123 Inventory Hmt Machine Tools

8/17/2019 123 Inventory Hmt Machine Tools

1/66


2/66

1" In#est!ent Decision: "hese decisions relate to the selection of assets in

which funds will be invested by a firm. "he investment of funds in a pro/ect

has to be made after careful assessment of the various pro/ects through capital

budgeting.

' firm’s investment decision involves capital

e0penditure. "hey are# therefore referred as 1capital budgeting decision’. '

capital budgeting decision involves the decision of allocation of capital to long

term assets that would yield benefits in the future. "wo important aspects of

investment decisions are*

a. 2valuation of the prospective profitability of new investment# and

b. "he measurement of a cut3off rate against the future returns of new

investment could be compared.

$" Financin Decision: t is the second important function to be performed by

finance manager. 4roadly he5she must decide when# where from and how to

ac)uire funds to meet the firm’s investment needs.

"he financial manager needs to possess a good

$nowledge of the sources of available funds and their respective costs and

needs to ensure that the company has to a sound capital structure# i.e.# a proper

balance between e)uity capital and debt.

%" Di#idend Decision: t is the third financial function performed by the

financial manager. "he financial manager must decide whether the firm should

distribute all profits or retain them or distribute a portion and retain the

balance. "he proportion or profits distributed as dividends is called the

1dividend3payout ratio’ and the retained portion of profits is $nown as the1retention ratio’.

&" 'i(uidit) Decision: nvestment in current assets affects the firm’s

profitability and li)uidity. 6urrent assets should be managed efficiently for

safeguarding the firm against the ris$ of li)uidity. (a$e of li)uidity in e0treme

conditions can lead to the firm’s insolvency. f the firm does not invest

sufficient funds in current assets# it may become illi)uid and therefore ris$y.

,


3/66

O*+ECTI,E OF THE TUD.

• "o $now the overall effectiveness of inventory management in H!" (td.

• "o study the methods of inventory control in H!"

• "o $now how the procurement of material is done.

• "o study the inventory valuation in H!".

• "o suggest a remedial measure for better decision ma$ing by the organization.

-


4/66

COPE OF THE TUD.

"he nventory !anagement discipline encompasses all system and data networ$

elements from the mainframe to the server level throughout the enterprise.

Financial and technical product information must be available through the

nventory System# as needed to support the functional responsibilities of

personnel within the finance and contracts management departments.

'sset criticality must be included with asset descriptive and financial

information# so that the 7ecovery !anagement department is supplied with the

information it re)uires. 7ecovery actions must be implemented to safeguard

critical assets.

'sset status must be included in the nventory !anagement system# so that the

components8 can be serviced in adherence to legal# environmental# business# and

industry re)uirements.

"he Standards and 9rocedures !anual section relating to nventory !anagement

must be created and published. "his section must describe the process by which

assets are identified# entered into the inventory !anagement System# trac$ed#

and finally deleted"


5/66

'IMITATION OF THE TUD.

"hough the pro/ect would be completed successfully a few limitations

are e0pected. Since the procedures and policies of the company do not allow

disclosing of all financial information of the pro/ect has to be completed with the

available data collected with ma0imum effort.

"ime is main constraint in completing the study with in the stipulated period

allowed.

t has become difficult to analyze all the documents in detail within si0 wee$s.

6onfidentiality of the information is also a limited factor.

"he analysis is made on the basis of secondary data only.

's there is a more dependency on secondary data realistic conclusions may

not be possible to be made.

"he 'vailable of data is only pertaining to five years is one of the constraint.

:


6/66

REEARCH METHODO'O/.

Met0odolo):

!ethodology is a systematic procedure of collecting information in order to

analyze and verify a phenomenon. !ethodology plays a vital role in the analysis of

the study. t refers to the way adopted for collecting the facts and information

formally presented for drawing inference.

ources of Data:

"he data that is necessary for doing this pro/ect is collected through the two

types of data*

+. 9rimary data

,. Secondary data

;


7/66

Pri!ar) Data:

"he primary data is the first hand information collected a fresh. t deals with

the original information. "he primary data for this is collected through personal

interviews and discussion with the concerned personnel in the organization# mainly

from finance department.

econdar) Data:

Secondary data is that which already e0ists# it is collected from the secondary

sources viz.# and company’s annual reports# published records# company manuals and

the theoretical concepts were complied and scrutinized for the relevance to the study

from various reference boo$s.

NEED FOR THE TUD.

nventory is needed to regulate the flow of raw materials and wor$ in progress

for purchasing and finished goods for sale. nventory does not earn interest# and is

e0pensive to store# insure# protect and stoc$ out costs. "herefore# inventory should b

held so as to hold enough to operate but not too much. "he inventories are needed for

the following reasons.

1" A#oidin 'osses of ales

f the firm is not having enough stoc$ of finished goods it will result in the

loss of sales normally# unless the product is being made to order as per the specific

re)uirement of the customer. n most cases# however# firm must be in a position to

deliver goods on demand.

$" /ainin (uantit) Discounts

Suppliers of raw materials usually offer )uality discounts if purchase are made

in bul$. "hese discounts will reduce the cost of goods increase the profit when it is


8/66

sales. "hus# the firm would li$e to purchase raw materials in )uantities greater than

their re)uirements.

