inventory mgt project
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Introduction
Meaning of Inventory Management
Inventory can be referred to as sum of the value of raw materials fuels and lubricants,
spare parts, maintenance consumables, semi processed materials and finished goods,
stock at any given point of time in large companies inventory place a most significant
part of the current assets.
The business has about 15 to 30 of inventories in total assets.Inventory is composed
of assets that will be sold in feature in the normal course of business operations. The
assets which firms stores as inventory is anticipation of need are raw materials, work
in progress and finished goods.
Inventory management consists of maintaining for a given financial investment an
ade!uate of something in order to meet and accepted pattern of demand. Inventory
considers control over costs of inventory on one hand an handle the si"e of inventory
on other hand.#ontrolling investments in inventories constitute crucial part in current
assets. $n efficient inventory controlling system will decide,
%hat to purchase
%hen to purchase
&ow to purchase
'i"e of purchase
$nd from where to purchase ('uppliers)
The main purpose of inventory management is to ensure
*e!uired !uantity of availability of raw materials
+inimi"e the investments in inventories
+aintain reasonable stock levels not ecess or not under stocks
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Objective of the Study
The main ob7ective of the pro7ect work is to study and analy"e and preparation
I/2T4* +$$82+2T in Tecumseh India products private td.,
The objectives are
To analy"e performance of inventory management at Tecumseh India productltd.
To study impact of inventory on financial performance.
To evaluate the operational efficiency of Tecumseh India 9roduct ltd.
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Scope of the study
%e have introduced inventory management as an etremely important problem area in
the management of materials which is !uite susceptible to control and a very large
number of scientific models are available in the literature to enable us to choose an
optimal inventory policy. uying the optimal !uantity can result only from a sound
inventory control system which is achieved by 7udicious reconciliation of conflicting
costs and departmental ob7ectives. &owever, inventory is only an indicator of
performance of materials management function and to cut down inventories we use not
only scientific inventory management principles and models but also take long-term
measures to reduce inventories through strategies such as variety reduction and
standardi"ation, source development and vendor rating, lead-time reduction through
improvements in the systems and procedures of procurement. It is obvious that scientific
inventory management has to be practiced selectively rather than indiscriminately to
make it cost-effective. It is also important to have informational inputs like demand
forecast, lead-time estimate and other cost estimates to be realistic to make effective use
of inventory models.
2tend this theory to ensures and ade!uate supply of items to the customers and
avoids the shortages as far as possible at the minimum cost, make use of available
capital in a most effective way and avoids an unnecessary ependiture on high
inventories, etc. also by reducing the unnecessary tying up of capital in ecess
inventories, it improves the li!uidity position of the firm. 9rovides caution between
work centers thereby assures a smooth and efficient running of the organi"ation. 'erve
as a buffer stock in case of delayed deliveries by the suppliers. In other words it ensures
against scarcity of materials in the market. &elps in minimi"ing the loss of due to
deterioration, obsolescence, damages or pilferage of goods etc. helps in maintaining
economy by absorbing some of the fluctuations when the demand for an item fluctuates
or is seasonal. #ontrol minimi"es accumulation and build-up of surplus stock, and
eliminates the dead movable surplus stock as far as practicable.
.
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Research Methodology
To attain the ob7ectives of study of the inventory management of Tecumseh India
9roducts 9rivate td.,
The information has been collected in two ways.
Sources of Data
9rimary data
'econdary data
Primary Data
In 9rimary data the analysis of purchasing procedure, inventory data, inventory turn
over ratio, stock levels, $# analysis, Twobin system, ;IT has made possible by the
discussions with various administrative eecutives and other concerned people of
Tecumseh India 9roducts 9rivate imited.
Secondary Data
The 'econdary data has been collected from annual reports of organi"ation, internet
(www.bkbirlagroup.com) and books.
$verage inventory < 4pening stock = closing stock > 6
Inventory Turn over ratio < #ost of goods 'old > $verage inventory
Inventory #onversion period < 3?5 days > Inventory turnover ratio
Inventory current assets ratio < current assets > Total inventory = 100
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imitations
The study period of :5 days as prescribed by university.
The study is limited unto the date and information provided by Tecumseh
India products private td and its annual reports.
The report will not provide eact udgetary 'ystem status and position in
Tecumseh India products private td@ it may vary from time to time and
situation to situation.
This report is not helpful in investing in Tecumseh either through
disinvestments or capital market.
The accounting procedure and other accounting principles are limited by the
company changes in them may vary the actual and budget performance.
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Revie! of literature
Mc "oney #$%%&) Inventory management is one of the success stories of recent years
and it is changing rapidly in response to international competition and new technology.
This paper eamines some of these developments. Inventory is a ma7or investment in
most companies. It strongly influences the internal fleibility of a company, e.g. by
allowing production levels to change easily and by providing good delivery
performance to customers. et inventory ties up working capital and space and it can
suffer from obsolescence, deterioration and shrinkage. The approach is also very
effective in supermarket retailing and, at its best, provides very high stock turn and high
profits to the company at the same time as providing good service and fresh items to
customers at low cost.
Rosenblatt #$%''(noted that the cost of maintaining inventory is included in the final
price paid by the consumers. $s such, goods in inventory represents a cost to their
owner because, the manufacturer has paid for materials and labor. +orris (1AA5) also
stressed that inventory management in its broadest perspective is to keep the most
economical amount of one kind of asset in order to facilitate an increase in the total
value of all assets of the organi"ation such as human and material resources. Thus, the
overall goal of inventory management is minimi"ation of stock-out.
Robert #$%%)(defined inventory as the aggregate of those items of tangible personal
asset of a firm which areB held for sale in the day to day activities of the business .i.e.
finished goods@ in the process of production for sale i.e. work in progress@ are to be
currently consumed in the production of goods and services. %hile acey (1AA6) says
that, after each issue or receipt of the physical balance of stock is calculated, the total
balances represent stock in hand (closing stock). Inventory in many organi"ation are
held in form of raw material, spare part, work in progress and finish goods.
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Inventory Management
Tecumseh India Products Private imited
Introduction
2very enterprise needs inventory for smooth running of its activities. It server as a link
between the production and distribution process. The greater a time lag, the higher the
re!uirement of inventory the unforeseen fluctuation of inventory demand and supply
of goods, fluctuating inventory prices, necessitate the need for inventory management.
