Inventory Managemesdnt in Ashok Leyland 1

8/11/2019 Inventory Managemesdnt in Ashok Leyland 1

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A STUDY ON INVENTORY MANAGEMENT

STATEMENT ABOUT THE PROBLEM

The three primary functions that characterize the occupation are manaement! coor"ination! an"contro# of in$entory an" systems of in$entory manaement% Manaement of in$entory recor"s

an" re#e$ant "etai#s is an important area of concern for e$ery oranization! &hether it is #are or

sma##% An" a#so ca##s for efficient p#annin an" maintenance% Thin' of a situation &hen you ha$e

to #oo' into $arious reisters to fin" an" enter each an" e$ery minor man"atory "etai#% An" the

situation oes &orse &hen you nee" to manae a num(er of such reisters% E$ery reister nee" to

(e up"ate" to ma'e the recor"s up to "ate% O($ious#y! manain num(er of such recor"s an"

reisters manua##y soun"s to (e tru#y a #a(orious )o( an" ca##s for efficient an" effecti$e p#annin

an" imp#ementation of effecti$e s'i##s to et the )o( "one%

*ut &hat for! if not a## (ut a ma+imum part of the )o( of manaement can (e "one automatica##y

&ith )ust the c#ic' of a (utton,,Soun"s a (it re#ie$in an" interestin! isn-t it,, .ere comes the

concept of

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WHAT IS INVENTORY

Despite its importance to the supp#y chain! in$entory is not uni$ersa##y &e## un"erstoo"% It is

$arious#y characterize"! (oth positi$e#y an" neati$e#y! as an economic asset to a non/income/

pro"ucin use of capita# fun"s% On#y &hen consi"ere" in #iht of a## 0ua#ity! c#ient ser$ice an"

economic factors1from the $ie&points of purchasin! manufacturin! sa#es an" finance1"oes

the &ho#e picture of in$entory (ecome c#ear% No matter the $ie&point! effecti$e in$entory

manaement is essentia# to supp#y chain competiti$eness%

In$entory is a #ist for oo"san" materia#s! or those oo"s an" materia#s themse#$es! he#"

a$ai#a(#e in stoc' (y a(usiness% In$entory are he#" in or"er to manae an" hi"e from the

customer the fact that manufacture2supp#y "e#ay is #oner than "e#i$ery "e#ay! an" a#so to ease

the effect of imperfections in the manufacturin process that #o&er pro"uction efficiencies if

pro"uction capacity stan"s i"#e for #ac' of materia#s% In other &or"s! In$entory is a 0uantity or

store of oo"s that is he#" for some purpose or use 3the term may a#so (e use" as a $er(! meanin

to ta'e in$entory or to count a## oo"s he#" in in$entory4% In$entory may (e 'ept 5in/house!5

meanin on the premises or near(y for imme"iate use6 or it may (e he#" in a "istant &arehouse

or "istri(ution center for future use% 7ith the e+ception of firms uti#izin )ust/in/time metho"s!

more often than not! the term 5in$entory5 imp#ies a store" 0uantity of oo"s that e+cee"s &hat is

nee"e" for the firm to function at the current time 3e%%! &ithin the ne+t fe& hours4%

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NEED FOR THE STUDY

o To a$oi"in &astae

o To a$oi" shortae of materia#

o To a$oi" #ac' of materia#

o To manae in$entory effecti$e#y

o To meet une+pecte" "eman"s of materia#

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SCOPE OF THE STUDY

The present stu"y aims at the fo##o&in

o .ih#iht the nee" for an" nature of in$entory%

o Un"er#ine nee" for in$estin in current assets an" e#a(orate the concept of

in$entory manaement%

o 8ocus on the nee" for ana#yzin in$estment in in$entory%

o Discuss the process of manain in$entory%

OBJECTIVE OF THE STUDY

To c#assify the ra& materia# for the (etter contro#

To recommen" proper in$entory manaement

To suest suita(#e measures to impro$e the in$entory manaement system

To stu"y the effecti$e uti#ization of in$entory

To maintaine" #are size of in$entory of ra& materia#s an" &or' in process for efficient

an" smooth pro"uction an" finishe" oo"s for uninterrupte" sa#es operation

To maintain a minimum in$estment in in$entory to ma+imize profita(i#ity

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RESEARCH DESIGN

The Term research "esin is "efine" as ;the &ays an" metho"s that are fo##o&e" in ana#yzin

the "ata a$ai#a(#eourna#s! :ompany (roachers an" Internet!

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an" annua# reports%

INDUSTRY PROFILE

The automo(i#e in"ustry in In"ia is the tenth #arest in the &or#" &ith an annua# pro"uction of

appro+imate#y ? mi##ion units @ is e+pecte" to (ecome one of the ma)or #o(a# automoti$e

in"ustries in the comin years% A num(er of "omestic companies pro"uce automo(i#es in In"ia

an" the ro&in presences of mu#tinationa# in$estment! too has #e" to an increase in o$era##

ro&th fo##o&in the economic reforms of BB the In"ian ro&th as a resu#t of increase"

competi$eness an" re#a+e" restrictions%

Hi$to!#(

In BC! the Go$t of In"ia an" the In"ian pri$ate sector initiate" manufacturin processes to

he#p "e$e#op the automo(i#e in"ustry! &hich ha" emere" (y the BFs in a nascent form%

*et&een BF to the economic #i(era#ization of BB! the automo(i#e in"ustry continue" to ro&

at a s#o& pace "ue to the many o$t restrictions% >apanese manufacturers entere" the In"ian

mar'et u#timate#y #ea"in to the esta(#ishment of Maruti u"yo% A num(er of forein firms )oint

$entures &ith In"ian companies%

AUTOMOBILE INDUSTRY HISTORY(

In the year HB! a 8rench enineer (y the name of Nico#as >% :unot in$ente" the

first automo(i#e to run on roa"s%

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This automo(i#e! in fact! &as a se#f/po&ere"! three &hee#er! mi#itary tractor that

ma"e use of steam enine% The rane of the automo(i#e! ho&e$er! &as $ery (rief an" at the

most! it cou#" on#y run at a stretch for fifteen minutes% In a""ition! these automo(i#es &erenot fit for the roa"s as the steam enines ma"e them $ery hea$y an" #are! an" re0uire"

amp#e startin time% O#i$er E$ans &as the first to "esin a steam enine "ri$en automo(i#e

in the U%S%

The automo(i#e in"ustry fina##y came of ae &ith .enry 8or" in B for the (u#'

pro"uction in cars% This #ea" to the "e$e#opment of the in"ustry an" it first (eun in the

assem(#y #ines of his car factory% The se$era# metho"s a"opte" (y 8or"! ma"e the ne&

in$ention i%e%4 car! popu#ar amonst the rich as &e## as masses% Accor"in to the history of automo(i#e in"ustry U%S! "ominate" the automo(i#e

mar'ets aroun" the #o(e &ith no nota(#e competitors% .o&e$er! after the en" of Secon"

7or#" 7ar in BC! the automo(i#e in"ustry of other techno#oica##y a"$ance" nations such

as >apan an" certain European nations aine" momentum an" &ithin a $ery short perio"!