%"Reducin Orderin Cost

2ach time a firm places an ordered= it incurs certain e0penses# which are called

as ordering cost. Forms have to be filled# approvals have to be obtained# and goods

that arrive must be accepted# inspected# and counted. (ater# an invoice must be

processed and payment made. "he greater the number of orders greater is the

ordering cost.

&"Ac0ie#in efficient Production Runs

2ach time a firm organized wor$s and machine to produce an item# startup

costs are incurred. "hese are then absorbed as production begins. Fre)uent setups

will result in high startup costs= larger runs involve lower costs.

"Reducin ris2 of 3roduction s0ortaes

>nce the production process starts all the re)uired raw materials# components

etc# should be made available to the production department without any delay.

CHAPTER $

PROFI'E OF AUTOMO*I'E INDURT.

H!" (imited# the pioneer in !achine "ools ndustry in ndia and

manufacturers of a diversified range of products has incorporated ?H!"

!'6H2 ">>(S (!"2%@ as its fully owned subsidiary on Ath 'ugust +AAA.

• ?H!" !'6H2 ">>(S (!"2%@ BH!"3!"(8 is a !ulti3unit# !ulti

location# !ulti technology 6ompany manufacturing a wide variety of

?S"'"23>F3"H23'7"@ !achine "ools.

• 6omprehensive 6ustomer Support services including 'pplication

2ngineering# 6ustomer "raining and after sales service.

• "he best of products in terms of technology# productivity and cost effectiveness

• 'll manufacturing units of H!" !achine "ools are S>ACC+ certified.

D


9/66

NATURE OF *UINE CARRIED:

H!" limited# the pioneer in machine tools industry in ndia and

manufacturers of a diversified range of products has incorporated ?H!" !'6H2

">>(S (!"2%@ as it’s fully owned subsidiary on Ath

'ugust +AAA.

?H!" !'6H2 ">>(S (!"2%@ BH!"3!"(8 is a multi3unit# multi3

location# multi "echnology 6ompany manufacturing a wide variety of ?S"'"23>F3

"H23'7"@ machine "ools. H!"3!"( has its manufacturing units at five locations

with each unit specialized in a particular family of !achines. "he sales and service

networ$ is spread across the length and breadth of the country. 's leading

manufacturer of !achine "ools in ndia# H!"3!"( provides the best of products in

terms of technology# productivity and cost effectiveness.

,IION4 MIION AND 5UA'IT. PO'IC.

Cor3orate ,ision

• "o be a leading E(>4'( 2E227E 6>E(>!27'"2 Focused on

6S">!27 %2(EH" in our fields of 2ndeavour.

Cor3orate Mission

• "o establish ourselves as one of the world’s premier companies in the

engineering field having strong international competitiveness.

• "o achieve mar$et leadership in ndia through ensuring customer satisfaction

by supplying internationally competitive products and services.

• "o achieve sustained growth in the earnings of the group on behalf of

shareholders.

5ualit) Polic)

• "o maintain 5UA'IT. 'EADERHIP in all our PRODUCT 6

ER,ICE

• TOTA' CUTOMER ATIFACTION through Guality Eoods and

Services

A


10/66

• COMMITMENT of management to Guality

• "o create a CU'TURE amongst all 2mployees towards TOTA' 5UA'IT.

CONCEPT

• TOTA' 5UA'IT. through PERFORMANCE 'EADERHIP

CHAPTER %

COMPAN. PROFI'E

*AC7/ROUND AND INCEPTION OF THE COMPAN.

H.!.". is one of the leading public sector companies# in ndia# H!" &

4angalore plant was inaugurated in +A:- by PANDIT +A8AHAR'A' NEHRU= it

+C


11/66

has +; manufacturing units spread over +C states# , divisions and ,A#CCC employees

in +C different states.

%7.S.!.9atil started H!" limited as a Hindustan !achine "ools (imited on

<th

February +A:- in technical and financial collaboration with the DER'I7ON

MACHINE TOO' 8OR7 of Switzerland. "he first product produced by H!"

was lathe on ;th>ctober +A:-."hen the government of ndia bought the shares held by

%erli$on thereby transforming H!" as a Eovernment underta$ing

INTRODUCTION OF MACHINE TOO' 'IMITED

H!" (imited# the pioneer in !achine "ools ndustry in ndia and

manufacturers of a diversified range of products has incorporated ?H!"

!'6H2 ">>(S (!"2%@ as its fully owned subsidiary on Ath 'ugust +AAA.

• ?H!" !'6H2 ">>(S (!"2%@ BH!"3!"(8 is a !ulti3unit# !ulti

location# !ulti technology 6ompany manufacturing a wide variety of

?S"'"23>F3"H23'7"@ !achine "ools.

• 6omprehensive 6ustomer Support services including 'pplication

2ngineering# 6ustomer "raining and after sales service.

• "he best of products in terms of technology# productivity and cost effectiveness

• 'll manufacturing units of H!" !achine "ools are S>ACC+ certified.

NATURE OF *UINE CARRIED:

H!" limited# the pioneer in machine tools industry in ndia and

manufacturers of a diversified range of products has incorporated ?H!" !'6H2

">>(S (!"2%@ as it’s fully owned subsidiary on Ath 'ugust +AAA.