The investment inventory constitutes the most significant part of the current assets
inventory of the under taking. Thus it is very essential to have a proper control and
management of inventory.
Meaning and nature of inventory
The general meaning of inventory is stock of goods or list of goods inventory. In
accounting language it means stock of finished goods. Dor inventory manufacturing
concern it includes raw materials, work in progress, consumables finished goods and
spares etc.
Ra! materials
If forms a ma7or input inventory in organi"ation. The !uantity of raw materials
re!uired will be determined by the rate of consumption.
*or+ in Progress
The work in progress is that stage of stocks, which are in between raw materials
and finished goods.
,onsumables
These are the material, which are needed to smoothen, the process of production.
These do not directly go into production, but act as catalyst.
-inished .oods
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These are the goods, which are ready to sale for the consumers. The stock of
finished goods provides as buffer between production and market.
Spares
'pares also from a part of inventory. The stocking policies differ from industry to
industry.
Inventories cost account for nearly 55 percent of the cost of production, as it is
clear from an analysis of financial statements of large number of private and
public sector organi"ations. 'o, It essential to establish suitable procedures for
proper control of materials from the time of purchase order placed with supplier
until they have been consumed properly and accounted for.
Definition
The term inventory refers to assets, which will be sold in future in the normal
course of business operations. The assets, which the firm stores as inventory in
anticipation of need, are raw materials, work-in-progress>process, and finished
goods.
Inventory often constitute a ma7or element of a total working capital and hence
ft has been correctly observed, F8ood inventory management is good financial
managementG
Inventory control is a system, which ensures the provision of the re!uired
!uantity at the re!uired time with the minimum amount of capital.
Inventories are the second largest asset category for the manufacturing firms
net to plant and e!uipment.
Inventory control includes scheduling, the re!uirements, purchasing, receiving
and inspecting, maintaining stock records and stock control.
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Objective of inventory management
The main ob7ective of inventory management is operational and financial. The
operational ob7ect means availability of materials and spares in sufficient
!uantities for undisturbed flow of production. The financial ob7ective means
investments in inventories should not remain idle and minimum working capital
should be locked in it.
The Other Objectives /re
To ensure continues supply of inventories to the production.
To avoid over stocking and under stocking.
To maintain optimum level of investment in inventories.
To keep material cost under control, to keep low cost of production.
To eliminate duplication in ordering or replacing stocks.
To minimi"e losses through, deterioration, pilferage, wastage and damages.
Hesigning structures for good inventory management.
9erpetual inventory control of materials.
To ensure right !uality of goods at reasonable prices. $nalysis of prices cost
and value.
To facilitate data for short and long term planning and control of inventory.
Need for Inventory ,ontrol
If a cost accounting system is to be effective there must be a proper control of
inventory and supplies form the time orders are placed with suppliers until they have
been effectively utili"ed in production.
+aterials are e!uivalent to cash and they make up an important part of the total cost. It
is essential that materials should be properly safeguarded and correctly accounted.
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9roper control of material can make a substantial contribution to the efficiency of a
business. The success of a business concern largely depends upon efficient
purchasing, storage, consumption and accounting. In a large firm the planning and
routing department is responsible for arranging how and where the work is to be done
and issue instructions. It sets definite time schedules so that necessary materials are
delivered to the proper department in proper time not too long before hand neither lest
it should interfere with other work nor after they are re!uired as this result in idle time.
usiness firm keep inventories for different purposes. 2very firm big or small trading
or manufacturing has to maintain some minimum level of inventories. ased on some
motives the inventories are maintained.
Transaction motives
2very firm has to maintain some level of inventory to meet the day-to-day
re!uirements of sales, production process, customer demand etc. In this finished
goods as well as raw material are kept as inventories for smooth production
process of the firm.
Precautionary motive
$ firm should keep some inventory for unforeseen circumstances also like loss
due to natural calamities in a particular area, strikes, lay outs etc so the firm must
have some finished goods as well as raw-materials to meet circumstances.
Speculative motive
The firm may be made to keep some inventory in order to capitali"e an
opportunity to make profit due to price fluctuations.
Reasons and "enefits of Inventory
The optimal level of maintaining inventory is a sub7ective matter and depends
upon the features of a particular firm,
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Trading firm
In case of a trading firm there may be several reasons for holding inventories
because of sales activities that should not be interrupted. +ore over it is not
always possible to procure the goods whenever there is a sales opportunity as there
is always a time gap re!uired between purchase and sale of goods. Thus trading
concern should have some stock of finished goods in order to undertake sales
activities independent of the procurement schedule.
'imilarly, a firm may have several incentives being offered in terms of !uantity
discounts or lower price etc by the supplier of goods. There is trading concern
inventory helps in a de-inking between sales activity and also to capitali"e a profit
of opportunity due to purchase made at a discount will result in lowering the total
cost resulting in higher profits for the firm.
Manufacturing firm
$ manufacturing firm should have inventory of not only the finished goods, but
also of raw materials and work-in-progress for following reasons.
0ninterrupted production schedule
2very manufacturing firm must have sufficient stock of raw materials in order to
have the regular and uninterrupted production schedule. If there is stock out of raw
materials in order to have the regular and uninterrupted production schedule. If
there is stock out of raw material at any stage of production process then the whole
production may come to a half. This may result in custom dissatisfaction as the
goods cannot be delivered in time more over the fied cost will continue to be
Durther work-in-progress would let the production process run smooth. In most of
manufacturing concerns the work in progress is a natural outcome of the
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production schedule and it also helps in fulfilling when some sales orders,
Independent sales activity
Inventory of finished goods is re!uired not only in trading concern but
manufacturing firms should also have sufficient stock of finished goods. The
production schedule is a time consuming process and in most of the cases goods
cannot be produced 7ust after receiving orders. Therefore, every firm has to
maintain minimum level of finished goods in order to deliver the goods as soon as
the order is received.
1ssentials of Inventory ,ontrol
The important re!uirements of Inventory control areB
The proper co-ordination among the departments involved in buying,
receiving, inspecting, ciorage, consuming and accounting.
#entrali"ation of purchasing under the control of competent buyer whenever
possible.
9roper scheduling of material re!uirements.
9roper classification of materials with codes, material standardi"ation and
simplification.
The operation of a system of internal check to ensure that all transactions
involving materials and e!uipment are checked by properly authori"ed and
independent persons.
