draft project report dhiraj chavan

Selective Control Of Inventory And Study Of SCM

CHAPTER: 1

1.1 EXECUTIVE SUMMARYThe project titled Selective control of inventory and study of supply chain management has the following objectives1) Selective control of inventory using Always Better Control (ABC) analysis

2) Fish bone analysis of Raw material shortage of Crank case and Housing suppliers 3) Study of supply chain of Emerson climate technologies (India) Ltd, Karad4) Study of assembly, production process of compressors, various departments, their

functions, performance indicators & manufacturing practices. 5) To make the Porters model for Emerson climate technologies (India) Ltd, Karad Always Better control (ABC) analysis is one of the selective inventory control

technique which classifies the materials on the basis of their usage values i.e. High Value, Medium value and low value materials. Very few items i.e. up to 10% contribute to about 75% of cost those items needs regular review these are called as high value materials ( denoted by symbol A) , remaining 15 % contribute to about 15% of cost called medium value materials (Denoted by symbol B) and remaining 70% items contribute about 10% of cost (denoted by symbol C) and needs less attention are called low value materials. In this project the ABC analysis is done using Microsoft XL and concluded about the number of High Value, Medium value and low value materials which helped to control major portion of cost in inventory by controlling few Raw material items as shown in the graphs and matrices in the Annexure at the end of the report Fish bone analysis is a technique which is used to find out the causes ,sub causes and root causes of any problem ,it is a graphical representation which shows at one go the entire

IES Management college & Research Centre, Mumbai

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causes of a particular problem, In this project this technique is used to find causes and sub causes of raw material shortage ,the causes are find out by taking unstructured interviews & discussions with managers at suppliers plant The project also includes the study of supply chain i.e. Raw material suppliers, assembly process, production process of compressors ,study of various departments ,their functions , performance indicators & various projects undertaken and finally the suggestions are given regarding the management of materials & causes of raw material shortage.


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CHAPTER: 2

2.1 INTRODUCTIONThe project on selective control of Inventory and study of supply chain management is carried out at Emerson Climate Technologies Ltd, Karad, the duration of the project was from 8 th of May 2009 to 29 th of June 2009 i.e. seven weeks First two weeks of the project work were spent on studying the supply chain of Emerson, Assembly, Production process of compressors, Visiting the managers of various departments and taking their unstructured interviews to find out loop holes in the supply chain as well as studying the working of their departments. After fifteen days study of supply chain it was decided to work on one of the critical problem in the supply chain and that was raw material shortage problem During the peak period i.e. from January to May the demand for compressors is high because of the higher demand for refrigerators and air conditioners, as everything is demand based and makes to order type there is a problem of raw material shortage, so it was decided to work on this problem & Find out the causes & Sub causes of raw material shortage by unstructured interviews with the suppliers. Since the project was related to raw materials and their suppliers it is logical to study the details of these materials, hence to understand materials the researcher has done the selective control of inventory using ABC analysis which has helped to know and classify the material on the basis of their usage values i.e. High value, medium value and low value materials. Since high usage value materials are more vital and critical and the shortage of these materials will stop the production, hence the researcher has studied some of the suppliers of


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high value materials by taking the unstructured interviews with the executives and manager at suppliers office and tried to find out the causes of raw material shortage. The visits to suppliers helped to understand the practical difficulties and also helped to learn about how to present the situation and ask indirect questions which lead to logical solution It was decided to select Emerson Climate Technologies Ltd, Karad because it is Engineering type of company and there is a big opportunity to learn, the another reason for the selection of the project was they have given project in the area of Inventory and Supply chain management which is one of the challenging area of Operations Management. The Summer Internship benefited in the following ways,1) It helped to learn about professional environment, time management, meeting

deadlines, following instructions, make decisions and also to solve practical problems 2) It helped to correlate theoretical studies with the practical aspects 3) It has given firsthand experience of the industry 4) It instilled responsibility and accountability 5) It has given idea about skills, attitudes and habits required to be successful on the job in the area of supply chain management


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2.1.1 INTRODUCTION TO THE SUBJECT INVENTORY MANAGEMENTABC analysis is a part of the inventory management, before going to discuss about ABC analysis it is necessary to know about inventory management and some related topic of inventory management:

INVENTORYIn Majority of the organizations, the cost of material forms a substantial part of the selling price of the product. The interval between the receiving the purchased parts and transforming them in to final products varies from industries to industries depending upon the cycle time of manufacture .Materials are procured and held in the form of inventories. It is therefore necessary to hold inventories of various kinds to act as a buffer between supply and demand for efficient operation of the system. Thus an effective control on inventory becomes a must for smooth and efficient running of the production cycle with least interruptions. The stocking of anything that is tangible in order to meet the future demand is the subject matter of inventory theory. MEANING OF INVENTORY Inventory generally refers to the materials in stock. It is a detailed list of those movable items which are necessary to manufacture a product and to maintain the equipment and machinery in good working order. The quantity and value of every item is also mentioned in the list. Inventory is an idle resource which is usable and has value. It may be men, money, materials, plant acquisition, spares and other stocked to meet future demand.IES Management college & Research Centre, Mumbai Page 5


IMPORTANCE OF INVENTORY1. Provides and maintains good customer service. 2. Enables smooth flow of goods through the production process. 3. Provides protection against the uncertainties of demand and supply. 4. Various production operations can be performed economically and independently. 5. Ensures a reasonable utilization of equipment and labour. 6. With purchases in bulk discount can be availed. 7. Adequate controls over materials un-used, used.

TYPES OF INVENTORIESA manufacturing firm generally carries the following types of inventories:1. Raw materials: Raw materials are those basic unfabricated materials which have not

undergone any operation since they are received from the suppliers ,e.g. round bars, angles, channels, pipes etc.2. Bought out parts: These parts refer to those finished parts, subassemblies which are

purchased from outside as per the companys specifications3. Work-in-process inventories(WIP):These refer to the items or materials in partially

completed condition of manufacturing, e.g., semi-finished products at the various stages of manufacture


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4. Finished goods inventories: These refer to the completed products ready for dispatch 5. Maintenance, Repair and operating stores: Normally these inventories refer to

those items which do not form the part of the final product but are consumed in the production process, e.g., Machine Spares, oil, grease.6. Tools inventory: Includes both standard tools and special tools. 7. Miscellaneous inventories: Miscellaneous inventories-office stationeries and other

consumable stores. Inventories can also be classified as,i) Fluctuation Inventories: These have to be carried for the reason that sales and

production times for the product cannot be always predicted with accuracy. There are variations in demand and lead times required to manufacture items. Thus, there is a need for reserve stock or safety stock to account for the fluctuations in demand and lead timeii) Anticipation Inventories: These are built up in advance for big selling season,

promotion programme or anticipation of likely change in demand suddenly and in case of plant shutdown period. It is the inventory for the future need.iii) Lot size inventory: It refers to producing and storing at the rate higher than the

current consumption rate. The production in lot is going to help the advantage of price discounts for quantities purchased in bulk and fewer set-ups and, hence the lower set-up cost.iv) The transportation inventories : It exist because materials must be moved from one

place to another. When transportation requires a long time, the items in transport represent the inventory. Thus, transportation inventory is a result of extended or longer transportation time

