of the foundry market in
India for 2017-2021. To calculate the market size, the report considers the revenue generated
from the production value of castings manufactured by the foundry market in India.

The report, Foundry Market in India 2017-2021, has been prepared based on an in-depth
market analysis with inputs from industry experts. The report covers the market landscape
and its growth prospects over the coming years. The report also includes a discussion of the
key vendors operating in this market. .

Further, the report states that one major challenge in the market is environmental issues
leading to increasing environmental cost. Tightening of government regulations on the
release of waste produced by foundries in the environment is leading to increased investment
in waste recycling process and technologies. This is hindering the growth of the Indian
foundry market, as the majority of the Indian foundries are MSMEs with low market
capitalization. Foundries are responsible for the emission of harmful and poisonous gases and
solid wastes that cannot be reused. The waste products generated depend on the type of
molding technology, furnace, and metal used by the foundries during metal casting.
Foundries that use non-ferrous and steel metals to produce casting generate harmful waste
because of the cadmium, lead, zinc, and other metals present in the waste. Cupola furnaces
cause more air pollution than induction furnaces. Also, induction furnace offers precise
control on melting process and temperature.

VISION OF FIRM

To be a leading organization committed to meet customers, employees & shareholders

expectations adhering to the core values.

6
MISSION OF FIRM

To manufacture world class quality S.G. IRON CASTING engineering products for domestic
& International markets.
We are committed to on time deliveries at competitive price in challenging business
environment which is driven by customer’s expectations.

CORE VALUES

1. Customer satisfaction & Responsiveness

2. Entrepreneurship
3. Professionalism
4. Integrity & Ethics
5. Respect & Dignity to all the individuals

OUR CUSTOMERS:

S.G. Foundary Group has an impressive track record of services for customers who are the
leaders in their segments. The group has proven itself to give our customers a competitive
advantage with our world class quality, outstanding customer service and competitive
pricing.

• Mahindra & Mahindra Ltd.

• Metso India, alwar
• TATA Motors, Pune
• Unipart India .Noida
• Action, Bawal

7
 CHAPTER 3

INTRODUCTION TO THE TOPIC

INVENTORY MANAGEMENT

Financial Management is concerned with the duties of the finical manager in the business
firm. Financial managers actively manage the financial affairs of any type of business,
namely financial and non-financial, private and public, large and small, profit seeking and
non-profit. They perform such varied task, as budgeting, financial forecasting, cash
management, credit administration, investment analysis, funds management and inventory
management. A term inventory refers to the stock file of the products a firm is offering for
sale and the components that make up the product. In other words, inventory is composed of
assets that will be showed in future in the normal course of the business operations. Inventory
is a list for goods and materials, or those goods and materials themselves, held available in
stock by a business. It is also used for a list of the contents of a household and for a list for
testamentary purpose of the possessions of someone who has died. In accounting inventory is
considered an asset The assets which firms store as inventory in anticipation of need are:

1. Raw materials
2. Work in process (Semi Finished goods)
3. Finished goods

The raw material inventory contains item that are purchased by the firm from other and are
converted into finished goods through the manufacturing (production) process. They are an
important input of the final product. The working process inventory consists of items
currently being used in the production process. They are normally semi finished goods that
are at various stages of production in a multi stage production process. A finished goods
represented final or completed products which are available for sale .The inventory of such
goods consists of items that have been produced but are yet be sold.

Inventory, as a current asset, differs from other current assets because only financial
managers are not involved. Rather all the functional areas, finance, marketing, production,
and purchasing are involved. The views concerning the appropriate level of inventory would
differ among the different functional areas.

8
The job of the financial manger is to reconcile the conflicting view points of the various
functional areas regarding the maximizing the owners wealth. Thus, inventory management,
like the management of other current assets , should be related to the overall objective of the
firm. It is in this context that the present chapter is devoted to the main elements of inventory
management from the view point of financial management.The objective of inventory
management is explained in some detail sections. Section two is concerned with inventory
management techniques. Attention is given here to basic concepts relevant to the
management and control of inventory.

The aspects covered are:

• Determination of the type of control required.

• The basic economic order quantity
• The reorder point, and
• Safety stocks.