The storage of materials is well planned and kept in properly. 9lanned and kept
in properly designated location, sub7ect to ade!uate safeguard and supervision.
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The operation of a system of perpetual inventory so that it is possible to
determine at any time, the amount and value of each kind of material in stock.
$ suitable method of valuation of materials is essential because it affects the
cost of 7obs and the value of closing stock of materials.
Objectives of Inventory ,ontrol
The main ob7ectives of inventory control areB
To maintain a large si"e of inventory for efficient and smooth production and
sales operation.
To maintain a minimum investment in inventories to maimi"e profitability.
To ensure a continuous supply of raw materials to facilitate uninterrupted
production.
To maintain sufficient stocks of raw materials in periods of short supply and
anticipate price change.
+aintain sufficient finished goods inventory for smooth sales operation and
efficient customer service.
+inimi"e the carrying cost and time.
#ontrol investment in inventories and keep it at an optimum level.
/dvantages of Inventory ,ontrol
The following are suggested advantagesB
2liminates wastage in use of material,
It reduces the risk of loss from fraud and theft.
It helps in keeping perpetual inventory and other records to facilitate the
preparation of accurate material reports to management,
To reduces the capital tied up in inventories,
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It reduces cost of storage,
It furnishes !uickly and accurately the value of materials used in various
department.
It prevents delays in production due to lack of materials by supplying, proper
!uantities at the right time
Disadvantages of Inventory ,ontrol
2very firm has to maintain optimal level of inventories. It not the following
will be the result in form of losses.
4pportunity costB 2very firm has to maintain inventory for that some
investment is needed it is know as 4pportunity cost and handle the investment
in inventory are more the funds are blocks up with inventory.
2cessive inventoriesB It will lead to firm losses due to ecessive carrying
costs and the risk of li!uidity. It is also referred as danger level.
Inade!uate InventoryB it is another danger which results is production hold-up
and failure to meet deliver commitments.In ade!uate raw materials and work
-in -process inventors will results in fre!uent production interruptions .It
finished goods are not sufficient customers may shifts to competitors.
,osts involved in inventory
2very firms maintains inventory depending upon re!uirement and other features of
firm for holding such inventory some cost will be incurred there are as followsB
,arrying ,ost
This is the cost incurred in eeping or maintaining an inventory of one unit of raw
materials, work-in -process or finished goods. &ere there are two basic cost involved.
,ost of storage
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to stop and it is epensive because employees will be paid for the time not spend in
producing goods.
The carrying cost and the ordering cost are opposite forces and collectively. They
determine the level of inventors in a firm.
Total cost < (cost of items purchased) J (Total #arrying and ordering cost)
2aluation of Inventory
The methods of valuing inventory are combination of the actual cost and replacement
cost plans. The chief advantage of the cost or net reali"able value rule is that it is
conservative. &ence the methods of /aluation of inventory are !uite independent of
system of mincing.
In balance sheet closing stock is shown under current assets and is also credited to
manufacturing or trading accounts. The inventories are valued on the basis as follows.
Issue Pricing Methods
There are two categoriesB
,ost prices
DID4 (Dirst in Dirst out)
ID4 (last in first out)
'pecific price
ase stock price
&ID4 (highest in first out)
Derived from cost prices
'imple average price
%eighted average price
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9eriodic simple average price
9eriodic weighted average price
+oving simple average price
Notional prices
'tandard price
Inflated price
*e-use price
*eplacement price
-irst in -irst out #-I-O(
This is the price paid for the material first taken into stock from which the material to
be priced could have been drawn.
nder this method stocks of materials may not be used up in chronological order but
for pricing purpose it is assumed that items longest in stock are used up first. The
method is most suitable for use where in material is slow-moving and comparatively
high unit cost.
/dvantages
9rice is based on actual cost and not on basis of approimations such as no
profits or losses arises by reasons of adopting this method.
The resulting stock balance generally represents fair commercial valuation of
stock.
It is based on traditional principles.
Disadvantages
The number of calculations in the stores ledger involved tends to be
complicated with increase in clerical error.
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The cost of consecutive similar 7obs will differ if the price changes suddenly,
In times of rising prices, the charge to production is unduly low as the cost of
replacing the material will be higher.
Material Purchasing and Purchasing Procedure
9urchase of material is one of the important functions of material management. $t
times more than 50 of the total product cost is material.
Dunctions of 9urchase Hepartment
Heciding the items to be purchased based on demand.
'election of sources of supply.
#ollection the price information.
9lacing the ordered.
Dollow-up the ordered.
#hecking the invoices.
+aintenance of purchase records.
+aintenance of vendorGs relations.
Purchase Procedure
9urchasing procedure start with the initiation of purchase re!uisitions and ends
with the receipt of materials in the stores.
,auteri3ed Purchasing
It is most important and relevant to large organi"ations operating deferent plants
may or may not be located at different places. Dor a single place organi"ation
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decentrali"ation might be feasible on a very limited place. ut where as + K +
td., is a multiple plants operating organi"ation.
In +ahindra and +ahindra #entrali"ed purchasing procedure is following to purchase
of materials.
#entrali"ed purchasing avoids duplications of efforts and working at cross
purpose from one plant to another.
#entrali"ed purchasing permits consolidation of order of materials commonly
used for two or more plants. The ultimately results in greater buying power,
favorable contracts and trade agreements.
2asier to maintain the !uality of purchased parts > items through centrali"ed
testing and inspection. It is also possible to conduct testing and inspection
facilities.
#entrali"ed purchasing permits to avail facilities like !uantity discounts and
cash discounts thus its helps to reduce cost.
It is beneficial to vendor also in case the si"e of order constituted ma7or
proportion of his total production capacity
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4istory and Profile of Tecumseh Products ,ompany
Tecumseh 9roducts #ompany started in 1A30 when *ay. %. &errick opened the
&illsdale machine and Tools #ompany of &illsdale, +ichigan a former employee
of Dord +otors #ompany, *ay &errick initially produced parts of automobiles, as
well as electric refrigerator components in small town ?0 miles southwest of
Hetroit, and *ay &errick renamed his company after his town. In 1A3C, the
company went public with an offering of 65000 shares. T2#+'2& means
L#*4#&I8 9$T&2*M derived from the chief of 'hawnee tribe (1C?E-
1E13), it was not in the automobile industry bit in the burgeoning new refrigeration
industry. y 1A3A, Tecumseh turned out 1?0000 compressors a year for
+echanical *efrigerators.