(einnin in the ear#y BFs! the U%S automo(i#e in"ustry &as f#oo"e" &ith forein

automo(i#e companies! especia##y those of >apan an" Germany%

The current tren"s of the G#o(a# automo(i#e in"ustry re$ea# that in the"e$e#ope" countries the automo(i#e in"ustry are stanatin as a resu#t of the "roopin car

mar'ets! &hereas the automo(i#e in"ustry in the "e$e#opin nations! such as In"ia an"

*razi#! ha$e (een consistent#y reisterin hiher ro&th rates e$ery passin year for their

f#ourishin automo(i#e mar'ets%

INDIAN AUTOMOBILE INDUSTRY(

In"ia is one of the fastest ro&in automo(i#e in"ustries in the &or#"% After BHF!

the automo(i#e in"ustry sa& rapi" ro&th an" many automoti$e manufacturers starte"

pro"uction

The automo(i#e in"ustry in In"ia is the se$enth #arest in the &or#" &ith an" annua#

pro"uction of o$er ?%H mi##ion units in ?FFB% In ?FFB! In"ia emere" as Asia-s fourth #arest

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e+porter of automo(i#es! (ehin" >apan! South Jorea an" Thai#an"% *y ?FCF! the country is

e+pecte" to top the &or#" in car $o#umes &ith appro+imate#y H mi##ion $ehic#es on the

nation-s roa"s%

A &e## "e$e#ope" transport net&or' in"icates a &e## "e$e#ope" economy% 8or rapi"

"e$e#opment a &e##/"e$e#ope" an" &e##/'nit transportation system is essentia#% As In"ia-s

transport net&or' is "e$e#opin at a fast pace! In"ian automo(i#e in"ustry is ro&in too%

A#so! the automo(i#e in"ustry has stron (ac'&ar" an" for&ar" #in'aes an" hence pro$i"es

emp#oyment to a #are section of the popu#ation% Thus the ro#e of automo(i#e in"ustry cannot

(e o$er#oo'e" in the In"ian economy% In"ian automo(i#e in"ustry inc#u"es manufacture of

truc's! (uses! passener cars! "efence $ehic#es! t&o &hee#ers etc%%! the in"ustry can (e(roa"#y "i$i"e" into the car manufacturin! t&o/&hee#er manufacturin an" hea$y $ehic#e

manufacturin units%

The ma)or car manufacturers are .in"ustan Motors! Maruti U"yo! 8iat In"ia =$t%

9t"! 8or" In"ia 9t"%! Genera# Motors =$t% 9t"%! .on"a Sie# :ars In"ia 9t"%! .yun"ai Motors

In"ia 9t"%! S'o"a In"ia =$t% 9t"%! Toyota Jir#os'ar Motor 9t"%! to name a fe&%

The t&o &hee#er manufacturin is "ominate" (y companies #i'e TVS! .on"a

Motorcyc#e KScooter In"ia =$t% 9t"%! .ero .on"a! Yamaha! *a)a) etc%%!

The hea$y motors #i'e (uses! truc's! "efence $ehic#es! auto ric'sha&s an" other

mu#ti uti#ity $ehic#es are manufacture" (y Tata/Te#co! Asho' 9ey#an"! Eicher Motors! *a)a)!

Mahin"ra an" Mahin"ra etc%%!

INDIAN AUTOMOBILE MAR)ET(

Many forein companies ha$e (een in$estin in the In"ian automo(i#e mar'et in

$arious &ays such as techno#oy transfers! )oint $entures! strateic a##iances! e+ports an"

financia# co##a(orations% The auto mar'et in In"ia can (oast of attracti$e finance schemes!

increasin purchase po&er an" #aunch of #atest pro"ucts% Some $ita# statistics rear"in the

automo(i#e mar'et in In"ia has (een mentione" (e#o&L

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In"ia ran's ?n" in the #o(a# t&o/&hee#er mar'et In"ia is the th (iest commercia# $ehic#e mar'et in the &or#" In"ia ran's th in the internationa# passener car mar'et In"ia ran's Cth pertainin to the num(er of (us an" truc' so#" in the &or#"%

HEAVY VEHICLES MAR)ET(

.ea$y $ehic#es mar'et in In"ia comprises of truc's! machines! am(u#ances an"

schoo# (uses% The popu#ar hea$y $ehic#e (ran"s in In"ia are Vo#$o! Eicher! Tata! Te#co!

Asho' 9ey#an" an" S&ara) Maz"a%

8o##o&in are the ma)or p#ayers in the In"ian .ea$y Vehic#es Mar'etL

Tata Motors is the #arest automo(i#e manufacturin company in In"ia that

manufactures a &i"e rane of hea$y $ehic#es a"herin to &or#" c#ass stan"ar"s% It is the

mar'et #ea"er in commercia# $ehic#es in a## the sements! (e it hea$y $ehic#es! me"ium size

$ehic#es! sma## $ehic#es! (uses or "efence $ehic#es% The hea$y $ehic#es manufacture" (y

Tata Motors ha$e hih#y "e$e#ope" (ra'in structure! hih roun" authorization! (etter

"irection competence an" a muscu#ar (o"y% The a"$ance" enine imparte" to these hea$y

$ehic#es ma'es them a c#ass apart from the other hea$y $ehic#es runnin on the In"ian roa"s

an" .ih&ays% Tata Motors #ea"s this sement &ith a mar'et share of H%

Asho' 9ey#an" is an e+c#usi$e#y hea$y $ehic#e manufacturin company situate" in

:hennai an" &as initiate" in the year B% It is one of In"ia-s (iest pro"ucers of hea$y

$ehic#es such as truc's! (uses! mi#itary $ehic#es an" a#so the secon" (iest commercia#

$ehic#e firm in In"ia hea$y $ehic#e "i$ision &ith a mar'et share of aroun" ?% Asho'

9ey#an" is a#so reno&ne" for pro"ucin auto spare parts an" enines for marine an"

in"ustria# su(mission% Eicher Motors &as initiate" in r" Septem(er! BHF% The first firm to manufacture the

first tractor in In"ia% The in"ienous#y manufacture" tractor &as intro"uce" in the In"ian

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mar'et straiht from Eicher-s 8ari"a(a" factory% The history of the firm can (e trace" (ac'

to B! &hen Goo" earth :ompany &as esta(#ishe" for $en"in an" repairs of importe"

tractors in the nation% S&ara) Maz"a! a tie up (et&een Maz"a an" S&ara) Enterprise! S&ara) Maz"a represents

a"$ance" In"ian e+pertise an" manufacturin% The firm has Research an" De$e#opment

impro$ement e"e on internationa# sca#e% The firm manufactures $arious pro"ucts such as

*us! Am(u#ance! Truc's etc%

The mo"ern automo(i#e mar'et in In"ia has (een consi"erin 'ey issues in the process of

ro&thL

:ustomer care! an" not )ust ser$ice Domestic as &e## as mu#ti/nationa# in$estments Searin throuh cut/throat competition Roa" safety Anti/po##ution norms :o/or"ination &ith o$ernment to ena(#e a"$ancement Use" $ehic#e tra"e

The future of In"ian automo(i#e mar'et is (riht as it #oo's for&ar" to manufacturin an"

imp#ementin ne& inno$ations such as e#ectric cars as pro$i"e" (y Re$a! a#ternate fue#s #i'e:NG an" 9=G an" pro(a(#y customize" internet automo(i#e or"ers%

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COMPANY PROFILE

Asho' 9ey#an" has (een a ma)or presence in In"ia-s commercia# $ehic#e in"ustry since

B! the year it &as (orn% The oriin of Asho' 9ey#an" can (e trace" to the ure for se#f/

re#iance! fe#t (y in"epen"ent In"ia% =an"it >a&ahar#a# Nehru! In"ias first =rime Minister

persua"e" Mr% Rahunan"an Saran! an in"ustria#ist! to enter automoti$e manufacturin%

They are one of the In"ia-s #ea"in manufacturers of commercia# $ehic#es an" specia#

$ehic#es! enines for in"ustria# purpose! en sets an" marine re0uirement e0uipments% 8or

o$er fi$e "eca"es! Asho' 9ey#an" has (een the techno#oy #ea"er in In"ia-s commercia#

$ehic#e in"ustry! mo#"in the country-s commercia# $ehic#e profi#e (y intro"ucin

techno#oies an" pro"uct i"eas that ha$e one on to (ecome in"ustry norms%

Asho' 9ey#an" at the time of its inception &as 'no&n as Asho' Motors% It &as

assem(#in Austin cars at the first p#ant! at Ennore! near :hennai% In BCF! the company

starte" assem(#y of 9ey#an" commercia# $ehic#es an" soon the #oca# manufacturin un"er