As a matter of fact, the inventory management techniques are a part of production

management. But a familiarity with them is of great help to the financial managers in
planning and budgeting inventory. Inventory management and supplychain management are
the backbone of any business operations. With the development of technology and
availability of process driven software applications, inventory management has undergone
revolutionary changes. In any business or organization, all functions are interlinked and
connected to each other and are often overlapping.

Some key aspects like supply chain management, logistics and inventory form the backbone
of the business delivery function. Therefore these functions are extremely important to
marketing managers as well as finance controllers. Inventory management is a very important
function that determines the health of the supply chain as well as the impacts the financial
health of the balance sheet. Every organization constantly strives to maintain optimum
inventory to be able to meet its requirements and avoid over or under inventory that can
impact the financial figures. Inventory is always dynamic. Inventory management requires
constant and careful evaluation of external and internal factors and control through planning
and review. Most of the organizations have a separate department or job function called
inventory planners who continuously monitor, control and review inventory and interface
with production, procurement and finance departments.

9
INVENTORY MANAGEMENT TECHNIQUES

Managing inventory can be a daunting task, and if it isn’t done properly it could cost
company thousands of dollars. Inventory management grows more and more complicated
with increase in sales volume and diversification of product assortment.

1. STOCK REVIEW

Stock review is a regular analysis of stock versus projected future needs. This can be done
through a manual review of stock or by using inventory software. Defining your minimum
stock level will allow you to set up regular inspections and reorders of supplies. Make sure to
take into account certain situations that can arise, such as vendors taking longer than average
to replenish stock.

In businesses where manual inventory management techniques are still in use, the primary
inventory control methods include:

1. Visual control
2. Tickler control
3. Click-sheet control

You shouldn’t perform manual reviews because they can take a lot of time and possibly
produce errors. Businesses are starting to invest in software to automate the review, and it
will help organizations keep track of their inventory, ensure timely reorders, and avoid costly
shortages.

2. ABC ANALYSIS

This is a popular way to analyze your inventory. Under this method, you classify the
inventory into three categories, such as A, B and C. These categories are based upon the
inventory value and cost significance. Also, the number of items and values of each category
are expressed as a percentage of the total.

- Items of high value and small in number are termed as “A” - Items of moderate value and
moderate in number are termed as “B” - Items of small in value and large in number are
termed as “C” To manage each category separately: The nice thing about group C is that it

10
can be fairly hands-off, while group A requires special attention. You can use ABC analysis
in conjunction with the just-in-time technique to help you get your reorder timing just right.

3. VED ANALYSIS

VED analysis represents classification of items based on criticality. The analysis classifies
the items into three groups called Vital, Essential, and Desirable. Vital category encompasses
those items for want of which production would come to halt. Essential group includes items
whose stock outs cost is very high. Desirable group comprises of items which do not cause
any immediate loss of production or their stock-out entail nominal expenditure and cause
minor disruptions for a short duration.

4. SDE ANALYSIS

SDE analysis is based on problems of procurement namely:

1. Non-availability
2. Scarcity
3. Longer lead time
4. Geographical location of suppliers
5. Reliability of suppliers, etc. SDE analysis classifies the items into three groups called
‘Scarce’, ‘Difficult’ and ‘Easy’. The information so developed is then used to decide
purchasing strategies.

6. JUST IN TIME

The objective of JUST IN TIME method is to increase the inventory turnover and at the same
time reduce the inventory holding cost. JIT inventory system also exposes the unwanted or
the dead inventory held by the retailer/ manufacturer. This method is ideal for manufacturing
organization and it is not used in Retail industry in general. This will also involve usage of
Kanban card to track inventory movement.

7. VENDOR MANAGED INVENTORY

As the name explains, it involved SKUs managed directly by the supplier. Inventory is
replenished based on the sales on regular intervals by the vendor. The retailer provides shop
floor space and the vendor is charged a consignment rate on every product sold at the

11
location. The ownership of the items from receiving to sales and inventory loss if any will be
with the supplier.

BASIC REASONS TO KEEPING AN INVENTORY:

There are three basic reasons for keeping an inventory:

1. TIME: The time lags present in the supply chain, from supplier to user at every stage,
requires that you maintain certain amount of inventory to use in this “lead time”.

2. UNCERTAINTY: Inventories are maintained as buffers to meet uncertainties in demand,

supply and movement of goods.