$fter %orld %ar II, Tecumseh resumed manufacturing compressors, epanding its
product base to include compressors for window air conditioners in 1A:C. In 1A50,
the company ac!uired two %isconsin-based small engine manufacturers. awson
engine and power products. The addition of these two companies made Tecumseh
as an important presence in the epanding outdoor power e!uipment industry.
Today, Tecumseh has over 30 principle locations producing compressors, engines
and pumps worldwide@ with facilities in ra"il, #anada, #"ech *epublic, Drance,
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India and the '.
The compressors sell in four ma7or segmentsB
&ouse hold refrigerators and free"ers
*oom air conditioners
#ommercial and residential unitary central air conditioning systems
#ommercial devices including free"ers, dehumidifiers, water coolers and
.
The company sells compressors to original e!uipment manufacturers and cool
products distributors in the nited 'tates, as well as distributors around the globe.
Tecumseh 9roducts #ompany continues to invest money and resources in order to
develop new and improved products.
The head !uarters engineering department plays an important role as the
technology centre of the Tecumseh group of companies and entails various testing
and the facilities for the purpose. The test facilities include #alorimeter, ocked
*otor, $pplication Testing and 2ndurance Testing. Hevelopment>9roduction
samples, sound testing, etc. in the room of development>9roduction samples, they
work on samples of new compressors not yet released for production, such as
scroll and advanced reciprocating design.
Touching the lives of millions for more than '5 years6
Demonstrated performance
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Tecumseh 9roducts #ompany is renowned for bringing an etra dimension of
product innovation, customer reliance, and product !uality to the air conditioning
and refrigeration industry. $s a result of our innovative spirit and product
performance, people rely on our products every day. %e literally touch the lives
of millions.
1arly beginnings
%e developed the first LhermeticM compressor for consumer refrigerators in 1A3C. $s
the name Tecumseh became synonymous with commercial refrigeration and central
home air conditioning, we epanded our product line to include automotive air
conditioning compressors in 1A53. 4ur reputation for innovation was further
enhanced in 1A5A when we developed the first high-speed hermetically-sealed
compressor for commercial applications.
/ -ocused ,ompany
$lthough our product manufacturing focus remains constant, Tecumseh has
substantially invested in research and development engineering laboratories in orth
$merica, 2urope, 'outh $merican and India. %eFve also partnered with *KH
facilities at universities throughout the globe. These facilities are not 7ust responsible
for engineering product solutions, but our university partners also provide ife
'cience *esearch on how our products interface with mankind and the environment.
Tecumseh innovation
Today, we engineer a full-line of hermetically-sealed compressors for residential and
specialty air conditioning, home refrigerators and free"ers, and commercial
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refrigeration. ut our epertise doesnGt stop there@ we also offer a complete line of
indoor and outdoor condensing units, evaporator coils, heat pumps, complete
refrigeration systems and authori"ed spare parts.
.lobal products
4ur products can be !uickly accessed from manufacturing facilities on four continents
when needed on a worldwide basis. %e can provide coordination among our global
facilities and your plant locations anywhere, so product selection, specifications and
delivery of product are assured.
0n!avering commitment
Tecumseh has responded to the challenges of the refrigeration and air conditioning
marketplace for over seven decades, leading the way with improved products and
service in support of the industry we serve. $ company-wide dedication to !uality
control has already earned Tecumseh the highest !uality rating from ma7or
refrigeration and air conditioning manufacturers. $nd the people we employ are
honored to touch so many lives, in so many countries, every day.
4yderabad Plant
The &yderabad plant is located on the sprawling 5: acre land at alanagar Industries
elt 15km away from &yderabad city on highway line going towards &+T limited,
arsapur road. $t the &yderabad plant, they manufacture compressors for air
conditioning from 1600T to ? lakhGs T (ritish thermal unit) and also
compressors for deep free"ers, bottle coolers and water coolers which are considered
to be world no. 1 in 150 million compressor market a year. &yderabad plant has a
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capacity of manufacturing more than 3000 units per day. This plant has a technology
development center with *KH faculty. This plant is also supported by two service
centers $% service center and +# service center. &yderabad plant has si regional
sales offices, out of which four are the metro cities Helhi, +umbai, #hennai and
#alcutta. The remaining two offices are at $hmadabad and 'ecunderabad. esides
there are branch offices and depots located in prime cities across the country. The
&yderabad plants also have a network of about 1CC dealers across the country and
preferred suppliers to key 42+s (4riginal 2!uipment +anufacturers) like /oltas,
$+T*2N, 8, lue-'tar, 8odre7, /ideocon, Dodders loyd, &itachi etc. T9I9
&yderabad plant was successful in getting the I'4 A001 certification for maintaining
high !uality of the compressors in 1AA: for the 2#4 friendly environment
maintenance the company has got I'4 1:001 certification. T9I9 &yderabad has a
total of E63 employees.
In 1AAC T2#+'2& fully ac!uired '*I, &yderabad.
In 1AAE the turnover for the year was *s. 111.6E crores with an operational
profit of *s.1:.1: crores and 9T of *s. 10.50 crores.
#ompany not only meets its target but also increases its market share and company
thinks about amalgamation.
2mployees for the current year areB
9ermanent worker :06
'taff 1E5
4fficers 15?
*'4 :5
Total To-Hated 600? employees areB CEE
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The company has 1000 of control workers. It is divided into adali or 'pecial
adali.
$# #ompressors usinessB
The capacity is 3,00,000(epanding)
The plant is certified company with I'4 A001-6000 version, I'4 1:001
+odels $# applications $%
#ertification, /H2
9roductsB
$ir #onditioning (16,000-6A, 5000 T per>hr)
#ompressors manufactured at &yderabadB
$% series- $%, $%O, $%$, etc.
*otaries (to be introduced in 6003)
The management had started development activities in the following areasB
a) 2ffluent Treatment 9lan
b) Tree 9lantation
c) iological Treatment 9lan
*ain water &arvesting is to increase the group water level and T9I9 has the
distinctions of being the first organi"ation in this regard.
d) /ermin culture is the process of utili"ing canteen food wastage for converting
in this regard.