?H!" !'6H2 ">>(S (!"2%@ BH!"3!"(8 is a multi3unit# multi3

location# multi "echnology 6ompany manufacturing a wide variety of ?S"'"23>F3

"H23'7"@ machine "ools. H!"3!"( has its manufacturing units at five locations

with each unit specialized in a particular family of !achines. "he sales and service

networ$ is spread across the length and breadth of the country. 's leading

manufacturer of !achine "ools in ndia# H!"3!"( provides the best of products in

terms of technology# productivity and cost effectiveness.

++


12/66

,IION4 MIION AND 5UA'IT. PO'IC.

Cor3orate ,ision

• "o be a leading E(>4'( 2E227E 6>E(>!27'"2 Focused on

6S">!27 %2(EH" in our fields of 2ndeavour.

Cor3orate Mission

• "o establish ourselves as one of the world’s premier companies in the

engineering field having strong international competitiveness.

• "o achieve mar$et leadership in ndia through ensuring customer satisfaction

by supplying internationally competitive products and services.

• "o achieve sustained growth in the earnings of the group on behalf of

shareholders.

5ualit) Polic)

• "o maintain 5UA'IT. 'EADERHIP in all our PRODUCT 6

ER,ICE

• TOTA' CUTOMER ATIFACTION through Guality Eoods and

Services

• COMMITMENT of management to Guality

• "o create a CU'TURE amongst all 2mployees towards TOTA' 5UA'IT.

CONCEPT

• TOTA' 5UA'IT. through PERFORMANCE 'EADERHIP

+,


13/66

1"% PRODUCT PROFI'E:

+-


14/66

Our *usiness Do!ain

HMT PRODUCT

+


15/66

TRACTOR

*EARIN/ 8ATCHE

+:


16/66

H!" is synonymous withe0cellence in precision engineering in ndia. H!" is

built on a strong foundation of technical $now how ac)uitted from world leaders in

machine tools# such as >72(I># !'76H#E(% !2S"27# (22 4227#

7> 427'%# F7"J W2!27 92E'7%. "oday H!" !achine "ools e0pertise

has been developed to such an e0tent that H!" can design and develop any $ind of

machines. From simple lathe to multi station transfer lines# from stand alone 66

machine to fle0ible manufacturing systems BF!S8 leading to factory automation

H!"’s broad range of machine tools covers.

Eeneral purpose machines and 66 machines are produced to meet the

application needs of every engineering industry.

+. 6omputer etwor$ing 6ontrol B668 machines.

,. "urning machines.

-. !illing machines.

. %rilling machines.

:. Erinding machines.

;. 4oring machines.


17/66

A. >ther products*

• !etal forming.

• %ie costing and plastic machinery.

• 9rinting machines.

• Food processing machines.

• "ractors.

• Guartz watches.

• 4earings.

• 9rKcising ball screw.

• 7econdition.

+


18/66


19/66

OR/ANI9ATION TRUCTURE OF PRODUCTION DEPARTMENT

/eneral Manaer

+oint /eneral Manaer

De3ut) /eneral Manaer

Assistant /eneral Manaer

Manaer

De3ut) Manaer

Fore!en

u3er#isor

+unior u3erior

8or2er

+A


20/66

CUTOMER OF HMT

• H'(

• 4H2(

• 7'(W'LS

• SH9 4(%E %S"72S

• 62!2" %S"72S

• E227'( 2E227E %S"72S

• 4'M'M '">S

• "VS

COMPETITOR OF HMT

• !67>!2"76S3"7E 62"72& E7%E !'6H2S.

• 927SH2%3 EH'J 4'% E7%E !'6H2S.

• H26 BH2'VL 2E227E 6>79>7'">3 H2'VL %"L ('"H2.

• '62 %2SE27S '" 4'E'(>72 3 "7E 62"27# !'6HE

62"27S.

• (!W "7E '% %7(( "'9 62"27S.

• "'( 92 S9'!.

• ML>"H "7E 62"27& !'6HE 62"27.

• 'SI'7 !67>3 !LS>72 "7E 62"27S.

• W%'3 4'E'(>723 S9'!.

• I7(>SI'7 3 !LS>72.

,C


21/66

,+


22/66

CHAPTER &

THEORITICA' FRAME8OR7 :

MEANIN/ OF IN,ENTOR. MANA/EMENT

nventory management means safeguarding the company’s property in the form of

inventories and maintaining it at the optimum level# considering the operating

re)uirements and financial resources of the business. nventory management

emphasizes control over for each item of inventory. "he reduction in ?an e0cessive

inventory. i.e. 20cesses above the optimum level carries a favourable impact on

company’s profitability# line wise maintaining inventory below optimum level

negatively affects the company’s profitability. Hence# inventory management should

be comprehensive enough to cover the flow of materials starting from the point when

for the purchase# up to the stage when the finished products are sold.

2fficient inventory management reduces levels of inventories to a considerable

degree without effect on production and sales by using simple inventory planning and

control techni)ues. 'n understanding neglecting the management of inventory will be

/eopardizing its long run profitability and survival.

S.I. Iuchal ?Eood inventory management is good financial management@.

nventory comprises stoc$ of raw materials = wor$ in process# finished

products# stores and components.