#icense from *ritish 9ey#an"6 participation in the e0uity capita#! in BC! the company &as

re christene" Asho' 9ey#an"%

In B the o$erseas ho#"in (y 9R9I. 39AND ROVER 9EY9AND

INTERNATIONA9 .O9DINGS 9IMITED4 &as ta'en o$er (y a )oint $enture (et&een the

.in"u)a roup! the Non Resi"ent In"ian Transnationa# roup an" IVE:O 8iat S=A part of

the 8iat roup an" Europe-s #ea"in truc' manufacturin company% Asho' =%.in"u)a is the

chairman of the company% The .in"u)a roup a#so associate" &ith Ennore 8oun"ries

9imite"! Automoti$e :oaches an" :omponents 9imite"! an" Gu#f Ash#ey Motors 9imite"%

The su(si"iary ho#"ins are Ash#ey .o#"ins 9t"%! Ash#ey In$estment 9t"%! an"

Asho' 9ey#an" =ro)ect Ser$ices% The chief competitors of the company are6

Mahin"ra Vo#$o

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Tata Motors

7ith a comman"in strenth of the a(out ?!FFF emp#oyees the company is #oo'in

for&ar"s to enhance the scope of its action% It is aimin at e+pan"in its pro"uction

operation o$erseas to ma'e it a more #o(a##y accessi(#e company% It is #oo'in to ac0uire a

sma## to me"ium size" commercia# $ehic#e manufacturers in :hina an" other "e$e#opin

nations! &hich ha$e an esta(#ishe" pro"uct #ine% An e+amp#e &ou#" (e the ?FF ac0uisition

of the :zech (ase" A$ia-s truc' (usiness rechristene" A$ia Asho' 9ey#an" Motors%

Since its inception! Asho' 9ey#an" has (een a ma)or presence an" these years ha$e(een punctuate" (y a num(er of techno#oica# inno$ations &hich &ent to (ecome in"ustry

stan"ar"% This tra"ition of techno#oica# inno$ations an" #ea"ership &as achie$e" throuh

years of $iorous in/house research an" "e$e#opment%

8rom seater to ? seater "ou(#e/"ec'er (uses! from %C tons to B tone in

hau#ae $ehic#es! from numerous specia# app#ication $ehic#es to "iese# enines for in"ustria#!

marine an" enset app#ications! Asho' 9ey#an" offers a &i"e rane of pro"ucts%

Asho' 9ey#an" has se$en manufacturin p#ants @

Ennore =#ant! :hennai% .osur =#ants Unit I! Unit II an" Unit II A% A#&ar! Ra)asthan% *han"ara! Maharashtra% =antnaar! Uttara'han"

Ear#y pro"ucts of Asho' 9ey#an" inc#u"e" the 9ey#an" :omet (us chassis so#" to many

operators inc#u"in .y"era(a" Roa" Transport! Ahme"a(a" Municipa#ity! Tra$ancore State

Transport! *om(ay State Transport an" De#hi Roa" Transport Authority%

In the popu#ar metro cities! four out of fi$e state transport un"erta'in (uses come from

Asho' 9ey#an"% Some of them #i'e the Dou(#e Dec'er an" Vesti(u#e (uses are uni0ue

mo"e#s from Asho' 9ey#an"! tai#or ma"e hih/"ensity routes%

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Statistics re$ea# that the company is In"ia-s #arest e+porter of me"ium an" hea$y "uty

truc's% It se##s c#ose to !FFF me"ium an" hea$y $ehic#es each year% The company has a

near B%C mar'et share in the Marine Diese# enine mar'ets in In"ia% At HF mi##ion

passeners a "ay! Asho' 9ey#an" (uses carry more peop#e than the entire In"ian Rai#&ay

net&or'%

T*e Fi+e AL Val%e$ a!e(

% Internationa#

?% Spee"y

% Va#ue :reator

% Inno$ati$e

C% Ethica#

GROWTH MILESTONES OF ASHO) LEYLAND(

BHH @ 8u## air (ra'es intro"uce"

BH @ Dou(#e Dec'er (uses intro"uce"%

BH @ =o&er steerin offere"%

BB @ Mu#ti/a+#e truc's intro"uce"%

BF @ Intera# (us &ith air suspension%

BB? @ Se#f/certification status for "efence supp#ies%

BB @ ISO BFF :ertification

BB @ In"ia-s first :NG po&ere" (us%

BB @ PS BFFF :ertification

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BBB @ :NG 3:ompresse" Natura# Gas4 intro"uce"%

?FFF @ Euro/I! Enines2$ehic#es intro"uce"%

?FF? @ ISO FFF En$ironment Manaement System :ertification%

?FF? @ E+c#usi$e Machine #ine @ ? for .ino cy#in"er%

?FF @ E/:omet #aunche"%

?FF @ CF!FFF mar' $ehic#e pro"uce"%

?FFH/ ISO2TS HBB :orporate :ertification%

ASSOCIATE COMPANIES(

Automoti$e :oaches K :omponents 9t" 3A::94 9an'a Asho' 9ey#an" .in"u)a 8oun"ries IRIQAR @ TVS Asho' 9ey#an" =ro)ect Ser$ices 9t" Gu#f Ash#ey Motors 9t" Ennore 8oun"ries 9t"

FACILITIES(

The company has se$en manufacturin #ocations in In"ia

4 Ennore! Tami#na"u

?4 .osurL Unit ! Tami#na"u

4 .osurL Unit ?! Tami#na"u

4 .osurL Unit ?A! Tami#na"u

C4 A#&ar! Ra)asthan

H4 *han"ara! Maharashtra

4 =antnaar! Uttara'han"

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Asho' 9ey#an"-s Technica# :entre! at Ve##i$oya#cha$a"i in the outs'irts of:hennai! is a state/of/the/art pro"uct "e$e#opment faci#ity! that apart from mo"ern test trac's

an" component test #a(s! a#so houses In"ia-s one an" on#y Si+ =oster testin e0uipment%

The company has an Enine Research an" De$e#opment faci#ity in .osur%

The ne& p#ant in the North In"ian state of Uttara'han" at =atnanaar is set up at an

in$estment out#ay of Rs%?FF crores% This p#ant is e+pecte" to o on stream in the year ?FF

to cater main#y to the North In"ian mar'et ta'in a"$antae of the e+cise "uty an" other ta+

concessions% The faci#ities ha$e (een so "esine" as to accommo"ate further e+pansion in

terms of capacity an" future mo"e#s% At fu## capacity uti#ization! CFFF $ehic#es &i## ro## out

of the =atnanaar p#ant%

The company has sine" an areement &ith Ras A# Jhaimah In$estmentAuthority 3RAJIA4 in UAE for settin up a (us (o"y (ui#"in unit in the Mi""#e east%

CLIENTS ,Not e-*a%$ti+e(

In"ian Army% US Army% .on"uras Arme" 8orces 3.A84% Tami#na"u State Transport :orporation 3TNST:4% Metropo#itan Transport :orporation 3MT:4! :hennai% State E+press Transport :orporation 3SET:4! Tami#na"u% Jera#a State Roa" Transport :orporation% Maharashtra State Roa" Transport :orporation 3MSRT:4% An"hra =ra"esh State Roa" Transport :orporation 3A=SRT:4% =ar$een Tra$e#s% Sharma Transport%VISION

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Achie$in #ea"ership in the me"ium2hea$y "uty sements of the "omestic

commercia# $ehic#e mar'et an" a sinificant presence in the &or#" mar'et throuh transport

so#utions that (est anticipate customer nee"s! &ith the hihest $a#ue /to/cost ratio%

MISSION

/I"entifyin &ith the customer%

/*ein the #o&est cost manufacturer%

/G#o(a# (enchmar'in our pro"ucts! processes an" peop#e! aainst the (est in the

In"ustry%

.UALITY POLICY

Asho' 9ey#an" is committe" to achie$e customer satisfaction (y anticipatin an"

"e#i$erin superior $a#ue to the customer in re#ation to their o&n (usiness! throuh the

pro"ucts an" ser$ices offere" (y the company an" comp#y &ith statutory re0uirements%

To&ar"s this! the 0ua#ity po#icy of Asho' 9ey#an" is to ma'e continua#

impro$ements in the processes that constitute the 0ua#ity manaement system! to ma'e them

more ro(ust an" to enhance their effecti$eness an" efficiency in achie$in state" o()ecti$es

#ea"in to

% Superior pro"ucts manufacture" as a#so ser$ices offere" (y the company%

?% Ma+imum use of emp#oyee-s potentia# to contri(ute to 0ua#ity an" en$ironment (y=roressi$e up ra"ationof their 'noe"e an" s'i##s as appropriate to their

functions%% Seam#ess in$o#$ement from supp#iers an" "ea#ers in the mission of the company to a""ress customers chanin nee"s an" protection of the en$ironment

ORGANI/ATION STRUCTURE OF M0$1 ASHO)

LEYLAND LTD1

,AUTHORITY FLOW

Page 17

MANAGING DIRECTOR

WHOLE TIME


18/83


PRODUCT PROFILE

Asho' 9ey#an" offers a comprehensi$e pro"uct rane &ith truc's from

%C tons GV7 to B tons GV7 3Gross Vehic#e 7eiht4% 8rom B to F seaters in passenertransport! a host of specia# app#ication $ehic#es an" "iese# enines for in"ustria# ensets an"

marine app#ication% =ro"uct profi#e can (e (roa"#y sp#it into fi$e cateories $iz% *uses!