$ new pro7ect under the name /I&$/ *4T$* 9*4;2#T is under
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construction that is to be completed by the month of ;uly 6005. 4n completion of
this pro7ect, the production starts form ;anuary of 600?, with a production of
10,000 units per day with this pro7ects, the market share of production of
compressors of Tecumseh increases to 15
$$8$*& 9$TB
$t Daridabad, in orthern India, they have a capacity of about one million
compressors. This plant is being relocated to an integrated unit at allabgarh with
an investment of *s. 600 crores (appro). This state of the art plant for
manufacturer of non-#D# compressors will be one of the best compressor
facilities in $sia. It is located on 61 acres of land on the Helhi- +athura ational
&ighway.
+r. '. /ipin 'ondhi, managing director, heads Tecumseh India and employs about
6500 people. Tecumseh India is a 100 subsidiary of Tecumseh product company
'$ wills to continue in its mission of offering the largest compressors to the
discerning Indian customers.
Tecumseh India is the largest merchant manufacturer of compressors in the
country catering to all there segments air conditioners, domestic and commercial
refrigeration and is a leading playing with a growing Indian market for
compressors in all the three segments.
The company was incorporated on ;anuary 30, 1AAC and operational
commenced since 1:th ;uly 1AAC, after takeover of compressor division of
%hirlpool of India imited.
The company ac!uired the compressor business from %4I by taking over the
plant and e!uipment of the compressors division at Daridabad and the entire
facilities of allabgarh ecluding the plastic division of %4I.
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The ac!uisition was funded by e!uity, but since take over, the company
supplies to %4I its re!uirements of the compressor.
The company recorded a turnover of *s. 10 #rores since taken over till 31st
Hecember 1AAC since purchased by %4I did not materiali"ed the turnover has
been less which led to net loss of *s. :.A3 #rores.
The company is in process of implementing a ma7or epansion diversification
programmed at allabgarh to enable the manufacture of compressor once the
pro7ect is implemented by 1AEE the company would be the pioneer in
manufacturing environment.
In 1AEE the company recorded a turnover of AA.AE crores against a turnover of
*s. 6?.16 crores for the period ;uly 1AAC to Hecember 1AAC.
The net loss recorded was *s. ?.EC crores against *s. :.A6 crores during 1AAC.
*efrigeration and #ommercial usinessB
9lant is certified I'4 A001, *-13: a certified plant, and 4wn limitation, and
%ire drawing facilities.
%ith capacity of 1,50,000
+odels +$, TI2
Products
Homestic *efrigeration (330-1600 T per hr) and #ommercial *efrigeration
(C00-3000 T per hr).
,ompressors manufactured at "allabgarh7
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TI2 models
+$ models
+$ #*$ models
TPIP 2ision
%e are not going to simply provide compressors are going to provide the customerGs
satisfaction.
It is our goal to be the global leader in all the markets which we choose to participate
we will pursue disruptive technologies to redefine our products.
TPIP Mission
%e will all leverage our global epertise in mechanical, electrical, flood handling
related components and services to provide comprehensive solutions for our customer
needs compressors, engines, electrical motors, pumps, electronics and controls.
%e will be best in class and the most effective cost producer by utili"ing the
principles of TO+, ? 'I8+$, and 2$.
4ur organi"ation will modify itself in response to change in environment at a
pace and amount of change that can be made without eliminating or impending
our ongoing effectiveness.
Incisive continuous strategic thinking will be will communicated and shared
by the organi"ation.
Incisive continuous planned thinking will be will communicated and shared by
the organi"ation.
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8ey "usiness /ctivates
'et the world industry standard of ecellence for customer satisfaction achieve
total !uality.
To attain and surpass global !uality and reliability standards for our products.
+aintain clear technology leadership.
+arket share leadership with focus on customer needs.
+eet business and financial commitments.
Image
To build up a high degree of customers confidence by sustaining international
markets in regard to supply of spare parts and after sale service. The &*H# policy
of T2#+'2& is manifested in the code of conduct of T9I9 listed belowB
*espect and mutual trust
Integrity and fairness in all matters
Team work
Tipple 9uality Policy
#ommitted to total customer satisfaction by meeting their needs, epectations
and aspirations-stated, implied or latent.
'triving to provide products and services of global standard and to reach a
position of leadership in the field of operations, setting new values.
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#ontinuous improvement across the organi"ation and upgrading of product,
technology and process supportive environment at least cost to society shall be the
means t achieve the goals.
The approach will be through proper systems and procedures and total
involvement of employees endeavor and other business associates.
Tipple 1nvironment Policy
The vision of Tecumseh India is to be '2*22 green and co-friendly co-
operation carrying out all its operations contributing to preservations of
environment and nature resources for the benefit at large.
$mong others this can be achieved throughB
$llocation of count country wide priority for sustainable development with
total involvement and commitment.
2valuation and up gradation of current technologies products and raw
materials for minimi"ation handling and disposal of solid, li!uid and gaseous
wastes.
*eali"ation of tangible ob7ective and target set for continual improvement to
control and prevent pollution and conserve resources.
/ariable earning sharing of value addition.
$greement process organi"ation needs.
on conformance reporting audits
4pen audits> communication meetings
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Team assessment and feed back
#hanging lifestyles
Safety Policy
2ducation and training
#reating a safe working environment
9roviding ade!uate and re!uired personal protective e!uipment
pdating safety rules and procedures
#ontinuous improvement through safety audits and risk assessment audits
The 2mployees and all others share
Dollow safety rules
se all the re!uired personal protective e!uipment
$dopt safe working methods
Take proactive interest in maintaining safety standards.
TPIP:S S121N D1/D; SINS
Inconsistent product !uality
'low response to market pace.
ack of innovative and competitive product.
ncompetitive cost structure.
Inade!uate employee involvement.
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nresponsive customer service.
Ineffective resources allocation.
Strategies and Process at Tipple
%ork place improvement
#reativity club
*$Gs club (improvement> suggestions)
The management has started development activities in the following areasB
2ffluent Treatment 9lan
Tree 9lantation
iological Treatment 9lan
*ain water &arvesting is to increase the group water level and T9I9 has the
distinctions of being the first organi"ation in this regard.
/ermin culture is the process of utili"ing canteen food wastage for converting
in this regard.
P1/S1 ,41,8
Ho you have anything not useful around youP
$re all the re!uired things kept at their allocated placesP
$re you following the operating standardsP
$re you following the timingP
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et us review the 5-'
et us improve if we have any bad practices. et us have a new practice in which
we have more comfortable atmosphere and we manufacture a better !uality
product.