Reasons for Keeping Inventories


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i) To Stabilise Production: The demand for an item fluctuates because of the number of

factors, e.g., seasonality, production schedule etc. The inventories (raw materials and components) should be made available to the production as per demand failing which results in stock out and the production stoppage takes place for want of materials. Hence the inventory is kept to take care of this fluctuation so that the production is smooth.ii) To take advantage of price discounts: Usually the manufacturers offer discount for

bulk buying and to gain this price advantage the materials are bought in bulk even though it is not required immediately. Thus, inventory is maintained to gain economy in purchasing.iii) To meet the demand during replenishment period: the lead time for procurement

of materials depends upon many factors like location of source, demand supply condition, etc. So inventory is maintained to meet the demand during the procurement (replenishment) period.iv) To prevent loss of orders (sales): In this competitive scenario, one has to meet the

delivery schedules at 100 per cent service level, means they cannot afford to miss the delivery schedule which ,may result in loss of sales. To avoid this the organizations have to maintain inventory.v) To keep pace with changing market conditions: The organizations have to

anticipate the changing market sentiments and they have to stock materials in anticipation of non-availability of materials or sudden increase in prices. Sometimes the organizations have to stock materials due to other reasons like suppliers minimum quantity condition, seasonal availability of materials or sudden increase in prices

Inventory Control


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Inventory control is a planned approach of determining what to order, when to order, how much to order and how much to stock so that cost associated with buying and storing are optimal without interrupting production and sales. Inventory control basically deals with two problems, i.e. when should an order be placed (Order level) and how much should be ordered (Order Quantity) These Questions are answered by the use of inventory models.The scientific inventory control system Strikes the balance between the loss due to non-availability of an item and cost of carrying the stock of an item. Scientific inventory control aims at maintaining optimum level of stock of goods required by the company at minimum cost to the company.

Objectives of Inventory control:1. To ensure adequate supply of products to customer and avoid shortages as far as possible. 2. To make sure that the financial investment in inventories is minimum(i.e., to see that the working capital is blocked to the minimum possible extent)3. Efficient purchasing, storing, consumption and accounting for materials is an

important objective. 4. To insure timely action for replenishment. 5. To provide a reserve stock for variations in lead times of delivery of materials. 6. To maintain timely record of inventories of all the items and to maintain the stock within the desired limits. 7. To provide a scientific base for both short-term and long-term planning of materials


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Benefits of Inventory control1. Improvement in customers relationship because of timely delivery of goods and services. 2. Smooth and uninterrupted production and hence no stock out. 3. Efficient utilization of working capital.4. Helps in minimizing loss due to deterioration, obsolescence damage and preliferage.

5. Economy in purchasing 6. Eliminate the possibility of duplicate ordering.

Supply Chain ManagementSupply chain management (SCM) is the term used to describe the management of the flow of Materials, information, and funds across the entire supply chain, from suppliers to component producers to final assemblers to distribution (warehouses and retailers), and ultimately to the consumer.1 In fact, it often includes after-sales service and returns or recycling. Figure 1 is a schematic of a supply chain. In contrast to multiechelon inventory management, which coordinates inventories at multiple locations, SCM typically involves coordination of information and materials among multiple firms. Supply chain management has generated much interest in recent years for a number of reasons. Many managers now realize that actions taken by one member of the chain can influence the profitability of all others in the chain.2 Firms are increasingly thinking in terms of competing as part of a supply chain against other supply chains, rather than as a single firm against other individual firms. Also, as firms successfully streamline their own operations, the next opportunity for improvement is through better coordination with their suppliers and customers. The costs of poor coordination can be extremely high. In the Italian pasta industry, consumer demand is quite steady throughout the year. However, because of trade promotions, volume discounts, long lead times, full-truckload discounts, and end-of-quarter sales incentives the orders seen at the manufacturers are highly variable. In fact, the variabilityIES Management college & Research Centre, Mumbai Page 10


increases in moving up the supply chain from consumer to grocery store to distribution center to central warehouse to factory, a phenomenon that is often called the bullwhip effect It seems that integration, long the dream of management gurus, has finally been sinking into the minds of western managers. Some would argue that managers have long been interested in integration, but the lack of information technology made it impossible to implement a more systems-oriented approach. Clearly industrial dynamics researchers dating back to the 1950s have maintained that supply chains should be viewed as an integrated system. With the recent explosion of inexpensive information technology, it seems only natural that business would become more supply chain focused. However, while technology is clearly an enabler of integration, it alone cannot explain the radical organizational changes in both individual firms and whole industries. Changes in both technology and management theory set the stage for integrated supply chain management. One reason for the change in management theory is the power shift from manufacturers to retailers. Wal-Mart, for instance, has forced many manufacturers to improve their management of inventories, and even to manage inventories of their products at Wal-Mart. While integration, information technology and retail power may be key catalysts in the surge of interest surrounding supply chains, E-Business is fueling even stronger excitement. E-Business facilitates the virtual supply chain, and as companies manage these virtual networks, the importance of integration is magnified. Firms like Amazon.com are superb at managing the flow of information and funds, via the Internet and electronic funds transfer. Now, the challenge is to efficiently manage the flow of products.

A schematic layout of general supply chain is as follows


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A schematic of supply chain

2.1.2 INTRODUCTION TO THE INDUSTRYThe Company manufactures hermetically sealed compressors which forms the major part of Refrigerators and air conditioners, hence the growth of the company directly depends upon the growth of refrigeration and air conditioning industry which is major part of HVAC i.e. Heating, Ventilation and air conditioning industry, hence it is much more logical to explain about HVAC as well as Refrigeration and air conditioning industry Refrigeration and Air conditioning industry:


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Refrigerators have been manufactured in India since 1950,Till the 1980s, players like Godrej, Kelvinator, Allwyn and Voltas controlled almost 90% of the market. Earlier, the white goods sector was categorized as a luxury goods industry and was subject to oppressive taxation and licensing. The situation changed after the liberalization of the Indian economy in the early 1990s. The government removed all restrictions, and now there is no restriction on foreign investment, and licenses are no longer required. Post-liberalization, a number of foreign companies entered the market and many domestic players also diversified into refrigerators. BPL and Videocon, who already had a presence in the consumer electronics market, leveraged their strengths to enter the durables sector. In India, refrigerators have the highest aspirational value of all consumer durables, with the exception of televisions. This accounts for the high growth rate of the refrigerator market. The refrigerator market has been growing at a rate of about 15% per year, while the consumer durables industry as a whole has grown at almost 8%. The size of the refrigerator market is estimated to be 3.5- 4 million units approximately, valued at Rs 50 billion. The domestic penetration rate of refrigerators is about 9%. The penetration of refrigerators is considerably higher in urban areas, which account for 75% of the demand, with rural areas constituting the other 25%. The demand is also higher in the northern and western parts of the country than in the east. The south also has high demand as the warmer weather of the south requires a refrigerator running throughout the year. The Indian AC market size is Rs 2,790 crore comprising the household and commercial segments. The market is currently at a nascent stage and shows tremendous promise to grow. However, despite the reasonable growth in the last few years, the growth potential has not been entirely captured.The key bottleneck to growth is the low affordability of ACs. This is clearly evidenced in the Chinese market where substantially low price points (less than 50% of Indian retail prices) have driven penetration of ACs.In order to capture the growth potential, a substantial reduction in price is required. The primary cause for the high prices is the high incidence of indirect taxes, excise duties and import duties on the product category accounting for close to 45% of the MRP. In particular, the abnormally high excise duty of 32% is a major deterrent to growth. With government support in duty and tax rationalization, the AC market can grow very rapidly over the next 5 years to as much as Rs.IES Management college & Research Centre, Mumbai Page 13


