EASTMAN Final Project1

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A

SUMMER TRAINING PROJECT REPORT

ON

INVENTORY MANAGEMENT

Submitted in the patia! "u!"i!!ment #" the e$uiement "# the a%ad #" de&ee #"

Master of Business Administration,

Punjabi University, Patiala.

Submitted '()

Tinu Joshi

oll !umber" #$##$#%&$%'

Uni. e(. !o.

MBA )rd *emester

Unde the &uidan*e #")

Mr. *unil +umar *harma

inance Mana(er

-astman ast / or(e 0td. 0udhiana

+ES, ',AGAT INSTITUTE O- MANAGEMENT AN+ COMPUTER SCIENCES

MAN+I GO'IN+GAR,

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1-0AAT23!

24444444444444444444444444444444444444 oll !o 444444444444444444 a full

time bonafide student of Master of Business Administration 5MBA6 Pro(ramme

of 1esh Bha(at 2nstitute 3f Mana(ement And omputer *ciences, Mandi

7obind(arh. 2 hereby certify that this project entitled In1ent#( Mana&ement

carried out by me at4444444444444444444444444444444444444444444444444. The

report submitted in partial fulfillment of the re8uirements of the pro(ramme is an

ori(inal 9or: of mine under the (uidance of the industry (uide

44444444444444444444444444444444444444444444444444444444444444444

and is not based or reproduced from any e;istin( 9or: of any other person or on any

earlier 9or: underta:en at any other time or for any other purpose, and has not been

submitted any9here else at any time.

+ate) Name 3 i&n #" tudent

R#!! N#

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AC5NO67E+GEMENT

2 consider it pleasant privile(e to e;press my heartiest (ratitude and indebtedness to

those 9ho have assisted me to9ards the completion of my project report.

2 am very much than:ful to M. Suni! 5uma Shama 3 Sumit Gupta *enior

Mana(er in Accounts 1epartment for ma:in( me capable of conductin( such a study.

2 e;press my heartiest and sincere than:s to my company (uide M. Suni! 5uma

Shama M. Sumit Gupta Mi Geeti8a Gu!ati M. +a(a 'ha*hu S. Pa&at

Sin&h Mi 'ainde 5au M. Ahih S##d M. Vina( Gupta #" A**#unt

+epatment In EC-7 9ho have been a constant source of inspiration and

encoura(ement to me in carryin( out this study.

2 9ould also li:e to e;press my (ratitude to9ards my aculty (uide Mr. *andeep

Bansal 9ho helped me to complete the project.

2 o9e my special re(ards to 7od, my parents and my elders for their blessin(s and(ood 9ishes.

Under his able (uidance 2 have increased my capacity to understand and 9or: in a

demandin( environment.

5T2!U J3*=26

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E9ECUTIVE SUMMARY

The dictionary meanin( of inventory is >stoc: of (oods, or a list of (oods?.

The 9ord >2nventory? is understood differently by various authors. 2n accountin(

lan(ua(e it may mean stoc: of finished (oods only. 2n manufacturin( concern, it may

include ra9 material, 9or: in process and stores, etc.

2nventory includes follo9in( :inds@

Ra% Mateia!)

a9 material from a major input into the or(aniation. They are re8uired to carry out

production activities uninterruptedly. The 8uantity of ra9 materials re8uired 9ill be

determined by the rate of consumption and the time re8uired for replenishin( the

suppliers. The factors li:e the availability of ra9 material and (overnment re(ulation,

etc. too affect the stoc: of ra9 materials.

6#8 :inP#&e)

The 9or:inpro(ress is that sta(e of stoc:s 9hich are in bet9een ra9 materials and

finished (oods. The ra9 materials enter the process of manufacture but they are yet to

attain a final shape of finished (oods. The 8uantum of 9or:inpro(ress depends upon

the time ta:en in the manufacturin( process. The (reater the time ta:en in

manufacturin(, the more 9ill be the amount of 9or: in pro(ress.

C#numab!e)

These are the materials 9hich are needed to smoothen the process of production.These materials do not directly enter production but they act as catalysts, etc.

onsumables may be classified accordin( to their consumption and criticality.

7enerally, consumable stores do not create any supply problem and form a small part

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of production cost. There can be instances 9here these materials may account for

much value than the ra9 materials. The fuel oil may form a substantial part of cost.

-inihed #d)These are the (oods 9hich are ready for the consumers. The stoc: of finished (oods

provides a buffer bet9een production and mar:et. The purpose of maintainin(

inventory is to ensure proper supply of (oods to customers. 2n some concerns the

production is underta:en on order basis, in these concerns there 9ill not be a need for

finished (oods. The need for finished (oods inventory 9ill be more 9hen production

is underta:en in (eneral 9ithout 9aitin( for specific orders.