Truc's! "efence $ehic#es! specia# Vehic#es an" Enines%

BUSES

Page 18

EXECUTIE DIRECTOR

GENERAL

MANAGER

A!!T"GENERALMANAGER

!PECIAL DIRECTOR

DII!IONALMANAGER

!ENIOR MANAGER

MANAGER

DEPUT# MANAGER

DEPUT# GENERALMANAGER

A!!T"MANAGER

!ENIOR O$$ICER

O$$ICER


19/83


9YN *S/II Vi'in *S/II ? M *us/*S II

:heetah 38ront enine4 Vi'in *S/III Vi'in A9

Airport Tarmac :oach Vesti(u#e *us =anther 3Rear enine4

:ruiser Vi'in :NG *S/III 8a#con 38ront enine4

Sta *S/II Dou(#e "ec'er

TRUC)S

+? .au#ae mo"e#s Ecomet

+? an" Mu#ti/a+#e Tipper Tractor

Mu#ti A+#e $ehic#es

DEFENCE VEHICLES

Short :hassis *us 8ie#" arti##ery tractor :omet +

Topchi fie#" Arti##ery tractor 9on :hassis *us

Sta##ion H+H Sta##ion truc' fire fihtin

SPECIAL VEHICLES

.ippo tractor Sta##ion M' III Tipper .ippo Tipper

*ea$er tractor Rapi" Inter$ention Vehic#e

*ea$er .au#ae .ippo .au#ae

Page 19


20/83

ENNORE PLANT(

Asho' 9ey#an" has si+ manufacturin p#ants / the mother p#ant at Ennore near :hennai! t&o

p#ants at .osur 3ca##e" .osur I an" .osur II! a#on &ith a =ress shop4! the assem(#in p#ants at

A#&ar an" *han"ara% The tota# co$ere" space at these si+ p#ants e+cee"s CF!FFF s0 m an"

toether emp#oyees o$er !CFF personne#%

Sprea" o$er C acres! Asho' 9ey#an" Ennore is a hih#y interate" Mother

=#ant accountin for o$er F A99 pro"uction% The p#ant manufactures a &i"e rane of $ehic#es

an" house pro"uction faci#ities for important areates such as Enines! Gear *o+! A+#es an"

other 'ey in/house components% Num(er of emp#oyees in ennore p#ant are H an" num(er ofmo"e#s manufacture" are ?% Asho' 9ey#an" is the f#aship company of the *in'%2a 3!o%4 an"


21/83

is the secon" #arest manufacturer of commercia# $ehic#es in In"ia%


22/83


23/83

The mar'etin persona# maintain constant interaction &ith customers for app#ication

"e$e#opment an" fee"(ac' for continuous impro$ement of the pro"ucts% The ser$ices function is

carrie" out (y 0ua#ifie" persona# &hose s'i##s are continuous#y upra"e" throuh trainin to meet

the ser$icin re0uirements of ne&er or impro$e" pro"ucts% The "esin function is carrie" out (y

the pro"uct De$e#opment Di$ision operatin throuh centres $iz% =ro"uct De$e#opment

3Enno!e4 for R@D re#ate" to Asho' 9ey#an" enines! Technica# centre $e##i$oya#cha$a"i for

"esin! proto/type "e$e#opments of $ehic#e! $ehic#es an" components testin6 Enine RKD

3Ho$%!4 for "esin an" "e$e#opment of .ino enines an" A"$ance" Enineerin 3C*ennai4 for

research re#ate" to future pro"ucts%


24/83

The manufacturin units of the company are #ocate" at Enno!e ,TN> Ho$%! ,TN4! Ala!

,Ra2a$t*an4 an" B*an'a!a ,MR4% The Ennore ! .osur 3p#ant / 4! .osur 3p#ant/ii4! Am(attur !

A#&ar an" *han"ara manufacturin units are certifie" ISO 6


25/83

Int!o'%ction To In+ento!# Mana3e"ent

8inancia# manaement is the manaeria# acti$ity &hich is concern &ith the p#annin an"

contro##in of the firms financia# resources% Thouh it &as a (ranch of economics ti## BF as a


26/83

separate acti$ity or "iscip#ine% It is of recent oriin sti## it as no uni0ue (o"y of 'noe"e of its

o&n an" "ra&s hea$i#y on economics for its theoretica# concepts e$en to"ay%

The su()ect of financia# manaement is of immense to (oth aca"emician an" practicin

manaers% It is of reat interest to aca"emicians the su()ect is sti## "e$e#opin an" there are sti##certain areas &hen contro$ersies e+ist for &hich unanimous so#utions ha$e (een reache" as yet%

In financia# manaement the &or'in capita# manaement p#ays a ma)or ro#e% The &or'in

capita# manaement &i## (e effecti$e#y manae" (y in$entory manaement% In my present

chapter the in$entory manaement &i## (e "iscusse" in these topics! importance of in$entory

manaement! nature of in$entories! nee" to ho#" in$entories! cost of ho#"in in$entories! other

characteristics of in$entory situations! types of in$entory! economic or"er 0uantity! techni0ues of

in$entory manaement%

Meanin3 o In+ento!# Mana3e"ent

In$entory manaement means safeuar"in the company property in the form of in$entories an"

maintainin it at the optimum #e$e#! consi"erin the operatin re0uirements an" financia#

resources of the (usiness% In$entory manaement emphasizes contro# o$er purchases! storae!

consumption of materia#s an" "eterminin the optimum #e$e# for each item of in$estments%

I"4o!tance o In+ento!# Mana3e"ent

In$entory manaement is concerne" &ith 'eepin enouh pro"ucts on han" to a$oi" runnin

out &hi#e at the same time maintainin a sma## enouh in$entory (a#ance to a##o& for a

reasona(#e return on in$estment% =roper in$entory manaement is important to the financia#hea#th of the corporation6 (ein out of stoc' forces customers turn to competitors or resu#ts in a

#oss of sa#es% E+cessi$e #e$e# of in$entory ho&e$er! resu#ts in #are carryin costs! inc#u"in the

cost of capita# tie" up in in$entory &arehouse fees! insurance etc%


27/83

A ma)or pro(#em &ith manain in$entory is that the "eman" for a corporation-s pro"uct is

to a "eree uncertain% The supp#y of the ra& materia#s use" in its pro"uction process is a#so

some&hat uncertain% In a""ition the corporations o&n pro"uction contains some "eree of

uncertainty "ue to possi(#e e0uipment (rea'"o&ns an" #a(or "ifficu#ties%

*ecause of these possi(i#ities! in$entory acts as a shoc' a(sor(er (et&een pro"uct "eman"

an" pro"uct supp#y% If pro"uct "eman" is reater than e+pecte"! in$entory can (e "ep#ete" &ith

out #osin sa#es unti# pro"uction can (e steppe" up enouh to se#ect the une+pecte" "eman"%

.o&e$er in$entory is "ifficu#t to manae (ecause it crosses so many #ines of responsi(i#ity%