90/IT; IMPRO21M1NT M1/S0R1S
our companyGs at &yderabad and allabgarh plant are I'4 A001 (version 6000)
certification. our company is constantly meeting the !uality re!uirement of
Homestic and International customers.
1N2IRONM1NT/ PROT1,TION < ,ONS1R2/TION O- N/T0R/
R1SO0,R1S
Huring the year, I'4 1:001 first $nnual $ssessment after *ecertification
$udit carried out by the corporate Hirector of 2nvironment control &yderabad
unit has scored A5 points and reveal any non-conformity.
Huring the $nnual #ompliance $ssurance review carried out by the corporate
Hirector of 2nvironment control &yderabad unit had scored A5 points and the
allabgarh unit had scored EA point of 115 for 600:.
The following conservations measures were undertaken by the companyB
sage of He-minerali"ed water in place of +unicipal> ore water in the
process.
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I +2#4 4%' components cleaning e!uipment have been introduced in
24 for effective cleaning of components to minimi"e water and chemicals.
2port oriented unit is completely *-13: compatible plant.
2nergy factory canteen renovation and new kitchen e!uipment installation.
#onstruction of new septic tanks for effective treatment of sewage water.
+e""anine floor fabrication and erection to install Hehydration oven.
98 yard renovation to accommodate 5 ton 98 bullet to cater pretreatment
plant re!uirements.
,ertifications
I'4 A001-6000 /2*'I4B
$s T2#+'2& is I'4 A001-6000 certified company it makes all the employees
aware of the 4'4 norms. The topics covered under this training program areB
ackground to revision of I'4 A001 standards.
#oncepts used in the new standard.
9rocess based !uality management system model.
$lignment with other standard for eample I'4-2+' 1:000, health and safety
4verview of A001B6000
'cope
$pplication normative reference
Terms and definitions
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ey definitions in new standards
#oncept of continual improvements
nder overview of A001-6000 the program also includes information on five
clausesB
Ouality management systemB It includes
8eneral re!uirement
Ouality management
Hocuments re!uirement
#ontrol of document
#ontrol of records
+anagement responsibilityB It includes
+anagement commitment
#ustomer focus
Ouality policy
Ouality ob7ectives
*esponsibility and authority
#ommunication
Hue to eposure to I'4 A001-6000 norms and re!uirement the employees know
how to carry out their work. They know about record maintenance and its
importance. Thus, making all the employees aware of these standards it will be
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easy for the organi"ations to produce !uality products.
,ompetitor /nalysis
In India, T9I9 has four main #ompetitors i.e., irloskar, /oltaGs, lue 'tar and
#arrier $ir #onditioners td. T9I9 is the market leader with overall 50 market
share impressed in terms of value. In this segment of air conditioning compressor,
it has still competition from irloskar #opeland. The other manufacturers i.e.,
#arrier $ir #onditioners td, /oltaGs, lue 'tar are manufacturing compressors
mostly for their indigenous use as they are in their air conditioners markets and
refrigerators market. #arrier $ir #onditioner is looking for diversity of their
compressor division as of their comeback strategy they have been on down
sidelines since 1AAA it has also listed its shares during their period.
Tecumseh refrigerators and air conditioners products have concerns, a large chunk
of the Indian markets as its clients include most of the 42+Gs. Tecumseh has a
:0 of market share of the domestic and 30 of the refrigerator compressor
market. irloskar is 51B:A 7oint ventures between irloskar rother and ' based
#opeland #orporation, a global competitor of T9I, '$. The 7oint venture
company was incorporated on 1Ath+arch 1AA3. The 7oint venture company took
over the compressors manufacturing and sells business of emetic compressor
division at arad and $titl of irloskar rother limited from 1st $pril 1AA3.
irloskar rother limited stated its production of hermetic compressor way back
in 1AA?, at irloskar wadi. It was then with a technical collaboration with T9#
'$, which had no yet entered India.
Introduction
Material ,ontrol
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1. Hefinition of +aterial #ontrol.
6. 4b7ectives of +aterial #ontrol.
3. Hifference between +aterials #ontrol and Inventory #ontrol.
:. +aterial 9urchasing and 9urchasing 9rocedure.
The 9rimary 4b7ective of cost accounting is cost control. This is achieved by eercising
effective control over element of cost of the three elements of costs, i.e., material cost,
wage cost and epenses, direct material cost is the largest single item of ependiture and
substantial proportion of the costs of an organi"ation.
The term materials include physical commodities used to make the final end Q product.
The raw materials and supplies are e!uivalent to cash and they make up and important
part of cost of manufacturing in many cases.
Material ,ontrol
+aterial #ontrol refers to managerial functions which are directed to ensure that
re!uired !uantity and !uality of material is provided at the proper time with the
minimum amount of capital.
+aterial #ontrol is affected by co-ordination and control activities related to
*elated to +aterial 9lanning.
*elated to +aterial 'ourcing.
*elated to +aterial 9urchasing.
*elated to 'tores and +aterial &andling.
Definition of Material ,ontrol
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The Term +aterial #ontrol means LThe regulation of the function of an organi"ation
relating to the procurement, 'torage and usage of materials in such a way as to maintain
an even flow of production without ecessive investment in material stockM
+aterial control involves the control of the three important functions. They areB
1. 9rocurement or 9urchase #ontrol
6. 'torage or 'tock or Inventory #ontrol and
3. Issue or sage or #onsumption #ontrol.
Objectives of Material ,ontrol7
The Twin 4b7ectives of +aterial #ontrolB
$voidance of production delay by maintaining an even flow of production.
9reventing ecessive investment in material stock.
4ther than these two ob7ectives the other ob7ectives are as followsB
1. To effect purchases of materials of the right !uantity consistent with the
standards prescribed in respect of the finished products.
6. To make available assured supply of materials so as to keep the cycle of
production going without any interruption.
3. To procure materials on the most favorable terms with a due to effect maimum
economy in the cost of buying.
:. To ensure effective utili"ation of materials.
5. To prevent over stocking of materials and conse!uent locking Q up of working
capital.
?. To prevent losses during up of storage of materials
Inventory ,ontrol
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Inventory control is the system devised an adopted for controlling investments in
inventory. It involves inventory planning and decision making with regard to the
!uantity and time of purchase, fiation of stock levels, maintenance of stock records and
continuous stock Q taking.
