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INVENTORY MANAGEMENT
FOR THE PARTIAL FULFILLMENT OF REQUIREMENT FOR THE TWO YEARS FULLTIME DEGREE INMASTER IN BUSINESS ADMINISTRATION.
ACKNOWLEDGEMENT
I am extremely grateful to Mr.Subhasish Bhattacharya, Manager, (Finance Department), Lucas-TVS Ltd., Pantnagar Plant for the invaluable guidance and support he has extended to me during the course of the project. I thank Mr. Ranbir Negi, Manager, (HR Department) for giving me an opportunity to do the project with Lucas-TVS Ltd., Pantnagar. I extend my gratitude towards Mr. Gaurav Saxena (Dy. Engineer Purchase) and Mr. Vardharajan (Store Officer) for their critical inputs to the project & timely help and invaluable inputs which enabled me to complete the project within the stipulated time-frame. Finally, I thank all the engineers and operators for their co-operation without whom this project would ever have been completed. I would like to sincerely thanks Ms. Neha Aggarwal, Lecturer( MBA), COER SCHOOL OF MANAGEMENT for their valuable suggestions and guidance and making it possible for me to accomplish the Project.Last but not the least, I would like to thank my parents and my colleagues who instilled confidence and gave moral support at various stages during the course of summer training.
EXECUTIVE SUMMARY
The conceptual knowledge acquired by management is the best manifested in the projects and trainings they undergo. As a part of curriculum of M.B.A, I have got a chance to undergo partial training in LUCAS-TVS LTD. The present project gave a perfect event to my understanding of Financial Management specially the most modern concept of INVENTORY MANAGEMENT. Which define about the inventory control of material and analysis of material consumption and depicts the direct relationship between material and turnover. It is also concerned with supplier quality assurance and methods to control inventory.?
CONTENTS
CHAPTER -1 INTRODUCTION
Companys profile Products manufactured in this unit Customers Mission & vision of the company Lucas-TVS Ltd Pantnagar organization structure
CHAPTER-9 BIBLIOGRAPHY
To know about the functions performed regarding inventory management. To get aware about purchase management. To know about quality & rejection of material. To find out ways of controlling inventory.
CHAPTER-1
TVS Group
TVS Group is one of India's oldest business groups. It is a giant conglomerate with presence in diverse fields like automotive component manufacturing, automotive dealerships and electronics. Today, there are over thirty companies in the TVS Group, employing more than 40,000 people worldwide and with a turnover in excess of USD 2.2 billion.
TVS Group originated as a transport company in 1911. TV Sundaram Iyengar and Sons Limited (TVSs) is the parent and holding company for the TVS Group of companies engaged in the manufacturing of various automotive components, two wheelers and a few other industrial products. They are also into the financial services sector. The turnover of the entire group was close to $2 billion in 2003.
The mother plant of Lucas-TVS ltd. is situated in Padi, Tamil Nadu, in the outskirts of Chennai. Lucas-TVS Limited, along with its subsidiaries, designs, develops, manufactures, and supplies automotive electrical systems. The company offers starter, wiper, blower, and fan motors; and alternators, headlamps, dynamo regulators, dynamos, ignition coils, diesel fuel injections, fuel injection equipment, electronic ignition systems, and automotive lighting products. Its products are used in passenger cars, commercial vehicles, tractors, jeeps, two-wheelers, and off-highway vehicles; earth moving equipment and gensets; and stationary and marine applications. Lucas-TVS Limited offers its products through a network of branches and outlets serving customers in the United States/European markets. The company was founded in 1961 and is based in Chennai, India. Lucas-TVS Limited operates as a subsidiary of TV Sundram Iyengar and Sons Limited and Lucas Varity, Ltd. Lucas - TVS is a TS16949 and OSHAS 18001 certified company.