3. ECONOMIES OF SCALE: Ideal condition of “one unit at a time at a place where user
needs it, when he needs it “principle tends to incur lots of costs in terms of logistics. So bulk
buying, movement and storing brings.

INVENTORY MANAGEMENT

Inventory management is primarily about specifying the size and placement of stocked good
Inventory management is required at differ locations within a facility or within multiple
locations of a supply network to protect the regular and planned course of production against
the random disturbance of running out of materials or goods. The scope of inventory
management also concerns the fine lines between replenishment lead time, carrying costs of
inventory, asset management, inventory forecasting, inventory valuation, inventory visibility,
feature inventory price forecasting, physical inventory, available physical space for
inventory, quality management, replenishment, returns and defective goods and demand
forecast.

Inventory management involves:

• Inventory management is the active control program which allows the management of
sales purchases and payment.
• System and processes that identify inventory requirements, set targets, provide
replenishment techniques and report actual and projected inventory status.
• Inventory management helps providing a good understanding ground and the
capacity to control financial costs.

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 • The Inventory management will control operating costs and provide better
understanding.

OPERATING CYCLE OF INVENTORY MANAGEMENT

Operating Cycle is the time duration to convert sales after the conversion of resources into
invention, into sales there is difference between current assets and fixed assets. A firm
required many years to recover initial invests in fixed assets such plant and machinery or land
buildings or furniture and fixtures etc. On the contrary, investment in current assets such as
inventory and books debts are realized during the firms operating cycle, which in usually less
than a year.

The operation cycle can be said to be the heart of the working capital. The need for working
capital or current assets cannot be over emphasized as already observed. The main motive of
many business firms is to achieve maximum profits, which can be earned depending upon the
magnitude of the sales among other things. However, sales do not convert in to cash instantly.
There is invariable time lag between sale of goods and receipts of cash. Therefore the need of
working capital in the form of current assets to deal with the problem arising good sold.
Therefore, sufficient working capital requires sustaining sales activity. Technically this is
refer to as the operating the cash cycle. The operating cycle of manufacturing company has
three phases namely

1. Acquisition of resources

2. Manufacturing products

3. Sale of product

Acquisition of resources:-

In the phase first operating cycle, include phases of raw materials, fuel & power etc., which
are totally required or manufacturing product

Manufacturing products:-

In the phase 2 of the operating cycle includes conversion of raw material in to work-in
progress and the work in progress is converted into finished goods.

13
Sale of product:-

In the phase 3 of the operating cycle may sale the product either for credit is made to
customers.

REASONS AND BENFITS OF INVENTORY:

The optimal level to maintaining inventory is subjective matter and depends upon the features
of a particular firm.

Trading firm

In case of a trading firm there may be several reasons for holding inventories because of sales
activities that should not be interrupted more over it not always possible to procure the good
whenever there is a sales opportunity there is always a time gap required between purchase
and sale of goods. Thus trading concern should have some stock of finished goods in order to
under- take sales activities independent of the procurement schedule. Similarly, a firm may
have several incentives being offered in terms of quantity discounts or lower price etc by the
supplier of goods. There is trading concern inventory helps in a de-inking between sales
activity and also to capitalize a profit of opportunity due to purchase make at a discount will
result in lowering the total cast resulting in higher profits for the firm

Manufacturing firm

A manufacturing firm should have inventory or not only the finished goods, but also of raw
materials and work -in-progress for following reasons.

Uninterrupted production schedule

Every manufacturing firm must have sufficient stock of raw materials in order to have the
regular and uninterrupted production schedule. If there is stock out of raw materials in order
to have the regular and uninterrupted production schedule. If there is stock out of raw
material at any stage of production process then the whole production may come to a half.
This may result in custom dissatisfaction as the goods cannot be delivered in time more over
the fixed cost will continue to be incurred even if there is no production. Further work-in-
progress would let the production process run smooth. In most of manufacturing concerns the
work in progress is a natural outcome of the production schedule and it also helps in fulfilling
when some sales orders, even if the supply of raw-materials have stopped

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 CHAPTER 4

RESEARCH METHODOLOGY

Research is the systematic design; collection, analysis and reporting of data and findings are
relevant to a specific organization situation.

The main objective of the research is to find out the truth, which is hidden and has not been
discovered yet. Research replaces intuitive business decision by more logical and scientific
decisions.