The purchasin manaer is responsi(#e for supp#ies of ra& materia# an" &ou#" #i'e to a$oi"

shortaes an" to purchases in (u#' or"er ta'e a"$antaes of 0uantity "iscounts%

The pro"uction manaer is responsi(#e for uninterrupte" pro"uction an" &ants to ha$e

enouh ra& materia#s an" &or' in process! in$entory on han" to a$oi" "isruption in the

pro"uction process% The mar'etin manaer is responsi(#e for se##in the pro"uct an" &ants to

minimize the chances of runnin out of in$entory% The financia# manaer is concerne" a(out

achie$in an appropriate o$era## rate of return%

Nat%!e o In+ento!ie$

In$entories are stoc' of the pro"uct a company is manufacturin for sa#e an" components

that ma'e up the pro"uct% The $arious forms in &hich in$entories that e+ist in manufacturin

company are

Ra& materia#s

7or'/in/process

8inishe" oo"s

Ra "ate!ial$L These are those (asic inputs that are con$erte" into finishe" pro"uct throuh

the manufacturin process% Ra& materia#s in$entories are those units &hich ha$e (een

purchase" an" store" for future pro"uction%


28/83

Wo!in4!oce$$L These in$entories are semi/manufacture pro"ucts% They represent

pro"ucts that nee" more &or' (efore they (ecame finishe" for sa#e%

Fini$*e' 3oo'$( These in$entories are those comp#ete#y manufacture" pro"ucts &hich are

rea"y for sa#e% Stoc's of ra& materia#s an" &or'/in/process faci#itate pro"uction &hi#e stoc'

of finishe" oo"s is re0uire" for smooth mar'etin operations% Thus! in$entories ser$e as

#in' (et&een the pro"uction an" consumption of oo"s%

Nee' to *ol' in+ento!ie$

Maintainin of in$entories in$o#$es tryin up the companies an" incurrence of storae an"

han"#in cost% There are three enera# moti$es for ho#"in in$entories%

T!an$action "oti+eL

It emphasizes the nee" to maintainin in$entories to faci#itate smooth pro"uction

an" sa#es operation% P!eca%tiona!# "oti+eL

It necessitates the ho#"in of in$entories to uar" aainst ris' of unpre"icta(#e

chanes in "eman" an" supp#y force an" other factors% S4ec%lati+e in+ento!ie$L

It inf#uences the "ecision to increase or re"uce in$entory #e$e# to ta'e a"$antae of price

f#uctuations% The firm shou#" a#&ays a$oi" a situation of o$er in$estment or un"er

in$estment in in$entories%

The ma)or "aners of o$er in$estment in in$entories are

i% Unnecessary tie up of the fun"s an" #oss of profits%

ii% E+cessi$e carryin cost%


29/83

iii% The ris' of #i0ui"ity%

The conse0uences of un"er in$estment in in$entories are

% =ro"uction ho#"/ups?% 8ai#ure to meet "e#i$ery commitments% Ina"e0uate ra& materia#s%

% 7or'/in/process &i## resu#t in fre0uent in pro"uction interrupts%

An efficient in$entory manaement shou#"

Ensure a continuous supp#y of ra& materia#s to faci#itate uninterrupte"pro"uction%

Maintain sufficient supp#y of ra& materia#s in perio"s of short supp#y an"

anticipate price chanes%

Maintain sufficient finishe" oo"s in$entory for smooth sa#es operation an"

efficient customer ser$ice%

Minimize the transportation cost on time%

:ontro# in$estment in in$entories an" 'eep it at an optimum #e$e#

Co$t o *ol'in3 in+ento!ie$

The "etermination of in$entory cost is essentia##y an income measurement pro(#em! a means

&here (y there is rationa# or"er#y! systematic interpretation of the effect on the economicproress of the company of e+pen"itures in$o#$e" ac0uirin oo"s or in maintainin an"

operatin pro"ucti$e faci#ities% A(i#ity to 0uantify an" "e$e#op riorous mo"e#s of most

manaeria# pro(#ems is "epen"ent on the "etermination (eha$ior of re#e$ant costs% The practica#

app#ication of such mo"e#s is a#so "epen"ent on a(i#ity to o(tain the cost "ata% Re#e$ant

in$entory costs &hich chane &ith #e$e# of in$entory are #iste" (e#o&%


30/83

O!'e!in3 co$t$

E$ery or"er is p#ace" for stoc' rep#enishment! certain cost are in$o#$e"% The or"erin cost

may $ary! "epen"ent upon type item%

This cost of or"erin inc#u"es

=aper &or' cost! typin an" "ispatchin or"er%

8o##o&/up costs the fo##o&/up re0uire" ensure time#y supp#ies inc#u"e the tra$e# cost for

purchases fo##o&/up! te#ephone te#e+ an" posta# (i##s%

:ost in$o#$e" in recei$in the or"er inception! chec'in an" han"#in to the stores%

Any set up cost of machines if chare" (y supp#ier! either "irect#y in"icate" in 0uotationsor assesse" thouht 0uotations for $arious 0uantities%

The sa#aries an" &aes to the purchase "epartment are re#e$ant for consi"eration if the

purchasin function is carrie" out at the same #e$e# &ith e+istin staff%

There are certain costs that remain the same rear"#ess of the size of the #ot purchase" or

re0uisitione"% This &ou#" (e retai#er or"erin from the "istri(utor! from the "istri(utor or"erin

from a factory &arehouse! for the factory &arehouse or"erin a ne& pro"uction run from the

factory! an" for the factory or"erin ra& materia#s from $en"ors% These 'in"s- of costs are ca##e"

preparation or set up costs%

If &e are or"erin to rep#enish supp#ies at one stoc' point from another stoc' point! our

interest is in the incrementa# c#erica# costs of preparin or"ers! fo##o&in these or"ers%E+pe"itin them &hen necessary! etc! a #are sement of the tota# cost of the or"erin function is

fi+e"! rear"#ess of the num(er or"ers issue"% E$en then it may (e "ifficu#t "etermine"

satisfactori#y the incrementa# cost! &hich resu#ts from one more or"er% Puantity "iscounts an"

han"#in an" transport cost are other factors! &hich $ary #ot sizes%


31/83

=reparation cost are the incrementa# costs of p#annin pro"uction! &ritin pro"uction

or"ers! settin machines an" contro##in the f#o& or"ers throuh the factory% Materia# han"#in

cost in the p#ant ha$e an effect on pro"uction #ot sizes in much the same &ay that freiht costs

may effect purchase #ot sizes%

*esi"es the preparation costs of pro"uction! there are some other pro"uction costs! &hich

ha$e a "irect (earin on in$entory mo"e#s! ho&e$er% These are o$er time premiums an" the

incrementa# cost of chanin pro"uction #e$e#s! such as hirin! trainin! an" separation costs%

Ca!!#in3 co$t$

:arryin costs constitutes a## the costs of ho#"in items in in$entory for a i$en perio" of time%

They are e+presse" either in rupees per perio" or as percentae of the in$entory $a#ue per perio"%

:omponents of these costs inc#u"e the fo##o&in

o Storae an" han"#in cost%

o O(so#escence an" "eterioration costs

o Insurance

o Ta+es

o The cost of the fun"s in$este" in in$entories

o Storae an" han"#in costs inc#u"e the cost of &arehouse space%

O(so#escence costs represent the "ec#ine in in$entory $a#ue cause" (y sty#e chanes that ma'e

the e+istin pro"uct #ess sca#a(#e%


32/83

Deterioration costs represent the "ec#ine in $a#ue cause" (y chanes in the physica# 0ua#ity of

the in$entory such as spoi#ae an" (rea'ae%

Another e#ement of carryin cost is the cost of insurin the in$entory aainst #osses "ue to

theft! fire an" natura# "isaster% In a""ition! a company must pay any persona# property ta+esre0uire" (y #oca# an" state o$ernment on the $a#ue of its in$entories%

9i'e or"erin costs! in$entory/carryin costs contain (oth fi+e" an" $aria(#e components%