People
Human resource is an asset never disclosed in a company's balance sheet. We at LucasTVS strongly believe that an organization's most valued assets are its people who individually and collectively contribute to the achievement of the objectives of the business. Keeping this in mind, Lucas-TVS's management style lays great emphasis on employee involvement and actively encourages participation and commitment through Small Group Activities (SGA), Suggestion Schemes, Voluntary Work Teams and the like
Culture
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A highly visible culture of Commitment, backed up by Discipline & Positive Attitude prevails across Employee the organization. Performance We = believe in the + following skill] equation: X [Will]
[Knowledge
Trust, Value, and Service are the key words and beliefs practiced always internally and externally. Openness and transparency are seen in leadership styles/ meetings. Internal customer- Supplier equations are extremely strong. SOP (Standard Operating Procedure-shop floor) & SWP (Standard Work Procedure-office areas) are base points of DRM in line and staff functional departments. TEI (Total Employee Involvement) is the foundation of the organization. Learning culture prevails at all times and all places in the company. 5S is the first step in every function. Approach and outlook of engineers / managers is always bi-focal (short term and long term).Continuous improvement is the driver of growth. Systems and procedures are always put in place in reality to recognize an orderly workflow. Performance culture is encouraged and visible results are rewarded. Customer, economy in operations in turn take care of our customers and Gemba are the basics of business culture. We take care of our employees and they in turn take care of our customers.
PRODUCT RANGE
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Ignition coil
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LMV Starter
Wiper motors
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CUSTOMERS
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MISSION:
To be a respected supplier in global auto industry, by developing innovative products & solutions of value to customers through creative skills & involvement of employees, suppliers & dealers & use of contemporary technology.
VISION:
To be the supplier of choice of all leading vehicle manufacturers in India.
To be a recognized OE supplier in Asia Pacific & middle east markets. To achieve global recognition for its innovative approach to products & solutions. By 2010, sell INR 1400 crores [USD 300 million] of products & solutions with a third to customers outside India.
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ORGANISATION STRUCTURE
PLANT HEAD
head
OPERATION
PRODUCTION AUTO ELECTRICAL PRODUCTION FILTERS MANUFACTURING SERVICES
SUPPLIER DEVELOPMENT
MATERIALS
IT
QUALITY
HR
MARKETING
FINANCE
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CHAPTER-2
INVENTORY MANAGEMENT
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2.0 INTRODUCTION
Inventory is defined as the sum of the value of raw materials, spare parts, maintenance consumables, semi-processed materials, and finished goods at any given point of time. These resources are idle when kept in the stores. Inventory is defined as an idle source of any kind having an economic value.
The investment in inventory is very high in the most of the undertaking engaged in manufacturing, whole sales and retail trades. It is necessary for every management to give proper attention to inventory management. A proper planning of purchasing handling, storing and accounting should form a part of inventory management. A efficient system of inventory management will determine (a) What to purchase (b) How much to purchase (c) From where to purchase (d) Where to store, etc
The purpose of inventory management is to keep the stocks in such a neither way that neither there is over-stocking nor under-stocking. The over-stocking will mean reduction of liquidity and starving of other production processes: under-processes, on the other hand, will result in stoppage of work. The investment in inventory should keep in reasonable limits.
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The major kinds of raw-materials used by LUCAS-TVS are : Casting (Aluminium) Forging Paper goods Plastics Copper Sheet metal Mild steel
INVENTORY FLOWCHART
Gate Entry ( Preparation of GI, Manual entry..)
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Quality Assurance (Material inspection, random check, tag OK material, rejection of material found NOT OK with RSN)
WIP(Work-In-Process) (Main line, in house processing, job work with SCDN, CTW)
CDC(Customer Dispatch Centre) (Finished goods dispatch to final customer, final QA, logistics, invoicing)
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CHAPTER-3
PURCHASE MANAGEMENT
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The scope of purchase policy lays down the directions and guidelines to be followed by the manufacturing Units /Regional /Other Divisions on matters relating to procurement of materials, equipments and related services and delegation of powers. The main objective of procurement activity is to purchase the required material, equipments and associated services, at the right time at an optimum price, consistent with quality requirements and with transparency in order to adhere to commitments made to the customers. LUCAS-TVS is procuring the material only from those vendors who are committed to quality on long term basis, so as to improve quality and reduce cost and procurement time. Its emphasis is more on process control rather than inspection of the product. LUCAS-TVS is giving its Purchase preference to those who have adopted internationally, the quality management system. LUCAS-TVS maintains good will with approved vendors by treating them as business partners. Procurements are from vendors approved as per the procedure prevalent in the unit except in very special circumstances as defined in working instructions of the respective units. Bulk buying and bunching of materials required for several contracts shall be done to the maximum extent possible to derive price advantage. No purchase order is placed against anticipated customers order except under special circumstances for which prior specific approvals of competent authority shall be taken. Procurement from unapproved vendors of the value Rs 5 lakhs and above in each case needs to be reported to the corporate materials management every month.