Spae)

spares also form a part of inventory. The onsumption pattern of ra9 material,

consumables, finished (oods are different from that of spares. The stoc:in( policies of

spares are different from industry to industry. *ome industries li:e transport 9ill

re8uire more spares than the other concerns. The costly spares parts li:e en(ines,

maintenance spares etc. are not discarded after use, rather they are :ept in ready

position for further use. All decisions about spares are based on the financial cost of

inventory on such spares and the costs that may arise due to their nonavailability.

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C#ntent

Ch. N#. Tit!e Pa&e N#.

;E4?

'%'

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C,APTER) 0

INT

RODUCTION OF EASTMAN CAST

& FORGE LTD.

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;0.0= EASTMAN CAST 3 -ORG AT 7U+,IANA P7ANT

6e ha1e manu"a*tuin& "a*i!itie at 7udhiana "# ,and T##! and P#%e T##!.

The -;port of Tools is directed to9ards %F mar:ets out of 2ndia such as ussia,

U:raine, Belarus, Tur:ey, Panama, Peru, Bul(aria, rance, Portu(al, Malaysia, and

*rilan:a etc.

-astman brand has presence in domestic mar:et and %# vehicle manufacturers such as

Tata Motors, Mahindra / Mahindra, Asho: 0eyland, John1eere, !e9 =olland,

-icher, TA-, =ero =onda Motors etc. -astman tool :its are supplied as ori(inal

e8uipments alon( 9ith the vehicles manufactured by these companies.

2n 2ndia -astman products are available throu(h a stron( net9or: of more than C$$

dealers and ompanyHs e;clusive *ho9 ooms cum 1emo / *ervice enters. We

have installed capacity of )$$$$$ Tools per annum. To ensure the 8uality parameters

9e have state of the art testin( lab that contains e8uipments for Motor -ndurance,

omplete unit life testin(, temperature rise testin(, =i(h volta(e testin(, Parts testin(,

able tension etc.

Bein( a customer focused or(aniation and to increase its competitiveness in the

overseas mar:ets the company has full fled(ed stron( technical force to adhere to the

(oals of the company.

We loo: for9ard Ito help you 9or: betterI 9ith our tools.

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;0.2= @S AT EC-7

This enables the plant to have better 9or:in( conditions and also increase 9or:

efficiency. A copy of it also displayed at each shop and depth to motivate the

employee to9ards healthy 9or: environment.

Meanin( and benefits of &* system are as follo9s"

0. SEIRI) It tand "# S#tin&B

Ta:e out necessary items and suitably dispose 9ith them

'ene"it)

#. -ffective *pace Utiliation

%. *top Material from deteroitin( or (ettin( dama(ed

). educe 9asta(e and searchin( items

2. SEITON" It tand "# Set in Ode

Arran(e. All necessary items in a proper order so that they can be easily pic:ed up for

use

'ene"it)

#. educe preparation and machine settin( and machine settin( timin(s.

%. educe time in locatin( or 9aitin( for Tool Parts and Machines.

. SEISON" It tand "# ShineDC#mp!ete!( C!eanB

lean your 9or:place completely so that there is no dust any9here.

'ene"it)

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#. Promotes 3rderly and *afe Wor:in( -nvironment

%. educes Brea:do9n and Accidents.

4. SEI5ETSU) It tand "# StandadieB

Maintain a hi(h standard of house :eepin( and 9or: place or(aniational at all

times

'ene"it)

#. Kuic: esponse throu(h Lisual Mana(ement

%. reate a maintenance system of =ouse :eepin( for all the times.

@. S,ITSU5E) It tand "# Se!" +i*ip!ine AttitudeB

Train People to follo9 7ood =ouse +eepin( 1iscipline 2ndependently

'ene"it)

#. *elf 1iscipline

%. 2mproves 2ndustrial *afety

). reates =ealthy Attitude and =abits

Ad1anta&e #" @S

=ealthy Wor:in( -nvironment

2mproves Wor: -fficiency

Producin( Better Kuality Products and =i(her Productivity

uttin( ost 1o9n

-nsurin( 1elivery on time

*afe Wor:in(

=i(h Morale and Better 0ife

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;0.= EC-7 MISSION 3 VISSION

;0..0= EC-7 VISION

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VisionCreate a team of Business

Managers with a clear visiblecareer growth path to run and lead

the organization to a virtuouscycle and gain national leadership

in hand tools and power tools


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;0..2= EC-7 MISSION

&order 8uantity? means the 8uantity produced or procured durin( one production

cycle. -conomic order 8uantity is calculated by balancin( the t9o costs. -conomic

3rder Kuantity 5-3K6 is that sie of order 9hich minimies total costs of carryin(

and cost of orderin(. i.e., Minimum Total ost occurs 9hen 2nventory arryin( ost

Q 3rderin( ost.

-conomic order 8uantity can be determined by t9o methods"

#.Tabulation method.

%. Al(ebraic method.

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0. +eteminati#n #" EOL b( Tabu!ati#n ;Tia! 3 E#= Meth#d

This method involves the follo9in( steps"

#. *elect the number of possible lot sies to purchase.