? Mohn H'!9">@ treats inventories# the ma/or element in the ?Wo$ing

capital@ Bappro0imately ;CN of current assests8 of many business underta$ing in

india.

,,


23/66

FUNCTION OF IN,ENTOR. MANA /EMENT

"he necessity of holding inventory is due to the following functions of

inventory*

3eciali>ation

' firm can either produce all the re)uired variety products at a plant at one

(ocations# or# produce different products at separate plant locations. (ocating

Separately will enable the firm to select the location of each different product

!anufacturing plant based on the particular re)uirements of that product# thus

'chieving specialization efficiencies li$e geographical facilities and economies of

scale. "his specialization approach creates inventory at diverse locations. 'lso#

9ipeline inventories are created due to transport lin$age re)uired between %ifferent

manufacturing plants and with distribution warehouses.

,-


24/66

IN,ENTOR. CONTRO' TECHNI5UE

2ffective inventory management re)uires an effective control for inventories.

20cess inventory holding leads to e0cessive carrying cost on account of interest of

interest# storage and handling changes# insurance# record $eeping# inspection and the

ris$ of deterioration in )uality and thus adversely affects the profitability of the

organization. 2ven through the optimum level of inventory varies from industry to

industry# it is generally considered that the value of inventory as a percentage of

annual consumption may not e0ceed -- percent and the value of finished goods to net

sales may be about one month’s sales. !anaging inventory levels in an ongoing

balance between the costs of carrying e0tra inventory# versus the revenue losses

incurred by not having enough inventories available. ' proper inventory control nothelps in solving the acute problem of li)uidity but also increases profits and causes

substantial reduction in the wor$ing capital of the concern. "he following are the

important tools and techni)ues of inventory management and control.

A"*"C" ANA'.I : Al?a)s @etter control;

'n '46 analysis offers an important solution to be problem of a scientific

planning and control of inventories and is on important techni)ue of inventory

management. t is based up on the value of different items constituting inventory. t

may be concerned with several items# raw materials# factory and office supplies#

machine tools and handling e)uipments. "he idea underlying on '46 analysis is in

recognition of the principle that some items of inventory are more important than

other. "he '46 techni)ues enables the enterprise to $eep its investment low avoid

stoc$ out of critical items. ts ob/ective is to reduce the minimum stoc$ as well as the

wor$ing stoc$. '46 analysis underlines a very important principal ?Vital few trivial

many@ statistics reveal that /ust a handful of times account for bul$ of the annual

e0penditure on materials. "hese few items called ?'@ items are numerous in numbers#

and their contribution is less significant.'46 analysis trends to segregate all items

into categories# '# 4 and 6 based on their annual usage. "he categorization so made

enable us to pay the right amount of attention and minimum of effort and

e0penditures.

,


25/66

A"*"C C'AIFICATION*

"he following steps have been underta$en to implement '46 analysis.

• "he price per unit for each purchased item is obtained.

• "he total consumption value is determined by multiplying consumption

)uantity by its unit price.

• "he consumption value is arrived by the above calculations for each of the

items.

• "he items are ran$ed in accordance with the total consumption value# giving

first ran$ to the item with highest total value. "he items are arranged in the

order of decreasing annual consumption value.

• "he ratio of total value of all items is determined.

• "he list of value is divided into three groups# namely# '3high value# 43medium

value# and 63low value. n ma$ing that division# a graph with y3a0is as

?cumulative percentage of value of inventory@# and 03a0is as ?percentage of

inventory items@ can be used.

F""N C'AIFICATION:

"his classification is based on the pattern of issues from stores and is useful in

controlling obsolescence. "o carry out FS analysis# the data of receipt or the last

date of issue# whichever is later# is ta$en to determine the number of months# which

have lapsed since the last transaction# the items are usually grouped in period of +,

month. t is found that many companies maintain huge stoc$s of non3moving items.

•

f the item is ordered in all C3+, months# the item is classified as fast3moving.

• f the item is ordered in all +,3;C months# the item is classified as slow3

moving.

• f the item is ordered in all above ;C months# the item is classified as on3

moving.

n H!" (td# inventories that are lying in stores for more than : years are

considered as non3moving items. "o verify the items# stoc$ verification has to be done

,:


26/66

by the stores department and result must be given to the inventory control department

for reconciliation.

-.+ NEED FOR THE TUD.

• "o maintain a buffer for doing different operations

• "o avoid a mista$es between supply and demand

• "o need un e0pected demand.

• "o have a smooth running of production.

• "o avoid a ideal time due to la$h of inventory.

• "o ma$e on time delivery.

,;


27/66

%"% O*+ECTI,E OF THE TUD.

"he main ob/ectives of inventory management are*

• nvestment in inventory li$e any other current asset involves a trade3

off. "he investment in inventory should stri$e a balanced between

efficient and smooth production or sales operation and profitability.

"his is so because both e0cessive and inade)uate inventories are not

desirable.

• 20cessive investments in inventory would ensure that there are no

shortages in production or sales operation.

• "o $eep material cost under control so that they contribute in reducing

cost of production and overall cost.

• "o avoid both over stoc$ing and under stoc$ing of inventory.

• "o minimize losses through deterioration# wastages and demand.