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3.1 METHODOLOGY
The initial procedure starts as per the flowchart shown below: -
Production and production planning department {Prepares the indent and passes to MM department}
Material management department {Actual purchase procedure starts from here after placing orders}
After purchasing material reaches the lucas-tvs gate {Here they prepare SRV(stores receipt voucher}
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Material reaches GRD (stores department) {They again check the entries of SRV}
Finance department
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The procedure starts with the commercial department, i.e. this department takes the order from the customer and then passes it to the production department. Then they plan what type of raw material is required in the department where this material has to go for further production. After deciding, production department passes the indent to the material department where material procurement routes are decided. The area of material procurement covers not only the process of purchasing but also the activity of evaluation, development and review of the suppliers. In order to bring uniformity as well as to meet the requirements of ISO 9000/TQM, the Directors of LUCAS-TVS have constituted a Task Force for material procurement procedures.
Purchase order from the material management department Stores receipt vouchers from stores department Bills from suppliers (Directly)
This section deals with the processing of suppliers bills which is based on the quantity and the rate of material ordered. The terms and conditions of the purchases are shown in PO (Purchase Order), SRV, duly priced in the document of the receipt of the materials by the stores department.
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Accounting for purchases is done in this section. Purchase as per Accounting Standard 3A means purchase cost plus all the expenditure related to purchase and freight bringing the goods upto the factory except duly refundable
In LUCAS-TVS PSL or stock ledger are classified according to value and quantity. There are two type of stocks: Raw material is composed of direct materials and it come under prime cost. Spare is composed of indirect materials and it come under overheads
Stores Records
Two set of records are often maintained in LUCAS-TVS for materials issue, materials received and material transferred. They are:
Bin Card
Bin Card is maintained department wise. Bin card is used by storekeeper to keep quantitative records of all the items, materials and goods in his store. This documents maintained by the storekeeper. A bin card entry is done for each materials receipt, issue or return.
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Store Card
In LUCAS-TVS the Store Card is maintained monthly wise. It is kept in the costing store ledger. The store ledger is generally maintained in the form of loose-leaf cards, because they can be removed and inserted easily.
STORE LEDGER
It contains only quantitative details of materials received, issued and returned. It contains both quantity and value.
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The mammoth organization like LUCAS-TVS where it has to control and fulfill a number of suppliers requirements for regulating the payment of the suppliers claims, the stores account section of LUCAS-TVS receives the following documents:
Purchase orders:
Purchase order is an order placed on the suppliers for supply of specified quantity of specific material at a specified rate in accordance with the terms and condition spelt out in the order. The purchase order contains the following essential information:
1) 2) 3) 4) 5) 6) 7) 8) 9) 10)
Name of the supplier. Description of the material. Unit of measurement. Quality to be supplied. Rate at which the supply is to be made. Terms of delivery. Destination and mode of transport. Terms of payment. Import license number, date and validity period. Test certificate, insurance, compensation delay supply.
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10) Quantity supplied. 11) Quantity accepted and quantity rejected. 12) Bin card balance. 13) Railway/lorry freight particular. 14) Other like postage
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This is the document commercially recognized and presented by a supplier for the settlement of his claim for the supplier services that are rendered or to be rendered.