5.1-TITLE OF THE STUDY:

“A STUDY ON INVENTORY MANAGEMENT SYSTEM AT HARIOM PRICISION

ALLOYS PVT. LIMITED.”

TYPES OF RESEARCH:

This is an exploratory research. Exploratory research is done when we are not aware of the
problem clearly. Find it out, and suggest possible solution. This research required exploring
into many aspects of the performance of the employees in the organization after training them
and finding out the effectiveness of the training. The methodology adopted for present study
was focus discussion, interviews, questionnaire and close observation through in-house study
Since the report is based on action research it was necessary to build rapport to collect
maximum information from the workers and management. The main focus was to do with the
assessing satisfaction level of workers and explore the possibilities of more sound overall
relations between workers and management.

There are several types of researches, but very few are popular. Those among the popular are:
• Descriptive Research
• Experimental Research
• Exploratory Research

DESCRIPTIVE RESEARCH studies are those studies which are concerned with describing
the characteristics of a particular individual, or of a group. Studies concerned with specific

15
predictions, with narration of facts and characteristics concerning individual, group or
situation are all examples of descriptive research.

EXPERIMENTAL RESEARCH is that research where the researcher tests the hypotheses
of causal relationships between variables. Such studies require procedures that will not only
reduce bias and increase reliability, but will permit drawing inferences about causality.
EXPLORATORY RESEARCH studies also termed as formulative research studies. The
main purpose of such studies is that of formulating a problem for more precise investigation
or of developing the working hypothesis from an operational point of view. The major
emphasis in such studies is on the discovery of ideas and insights.
My research is to be conducted mainly on exploratory study only. In exploratory research, the
focus is on the discovery of ideas. An exploratory study is generally based on the secondary
data that are readily available. Exploratory research has the goal of formulating problems
more precisely, clarifying concepts, gathering explanations, gaining insights and eliminating
impractical ideas. It doesn’t have a formal and rigid design as the researcher may has to
change his focus or direction, depending on the availability of new ideas and relationships
among variables.

SAMPLE SIZE:

Sample size of my study is 100 employees.

COLLECTION OF DATA

PRIMARY DATA

Primary data is known as data collected for the first time through field survey. Such data are
collected with specific set objectives. Primary data always reveals the cross section picture of
anything studied. This is needed in research to study the effect or impact any policy.

SECONDARY DATA

Secondary data refers to the information or facts already collected. The secondary data were
collected from:

• Magazine
• Books

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OBJECTIVE OF THE STUDY
1. To Study the Inventory Management Techniques.
2. To Study the procedure of Implementation of ABC Analysis.
3. To Study the Different types of Inventory Control techniques.

The main objective behind this project is to study the approach of Integrated Material
Management for better Inventory Control; this in turn affects overall working capital
efficiency in relation to Hariom precision alloys pvt. Ltd.. This can be achieved by

a) Elimination of Non-Value added activities.

b) Bench marking the best practices.
c) Converting Fixed cost as Variable cost
d) Import Raw Material substitution
e) Better Inventory control
f) Alternate Material without affecting the quality & features.
g) Negotiation with Vendor/ Service providers.

SCOPE OF THE STUDY

Due to lack of facilities provided by organization, people are not working efficiently and it
has indirect affect on their performance and outcome, so

1) Assessing their needs,

2) Working conditions,

3) Providing the development opportunities,

4) Helping skill development through training interventions and planning. And through this
the employee satisfaction level can be increases & productivity also increases.

17
 NEED FOR THE STDUY

Martin and miller identified three general motives for holding inventories

TRANSACTION MOTIVE:

This refers to the need of maintaining inventory to facilitate smooth production and sales
operations.

PRECAUTIONARY MOTIVE:

Precautionary motive for holding inventory is to provide a safeguard when then actual level
of activity is differ than anticipated. This inventory serves when there is a unpredictable
changes in the demand and supply forces.

SPECULATIVE MOTIVE:

This motive influences the decision to increase or decrease the levels of inventory to take the
advantage of price fluctuations.

LIMITATION OF THE STUDY

1. Work responsibility & daily works.

2. Process of planning & issue, ABC Analysis, Packing supplier wise rejection.
3. Just In Time.
4. Wastes.
5. Inventory Value of Plant & stores.
6. Commodity wise inventory value.
7. Types of Inventory.
8. The study of receiving process of material, issue process, dispatch process inventory
control the process for all items.
9. All the information regarding material was not disclosed due to Company policy.