• "o maintain investment in inventory at the optimum level as re)uired

by operational and sales activity.

• "o facilitate of data for short term and long term planning and control

of inventory.

,


28/66

CHAPTER-&

DATA ANA'.I AND INTERPRETATION

A*C ANA'.I

C'AIFICATION OF ITEM:

'46 classification is based on value

• +CN in number and


29/66

Polices ado3ted @) A< class ite!s:

1'’ class items account for bul$ of the annual usage value# hence it is re)uired

for at most attention of senior level in administration and is responsible for

regular reviewing of these items.

"he inventory control department maintains up3to3date and accurate records* t

will be sent more fre)uently to the top management.

"he inventory is at minimum level.

"he purchase department maintains better vendor relations confiding with

V7! BVendor 7elation !anagement8.

"he concept of first in and first out is adopted.

Polices ado3ted @) *< class ite!s:

"he policies for these items are intermediate between 1'’ and 16’ items.

"hese items are ordered more fre)uently than 1'’ class items.

Stoc$ and issue cards are maintained.

Polices ado3ted @) C< class ite!s:

Since the items are too much value is less# the policies are aimed at reducing the

ordering and stoc$ $eeping wor$ to an e0tent possible and ensuring the availability

at all times by stoc$ing liberal )uantities.

(iberal )uantities are $ept in stoc$# since it does not involve much capital tie up.

4ul$ purchase is done to ta$e advantage of )uantity discounts.

For ordering these items# a combination of review period system and ,3bit system is

maintained.

,A


30/66

A*C ANA'.I

T)3e Guantity 7ate nventory

Value B7s8

7an$ing 9ercentage 6umulative

1 A: DC;A


31/66

1$ 'u0iliary materials +,D -+#-:#: :; +D#,-#+C,

2lectrical parts +


32/66

'O8 MO,IN/ IN,ENTOR.

Type Description !"!-""

Count ,alue

+- 'ccessories -: 3!>VE "2!S@# non3moving items list

-,


33/66

will be prepared the end of the year and the material register for !arch is printed.

"he surplus committee declares at last either the item to surplus 5 obsolete.

'fter the approval# the stoc$ items will be transferred to salvage stores and

stoc$ transfer will not be received in material account section to remove the value

from the respective inventory accounts to the obsolescence.

NON-MO,IN/ IN,ENTOR.

Type Description !""-" #slow$ !"-"%

Count ,alue Count ,alue

+- 'ccessories - -


34/66

Reason for Non-!o#in in#entor)

• 6hange in design of the e)uipment

• "he sale order may be cancelled

• 6hange in the production pal

COMPONENT OF IN,ENTOR.

'll efforts of the management to control inventories should aim at maintaining

various components of inventory at economic levels and in proper proportions.

n H!" !achine "ools (td# nventory is divided into the following

categories.

• 7aw material and components

•

Stores and maintenance spare parts

-


35/66

• "ools and nstruments

• Wor$ in progress

• Stoc$ in trade

• !aterial and components in transit

• Scrap

"able showing the N change in components of inventory from ,C+C

Co!3onents of In#entor) $1

-:

In#entor) $1

,alue Rs; G

Ra? !aterial and co!3onents DD,A,,- ,+.


36/66

"able showing the N change in components of inventory from ,C+C and ,C++

In#entor) $11 $1$

ValueB7s8 N ValueB7s8 N

Ra? !aterial and co!3onents A#:,#;-#,A -+.A


37/66

Inter3retation:

From the above# we can say that the components of inventory fluctuating

during the study period. f we study the composition of inventory in H!"

!achine tools ltd the ma/or portion of its total inventory consist of wor$ in progress and components and stoc$ in trade.

-


38/66

Co!3onents of In#entor) $11

Co!3onents of In#entor) $1$

Co!3onents of In#entor) $1%

-D


39/66

I9E AND /RO8TH OF IN,ENTOR.

"he size of inventory and growth shows of the company. "he effective

regulation of inventory calls for the maintenance of inappropriate level of inventory.

'll though

nventory is necessary to run a plant efficiently the e0cess of inventory serves

no purpose and also affects the profitability of the firm.

Erowth rate of inventory shows the ratio of current 'sset as it is a part

of current 'sset reflects on current ratio establishes relationship between the current

asset and current liabilities. "he ability of a company to meet its short3term

commitment is normally assessed by comparing current asset whit current liabilities.

Ta@le s0o?in G Increase in in#entor) 6 ales fro! $1 to $1%

.ear In#entor) Rs; ales Rs; G Increase in

in#entor)

G Increase in

sales

$1 C#;-#-#+-


40/66


41/66

nventory turnover or stoc$ turnover ratio is the indicates the number of times

the stoc$ is turnover Bi.e.# sold8 during the year. n other words# it is relation between

the stoc$ and cost of goods sold. "his ratio indicates whether investments in inventory

are efficiently used or not.

' high inventory turnover ratio indicates bris$ sales. "he ratio is a measure to

discover the possible trouble in form of over stoc$ing or over valuation. ' low

inventory turnover ratio results in bloc$ing of funds in inventory# which may

ultimately result in losses due to inventory becoming absolute# or deteriorating in

)uality.