Difference bet!een Materials ,ontrol and Inventory ,ontrol
The terms materials and Inventory are used interchangeably, but they are not identical.
The latter is a wider term covers items like sundry supplies, maintenance stores, tools,
and 7igs and other components, work Q in Q progress and finished goods. The term
material control and inventory control are not interchangeable. +aterial control refers
to managerial function which is directed to ensure that re!uired !uantity and !uality of
material is provided at the proper time with the minimum amount of capital.
+aterial control is wider term than inventory control, besides Inventory control material
control includes control of production and planning, purchase procedure, control of
transportation and usage control etc., where as inventory control referred to as some of
the value of raw materials and fuels and lubricants, spare parts, maintenance
consumables, semi-processed materials and finished goods stock at any given point of
time.
/ctivity Related to Material Planning
Identification of +aterials
Ouantity and Ouality of +aterials
#lassification and #odification of +aterials
2very 2nterprise needs inventory for smooth working activities. Inventory
serves as a link between production and distribution process of any organi"ation.
8enerally a time lag between the recognition of a need and its fulfillment. The greater
the time lags the higher the re!uirement for Inventory. The fluctuations in demand and
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supply of goods also necessitate the need for Inventory. In large companies inventory
plays a most significant part of the current assets. The average business has about 15-
30 of total inventories in total assets. The main purpose of Inventory management is
to ensure availability of materials in sufficient !uantity as and when re!uired and also to
minimi"e investment in inventories
$ systemi"ed Inventory management will determine
1. %hat to purchase
6. %hen to purchase
3. &ow to purchase
:. 'i"e of purchase and
5. Drom where to purchase (/endors)
Material Purchasing and Purchasing Procedure
9urchase of material is one of the important functions of material management. $t times
more than 50 of the total product cost is material.
Dunctions of 9urchase Hepartment
1. Heciding the items to be purchased based on demand.
6. 'election of sources of supply.
3. #ollection the price information.
:. 9lacing the ordered.
5. Dollow-up the ordered.
?. #hecking the invoices.
C. +aintenance of purchase records.
E. +aintenance of vendorsG relation
Purchase Procedure
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9urchasing procedure start with the initiation of purchase re!uisitions and ends with the
receipt of materials in the stores.
,auteri3ed Purchasing
It is most important and relevant to large organi"ations operating deferent plants may or
may not be located at different places. Dor a single place organi"ation decentrali"ation
might be feasible on a very limited place. ut where the company, is a multiple plants
operating organi"ation. In the company #entrali"ed purchasing procedure is following
to purchase of materials. #entrali"ed purchasing avoids duplications of efforts and
working at cross purpose from one plant to another.
#entrali"ed purchasing permits consolidation of order of materials commonly
used for two or more plants. The ultimately results in greater buying power,
favorable contracts and trade agreements.
2asier to maintain the !uality of purchased parts > items through centrali"ed
testing and inspection. It is also possible to conduct testing and inspection
facilities.
#entrali"ed purchasing permits to avail facilities like !uantity discounts and cash
discounts thus its helps to reduce cost.
It is beneficial to vendor also in case the si"e of order constituted ma7or
proportion of his total production capacity.
,lassification of Inventories7
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S6 No Title "asic Main use
1$#($lways etter
#ontrol)
/alue of
conception
To control raw material, components
and %ork Qin 9rogress inventories in
the normal course of business.
6 &+(&igh, +edium, ow)nit price of
the material+ainly to control purchases.
3/2H(/ital, 2ssential,
Hesirable)
#ritically of the
component
To determine the stocking levels of
spare parts
:D'(Dast moving, 'low
moving, on - moving)
#onsumption
pattern of the
component
To control obsolescence
5'H2('carce, difficult, 2asy
to obtain)
9roblems faced
in 9rocurement.
ead time analysis and purchasing
strategies.
?
84D (8overnment
4rdinary, ocal, Doreign
'ources)
'ource of the
material9rocurement strategies.
C'4'('easonal, 4ff-
'easonal)
ature of
suppliers
9rocurement> holding strategies for
seasonal items like agricultural
products.
E NR/alue of items
in storage.
To review the inventories and their
uses at scheduled intervals.
Data /nalysis
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Total Inventory
Table B 1 (*s. In lakhGs)
Inventories=;ear >??)@?% >??%@$? >?$?@$$ >?$$@$>
*aw +aterial A5,56? A?,E00 AE,16: AA,5CA
%ork-in-progress :?,3C? :C,16: :A,613 50,615
Dinished 8oods :6,13: :1,6:5 :1,35? :6,5EA
'tores K 'pares ?6,:61 ?3,615 ?:,5C6 ??,6:5
Total >&AB&5' >&)BC)& >5CB>A5 >5)BA>)
'ourceB company annual reports
.raph7 $
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Interpretation7
4ne can interpret from the above table that, all items were increased during the period
of the study. There was a considerable growth in case of work-in-progress, whereas
finished goods shown meager increment which in turn well for the organi"ation.
Ra! Materials
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*aw material constitutes a ma7or input into the organi"ation. They are re!uired to carry
out production activities under uninterruptedly. The !uantity of raw material re!uired
will be determined by the ratio of consumption and the time re!uired for replenishing
the supplies. The factors like the availability of raw material and government regulation
etc., too affect the stock of raw materials.
Table@> #In akhGs(
ears *aw +aterial
600E-0A A556?
600A-10 A?E00
6010-11 AE16:
6011-16 AA5CA
'ourceB #ompany $nnual *eport
.raph@>
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Interpretation7
*aw materials consumption was at *s.A556? lakhGs during the financial year 600E-0A.
This was increased considerably in the net financial year 600A-10 to *s.A?E00 lakhGs.
Its consumption was further grew in the financial year 6010-11 and reached *s.AE16:
lakhGs. Its consumption was still grew in the year of 6011-16 stood at *s.AE5CA lakhGs.
*or+@In@Progress
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The work-in-progress is that stage of stocks which are in between raw materials and
finished goods. The !uantum of work in progress depends upon the time taken in the
manufacturing process. The greater the time taken in manufacturing, the more will be
the amount of work in progress.
Table@C #In lakhGs)
ears %ork-in-progress
600E-0A :?3C?