%. 1etermine avera(e inventory carryin( cost for the lot purchased.

). 1etermine the total orderin( cost for the orders placed.

C. 1etermine the total cost for each lot sie chosen 9hich is the summation of

inventory carryin( cost and orderin( cost.

&. *elect the orderin( 8uantity, 9hich minimies the total cost.

The data calculated in a tabular column can plot sho9in( the nature of total cost,

inventory cost and orderin( cost curve a(ainst the 8uantity ordered as in i(. C.E.

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2. +eteminati#n #" EOL b( Ana!(ti*a! Meth#d

2n order to derive an economic lot sie formula follo9in( assumptions are made"

#. 1emand is :no9n and uniform.

%. 0et 1 denotes the total number of units purchaseproduced and Kdenotesthe lot sie in each production run.

). *horta(es are not permitted i.e., as soon as the level of the inventory reaches

ero, the inventory is replenished.

C. Production or supply of commodity is instantaneous.

&. 0eadtime is ero.

E. *etup cost per production run or procurement cost is ).

F. 2nventory carryin( cost is # Q 2, 9here is the unit cost and 2 is called

inventory carryin( cost e;pressed as a percenta(e of the value of the avera(e

inventory.

%. This fundamental situation can be sho9n on an inventorytime dia(ram,

5i(. C.F6 9ith K

on the vertical a;is and the time on the horiontal a;is. The total time period

5one year6 is divided

into n parts.

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@. Jut In Time ;JIT= In1ent#( C#nt#! S(tem)

Just in time philosophy, 9hich aims at eliminatin( 9aste every aspect of

manufacturin( and its related activities, 9as first development in Japan. Toyota

introduced this techni8ue in #


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. In1ent#( Tun#1e Rati#)

2nventory turnover ratio are calculated to indicate 9hether inventory have been used

efficiently or not. The purpose is to ensure the bloc:in( of only re8uired minimum

fund in inventory. The 2nventory Turnover atio also :no9n as stoc: velocity is

normally calculated as salesavera(e inventory or cost of (oods soldavera(e

inventory cost. 2nventory conversion period may also be calculated to find the avera(e

time ta:en for clearin( the stoc:s.

ost of (oods sold

2nventory Turnover atio Q RRRRRRRRRRRRRRRR

Avera(e 2nventory at cost

!et *ales

3r RRRRRRRRRRRRRR

5Avera(e6 2nventory

1ays in a year

And, 2nventory onversion Period Q RRRRRRRRRRRRRR

2nventory Turnover atio

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>. A&in& S*hedu!e #" In1ent#ie)

lassification of inventories accordin( to period 5a(e6 of their holdin( also helps in

identifyin( slo9 movin( inventories thereby helpin( in effective control and

mana(ement of inventories. The follo9in( table sho9s a(in( of inventory of a firm.

?. C!ai"i*ati#n and C#di"i*ati#n #" In1ent#ie)

The inventories may be classified either accordin( to their nature or accordin( to their

use. 7enerally, materials are classified accordin( to their nature such as constructionmaterial, consumable stoc:s, spares, lubricants, etc. After classification, the materials

are (iven code numbers. The codin( may be done alphabetically or numerically. The

latter method is (enerally used for codin(. The class of material is assi(ned t9o di(its

and then t9o or three di(its are assi(ned to the cate(ories of material in that class. The

third distinction is needed for the 8uality of (oods and decimals are used to note this

factor. or e;ample, a concern has t9o cate(ories of item divided into #& (roups. T9o

number 9ill be used for main cate(ories and t9o in sub(roups 5because the number

is #& i.e., more than


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0/. In1ent#( Rep#t)

rom effective inventory control, the mana(ement should be :ept informed 9ith the

latest stoc: position of different items. This is usually do9n by preparin( periodical

inventory reports .These reports should contain all information necessary for

mana(ement action. 3n the basis of these reports mana(ement ta:es corrective action

9herever necessary. The more fre8uently these reports are prepared the less 9ill be

the chances of lapse in the administration of inventory.

00. 7ead Time)

0ead time is the period that elapses bet9een the reco(nition of a need and its

fulfillment. There is a direct relationship bet9een lead time and inventories. The

levels of inventory of an item depends upon the len(th of its lead time .suppose, lead

time is one month. Any action ta:en no9 9ill have an effect only one month letter. *o

inventory for the current month must be in hand. 1urin( lead time there 9ill be no

delivery of materials and consumin( departments 9ill have to be served from the

inventories held.

0ead time has t9o components" 0ead time for company 5administrative lead time6

from initiation of procurement action until the placin( of an order, and the lead time

for the producer, :no9 as delivery lead time from the placin( of an order unites the

delivery of the order material. Administrative lead time also follo9s ta:e some time.

Administrative lead time is in the hands of those 9ho are dealin( 9ith material

procurement. 1elivery time has to be ne(otiated at the time of preparin( purchase

contract.

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EASTMAN Final Project1

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