14,000 crores by 2007. Reducing excise duties, indirect taxes and import duties is a win-winwin solution for the government, players and consumers. The specific short term proposals include: A reduction in excise duty from 32% to 16% with 40% abatement Excise exemption in certain states such as Jammu, North East to be repealed as they destroy value for government, players and consumers and confer none of the intended benefits to the system A reduction of import duty to 25% for finished goods and 15% for components . Preserving food and dairy products Improving food distribution Reducing cost of food to the common man Cold chain enjoys excise exemption. however, CENVAT credit on inputs is not available To maintain the spirit of exemption from incidence of taxes, replace exemption to cold chain by refund/ subsidy The Indian Air-Conditioning Industry is a Rs 2,790 Crore Market and the major players in the market are Amtrex Hitachi, Blue Star, Carrier Aircon, Daikan Shriram, LG, Samsung, Voltas, Whirlpool, OGeneral and Matsushita. The final outcome will be a win-win-win situation for players, government and consumers because Domestic AC market can be a huge market by 2012, Size of domestic market Rs 6280 crore and 4.3 million units with further growth possible Increased standard of living for consumer AC will become a need and productivity enhancer Growth in exports will earn foreign exchange for country Scale in domestic market will drive competitiveness in exports (e.g., Chinese exports of 5.9 million units driven of domestic volume of 14 million units)IES Management college & Research Centre, Mumbai Page 14

However there is a huge unrealized potential for ,


future

Household AC exports can be Rs 700 crore

Hence it can be concluded that Refrigeration and air-conditioning industry is having a great

Porters Model for ECTILThe porters model which consist of five force analysis is as follows,


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The above model can be explained with respect to Emerson climate Technologies as follows, 1) Competitive Rivalry Within an Industry The rivalry within an industry is high because, There are many competitors both domestic as well as International, Domestic: Tecumseh products of India limited (TPIL) International: Emerson, TP, Danfoss, Bristol, Mitsubishi, LGE, Carrier, LGEIL, EMBRAKO etc. Also there are some critical factors which create rivalry and they are as follows, Rate of Industry Growth: (India): Refrigeration and air conditioning (RAC): 15 % Packaged air conditioning (PAC): 25 % Commercial Refrigeration. 20 % Big Refrigeration: 10 % Repairs: 5 Mn O/W Compressors Along with these some other factors which creates more rivalry are


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Seasonal demand of compressors It is the intermediate product which is used in the refrigerators and air conditioners Underutilized capacities due to seasonal demand

2) Threat of new potential entrants: The threat of potential entrants is high because, there are many new players coming in the Industry, those are as follows, Refrigeration and air conditioning TPIL with HUSH rotaries on mass scale. Dumping of rotaries by Matsushita, Hitachi, Siam in India. Import of appliances. Aggressive Recipes pricing by TPIL for India & China business. Possibility of LG, Bristol manufacturing Plant in India. Common Refrigeration: LG comm. ref. Compressors manufacturing in India with higher economies of scale. Aggressive pricing by Danfoss in India Entry of Donper-China in India & ME. 180 days credit offer by Europe players. Packaged air conditioning (PAC) Scroll Entry by Danfoss , Manuerope , DAIKIN / LG Import of systems Entry of low cost Sanyo scroll in exports.

Huge appliance imports. Entry of Danfoss MT series compressors with aggressive pricing.

3) Bargaining Power of Suppliers: There are mainly three types of suppliers which are as follows,


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Commodity suppliers, Imported item suppliers, Monopoly Items suppliers,

The bargaining power of commodity suppliers is low because there are many domestic commodity item suppliers as well as those suppliers have a threat of backward integration The imported item suppliers have medium bargaining power whereas monopoly item suppliers have high bargaining power because of less number of suppliers and monopoly in that particular item market 4) Bargaining power of customers: There are many compressor manufactures in the market Majority of the customers are original equipment manufacturers (OEMs) and most of them have also in house compressor manufacturing capability 5) Threat of substitute products: The threat of substitutes is medium because, Scroll technology for 2.0 to 5.0 Ton Packaged air conditioning Alternate refrigerants like R407 / R410 in European Market Linear compressor technology Entry of rotary technology in refrigeration segment The bargaining power of customers is medium because,

Industry Critical Success Factors:The critical factors to be successful in the industry are as follows,IES Management college & Research Centre, Mumbai Page 18


Lower costs of Products & Services Bestinclass quality & reliability Innovative products with lesser time to market Just-in-time delivery with bigger volumes Strong pre- post sales support Strong relation with Customers & suppliers Higher market share

True Competitive Position of Emerson Climate technologies against Competition based on Industry Critical Factors: Best inJust in timeInnovative Strong Lower cost of class Delivery/ products /pre post products / Total Quality /bigger lesser timesales services Reliability volumes to market support 2 1 2 3 5 1 4 4 5 1 1 2 2 1 3 2 4 5 1 1 1 1 2 2 4 2 2 1 1 1 2 2 2 4 3 3 1 2 1 2 1 3 3 3 6 6 7 9 11 11 12 16

Company

DANFOSS Matsushita TP TPIL BRISTOL EMBRAK ECTIL LGEIL CARRIER

1 16 Source-Emerson survey

2.1.3 INTRODUCTION TO THE COMPANY History of Emerson


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Emerson Climate Technologies is a diversified global manufacturing & technology company serving industrial commercial & consumer market around the world .Emerson was founded in 1890. The head quarter of the company is in St. Louis, Missouri USA. Emerson has grown from regional manufacturer into a global technology solutions power house. The Company has recognized for outstanding management process & record of consistent long term performance. It has a large sales presence in more than 150 countries. Emerson has recently entered into Indian market in climate technology field. The company acquired Kirloskar Copeland limited; a joint venture company had a technical collaboration between Indias number one compressor manufacturing, Kirloskar Brothers Ltd & Copeland Corporation, USA, the undisputed world leader Air Conditioning & Refrigeration compressor. The company has two manufacturing facilities in India one in Karad & Atit in Maharashtra. Emersons strategy for growth focuses on two core initiatives, technology leadership & expanding market. Technology leadership is attained through collaborations & commitment to innovation. Across the world economies are expanding & require the most advanced effective & efficient solutions to complete in an aggressive global marketplace. Emerson Brands have the solutions critical for their success. Emerson group comprises of the following technology solutions entities; Climate Technologies Process Management Network Power Industrial Automation Appliance Solutions Motor Technologies Storage Solutions Professional Tools


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The product spectrum of Emerson Climate Technologies spans Compressors, Controls, Thermostats, Valves & Motors and account for 17% of the Emerson group business. Emerson Climate Technologies unites 17 Emersons divisions under a single brand to serve to customers worldwide to heating, ventilation, air conditioning and refrigeration industries. Emerson Climate Technologies is the leading manufacturer of HVAC components in the world delivering comprehensive solutions for temperature, critical applications across numerous industrial and residential applications including residential air conditioning, commercial air conditioning refrigeration industrial, Heating and Ventilation. ECT combine technically superior products from the industry leading divisions such as Copeland, White Rodgers and Flow Controls along with their engineering design distribution, installation and monitoring capabilities for unquestionable reliable climate system. These industry defining proprietary technologies of Emerson Climate Technologies to provide their customers with the competitive advantage of the most advance, environmentally friendly climate control systems available.