Most carryin costs $ary &ith in$entory #e$e#! (ut a certain portion of them/such as &arehouse

rent an" "epreciation on in$entory han"#in e0uipment/ are re#ati$e#y fi+e" o$er the short run!

in$entory mo"e# such as EOP mo"e# treat the entire carryin cost as $aria(#e%

Stoc o%t co$t$

Stoc's out costs are incurre" &hen e$er a (usiness is una(#e to fi## or"ers (ecause the

"eman" for an item is reater than the amount current#y a$ai#a(#e in in$entory% 7hen a stoc' out

in ra& materia#s occur! for e+amp#e! stoc' out costs inc#u"e the e+penses of p#acin specia#

or"ers 3(ac' or"erin4 an" "e#ays% A stoc' out in &or' in proress in$entory resu#ts in a""itiona#

costs of resche"u#in an" spee"in pro"uction &ith in the p#ant! an" it a#so may resu#t in re"uce

pro"uction costs if &or' stoppaes occur% 8ina#! a stoc' out in finishe" oo"s in$entory may

resu#t in the imme"iate #oss of profits of customers "eci"e to purchase the pro"uct from thecompetitor an" in potentia# #on/term #osses if customers "eci"e to or"er from other companies

in the future%

Ot*e! c*a!acte!i$tic$ o in+ento!# $it%ation$


33/83

*esi"es the $arious types of costs in$o#$e"! there are other characteristics of the situation that

$ary amon types of in$entory an" must (e capture" if the "ecision mo"e# is to (e an accurate

representation of the physica# circumstances%

Lea' ti"e$

O(tainin in$entory usua##y re0uires a #a from the initiation of the process unti# the

in$entory starts to arri$e% This #ea"/time may (e a fe& minutes or it may (e many months! an"

"epen"s in part on &hether the firm is pro"ucin oo"s for its in$entory or is or"erin these

oo"s from another firm% To pro"uce oo"s for its o&n use! the firm must sche"u#e! set up an"

a")ust manufacturin e0uipment%

So%!ce$ an' le+el$ o !i$

Uncertainties p#ay a sinificant ro#e in in$entory situations% Uncertainties usua##y in$o#$e #ea"

times an" "eman" times an" "eman" #e$e#s! (ut situations &here other $aria(#es are uncertain

a#so occur% 7here are su(stantia# uncertainties an" &here the costs of stoc' out are important

Strateies for a""ressin ris' must (e formu#ate"

Static +e!$%$ '#na"ic 4!o&le"$

In$entory pro(#ems are usua##y "i$i"e" into t&o types (ase" on the characteristics of the

oo"s in$o#$e"% In static in$entory pro(#ems! the oo"s ha$e one/perio" #ife6 there can (e

carryin o$er of oo"s from one perio" to the ne+t% In$entory situations &here "ecisions in$o#$e

the num(er of ne&s papers to print! the num(er of reetin car"s to purchase or the num(er of

ca#en"ars to pro"uce are static in$entory pro(#ems% In "ynamic in$entory pro(#ems! the oo"s

ha$e $a#ue (eyon" the initia# perio"6 they "o not #ose their $a#ue comp#ete#y o$er time%


34/83

Re4leni$*"ent !ate

Once oo"s start to (e recei$e" from a $en"or or from the firms o&n pro"uction processes!

there are "ifferences amon oo"s in the rate at &hich they are recei$e"% Sma## or"ers from

$en"ors are #i'e#y to (y recei$e a## at once% 8or e+amp#e! assume that a firm has p#ace" in or"er

for F cases of paper to&e#s% 8or such a sma## or"er the rate of rep#enishment is infinite6 the

firm-s in$entories &e## o up F cases in a $ery short time as the oo"s are 0uic'#y un#oa"e"%

8or #are or"er from $en"ors! or for in$entory pro"uce" &ith in the firm! the rep#enishment

rate may (e s#o&er%

T#4e$ o in+ento!#

In$entories can (e c#assifie" into fi$e (asic types on the (asis of their pro"uction% These

$arious types of in$entories cannot (e i"entifie" an" sereate" &ithin the oranization% These

fi$e types are

51 Mana3e"ent in+ento!#

They are nee"e" (ecause of the time re0uire" to mo$e stoc's from one p#ace to another

p#ace%

=1 Lot $ie In+ento!ie$

These are as a resu#t of (uyin materia#s in 0uantities #arer than the imme"iate re0uirement!&ith a $ie& to minimizin cost of transportation! (uyin! receipt an" han"#in an" to o(tainin

0uantity "iscount%

;1 Fl%ct%ation In+ento!ie$


35/83

These are carrie" to ensure rea"y supp#iers to consumer e$en &hen these are irreu#ar an"

unpre"icta(#e f#uctuations in their "eman"

71 Antici4ation in+ento!ie$

These are usua##y maintaine" to meet a pre"icta(#e (ut chanin pattern of future "eman"

91 C#cle In+ento!ie$

These resu#t from manaements attempt to minimize the tota# cost of carryin an" or"erin

in$entory% They arise from or"erin in (atches or #ots! rather from nee"e" (asis%

In$entories can (e further c#assifie" into pro"uction in$entories maintenance repair an"

operation 3MRO4 in$entories! in/process in$entories an" finishe" oo"s in$entories%

=ro"uction in$entory consists of ra& materia#s parts an" components &hich are use" in

the pro"uction process formin parts of the fina# pro"uct%

Maintenance! repair an" operation supp#ies &hich are use" in the pro"uction of oo"s or

ser$ices (ut "o not (ecome part of the pro"uct%

In/process in$entories are semi/finishe" materia#s! parts an" assem(#ies foun" at $arious

staes in the pro"uction operation%

8inishe" oo"s in$entory consists of comp#ete" pro"ucts rea"y for sa#e%


36/83

TECHNI.UES AND SOFTWARE OF INVENTORY MANAGEMENT

In$entory manaement is the acti$e contro# proram &hich a##o&s the manaement of sa#es!

purchases an" payments% In$entory Manaement an" In$entory :ontro# must (e "esine" to

meet the "ictates of the mar'etp#ace an" support the companys strateic p#an% The many chanes

in mar'et "eman"! ne& opportunities "ue to &or#"&i"e mar'etin! #o(a# sourcin of materia#s!

an" ne& manufacturin techno#oy! means many companies nee" to chane their In$entory

Manaement approach an" chane the process for In$entory :ontro#%

Despite the many chanes that companies o throuh! the (asic princip#es of In$entory

Manaement an" In$entory :ontro# remain the same% Some of the ne& approaches an"

techni0ues are &rappe" in ne& termino#oy! (ut the un"er#yin princip#es for accomp#ishin

oo" In$entory Manaement an" In$entory acti$ities ha$e not chane"%

The In$entory Manaement system an" the In$entory :ontro# =rocess pro$i"es information to

efficient#y manae the f#o& of materia#s! effecti$e#y uti#ize peop#e an" e0uipment! coor"inate


37/83

interna# acti$ities! an" communicate &ith customers% In$entory Manaement an" the acti$ities of

In$entory :ontro# "o not ma'e "ecisions or manae operations6 they pro$i"e the information to

Manaers &ho ma'e more accurate an" time#y "ecisions to manae their operations% The (asic

(ui#"in (#oc's for the In$entory Manaement system an" In$entory :ontro# acti$ities areL

Sa#es 8orecastin or Deman" Manaement

Sa#es an" Operations =#annin

=ro"uction =#annin

Materia# Re0uirements =#annin

In$entory Re"uction

In$entory manaement soft&are he#ps create in$oices! purchase or"ers! recei$in #ists! payment

receipts an" can print (ar co"e" #a(e#s% An in$entory manaement soft&are system confiure" to

your &arehouse! retai# or pro"uct #ine &i## he#p to create re$enue for your company% The

In$entory Manaement &i## contro# operatin costs an" pro$i"e (etter un"erstan"in% 7e are

your source for in$entory manaement information! in$entory manaement soft&are an" too#s%

SOME INVENTORY MANAGMENT SO8T7ARES ARE

A"$ance=ro A"$ance&areTechno#oies! E$erestA"$ance" E$erest Soft&are>NTS7MS

Nationa# Techno#oy Ser$icesetc111
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38/83