"he ratio is e0pressed as* O Annual sales A#erae stoc2 of In#entor)

TA*'E NO : &"1

.earAnnual sales

Rs;

A#erae stoc2 of

In#entor)Rs;ITR

$1


42/66

Inter3retation:

From the above graph > .+# it is 6leary shows that the inventory turnover

ratio fluctuating year over year. nventory turnover ratio has a declining trend from

,C+C3,.+-#,C++3+.#,C+,3+.:#,C+-3,.+ which indicates that inventory utilizedefficiently without bloc$ing of inventors in stoc$ and ma$ing them obsolete.

$" Ra? Material turno#er ratio:

,

INVEN!"# $"N!VE" "%I!

2&13

1&4 1&5

2&1

0

0&5

1

1&5

22&5

2010 2011 2012 2013


43/66

7aw !aterial turnover ratio shows the ratio of turnover of inventory based

raw material consumed and average inventory. 7aw material is those basic inputs that

are converted into finished product through the production process. 7aw material

inventories are those units which have been purchased are stored for future

productions. "his ratio shows the number of times the raw materials were replaced

during a fiscal year.

"he ratio is e0pressed as*

Annual consu!3tion of ra? !aterials a#erae ra? !aterials

TA*'E NO : &"$

.earMaterial

consu!edRs;

A#erae stoc2 of ra?

!aterialRs;RMTR

$1 ,:#D-#:#:+,


44/66

Inter3retation:

From the above graph no .,# raw material ratio has shown a decline in

previous two years,C++3,.:-#,C+,3,.-- giving a good sign of effective use of raw

materials for the production process.


45/66

%" 8or2 in Proress turno#er ratio

Wor$ in progress goods are those which are in the process of production in the

manufacturing unit. "hey are also called as semi finished goods.


Cost of co!3leted ?or2s a#erae ?or2in 3roress

TA*'E NO : &"%

.ear Cost co!3leted

?or2s Rs;

A#erae stoc2 of 8IP

Rs;

8IPTR

$1 ;#+#CC#CCC +D#-#A:#AAC -.A

$11 ;,#A;#CC#CCC +


46/66

Inter3retation: From the above graph no .- it is clear that wor$ in progress ratio

has declined in previous year but it is high when compared to ,C+C3-.A.also this ratio

was in the year ,C++3-.:- and ,C+,3-.,D.

;

,or- in .rogre** t+rnover ratio

3&49 3&52

3&28

1&7

0

0&5

1

1&5

2

2&5

33&5

4

2010 2011 2012 2013


47/66

&" Finis0ed oods turno#er ratio*

Finished goods are those which are read for delivery to the customers# but

lying in the inventory due to some delay of sales. "his ratio indicates the average

finished goods turnover in one fiscal year.

t is e0pressed as*

Cost of oods sold a#erae finis0ed oods in#entor).

TA*'E NO : &"&

.ear Cost of oods

soldRs;

A#erae stoc2 of

finis0ed oods

in#entor)Rs;

F/TR

$1 ,+#


48/66

Inter3retation:

From the above graph no . it shows that this ratio# throughout the period of

study showed fluctuating trend ,C++3.A,#,C+-3C.: which shows that finished goods

are deign in the inventory depending on sales.

" In#entor) to ?or2in ca3ital ratio:

D

/ini*hed good* t+rnover ratio

2&52

4&924&03

0&5

0

1

2

3

4

5

6

2010 2011 2012 2013


49/66

nventory to wor$ing capital is the li)uidity ratio# which helps to measure the

short term solvency of the company. "his ratio indicates that the proposition of the

wor$ing capital tied up in the inventories. 's we $now that inventory is a current asset

and component of wor$ing capital# this ratio shows the percentage of inventory in

wor$ing capital.


In#entor) ?or2in ca3ital

TA*'E NO : &"

.ears In#entor)Rs; 8or2in ca3ital Rs; I TO 8CR

$1 C#;-#-#+- +D#D#DC#:AC ,.+A

$11 ,A#DC#C+#-


50/66

Inter3retation:

From the above graph no .: it can be observed that inventory carries steep

ratio in last few years when compared to ,C+C3,.+A#,C++3,.A#&,C+-3-.,A figures

giving a positive indication of inventory.

B" In#entor) 0oldin 3eriod:

:C


51/66

nventory holding period should be minimum. umber a day for which

inventory is holding is calculated by the following formula.

nventory holding period O in#entor) annual sales %B da)s

TA*'E NO : &"B

.ear In#entor)Rs; Annual sales Rs; IHPDa)s;

$1 C#;-#-#+-


52/66

Inter3retation:

's we $now that H9 should be minimum. Here in the above graph no .; it

shows that H!" !achine tools ltd is holding inventories for longer period in the

previous year ,C+C3,CD#,C++3+:#,C+,3,A-#,C+-3,C, "his is due to decline in sales

and other reason li$e change in design# order being cancelled etc.

CHAPTER-

:,


53/66

FINDIN/4U//ETION4CONC'UION.

"1 FINDIN/

"he growing competition and technological developments in this sector are

having inevitable effects on the ndian machine tool industry as a whole. "he H!"

machine tool limited is facing typical problems in the emerging globalization scenario

as under*

• H!" machine tool has a regular system for determining unserviceable or

damaged stores# raw materials and finished goods.