Company ProfileIndia has witnessed an economic boom with a steady growth rate of @ 9%in passed few years. Industries such as Retail, Telecommunications, Information Technology, Pharmaceuticals and Biotechnology have received impetus from the government for structured rapid growth. In this scenario, Emerson Climate Technologies (India) Limited is looking forward to the Air Conditioning and Refrigeration challenges that the market will offer. Emerson Climate Technologies (India) Limited, is the pioneer in the area of Hermetically Sealed Compressors in India. These compressors, with reciprocating technology, have a wide range of applications in refrigeration and air conditioning industry. Since the company inception in 1966, over 7 million compressors have been sold in the Indian & International markets.


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Emerson Climate Technologies (India) Limited, has established infrastructure at per with the global leaders. The state of the art manufacturing plants at Karad and Atit in Maharashtra have facilities for product evaluation and validation, product innovation, manufacturing, product development and support. Products are developed with the view of future market requirements and changing customers expectations. All the Compressors are tropic aliased to suit severest conditions of up to 55C ambient. The company has pioneered the introduction of eco-friendly compressors in R134A, R404A, R410A and Hydrocarbon refrigeration in India. The product spectrum comprises of: Compact & Energy Efficient KCN series for Commercial Refrigeration Applications. Unique features of the KCN series being: High EER, tropical design, compact and multi mounting, low sound and vibration, high starting torque and wide operating voltage range. KCJ and KCE series compressors are widely used in LBP, CBP and HBP applications. Customized Condensing Units for special applications. Performance and design of IHP and HHP Condensing Unit are optimized using the CAE capabilities. High Energy Efficient CR6 series for Room and Package Air conditioning. Heat Pump Compatible CK3 series for Air Conditioners Infrastructure and Facilities Engineering Center The Engineering Center at Karad boasts of having the best talent and infrastructure in the country for developing innovative product solutions for cooling needs. The engineering Center is equipped to design and develop new products in short lead times. Latest software like PROE, ANSYS, and IDEAS are used extensively for analysis and development.


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Manufacturing Infrastructure The manufacturing facilities are flexible to produce compressors for existing and future product needs. Toyota Production System is adopted for optimizing the manufacturing processes to reduce cost and improve quality. Balanced workflow, multi machine operations, skilled manpower and stringent quality control ensure excellence in manufacturing. Following advanced manufacturing techniques are adopted for production of best in class compressors CO2 welding Robotic welding CNC machining and turning centers (e.g. CNC shaft lobe machining) CD welding used for the first time in compressor manufacturing industry in India. Quality Assurance Quality is the hallmark of all the products that leave the Emerson Climate Technologies India plants. Stringent quality checks are carried out at every stage in the production cycle. The test facilities at Karad and Atit plants are approved by Emerson as Global Engineering Test Center. Some of the test facilities include: Component fatigue & stress analysis Calorimeter testing Shake test Accelerated Life Test Psycho acoustic bench test NVH test facilities Appliance balancing Tear down analysis


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Quality Certifications The Quality Management System and integrated approach at Emerson Climate Technologies (India) Limited have helped to bring down defect levels, customer line returns and fields returns significantly, ensuring process consistency. These relentless efforts to achieve high quality standards are reflected in the following certifications. UL Approvals for AC products Copeland PTF approval ISO 9001-2000 for Karad and Atit plants ISO 14001 Certification for Environment Management System CE marking for compressors BIS / DGS&D Approvals Awards and Accolades PTF (BEM) Gold rating for Atit and Karad plants by Copeland Corporation USA Best Business Partner (Export Support)- Hitachi 100 PPM Quality movement suppliers LGE Lowest Line Rejections SAMCO CII (Confederation of Indian Industry) Energy Conservation Awards Customer Support Our relations with our customers go far beyond the call of duly. Various initiatives at he plants and in the field are launched to ensure high level of customer delight Application Engineering Support


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Tested and Qualified RAC and Refrigeration Appliances Labs. Training Field Complaint Handling

VISION Emerson Climate Technologies, With our partners, will provide global solutions to improve human comfort, safeguard food and protect our environment. MISSION Become the industries steward and trusted partner by: Becoming an incredibility easy company to do business with through e-business and a

culture of customer service Expanding our technology leadership position. Using our broad capabilities in products and services to develop unique, high-value integrated solutions. Being the best value provider for products and services. Maintaining a work environment where our people and their ideas flourish. VALUES We conduct ourselves with integrity. We Treat people with respect. We depend on the creativity of our people.


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We Encourage teamwork. We strive for major improvements. We Confront challenges head on. We learn from our mistakes. We Pay attention to details and planning. We actively contribute to our community.

Department in the Organization1.

Operations:Production,Manufacturing,Quality assurance, Condensing unit Advanced Manufacturing Engineering: Advanced Manufacturing, Corporate

,Logistics, Excise Cell 2. 3. Purchase 4. Sales & Marketing 5. Accounts & Finance 6. Information Technology 7. Human Resource 8. Engineering 9. Secretarial They manufacture products under ISO 9001, EMS 14001, & ROHS Various products Manufactured and their capacity at Karad and Atit plant KCE/KCN: 275 - 6000BTU KCJ: 1000-12000 BTU quality, Support services, Plant Engineering


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KCG: 45000-60000BTU KCH: 2500-24000BTU CR6, CK3: 19000-42000BTU CONDENSING UNIT: 600-66000BTU

2.1.4 INTRODUCTION TO THE PROJECTThe project titled Selective control of inventory and study of supply chain management has the following objectives 1) Selective Control of Inventory Using ABC analysis 2) Study of supply chain management 3) Study and analysis of raw material shortage problem from some suppliers 4) Study of Assembly, production process of compressors, various departments, their functions, performance indicators and also the manufacturing practices at Emerson SELECTIVE CONTROL OF INVENTORY There are some selective Inventory control methods to have an effective control on the inventory. The important methods are:1. ABC Analysis (Always Better Control) 2. VED (Vital, Essential, Desirable)


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3. FSN (Fast, Slow moving and Non-moving) 4. SDE (Scarce, Difficult, Easy) 5. HML (High, Medium, Low)

Always Better Control (ABC) analysisAlways Better Control is an analytical technique for classification of inventory items was first introduced by an AMERICAN FIRM- GENERAL ELECTRIC COMPANY. According to this analysis, there are three categories of inventory items A, B and C type. Depending upon their percentages of consumption. The significance of this analysis is that a very close control is exercised over the items of A group which account for high percentage of costs Less stringent control is adequate for category B Very little control would be sufficient for Category C. ABC analysis is a basic analytical management tool which enables top management to place the effort where the result will be greatest. This technique, popularly known as Always Better Control or the alphabetical approach, has universal applications in many areas of Human Endeavour. The technique tries to analyze the distribution of any characteristic by money value of importance in order to determine its priority. In materials management, this technique has been applied in areas needing selective control, such as inventory, criticality of items,


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obsolete stocks, purchasing orders, receipts of materials, inspection, store-keeping, and verification of bills. The annual consumption analysis of any organization would indicate that a handful of top high value items-less than 10 per cent of the total numberwill account for a substantial portion of about 75 per cent of the total consumption value, and these few vital items are called A items which need careful attention of the materials manager. Similarly, a large number of bottom itemsover 70 per cent of the total number called the trivial many account only for about 10 per cent of the consumption value, and are known as the C class. The items that lie between the top and bottom are called the B category items.