OTHER LOTSI/ING TECHNI.UES

There are a num(er of other #ot/sizin techni0ues a$ai#a(#e in a""ition to the facts state" a(o$e%

These inc#u"e the fi+e"/or"er 0uantity! fi+e"/or"er/inter$a# mo"e#! the sin#e/perio" mo"e#! an"part/perio" (a#ancin%

FIEDORDER.UANTITY MODEL1

EOP is an e+amp#e of the fi+e"/or"er/0uantity mo"e# since the same 0uantity is or"ere" e$ery

time an or"er is p#ace"% A firm miht a#so use a fi+e"/or"er 0uantity &hen it is capti$e to

pac'ain situations% If you &ere to &a#' into an office supp#y store an" as' to (uy ?? paper

c#ips! chances are you &ou#" &a#' out &ith FF paper c#ips% You &ere capti$e to the pac'ain

re0uirements of paper c#ips! i%e%! they come FF to a (o+ an" you cannot purchase a partia# (o+%

It &or's the same &ay for other purchasin situations% A supp#ier may pac'ae their oo"s in

certain 0uantities so that their customers must (uy that 0uantity or a mu#tip#e of that 0uantity%

FIEDORDERINTERVAL MODEL1

The fi+e"/or"er/inter$a# mo"e# is use" &hen or"ers ha$e to (e p#ace" at fi+e" time inter$a#s such

as &ee'#y! (i&ee'#y! or month#y% The #ot size is "epen"ent upon ho& much in$entory is nee"e"

from the time of or"er unti# the ne+t or"er must (e p#ace" 3or"er cyc#e4% This system re0uires

perio"ic chec's of in$entory #e$e#s an" is use" (y many retai# firms such as "ru stores an"

sma## rocery stores%


39/83

SINGLEPERIOD MODEL1

The sin#e/perio" mo"e# is use" in or"erin perisha(#es! such as foo" an" f#o&ers! an" items

&ith a #imite" #ife! such as ne&spapers% Unso#" or unuse" oo"s are not typica##y carrie" o$er

from one perio" to another an" there may e$en (e some "isposa# costs in$o#$e"% This mo"e# tries

to (a#ance the cost of #ost customer oo"&i## an" opportunity cost that is incurre" from not

ha$in enouh in$entory! &ith the cost of ha$in e+cess in$entory #eft at the en" of a perio"%

PARTPERIOD BALANCING1

=art/perio" (a#ancin attempts to se#ect the num(er of perio"s co$ere" (y the in$entory or"er

that &i## ma'e tota# carryin costs as c#ose as possi(#e to the set/up2or"er cost% 7hen a proper #ot

size has (een "etermine"! uti#izin one of the a(o$e techni0ues! the reor"er point! or point at

&hich an or"er shou#" (e p#ace"! can (e "etermine" (y the rate of "eman" an" the #ea" time% If

safety stoc' is necessary it &ou#" (e a""e" to the reor"er point 0uantity%

Reor"er point E+pecte" "eman" "urin #ea" time Safety stoc'

Thus! an in$entory item &ith a "eman" of FF per month! a t&o/month #ea" time an" a "esire"

safety stoc' of t&o &ee's &ou#" ha$e reor"er point of ?CF% In other &or"s! an or"er &ou#" (e

p#ace" &hene$er the in$entory #e$e# for that oo" reache" ?CF units%

Reor"er point FF2month ? months ? &ee's safety stoc' ?CF

OTHER SCHOOLS OF THOUGHT IN INVENTORY MANAGEMENT

There are a num(er of techni0ues an" phi#osophies that $ie& in$entory manaement from

"ifferent perspecti$es%


40/83

MRP AND MRP II1

MR= an" MR= II are computer/(ase" resource manaement systems "esine" for items that

ha$e "epen"ent "eman"% MR= an" MR= II #oo' at or"er 0uantities perio" (y perio" an"! as such!

a##o& "iscrete or"erin 3or"erin on#y &hat is current#y nee"e"4% In this &ay in$entory #e$e#s can

(e 'ept at a $ery #o& #e$e#6 a necessity for a comp#e+ item &ith "epen"ent "eman"%

JUSTINTIME ,JIT1

>ust/in/time 3>IT4 is a phi#osophy that a"$ocates the #o&est possi(#e #e$e#s of in$entory% >IT

espouses that firms nee" on#y 'eep in$entory in the riht 0uantity at the riht time &ith the riht

0ua#ity% The i"ea# #ot size for >IT is one! e$en thouh one hears the term 5zero in$entory5 use"%

STEPS TO EFFECTIVE INVENTORY MANAGEMENT

There are t&o "ifferent approaches oranizations can ma'e &ith rear" to in$entory% They can

assume it is )ust a necessary e$i# an" start a specia# in$entory re"uction proram &hene$er cash

ets tiht% Or they can ma'e strateic "ecisions on the #e$e# to carry! put an in$entory

manaement process in p#ace to acti$e#y manae in$entory an" continua##y impro$e the (usinessresu#ts%%


41/83

REVIEW OF LITERATURE

In$entory Manaement is concerne" &ith 'eepin enouh pro"uct on han" to a$oi" runninout &hi#e at the same time maintainin a sma## enouh in$entory (a#ance to a##o& for a

reasona(#e return on in$estment% =roper in$entory manaement is important to the financia#

hea#th of the corporation% E+cessi$e #e$e# of in$entory! resu#ts in #are in$entory carryin cost!

inc#u"in the cost of capita# tie" up in in$entory &arehouse fees! insurance etc%

In$entory is nee"e" for the "efinite consumption "eman" of materia#s! an" to ta'e care of the

uncertainty in$o#$e" in the usae or a$ai#a(i#ity of the materia#s% Some times other authors

"escri(e" as the ;"ecoup#in function< of the in$entory of materia#s is maintaine" at the "ifferent

staes of pro"uction%

The in$entory ta'in care of the norma# consumption re0uirements i%e%! ;"epen"in upon the

a$erae consumption rates an" a$erae #ea" times for procurement2manufacture of the materia#!

in$entories are 'ept at the appropriate times< is ca##e" the ;norma# in$entory< an" the in$entory

ta'in care of ;a pro"uction process! ho&e$er continuous it may(e! is (oun" to ha$e some

interruptions6 it may a#so ha$e im(a#ances in the consumption an" pro"uction rates of themateria#s at "ifferent staes%

These interruptions an" im(a#ances ma'e it necessary to 'eep stoc's of in$entory (et&een

the "ifferent staes of the operations< the aspect of this uncertainty is ca##e" the ;safety stoc'< or

;(uffer stoc'< of in$entory

Tec*ni%e$ o in+ento!# "ana3e"ent


42/83

5 ABC anal#$e$

The A*: metho" is an ana#ytica# metho" of stoc' contro# &hich aims

at concentratin efforts on those items &here attention is nee"e" most% It is (ase" on the premise

that a sma## num(er of the items in in$entory may typica##y represent the (u#' money $a#ue ofthe tota# materia#s use" in pro"uction process% 7hi#e a re#ati$e#y #are num(er of items may

represent a sma## portion of the money $a#ue of stores use" an" that sma## num(er of items

shou#" (e su()ect to the reatest "eree of continuous contro#%

Un"er this system! the materia#s stoc'e" may (e c#assifie" into a num(er of cateories

accor"in to their importance i%e%! their $a#ue an" fre0uency of rep#enishment "urin a perio"%

The first cateory! &e may ca## it the roup of WA- items! may consist of on#y a sma## percentae

of tota# items han"#e" (ut its com(ine" $a#ue may (e a #are portion of the tota# stoc' $a#ue%

The secon" cateory! namin it as roup of W*- items! may (e re#ati$e#y #ess important% In the

thir" cateory consistin of W:- items! a## the remainin items of stoc' may (e inc#u"e" &hich

are 0uite #are in num(er (ut their $a#ue is not hih%

Cate3o!ie$ o ABC anal#$i$

In A*: ana#ysis the items are c#assifie" in three main cateories (ase" on their respecti$econsumption $a#ue%