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VENDORS
Harinaam Aurangabaad General auto Punjab Tractor Ltd Ashok Leyland
CUSTOMERS
Tata Motors Ltd Mahindra & Mahindra International Tractor Ltd
LOGISTICS
BIC T&S TVS
SERVICES ELECTRICAL
IMPAL Sundaram Madras Auto Services TVS Ware house Ltd Lucas Indian Service
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CHAPTER-4
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Material gate
Store (GRD)
assurance
Put a QA tag & send to store. From store parts will go mainline. 35
Part will be used in line if any rejection is there due to supplier parts. Then those parts will go to SQA
Final QA will check the finished goods & put sign on CTW.
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CHAPTER-5
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5.0 INTRODUCTION
Inventory control means understanding inventory , Ist we have to identify the stock label as per requirement of business, It effect inventory carrying cost & working capital ,Controling & reduction of surplus stock, non moving stock is an essential requirement of inventory control . Here we have adopted various techniques to resolve the excess inventory & smooth production on day to day basis. Controlling process are as follows :- The ABC Analysis KANBAN System Just-in-time (JIT) Maintaining minimum Stock level Taking Physical on monthly basis
A ITEMS
Small in number, but consume large amount of resources Must have:
Tight control Rigid estimate of requirements Strict & closer watch Low safety stocks
C ITEMS
Larger in number, but consume lesser amount of resources. It must have:
Ordinary control measures
ABC analysis does not stress on items those are less costly but may be vital
B ITEM
Intermediate Must have:
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Reasonably strict watch & control Moderate safety stocks Managed by middle level management
5.0.2 KANBAN
Lucas-TVS uses kanban system for inventory control .Kanban process is a tool to control inventory . It is a process which demands lot of discipline and sincerity. But the benefits derived from it far outweigh these rigors. Lean Manufacturing team has contributed in these efforts by identifying all the aspects which cause interruption in the smooth functioning of this system. Along with the concerned agencies of Stores and PLG they have planned and executed incorporation of new Kanban items as well. The efforts taken by this team is commendable and I congratulate them for publishing this Kanban booklet summarizing the process. The book contains all the basic
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requirements and steps that is to be followed in the Kanban process and also the systematic approach towards increasing the scope of Kanban.
WHAT IS KANBAN?
Kan - Sign Ban - Board
So, Sign Board A signaling device that gives authorization and instruction for the production or withdrawal of item in a pull system It is based on 2-Bin system
KANBAN is the two bin system that is mainly depend upon the. Lot size (material) Lead time storage media (means capacity of ware house)
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Benefits of JIT: Uniform workstation loads Small lot sizes Closer supplier ties Maintenance of high quality Quick and economic setups
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Inventory accuracy Reduce lead times of items you make Speed up the time to replenish raw material Review order quantities Clean out old inventory Hold your suppliers accountable Tighten up on replenishing from forecast
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Inventory accuracy
One of the thing we do during in MRP audit or review of Inventory Control is ask the folks "How accurate is the inventory?" The answers are quite revealing depending on who your talk to. We then go to the cage and count 10 parts and immediately go to the computer and see what the system indicates. I always make sure the sampling is representative of normally used parts. It doesn't matter why the counts are wrong. If the computer inventory doesn't match the actual count the part count is wrong, period! The inventory must be accurate and kept accurate for the MRP system to reliability plan for replenishment of material. Performing cycle counts to keep inventory accurate is a path leading to unreliable information and unrealistic procedures.
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systems, it almost seems too simple. I can assure you that these things are easier to talk about than to execute, but the payoff is worth it.
In this method the total cost of all the materials are divided by the total number of items in the stock. This method recover the whole cost of materials and this method is suitable when price fluctuations are frequently changed. This method is suitable when price fluctuations are frequent. In this method new issue prices are need not to be calculated each time when the issues are made unless new lot of material is received.
LUCAS-TVS uses the weighted average method for issuing the inventories and purchases the inventories on cost basis.
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CHAPTER-6
RESEARCH METHODOLOGY
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RESEARCH PROBLEM:
To know about the functions performed regarding inventory management. To get aware about purchase management. To know about rejection of material. To find out ways of controlling inventory.
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ANALYSIS OF DATA:
The Data used in this project report is Secondary.