Category A (High Cost) B (Medium Cost) C (Low Cost)

% of items 10 20 70

% of value 75 15 10

Purpose of ABC analysisNormally, once ABC analysis has been done, the following broad policy guidelines can be established in respect of each category: SL. A-items: B-items: Moderate value C-items: Low consumption value

NO. High consumption value


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1. 2.

Very strict control No safety stocks

Moderate control Low safety stocks

Loose control High safety stocks

3.

Frequent ordering or weekly Once in three months deliveries

Bulk ordering once in a 6 month

4. 5.

Weekly control statements Maximum expediting follow-up

Monthly control reports and Periodic follow-up

Quarterly control reports Follow-up and expediting in exceptional cases

6. 7.

Rigorous value analysis

Moderate value analysis or more

Minimum value analysis

As many sources as possible for Two each item

reliable Two reliable sources for each item estimate for

sources

8.

Accurate forecasts in material Estimate based on past Rough planning data on present plans control planning over Annual surplus material

9.

Minimization of waste, obsolete Quarterly and surplus

review and

over

surplus and obsolete items

obsolete

10. 11. 12.

Individual posting Central purchasing and storage

Small group posting Combination purchasing

Group posting Decentralized purchasing Minimum clerical efforts

Maximum efforts to reduce lead Moderate time

13.

Must be handled by senior Can be handled by middle Can be fully delegated officers management


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Color coding can be used to identify A, B and C categories in stores. Usually red is used for A items, pink is used for B items and blue for C items

Advantages Of ABC AnalysisThis approach helps the material manager to exercise selective control and focus his attention only on a few items when he is confronted with lakhs of stores items. By concentrating on A class items, the material manager is able to control inventories and show visible results in a short span of time. By controlling the A items, and doing a proper inventory analysis, obsolete stocks are automatically pinpointed. Many organizations have claimed that ABC analysis has helped in reducing the clerical costs and resulted in better planning and improved inventory turnover. ABC analysis has to be resorted to because equal attention to A, B and C items will not be worthwhile and would be very expensive. Concentrating on all the items is likely to have a diffused effect on all the items, irrespective of the priorities.

Objective Of ABC AnalysisAs discussed earlier, the ABC analysis enables the material manager to exercise selective control when he is confronted with a large number of items. Tighter and accurate procedures are essential for A value items relating to material planning, forecasts, ordering, review, records, postings, revisions, lead time analysis, safety stock, material consumption control, purchase budget, delivery schedule, value analysis, follow-up, clerical efforts, physical stock verification, receipts, issues, stores accounting and inspection. The degree control should be rigorous for A items and should be minimum for C items.ABC analysis is also helpful to rationalize the number of orders and reduce the overall inventory The A B C system of classification should, however, is used with caution. For example, an item of inventory may be very inexpensive. Under the A B C system it would be classified into C category. But it may be very critical to the production process and may not be easily available. It deserves the special attention of management. But in terms of the A B C framework, it would be included in the category which requires the least attention. This is a limitation of the A B C analysis.


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Mechanics Of ABC AnalysisThe mechanics of classifying the items into A, B and C categories is described in the following steps: Step1: Obtain a list of items along with information on their unit cost and the periodic (Usually annual) consumption. Step2: Determine the annual usage value for each of the items by multiplying unit cost with number of units and rank them in descending order on the basis of their respective usage values Step3: Express the value for each item as a percentage of aggregate usage value. Now, cumulate the per cent of annual usage values Step4: Obtain the percentage value for each of the items. For n items each item shall represent 100/n per cent. Thus if there are 20 items involved in classification, then each item would represent 100/20=5 per cent of the materials, Next cumulate these percentages as well. Step5: Using the data on cumulated values of items and the cumulated percentage usage values, plot the curve by showing these respectively on X and Y axes.


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Step6: Determine appropriate divisions for the A, B and C categories. The curve will rise steeply up to a point .This point is marked and the items up to that point constitute the A-type items. Similarly, the curve would only be moderately sloped towards upright. The point beyond which the slope is negligible is marked and the items covered beyond that point are classed as C-type items because they cause only a negligible increase in the cost. The other items are the B-type items for which the curve depicts a gradual upward rise. After the items are so classified, the inventory decisions are made on the basis of this classification. A items would call for a strict control and should be delivered near the time of use. The protection against their stock outs may be set as high as 98%.The C items might be kept in open storage available and as they are demanded they might be issued without formalities. For these, the re-order quantities might be larger than their respective EOQs. Periodic review system may be invoked for the procurement of such items. In regard to the Bclass items, the policy be of a fairly tight control-not as tight as for A-type items of course The normal items in most organizations show the following pattern:1. 5 per cent to 10 per cent of the top number of items account for about 75 per cent

of the total consumption value. These items are called A items.2. 15 per cent to 20 per cent of the number of items account for 15 per cent of the

total consumption value. These items are called B items.3. The remaining number of items account for the balance 10 per cent of the total

issue value. These items are called C items.

Limitation Of ABC AnalysisABC analysis in order to be fully effective should be carried out with standardization and codification. ABC analysis is based on grading the items according to the importance of performance of an item that is by VITAL, ESSENTIAL and DESIRABLE (VED ANALYSIS) analysis. Some items, though negligible in monetary value may be vital for running the plant and constant attention is needed. If the inventory position is analyzed


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according to the value, commonly known as XYZ analysis, then result of ABC and XYZ analysis will be different, depending upon the nature of obsolete items. The results of ABC analysis have to be reviewed periodically and updated. It is a common experience that a C item, like diesel oil in a firm, will become the most high value item during power crisis. However, ABC analysis is a powerful approach in the direction of cost reduction as it helps to control items with a selective approach. The A B C system of classification should, however, be used with caution. For example, an item of inventory may be very inexpensive. Under the A B C system it would be classified into C category. But it may be very critical to the production process and may not be easily available. It deserves the special attention of management. But in terms of the A B C framework, it would be included in the category which requires the least attention. This is a limitation of the A B C analysis.

Supply Chain ManagementThe Supply chain Consist of the various Raw material suppliers, Inbound Logistics, manufacturing plant, outbound logistics, C & F agents ,Distributors ,Retailers and their Customers which is shown in the following block diagramRaw Material supplier

Raw Material supplier

Raw Material s supplier

Inbound Logistic s provide

Manufact uring plant and Operatio ns

Outboun d Logistics

C&F Agent s

Distributors

Retailers

Customers


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The various departments which come across the supply chain are as follows,

1) Purchase DepartmentThe main functions of the purchase department are as follows Materials AOP (Annual operating plan) Planning BOM (Bill of materials) item materials planning Non BOM item materials planning Ordering ,scheduling, procurement, Inspection, Reviews, Inventory Management Feedback to corporate materials Vendor Development and supplier rating Searching new Supplier s and Supplier quality assurance

Performance Indicators: Material availability index (percent), Inventory Management (Rs.), Supplier Quality and delivery performance (Vendor rating) Measurement and monitoring of performance: For measurement of performance they set the target and take every quarter follow up2)

Production Department:

Departmental Functions: To Carry out the production as per plan On the basis of monthly plan they prepare weekly plan, Daily plan and set the target Performance Indicators: Cost of Energy, Consumables, Man hours, Quality at various stages, Delivery performance and Work in process (WIP) inventory.