• "he unit has maintained proper records showing full particulars including

)uantitative details and situations of fi0ed assets.

• !aterials are classified as 1'’ 14’ and 16’ class items.

•

"he unit has maintained good relationship with the employer and employees.

• "he unit has maintained up to date records and submitted to respective

authorities.

• nventory has been physically verified during the year by the management.

• "he technology is not advanced. "his is one of the reasons for low

productivity.

• !ost of the machines are obsolete. "hus production process is costly and time

consuming.

:-


54/66

"$ U//ETION

• "he company should ma$e efforts in ma$ing the whole use of installed and

licensed capacity.

• "he company should fi0 competitive prices for the productions in order to

compete in the global mar$et.

• "he company should adopt modern costing systems# balance scorecard

concept etc.

• "he company inventory management is at moderate level. Hence effective

steps have to be ta$en to see that the inventory management is made more

efficient so that capital is bloc$ed in inventory can be used for wor$ing capital

re)uired.

• !a/or part of revenue earned is spent on payment of interest* therefore

measures should be ta$en to reduce the amount of credit.

• Since the company is incurring loss for the past few years# the management

should ta$e measures to bring such a situation under control in order to

flourish in the near future.

• "he material cost is high in the company# thus the company should ma$e

efforts to buy the materials at reasonable price.

• "he company should update its technology so that it can beat the competitor’s

price and also produce higher )uality products.

• "he company has to concentrate much on credit policy for speedy collections

of accounts receivable.

:


55/66

"% CONC'UION

H!" is a very popular name among every ndian# because of its innovation of

technology )uality assurance durability affordability to its people or customer. H!"

has created the brand image that symbolizes machine tools to a manufacturer# tractors

to a farmer and watches to millions of people in ndia.

n the changed mar$et condition the organization needs to focus on the

customer satisfaction# in reaching out this goal are conclusion basis the management

has to constantly upgrade technology product profile internal wor$ process and plantand machinery in the end ultimately it is the employees who will change the

performance of the company. "herefore motivation must find priority.

::


56/66

HMT Mac0ine Tools 'td HMT Profit and 'oss Ac

Dr Cr

Particulars Schedule

As AT

31.03.2010

As At

31.03.2011

Earnings

Sales 6.1 74,91,45,908

48,00,30,182

Less: Excise duty 3,60,42,110 4,61,82,011

Net Sales 48,33,73,733

43,38,48,171

Transfer t !lant 6.2 11,87,853 21,57,460

"t#er inc$e 6.3 4,98,03,739 10,45,13,464

%#ar&es 'ec(ered 53,33,938 33,98,792

)nter factry Transfers %r 1,19,06,192 87,11,211

*ccretin+ -iscretin t.)!+/nis#ed

Stc+Scra

6.4 5,14,47,965

5,59,19,864

Total 0,01,7,4!0

60,8,48,!62

"ess# $%T&$'N&S

aterials 7.1 20,15,83,439

23,27,93,494

!ersnnel 7.2 29,61,58,730

29,98,76,973

-ereciatin 2,49,78,777 1,74,30,105

"t#er Exenses 7.3 10,67,36,654

9,42,76,334

)nterest 7.4 2,14,43,408 15,48,942

%#ar&es aid 3,23,76,377 2,93,02,958

'S c$ensatin .+ 0 2,91,33,719

:;


57/66

Less: Exenses allcated t sdne fr internal use

6.2 42,60,624 20,18,410

Total 67,!0,16,763

71,62,84,!