18
 CHAPTER 5
DATA ANALYSIS & INTERPRETATIONS

ANALYSIS 1

Which is the one that minimizes the total of its order and carrying costs?

ECONOMIC ORDER QUANTITY

19
20
ANALYSIS & INTERPRETATION :

In the above table the EOQ & the no. of orders purchased per year for various components
are calculated. The calculated EOQ is compared with the no. of units of each component
purchased in the organization. It is found that, there is a variation in the EOQ & no. of u n i t
p u r c h a s e d . It is understood that the company is not following EOQ for purchasing t h e
materials & therefore the inventory management is not satisfactory.

21
ANALYSIS 2

Which serve as a safety margin to meet an unanticipated increase in usage resulting from an
unusually high demand and an uncontrollable late receipt of incoming inventory?

Safety stock

22
ANALYSIS & INTERPRETATION

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

23
ANALYSIS 3

Which Category A needs the most rigorous control, C requires minimum

attention and B deserves less attention than A but more than C?

ABC ANALYSIS

Table 3

4
Series 1
3
Series 2
Series 3
2

0
Category 1 Category 2 Category 3 Category 4

ANALYSIS & INTERPRETATION

The above table shows the classification of various components as A, B & C classes using ABC
analysis techniques based on unit value. From the classification A classes are those whose unit value
is more than Rs.100 and constitutes 45% of total components. B classes are that whose unit
value is between Rs.25-100 constitutes 35% of total components and C classes are those
whose unit value is less than Rs.25 constitutes 30% of total components. It is good that the
company maintains its inventories based on its value using controlling techniques.

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ANALYSIS 4

SN classifies items into Fast moving, Slow moving and Non-moving

Table 4

Chart Title
14
12
10
8 Series 3

6 Series 2

4 Series 1

2
0
Category 1 Category 2 Category 3 Category 4

ANALYSIS & INTERPRETATION

In the above table shows the classification of various components as FSN items
using FSN analysis techniques based on movements. From the classification F
items are those which moves fastly and constitutes 43% of total components. S
items are those which moves slowly constitute 57% of total components and N
items are those which doesn’t move (Non -moving items). According to data
given, there are no Non-moving items. It is not good as the company maintains
low percentage in moving items

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 CHAPTER 6
SWOT ANALYSIS

STRENGTH WEAKNESS

1. Track record of innovation 1. Are there any operations or procedures

2. Talent management that can be streamlined?

3. Brands catering to different customers 2. Declining market share

segments within Misc. Fabricated 3. Extra cost of building new supply chain
Products segment and logistics network
4. Wide geographic presence 4. Loyalty among suppliers
5. Success of new product mix 5. Declining per unit revenue for
6. Market Leadership Position Mahindra CIE Automotive Ltd

OPPORTUNITIES THREAT

1. Lowering of the cost of new product 1. Shortage of skilled human resources

launches 2. Trade Relation between US and China
2. Trend of customers migrating to higher 3. Changing political environment
end products 4. Growing technological expertise
3. Customer preferences are fast changing 5. Competitors catching up with the
4. Opportunities in Online Space product development
5. Increasing government regulations 6. Competitive pressures

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 CHAPTER 7
FINDINGS OF THE STUDY

1. It is found that, there is a variation in the EOQ & no. of unit purchased. It is
understood that the company is not following EOQ for purchasing the materials.
So, the inventory management is not satisfactory.
2. From calculation of safety stock, we can able to determine how much the
company can hold the inventory in reserve stock per annum.
3. From the classification A classes are those whose unit value is more than Rs.100
and constitutes 45% of total components. B classes are those whose unit value is
betweenRs.25-100 constitutes 35% of total components and C classes are those
whose unit value i s l e s s t h a n R s . 2 5 c o n s t i t u t e s 3 0 % o f t o t a l
c o m p o n e n t s . I t i s g o o d t h a t t h e c o m p a n y maintains its inventories
based on its value using controlling techniques.
4. From the classification F items are those which moves fastly and constitutes 43%
of total components. S items are those which moves slowly constitute 57% of
total components and N items are those which doesn’t move (Non-moving items).
According to data given, there is no Non-moving items. It is not good as the
company maintains low percentage in fast moving items in compared to slow
moving inventories based on movements using controlling techniques.
5. From the calculation it shows, that the percentage of inventoried
increases from 9.65 to18.10 in the year 2003-2007. the inventory for the
year 2008 is expected to be 23.20which is again in the increasing trend. This
indicates increasing efficiency of the management