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Measurement and monitoring of performance: They track the performance daily and measure on a monthly basis in monthly review meeting Current projects: Production of 3000 compressors per day of KCE /KCN model Future Plans: Manufacture of KCE 3000 per day and KCJ 550 to 600 per day ramp up

3) Manufacturing DepartmentDepartmental Functions: Tools planning (Jigs and fixtures) Vendor development Vendor performance checking Development of new tools and purchase of new machineries New Capital Investment

Performance Indicators: Cost, Quality, performance of machineries and vendors, Lead times, process capability index Measurement and monitoring of performance: They set the parameters and monitor the performance Current Projects: Increasing manufacturing capability to increase the production of KCE model 2000 per day to 2500 to 3000 compressors per day Processing cost reduction Future Projects: Cost effective technology introduction


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4) Quality control departmentDepartmental Functions: Quality assurance activities Control of nonconforming product Monitoring and measurement of product First part approval/Qualification Control of monitoring and measuring device Analysis and monitoring of cost of quality Performance Indicators: Plant defects (ppm),Cost of quality(Rs % to sales),Customer line returns(ppm),Customer complaints(numbers),Product performance audits(% compliance) Measurement of performance: Effectiveness is checked through indicators such as in process quality audits, deviation concession reports, final pack audits, component and stage wise assembly defect reports and review in management meeting like MRM, QRM etc Current projects: Focus on field failure reduction Future Plans and projects: six sigma Quality level and Lean enterprise

5) Engineering DepartmentDepartmental Functions: New product development and Engineering support Design and drawing Performance indicators:


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Number of products released in a year, Expenses versus budget, Errors in drawing and Customer support Current projects: To support the companies project of 3000 compressors per day with technology, Energy conservation Future projects: To overcome energy crisis problem by designing low energy consumption compressors, Alternate refrigerant development to overcome environmental aspects, reducing ozone destroy level of refrigerants

Fish Bone analysisFish Bone analysis was developed by Dr. Kaoru Ishikawa which is used as an analysis tool. It consist of Graphical representation of data and it Provides a systematic way of looking at effects and the causes that create or contribute to those effects hence it is called as Causeand-effect diagram ,since Design of diagram looks like skeleton of a fish hence it is also called as fish bone diagram Uses of fish bone diagram


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To study the problem or issue To determine its root causes Team brainstorming tool To study possible reasons why a process is beginning to have difficulties, problems or breakdowns

To identify areas for data collection To study why a process is not performing properly To analyze why the process is not producing the desired results When less quantitative data available

Construction of fishbone diagramThe following figure shows the construction of fish bone diagram

Fish Bone Diagram First the problem is identified and stated on the right side ,after stating the problem the major causes because of which the problem is effected are find out and then detailed causes for each of the major cause are find out and studied


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Strengths of cause effect diagram Finds possible causes of problems Helps determine root cause of problem Encourages group participation Helps to focus on causes of issue Has an easy-to-read format Increases knowledge of the processes Identifies areas for further study


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2.2 Objectives of the project1) Selective Control of Inventory Using ABC analysis for raw materials at both Karad and Atit Plant 2) Study of supply chain management practices at Emerson climate technologies (India) Ltd, Karad 3) Fish bone analysis of raw material shortage problem from Crankcase and Housing Suppliers 4) To make porters model for Emerson climate technologies (India) Ltd, Karad 5) Study of Assembly, production process of compressors, various departments, their functions, performance indicators and also the manufacturing practices at Emerson


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2.3

Methodology

The data of the study is collected through both the primary as well as secondary sources of data collection

Primary DataThe primary data was collected through unstructured interviews, observations and discussions with the departmental heads, Managers, supervisors and concerned employees of the organization. The unstructured interview was with the company managers which consisted of production manager, Quality control manager, Purchase manager, supervisors and other executives in the company as well as with the suppliers of the raw materials. The interview consisted of questions related to inventory management, Reasons for raw material shortage during the peak seasonal period i.e. from February to May, The functions of various departments, their organizational structure, Performance Indicators, current projects ,Future plans ,measurement and monitoring of performance and supply chain management practices adopted. The supervisor interview consisted about the production processes, handling of machineries, Issue of materials and inventory control practices used in the company .Observation technique was used to understand the functioning of machineries, Quality control practices, how the various departments throughout the supply chain are linked and how the resources are managed. It was also helpful to understand and know the movement of inventory throughout the supply chain, various areas where inventory is piled up, detecting variations and correcting them. Discussions with various departmental heads highlighted the points where correction in variation could be made regarding the Material Requirement planning (MRP) and management of materials during peak period The causes of raw material shortage were collected by unstructured interviews with respective executives at suppliers office and concerned persons in purchase department of the company.IES Management college & Research Centre, Mumbai Page 42


Secondary DataThe secondary data is collected by referring companies report, Documents and various Production management, Materials management and other books. The various books such as production management and Industrial Engineering, Materials management and Quantitative techniques for management decisions as well as the information taken from the internet were basically used for the theoretical information highlighted in the project report. The data required for ABC analysis like Raw materials, Consumption and price per unit is taken from the company records .The other information like company profile, history of company, Product range and applications is taken from presentation and documents in the company

2.4 Sampling Design and Sample SizeSince there was a shortage of high value raw materials the suppliers of high value materials are chosen, they are also chosen according to their location so that it will be easy to visit at their plant and take their open ended interviews to find out the causes of raw material shortage and the sample size is 5


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2.5 Limitations of the Report 1) Because of the time limitation it is difficult to understand the process of purchase planning (MRP), sales forecasting and Bill of materials (BOM) which is required for finding out some of the root causes while preparing the cause effect diagram 2) Since there are very few hermetically sealed compressor manufacturers, the suppliers of raw materials are also few hence it is difficult to get the information of alternate suppliers and their Cost, Quality etc 3) Since the vendor locations of A class items are far it is difficult to visit all the suppliers and get the primary data. 4) Because of the data confidentiality of logistics cost involved during procurement, Investment in inventory, Expenses of purchase department, number of orders placed it is not possible to calculate EOQs for critical items


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CHAPTER: 3

3.1 ANALYSIS, FINDINGS AND CONCLUSIONS For Karad PlantThe Following graph also shows the % of cumulative items and their % of cumulative usage value for raw materials at Karad plant


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From the above graph it can be concluded that,


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1) By controlling 10% of the items of raw materials it is possible to control 75% of cost these items are called A class items 2) By controlling next 13% of raw materials it is possible to control 15% of cost these raw materials are classified as B class items 3) By controlling 23% of raw materials it is possible to control 90% of cost 4) The remaining 77% of items contribute to 10% of cost and are classified as C class items Also from the ABC analysis of raw materials at Karad plant the matrix of % of cumulative items, their % usage value, Number of items along with their consumption value is as follows No.of Items 98 119 717 934 % 10% 13% 77% 100% Class A B C Value 75% 15% 10%