!r/t +lss efre rirerid adust$ents and extrardinary ite$s

17,88,59,273

10,77,35,633

Less: rir erid adust$ents 7. 11,43,051 1,35,69,643

*dd: extra rdinary ite$s E") 7.6 0 4,68,12,125

!r/t +lss efre tax 18,00,02,32

4

7,44,93,151

Less: r(isin fr frin&e

ene/ts

0 24,94,135

!r/t +lss efre tax

Transferred T ac#ine Tl-irectrate *+c

(18,00,02,3

24

(7,6!,87,28

6

Mac0ine Tools 'td *alance 0eet

Particulars As AT

31.03.2010

As AT

31.03.2011

L"*S

Secured 1;1 11,25,09,194


58/66

T"T*L 82,89,67,421

>)?E- *SSETS

@rss Alc 2;1 83,52,15,972

Less: -ereciatin 73,43,44,879ET AL"%B 10,08,71,093

ac#inery C EDui$ent in Transit 1,972

%aital .r in !r&ress 0

%


59/66

HMT Mac0ine Tools 'td

HMT Profit and 'oss Ac

Dr Cr

Particulars Schedu

le

As AT

31.03.2011

As At

31.03.2012

Earnings

Sales 6.1 48,00,30,182

51,94,15,843

Less: Excise duty 8,27,03,710

Net Sales 66,64,42,1!8

71,10,4!,820

Transfer t !lant 6.2

"t#er inc$e 6.3 4,69,87,145 11,32,10,940%#ar&es 'ec(ered 19,70,219 1,30,97,778

)nter factry Transfers %r 30,84,179 47,52,771


Stc+Scra

6.4 11,39,26,82

3

3,61,00,539

Total 60,4,6,!18

80,60,10,770

"ess# $%T&$'N&S

aterials 7.1 23,27,68,231

25,83,54,512

!ersnnel 7.2 31,63,28,487

32,14,35,107

-ereciatin 1,49,58,672 1,62,11,663

"t#er Exenses 7.3 7,08,57,861 18,36,07,030

)nterest 7.4 13,72,467 4,11,69,468

%#ar&es aid 3,14,11,816 3,93,21,342

'S c$ensatin .+ 7,06,43,865 24,65,44,105

Less: Exenses allcated t 6.2 40,11,465 24,74,537

:A


60/66

s dne fr internal use

Total 74,01,2!,!34

1,10,41,68,6!0

!r/t +lss efre rir

erid adust$ents andextra rdinary ite$s

13,55,73,016

29,81,57,920

Less: rir eridadust$ents

7. 50,11,629 4,85,725

*dd: extra rdinary ite$sE")

7.6 0 13,78,00,534


8

0

Less: r(isin fr frin&e

ene/ts

23,10,234 64,597

19,85,968

!r/t +lss efre tax


14,28,94,87

2

16,28,93,676


;C


61/66

*alance 0eet

Dr Cr

;+

Particulars As AT

31.03.2011

As AT

31.03.2012

Earnings

Sales 6.1 51,94,15,843

Less: Excise duty

Net Sales 7!,!!,13,006

Transfer t !lant 6.2 0"t#er inc$e 6.3 3,44,60,770

%#ar&es 'ec(ered 1,96,28,884

)nter factry Transfers %r 0


Stc+Scra

6.4 5,55,094

Total 8,4,7,74

"ess# $%T&$'N&S

aterials 7.1 29,28,69,759

!ersnnel 7.2 42,54,08,432

-ereciatin 2,28,81,252

"t#er Exenses 7.3 20,68,12,263

)nterest 7.4 7,70,17,273

%#ar&es aid 4,59,51,966

'S c$ensatin .+ 5,13,59,006

Less: Exenses allcated t sdne fr internal use 6.2 3015056

Total 111!2848!


264727141

Less: rir erid adust$ents 7. 14,21,860

*dd: extra rdinary ite$s E") 7.6 1,28,31,83,889

!r/t +lss efre tax

Less: r(isin fr frin&e ene/ts 0

!r/t +lss efre tax


1,01,70,34,888


62/66


HMT Profit and 'oss Ac

Dr Cr

Particulars Schedu

le

As AT

31.03.2012

As AT

31.03.2013

Earnings

Sales 6.1 51,94,15,843

51,76,09,558

Less: Excise duty 4,01,41,768

3,60,42,110

Net Sales 47,74,67,7!0

48,33,73,733

Transfer t !lant 6.2 0 11,87,853"t#er inc$e 6.3 4,73,52,33

24,98,03,739

%#ar&es 'ec(ered 52,65,526 53,33,938

)nter factry Transfers %r 1,19,06,192


Stc+Scra

6.4 6,37,33,52

8

5,14,47,965

Total 46,63,2,1

20

0,01,7,4

!0"ess# $%T&$'N&S

aterials 7.1 21,08,36,787

20,15,83,439

!ersnnel 7.2 38,34,70,776

29,61,58,730

-ereciatin 3,19,48,656

2,49,78,777

"t#er Exenses 7.3 7,66,13,61

1

10,67,36,65

4)nterest 7.4 2,10,08,94 2,14,43,408

;,


63/66

5

%#ar&es aid 3,70,13,394

3,23,76,377

'S c$ensatin .+ 0 0

Less: Exenses allcated t sdne fr internal use

6.2 7,62,729 42,60,624

Total 76,01,2!,440

67,!0,16,763


29,37,77,3

20

17,88,59,27

3

Less: rir erid adust$ents 7. 13,24,453 11,43,051

*dd: extra rdinary ite$s E") 7.6 0 0


73

18,00,02,32

4

Less: r(isin fr frin&e ene/ts 0 0

!r/t +lss efre tax


(2!,1,01,7

73

(18,00,02,3

24

;-


64/66


65/66

"oans 5 Ad;ances 3. 17,71,7,66

17,72,40,78

4!,!!,02,610

62,71,26,!17

"ess# +%99ENT "'A'"'T'ES 5P9$:'S'$N

+urrent lia/9E?

0 0

T$TA" 13,!7,4,868

38,4,12,146

*I*'IO/RAPH.

;:


66/66

• "P /UPTHA 1; Jtatistical !et0odsK4sult0an c0and and co ne? del0i"

• I"M PANDE. 1;4 ?Financial !anagement@ Vi$as 9ublishing Home 9vt (td#

ew %elhi.

• M"."7HAN 6 P7 +AIN 1;# ?!anagement 'ccounting@# "ata !6 Eraw

Hill 9ublishing 6ompany (td# Himalaya 9ublishing House# !umbai.

8E*ITE:

• www.hmtindia.com

• www.hmtmachinetools.com
http://www.hmtindia.com/http://www.hmtmachinetools.com/http://www.hmtindia.com/http://www.hmtmachinetools.com/

123 Inventory Hmt Machine Tools

Documents

Transcript of 123 Inventory Hmt Machine Tools