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 CHAPTER 8
CONCLUSION

Economic Order Quantity (EOQ) for optimum purchase and it can maintain
safety stock for its components in order to avoid stock-out conditions & help in continuous
production f l o w . T h i s w o u l d r e d u c e t h e c o s t a n d e n h a n c e t h e p r o f i t . A l s o
t h e r e s h o u l d b e t i g h t c o n t r o l exercised on stock levels based on ABC
analysis & maintain high percentage in fast moving items in inventories as per
on FSN analysis for efficient running of the inventory. Since the inventory
Turnover ratio shows the increasing trend, there will be more demand for the products in the
future periods. If they could properl y implement and follow the norms and
techniques of inventory management, they can enhance the profit with minimum cost. The
presented analysis model for inventory management provides a basis for decisions regarding
the supply, production and distributions activities of companies with respect to the situation
and dynamic of inventory.

Its existence conditions the running of the production program and, implicitly, the
compliance with the contracts signed with beneficiaries, but, at the same time, it constitutes
capital expenditure, regardless of the stage at which the economic cycle is. The model
provides information about the factors that influence the efficient inventory management,
offering managers the possibility to make realistic decisions concerning the mobilization of
internal funds and the exploitation of the opportunities to reduce inventory, with favourable
consequences on improving financial stability and on increasing economic performance.

The results of the analysis show that the efforts to increase efficiency of inventory used must
be directed towards several directions: speeding inventory rotation because by shortening its
stationing period within the economic cycle it transforms rapidly into money; increasing
turnover to the level demanded by the market; improving the whole trading system for
products; reducing specific consumptions, etc. Using analysis equations for the correlation
inventory–sales, we can assess the speed with which the companies capitalize on their
production, thus achieving the closing of the economic cycle and the satisfaction of the
interests of the participants to the economic activity. At the same time, investors may have
more information about the risk level of the companies where they want to make investments
to exploit the available capital.

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 RECOMANDETION & SUGGESTIONS

➢ According to EOQ, as the company does not follow EOQ for its purchasing, the
company can be adjusted to order materials. This will reduce the cost & help to
enhance the profit of the company.
➢ The company is required to maintain safety stock for its components in
order to avoid stock-out conditions & help in continuous production flow.
➢ Under ABC analysis, the management must have more control on A than
B&C, because A class constitutes more (45%) of higher values. There
should be tight control exercised on stock levels, to avoid deterioration. This is
done through maintaining low safety stock, continuous check on schedules & ordered
frequently in inventories, in order to avoid over investment of working capital.
➢ The company must not go to the Non-moving items as far as possible, because there
will be unnecessary blocking of working capital. This would hinder the other
activities of the organization.
➢ The past data shows increase in inventory the company is also expecting more
inventories for future period i.e. 2008. The management is required to
maintain the same inventory trend in the forth coming year also.
➢ The inventory turnover ratio indicates whe ther investment in inventory is
within proper limit or not. It also measures how quickly inventory is sold. It
requires to maintain a high turnover ratio than lower ratio. A high ratio implies that
good inventory management and it also reflects efficient business activities

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 BIBLOGRAPHY

REFERENCES BOOKS

• M Y Khan P K Jain “Financial Management” 4thedition Tata McGraw Hill.

• R.S.N. Pillai V. Bagavathi “Management Accounting” S Chand & Co.
• Martand Telsang “Industrial Engineering & Production Management” S Chand & Co.
• R. Paneerselvam “Operations Research” Prentice hall Of India Private Ltd.
• B.M. Lall Nigam I.C. Jain “Cost Accounting” Prentice hall Of India Private Ltd.
• S.P. Iyengar “Cost & Management Accounting” Sultan Chand & Sons.

WEB SITES
www.whirlpoolindia.com
www.inventorymanagementreview.org/2005/06/safety_stock
www.inventorymanagementreview.org/inventory_basics/index
www.inventorymanagementreview.org/justintime/index
www.inventorymanagementreview.org/inventory_control/index

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