% :ateory WA- itemsL

The items! &hich are most cost#y an" $a#ua(#e! are c#assifie" as WA- near#y F of the

tota# num(er of items store" &i## account for F of tota# $a#ue of a## items stoc'e"%

?% :ateory W*- itemsL


43/83

The items ha$in a$erae consumption $a#ue are c#assifie" as W*- near#y?F of tota#

num(er of items &i## account for ?F of tota# $a#ue% Statistica# samp#in is enera#

usefu# to contro# them%

% :ateory W:- itemsL

The items ha$in #o& consumption $a#ue are put in cateory ;:< near#y F of tota#

num(er as items &i## account for F tota# $a#ue% Genera##y these items are s#o& an"

non/mo$in items in the stores! &hich are fre0uent#y use" for pro"uction process (ut

&ith more 0ua#ity%

? VED cla$$iication

This ana#ysis is (ase" on critica#ity of in$entory! it is use" to "etermine the

critica#ity of the item an" its effect on pro"uction an" other ser$ices %it is specia##y use" for

c#assification of spare parts% If a part is $ita#! it is i$en V c#assification% if essentia# !then it

is i$en E c#assification an" if it is not essentia# the part is i$en D c#assification for V

items! a #are stoc' of in$entory is enera##y maintaine" !these item ha$e imme"iate effect

on pro"uction more attention pai" for this items

3) ECONOMIC ORDER .UANTITY

The economic or"er 0uantity is that in$entory #e$e#! &hich minimizes the tota# of or"erin

cost an" carryin costs%


44/83

It is the 0uestion! ho& much to or"er the 0uantity &hen in$entory is rep#enishe"% If the firm

is (uyin ra& materia#s! the 0uestion is to purchase the 0uantity of6 each rep#enishment an" if it

has to p#an for pro"uction run! it is ho& much pro"uction to sche"u#e% It may (e so#$e" throuh

EOP%

COST OF HOLDING INVENTORIES

The "etermination of in$entory costs is essentia##y an income measurement pro(#em! a means

&here(y there is a rationa#! or"er#y! systematic interpretation of the effect on the economic

proress of the company of e+pen"itures in$o#$e" in ac0uirin oo"s or in maintainin an"

operatin pro"ucti$e faci#itates% A(i#ity to 0uantify an" "e$e#op riors mo"e#s of most

manaeria# pro(#ems is "epen"ent on the "etermination of the (eha$ior of re#e$ant costs% The

practica# app#ication of such mo"e#s is a#so "epen"ent on a(i#ity to o(tain the cost "ata% Re#e$ant

in$entory costs &hich chane &ith the #e$e# of in$entory are #iste" (e#o&%

O!'e!in3 co$t(

E$ery timer an or"er is p#ace" for stoc' rep#enishment! certain costs are in$o#$e"% The or"erin

cost may $ary! "epen"ent upon the type of item% .o&e$er! an estimate of or"erin cost can (e

o(taine" for a i$en rane of items%

=aper &or' costs! typin an" "ispatchin an or"er%

% 8o##o& @up costs/the fo##o&/up re0uire" to ensure time#y to ensure time#y supp#ies

inc#u"e the tra$e# cost for purchase fo##o&1up! te#ephone! te#e+ an" posta# (i##s%

?% :ost in$o#$e" in recei$in the or"er inspection! chec'in an" han"#in to the stores%

% Any set up cost of machines if chare" (y the supp#ier! either "irect#y in"icate" in

0uotations or assesse" throuh 0uotations for $arious 0uantities%

% The sa#aries &aes to the purchase "epartment are re#e$ant for consi"eration if the

purchasin function is carrie" out at the same "ecreases sinificant#y! o($ious#y a

proportiona# amount of personne# &i## (e transferre" to other "epartments%


45/83

Ca!!#in3 Co$t$(

:arryin costs constitute a## the costs of ho#in items in in$entory for a i$en perio" of time%

They are e+presse" either in rupees per unit per perio" or as a percentae of the in$entory $a#ue

per perio"% :omponents of this cost inc#u"e the fo##o&in%

% Sto!a3e an' Han'lin3 co$t$:It inc#u"es the cost of &arehouse space%

?% O&$ole$cence an' 'ete!io!ation co$t$:O(so#escence costs< represent the "ec#ine in

in$entory $a#ue cause" (y techno#oica# or sty#e chanes that ma'e the e+istin pro"uct

#ess sa#a(#e% ;Deterioration costs< represent the "ec#ine in $a#ue cause" (y chanes in

the physica# 0ua#ity of the in$entory! such as spoi#ae an" (rea'ae%

% In$%!anceLThe in$entory aainst #osses "ue to the theft! fire! an" natura# "isaster%

% Ta-e$( A company must pay any ;persona# property ta+es an" (usiness ta+es< re0uire"

(y #oca# an" state o$ernments on the $a#ue of its in$entory%

C% T*e co$t o %n'$ in+e$te' in in+ento!ie$: It is measure" (y the ;re0uire" rate of

return< on these fun"s% *ecause in$entory in$estments are #i'e#y to (e of ;a$erae ris' Asho' 9ey#an" :THH =an' Asho' 9ey#an" e/comet F?1

The purchase of ra& materia# are ha$in hih#y positi$e corre#ation sa#es of finishe"

oo"s


78/83

SUGGESTIONS

I sueste" that! the oranization may ha$e to contro# cost! for increasin ra& materia# to

in$entory ratio

I sueste" that the oranization may ha$e too increase ra"ua##y the ratio of in$entory tofi+e" asset

I sueste" that! the oranization may ha$e to maintain sufficient portion of cash in

current assets! (ecose is hih ratio of in$entory to current assets

8rom the stu"y A * : ana#ysis of ra& materia# the company &as oo" sho& the company

may (e use these metho" for the their proper uti#ization an" contro# of ra& materia#

In$entory shou#" (e i$en in accor"ance the chane of techno#oy

Reu#ar fee"(ac' shou#" (e ta'en from the in$entory manaement

Imp#ementation of the in$entory shou#" (e emphasize"

Reu#ar in$entory must (e further up"atin an" mo"ification

The finance "epartment has to maintain the same proce"ure to "e$e#op in$entory

manaement

The company has to concentrate on research an" "e$e#opment so that it can use the

in$entory efficient#y an" re"uce &astaes

:ompany it shou#" stri$e for ;ettin the riht oo"s to the p#ace at the riht time for the

#east cost


79/83

CONCLUSION

Automo(i#e In"ustry nee"s in$entory for smooth runnin of its acti$ities% It ser$es as a #in'(et&een pro"uction an" "istri(ution processes% There is enera##y a time #a (et&een the

reconition of a nee" an" its fu#fi##ment% The unforeseen f#uctuations in "eman" an" supp#y of

oo"s a#so necessitate the nee" for in$entory% It a#so pro$i"es cushion for future poses

f#uctuations%

The in$estment in in$entories constitutes the cost of sinificant part of current assets2&or'in

capita# in most of the un"erta'ins% Thus! it is $ery essentia# to ha$e proper contro# as an" &hen

re0uire" an" to minimize in$estment in in$entors%

The Asho' 9ey#an" 9t"%! maintain hih c#osin (a#ances of in$entory it #ea"s to o$er

e+pen"iture so company shou#" contro# o$er e+pen"iture to ma+imize profits%

REFERENCES

o I% M% =ANDEY 3?FFC4! ;financia# manaement

o S% N% MA.ES7ARI 3?FFH4! ;financia# an" manaement accountin

e"ition! su#tan chan" an" sons! Ne& De#hi%

o :% R% JOT.ARI! ;research metho"o#oy an" techni0ues


80/83

o *AJER% R %= K .O7 7E99% A%:! ;the preparation of reports


81/83

Balance S*eet$ o ASHO) LEYLAND LTD !o" MARCH =


82/83

Ma! K 57 Ma! K 5; Ma! K 5= Ma! K 55 Ma! K 5

Inventory Managemesdnt in Ashok Leyland 1

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