Total 100%

The above matrix indicates that, By controlling 10% of the raw material items shown in the Annexure I at Karad plant it is possible to control 75% of cost, there are 98 such raw materials which are called A class materials, they need strict control and more attention (usually weekly reviewed) Also by controlling next 13% of items it is possible to control 15% of cost, these materials are called B class materials and there are 119 items of such type these items also need moderate control (Usually monthly reviewed) By controlling remaining 77% items we can control 10% of cost, these items comes under the C class and they need very less attention while controlling the inventory(Usually Quarterly reviewed)


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For Atit PlantThe Following graph also shows the % of cumulative items and their % of cumulative usage value for raw materials at Atit plant

From the above graph it can be concluded that, 1) By controlling 9.54% of the items of raw materials it is possible to control 75% of cost these items are called A class items 2) By controlling next 10% of raw materials it is possible to control 15% of cost these raw materials are classified as B class items 3) By controlling 19.54 % of raw materials it is possible to control 90% of cost


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4) The remaining 80.46 % of items contribute to 10% of cost and are classified as C class items Also from the ABC analysis of raw materials at Atit plant the matrix of % of cumulative items, their % usage value, Number of items along with their consumption value is as followsNo. of Items 57.000 64.000 476.000 597.000 % 9.540% 10.000% 80.460% 100.000% Class A B C Total Value 75.000% 15.000% 10.000% 100.000%

The above matrix indicates that, By controlling 9.54% of the raw material items shown in the Annexure II at Atit plant it is possible to control 75% of cost, there are 57 such raw materials which are called A class materials , they need strict control and more attention (usually weekly reviewed) Also by controlling next 10% of items it is possible to control 15% of cost, these materials are called B class materials and there are 64 items of such type ,these items also need moderate control (Usually monthly reviewed) By controlling remaining 80.46 % of items we can control 10% of cost, these items comes under the C class and they need lose control and less attention while controlling the inventory(Usually Quarterly reviewed) The guidelines for control of A, B and C class items are given in the table shown in the Annexure III

Fish Bone analysis of crankcase suppliersIES Management college & Research Centre, Mumbai Page 49


The Following diagrams are cause effect Diagrams and they shows the Main as well as the sub causes of raw material shortage of crank case and Hosing required for compressor

Other Problems

Demand based planning

Supplier RM shortage & planning of RM purchase

Quality

Electrici ty Proble No kanban System Mainte nance

Low inventory of crankcase

High Procureme nt lead time

Supplier RM shortage

Raw Materia l shorta ge Tulsi Foundry (4000/da y) Ganesh Foundry (1500/da y) Tayson Industrie s (1500/da

Low Inventory of Crankcase

Low safety Stock

No FG Inventor y Low Inventory of RM

Compani es Purchase Planning

Manufactu ring capacity of Suppliers

Inventory at Suppliers end

Fish Bone analysis of Crankcase Shortage

Fish Bone analysis of Housing supplierLow Low IES Management college & Research Centre, Mumbai safety Inventory Supplier RM No Otherof Problems Mainte Demand based of Stock shortage & Supplier kanban Crankcase nance planning Housing planning of RM Quality RM System Low Page Procureme inventory50 nt of Steel lead sheetstime of 3 to 4 weeks


Make to order type of planning Odd size of sheet i.e.2.5

Raw Materi al shorta ge No FG Inventor y Only one week Inventory of RM

Manufacturin g Capacity of 2500 to 3000 maximum Manpow er Planning and layoffs

Companie s Purchase planning

Manufacturi ng Capacity of suppliers

Inventory at Suppliers end

Fishbone Analysis of Housing shortage

CHAPTER: 4IES Management college & Research Centre, Mumbai Page 51


4.1CONCLUSIONS1) From the ABC analysis of raw materials at Karad and Atit plant the A Value materials as shown in the annexure should be very strictly controlled, B Value Materials need moderate Control and C value materials need very less attention and control 2) Weekly control statements of A value materials and Monthly statements of B Value materials should be prepared 3) High Value materials i.e. A Class materials listed in the annexure I & II need Maximum efforts to reduce procurement lead time, Minimization of waste, obsolete and surplus 4) A value materials listed in the annexure I and II need As many sources (Suppliers) as possible for each item and Accurate forecasts in material planning 5) A value materials listed in the annexure I and II need Individual posting and they must be handled by senior officers 6) Very low safety stocks, Maximum follow-up and expediting & rigorous value analysis is needed for A class materials listed in the annexure I & II 7) To overcome shortage of crank case and housing search more number of alternate suppliers for these items

4.2 RECOMMENDATIONS1) Some finish goods inventory of each model should be maintained to avoid stock out situations and customer loss2) Kanban should be used so that there will be smooth flow of materials and no stock

out situations, this will also help to minimize the inventory


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Ite m No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

% of Usag Descripti Consump Price/U Usage e Selective Control Of Inventory And Study Of SCM Item on tion nit Value Karad Plant ABC Analysis Value A06001-03CASTING 940410 4.342 98 CRANK CASE 73527 128 3.3 % A09SAVSYN 999-00- 200KC(HATCOL 868500 4.010 06 3619) OIL 45000 193 0 % A03547-01KCE444 841852 3.887 01 ROTOR 83393 101 3.4 % A09SAVSYN 999-00- EAL22CC(HATC 760043 3.509 07 OL22CC) OIL 25152 302 1.4 % A07048-02LOWER HSG742373 3.427 01-P EXP(W/O OCT) 78194 94.9 8.4 % B03START 014-01- CAPACITOR(40527420 2.435 01-H 60 MFD) RoHS 97310 54.2 2 % B01KCJ LOWER 048-02- HOUSING(3208 510218 2.356 01 7) 32962 155 8 % B01CASTING001-01CRANK CASE 437321 2.019 99 (20164) 20805 210 1 % K01001-01CASTING374707 1.730 99 CRANK CASE 34615 108 3.8 % C05LT85002 040-02POTENTIAL 339276 1.566 01-H RELAY 40472 83.8 7.8 % B06001-01CASTING334359 1.544 99 CRANK CASE 16395 204 6.3 % A06KCE399 UPPER 048-01HOUSING 330257 1.525 01-P (32095) 61012 54.1 9.6 % A08007-01CRANK SHAFT 328199 1.515 73 SEMI FINISHED 58965 55.7 1.9 % K02001-01CASTING270626 1.249 99 CRANK CASE 25058 108 4 % A01547-01KCE336LAA 268768 1.241 01 ROTOR 30808 87.2 9.9 % G02999-00SUNISO 3GS 257000 1.187 01 (REF OIL) 30364 84.6 9 % K02547-01KCN415LAG 253815 1.172 01 ROTOR 23003 110 1 % K01048-01-Management college & Research Centre, Mumbai KCN UPPER 249318 1.151 IES 01-P HOUSING 44426 56.1 7.1 %

Annexure-I

% of Cumulati ve usage Value 4.342% 8.351% 12.238% 15.747% 19.174% 21.609% 23.965% 25.984% 27.714% 29.280% 30.824% 32.348% 33.864% 35.113% 36.354% 37.540% 38.712%

% Cumulati ve Items 0.107% 0.214% 0.321% 0.428% 0.535% 0.642% 0.749% 0.857% 0.964% 1.071% 1.178% 1.285% 1.392% 1.499% 1.606% 1.713% 1.820%