SECONDARY DATA:
In order to carry out my project I have used the secondary data. Secondary data is that source in which data is already exist and which is already being used by some other. Under this, the analyst is not the first user and it is conveniently available for research prospects. For ex: Internet.
LUCAS-TVS REPORT LUCAS-TVS PUBLICATION DIFFERENT DEPARTMENTS OF THE COMPANY LIKE etc
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7.0 INTRODUCTION
Analysis of inventory means controlling of materials from procurement to finish goods in a time frame where we can have sufficient time to build up inventory as per business trend & management guide line. In Lucas-Tvs Limited we are having three types of Raw materials like copper , iron , Aluminum base & plastic product . Presently we are getting more than 90 % materials out side of Pantnagar so we need to analyse our inventory on daily & hourly basis.
Copper Elements 27 % to 39% Iron parts 42 % Aluminum product used as raw materials 19% to 22%
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Stator & rotor For Alternator Iron part also using for yoke & as a child part Aluminum part for all type s of brackets etc.
As per the value & required quantity commercial department provide their schedule to respective vendors, considering lead time & follow up time, we used to maintain 12 days inventory including 6-7 days transit stock, for WIP we are having three to five shift stock & for Finish goods we are followed customers demand trend or three days stock whichever is less.
Raw materials Stock Considered as store Stock 12 days stock WIP Floor Stock - 2 days stock Finish Goods stock Maximum 3 days stock To maintain all stock we are doing ABC stock anaysis on daily basis ,& applying KANBAN for all products, For transferring stock from store to WIP floor we are maintain proper book keeping ,so that any point of day we can assess our store stock . From WIP floor raw materials became finish goods 7 through, it will transferred to Customer godown.
On monthly basis we are doing flowing activities for inventory analysis. Input output ratio Utilizations of Plant & Machinery Uses & techniques adopted for production Rejection analysis Preventive action taken for all machinery as a maintenance team work Deep analysis of & make QC circle for all production related problem
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Year
2009
2008
2007
Materials Consumption
58182
46844
46156
Turnover
105299
97736
105473
55%
48%
44%
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Observations
By this chart we can say that material has it own importance over turnover. According to this, We can analyze that there is a direct relationship between Material and
Turnover. The Maximum Consumption of material enables the company to generate maximum sales. This Chart assists in examining that there is better material inwarding from suppliers due to
CHAPTER-8
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8.0 CONCLUSION
In Lucas-TVS, Pantnagar during My Six week Summer Training I analyze the flow of Inventory. I came to know all the processes physically and in system to go simultaneously. The process of Material in warding and outgoing is in a very systematic way. After analyzing the financial condition of Lucas-TVS, Pantnagar through Inventory Management, it reveals that the company is in strong financial position. Overall the whole Inventory Management of this company is quiet sound which does not create any situation of Material excess or shortage.
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8.1RECOMMENDATION
The Capacity of all plants should be increased for better utilization of resources. Adopting Different Management methods which should increase order procurement.
Even though capital investment of LUCAS-TVS is satisfactory but for the future concern
capital investment should be conducted. We should give special attention on material consumption. Material management department should be active regarding decision making. The scrap percentages of material should be reduced.
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CHAPTER-9
BIBLIOGRAPHY
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BOOKS:THE LUCAS-TVS LTD MODEL 2009 MANUALS TRAINING DOCUMENT FROM LUCAS-TVS LIBRARY
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WEBSITES:WWW.SIDCUL.COM WWW.LUCAS-TVS.CO.IN
LIST OF ABBREVIATIONS
Original Equipment Manufacturing Goods Inwards Stock Transfer Central Excise Subsidiary Sales Secondary Higher Education Central Excise Subsidiary Sales Central Sales Tax
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GRD SCDN ADR RSN DRSN ALR MLR CLR BOM SIT CTW CDC JIT QA
Goods Receiving Desk Sub Contract Delivery Note Average Daily Requirement Return to the Supplier Note Debitable Return to the Supplier Note Assembly Line Rejection Main Line Rejection Customer Line Rejection Bill Of Material Store Issue Ticket Consignment To Warehouse Customer Despatch Centre Just In Time Quality Assurance
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