Cla ss A A A A A A A A A A A A A A A A A A

Page 54 39.863% 1.927%

B01014-01-

START CAPACITOR(80-

240002

1.108


All other Remaining are C class materials


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Ite m No 1 2 3

% of Usag e Selective Descriptio OfConsumpt Atit plant Usage Control Inventory And Study Of SCMValu Price/Un Item n ion it Value e

Annexure II

% Cumul ative usage Value 8.08% 16.13 % 20.53 % 24.82 % 28.11 % 30.72 % 33.30 % 35.37 % 37.22 % 38.97 % 40.63 % 42.26 % 43.65 % 45.04 % 46.37 % 47.66 % 48.90 % 50.10 % 51.27 % 52.41 % 53.46 % 54.45 %

% Cumul ative Items 0.17% 0.34% 0.50%

Item Class A A A

J01-04802-03 J01-00101-99 G02001-01-99 G02999-00-01 J01-04801-02 J03-00201-99 J01-00302-01 G02021-02-01 J01-51902-01 J05-04801-02 G02035-06-01 C02-99900-01-L G02004-02-03 G02004-02-04 G02048-01-10 J02-00702-73 Q01025-01-01 J01-00101-73 G02003-02-01

SHELL-LOWER (ALL CK3) BODY - CASTING CR BODY CASTING SUNISO 3GS (REFRIGERATION OIL) SHELL-UPPER (CK20/22/24) CASTING HEADCYLINDER (SAMCO) PLATE VALVE (0826-00) TERMINALFUSED CLUSTER(016300 CK3 MUFF DISCH ASSM SHELL-UPPER (CK27/30/32) BEARING-LOWER (035-0356-00) SHELL CLAVUS 32H (REF OIL) PISTON-UPPER (0252-02) PISTON-LOWER (0252-03) SHELL-UPPER (CR22K6M COMPACT) CRANK SHAFT SEMI FINISHED RING-PISTON (025-0114-01) BODY SEMIFINISH

107754 67924 37590

181.73 287.70 283.45

19582134 .42 19541734 .80 10654885 .50 10401532 .35 7987703. 22 6328938. 72 6263966. 28 5004007. 96 4491644. 96 4252572. 96 4017819. 78 3942642. 00 3375235. 71 3362233. 05 3243183. 85 3110163. 00 3010119. 42 2927303. 50

8.08 % 8.06 % 4.39 % 4.29 % 3.29 % 2.61 % 2.58 % 2.06 % 1.85 % 1.75 % 1.66 % 1.63 % 1.39 % 1.39 % 1.34 % 1.28 % 1.24 % 1.21 %

4 5 6 7

97989 48762 75832 76934

106.15 163.81 83.46 81.42

0.67% 0.84% 1.01% 1.17%

A A A A

8 9 10 11 12 13 14

108148 50776 25924 117963 51700 103313 102915

46.27 88.46 164.04 34.06 76.26 32.67 32.67

1.34% 1.51% 1.68% 1.84% 2.01% 2.18% 2.35%

A A A A A A A

15 16 17 18 19 20 21 22

15187 20300 224301 7975

213.55 153.21 13.42 367.06

2.51% 2.68% 2.85% 3.02% 3.18% 3.35% Page 56 3.52% 3.69%

A A A A A A A A

PLATE-VALVE 2823966. 1.16 (0654-00) 22831 123.69 39 % HEAD-CYLINDER G03CASTING 2771474. 1.14 002-01-99 CR22/30 33848 81.88 24 % IES Management college & Research Centre, Mumbai G03-048CR30K6M(C) 2529815. 1.04 01-10-P SHELL-UPPER 14500 174.47 00 % G03519-02-01 MUFFLER-DISCH ASSM(0154-00) 33353 72.57 2420427. 21 1.00 %


All other remaining are C class items

Annexure III ABC Description Matrix1) Matrix to describe Raw Material status at Karad Plant

No. of Items 98 119 717 934

% 10% 13% 77% 100%

Class A B C Total

Value 75% 15% 10% 100%

2) Matrix to describe Raw Material status at Atit Plant

No. of Items 57 64 476 597

% 9.540% 10.000% 80.460% 100%

Class A B C Total

Value 75% 15% 10% 100%


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Annexure IV Supplier Cause Matrix

Shrajesh Question Who are your major raw material suppliers & their locations What is your manufactur ing capacity per day What is your procureme nt lead time 3-4 weeks 2500-3000 Max Ispat, Bhushan and Essar Engg Works

Ganesh Foundry

Tulsi Foundries

Tayson Industries Quadromatic

Aluminium LocationsSatara,Manalor e,Goa,Gujrat,M umbai,Nagpur Crompton, Basicast Pig iron-Sesa Industries(Goa) ,Omkar(Gujrat) Suppliers,1 from silvasa and 2 from bombay

6000(50% of 4000 per 1500 per day day solid and 1500 50% of split)

Bentonate-4 Days,Sand 3 days Boring-3 Days,Pig iron-3 Days,sand-5 Aapproxima tely 1 weeks inventory days,Pig iron-3 days,Bentonat e-4 Days 10 Days 1 week 2 tons of Raw material inventory 2-3 Days 2-4 days 1 Week

How much inventory do you maintain


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Do you maintain a Finished goods inventory 3 days FG inventory 3 Days Very Little Emerson Who are your customers Emerson, Tata motors Emerson, Tata, Cummins India, Camco ,Spicer, Boasch, Kairfied Emerson, Mahindra 3 Days some odd model FG Inventory Emerson,JCB, Escot,Voltas, Godrej,Actio n Connecting rod,Power Steering,Loc k what are your major products what is Emersons share in your business Do you give treatment according to share No According to How do you plan your Purchases Credit Period of Emerson the plan of Emersons demand Emerson90,Supplier60 No According to the plan of Emersons demand Emerson (50-60), Suppliers 30 days both 30-40 days Yes According to the plan of Emersons demand No According to the plan of Emersons demand No According to the plan of Emersons demand Emerson-45 days,Supplie rs-30 to 45 80 percent .. 10-125 30% 90% Housing,Car burator cover etc Crankcase and other castings Crank case Valves,Flow and pressure relief Valve


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and your RM Supplier (50-60) days


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Questionnaire

1) Who are your various raw material suppliers2) How much is manufacturing lead time for a batch 3) What is the Manufacturing Capacity per day 4) How do they manage finish good stock and raw material during peak and slack period 5) What is your procurement lead time 6) Do you maintain finish good inventory or everything is make to order 7) How much raw material and finish good inventory you hold 8) Who are your raw material suppliers, their locations and lead time of each item 9) Who are your customers and which different products you manufacture 10) What is Emersons share of your business 11) Whether you give treatment according to share


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Bibliography 1) Industrial Engineering and production management, second edition by M.T.Telsang, pagenos 324 to 354 & 455 to 457 2) Quantitative Techniques in management ,second edition by N .D .Vora page nos 386 to 418 3) Paper on ABC analysis by Mukesh Kumar Burnwal4) www.indiamarkets.com/Engineering industry/compressor industry

5) Production and operations management for Manufacturing and services by Richard .B. Chase and Nicholas. J. Aquilano, Eighth Edition Chapter no-15, page numbers 580 to 606


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