600A-10 :C16:
6010-11 :A613
6011-16 50615
'ourceB $ccording to #ompany $nnual *eport
8raphB 3
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Interpretation7
%orking-in-progress was at *s.:?3C? lakhGs in the financial year 600E-0A, which was
increased by in the following year to *s.:C16: lakhGs in the year 600A-10. In the
financial year 60010-11 it was increased and reached *s.:A613 lakhGs. In the financial
year 6011-16, it was increased and reached to *s. 50,615 lakhGs.
-inished .oods
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These are the goods, which are ready for the consumers. The stock of finished goods
provides a buffer production and market, the purpose of marinating inventory is to
ensure proper supply of goods to customers.
Table@& #In akhGs(
ears Dinished goods
600E-0A :613:
600A-10 :16:5
6010-11 :135?
6011-16 :65EA
'ourceB #ompany $nnual *eport
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.raph@&
Interpretation7
Dinished goods were valued at :613: lakhGs in the year 600E-0A. It was decreased in the
net financial year 600E-0A to :16:5 lakhGs. It was shot up more than in the year 6010-
11 to *s :135? lakhGs. It was increased in the net year 6011-16 to *s.:65EA lakhGs.
Stores < Spares
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The stock polices of stores K spares fifer from industry to industry. 'ome industries like
transport will re!uire more stores K spares than the other concerns. The costly stores K
spares parts like engines, maintenance stores K spares etc., are not discarded after use
rather they are kept in ready position for father use. $ll decisions about stores K spares
are based on the financing cost of inventory on such stores K spares and the cots that
may arise due to their non-availability.
Table@5 #In akhGs(
;ears Stores < Spares
600E-0A ?6:61
600A-10 ?3615
6010-11 ?:5C6
6011-16 ??6:5
'ourceB #ompany $nnual *eport
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This ratio indicates the number of times the stock has been tuned over during the period
K evaluated the efficiency with a firm is able to manage its inventory.
#ost of goods sold
Inventory Turnover *atio < ---------------------------
$verage inventory
Table@A #In akhGs(
;ears ,ost of .oods Sold /verage Stoc+
Inventory Turnover
Ratio
600E-0A :C0:06 66300 61.0A
600A-10 :E65?0 1A650 65.0C
6010-11 :50610 63A00 1E.E:
6011-16 5165:6 6:560 60.A0
'ourceB $ccording to company annual reports
.raph@A
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Interpretation7
The inventory>stock turn over ratio measures how !uickly inventory is sold . In the year
of 600E-0A the inventory turnover ratio has been in the ratio of 61.0A, in the net year
the inventory turnover ratio was highly reaches in the year of 600A-10 was at 65.0C and
reamaining two years were almost leaves consistancy incresed and descresed from the
given in the graph.
Inventory ,onversion Period
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It may also be of interest to see average time taken for clearing the stocks. This can be
possible by calculating inventory conversion period. This period is calculated by
dividing the numbers of the days by inventory turn over. This formula may be asB
Hays in a year (3?5 days)
Inventory #onversion 9eriod < ----------------------------------
Inventory turnover ratio
Table '
;ear Inventory Turnover Ratio Inventory conversion period # Days (
600E-0A 61.0A 1C.30
600A-10 65.0C 1:.5?
6010-11 1E.E: 1A.3E
6011-16 60.A0 1C.:?
'ourceB company annual reports
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.raph@'
Interpretation7
Inventory conversion period was at 1C.30 days in the year 600E-0A. It was decreased to
the 1:.5? days in the financial year 600A-6010. $gain it was increased and recorded
1A.3E days in the year 6010-11 but not satisfied to the company. In the year 6011-16,
the ratio was improved 1C.:? days but still higher than the 1:.5? days in the year 600A-10. 4verall it was showing fluctuation during the period of the study.
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Percentage of Inventory Turnover ,urrent /ssets
In order to know the percentage of inventory over current assets the ratio of inventory to
current assets is calculated and which is presented in the following table.
Inventory
Inventory Turnover to #urrent $sset *atio
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.raph@)
Interpretation7
9ercentage of inventory turnover current assets was C3 in the year 600E-0A. It was
dropped to C0 in the following year 600A-10. ut it was still dropped due some
inventory consumed in various segment and other in the year of 6010-11 the ratio was
comes down the track of ?A, over the net year the inventory current assets ratio was
also consistancy down at ?C, but it was not under the manufacturing hearing was at
above the ?0.
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/", /nalysis of year >??)@?%
Table7 % #Rs7la+h:s(
/", /nalysis >??)@?%
Material 9uantity 2alue ,umulative 2alue
$lloy 'teel (+T) 6,E00 :E CA.5? CA.5?
&ard Dacing +aterial
(+T):1 5.63 E.?? EE.66
8uide #astings noFs C630161 :.5 C.:5 A5.?C
Tapping 'crew 10=13 5105:0 0.A 1.:A AC.1?
T ut %idth 3? for +30 60:?00 0.5C 0.A: AE.1
olt DH (+60=50) 1E0,600 0.:A 0.E1 AE.A1
8ate /alve 6A00 0.3E 0.?6 AA.?C
'wing #heck /alve
($$C5)A0 0.0A 0.1: AA.E1
+anifold /alve ($$C3) E30 0.0E 0.13 AA.A:
+iscellaneous 0.0A 0.1: 100
Total ?0.33
'ourceB #ompany annual reports
8raphB A
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Interpretation7
4ne can interpret for the above graph that, in the year 600E-0A 1 K 6 items constitutes
as $- items holds around EE percent of total purchase. et two items categori"ed as -
items holds approimately A percent of total purchased items, where as all other good
categori"ed as #-items makes only around 3 percent of the total purchase cost. &ence,
organi"ation gives a greater importance to inventory management of $-items.
/", /nalysis of year >??%@$?
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Table7 $? #Rs7 la+h:s(
/", /nalysis >??%@$?
Material 9uantity 2alue ,umulative 2alue
$lloy 'teel (+T) 2,720 37 66.63 66.63
&ard Dacing +aterial
(+T) 48 7.23 13.01 79.64
8uide #astings noFs 7241525 5.1 9.18 88.82
Tapping 'crew 10=13 500593 1.8 3.24 92.06
8ate /alve 3000 1.2 2.16 94.22
+anifold /alve ($$C3) 900 0.9 1.62 95.84
T ut %idth 3? for +30 218500 0.9 1.62 97.46
olt DH (+60=50) 182,356 0.2 0.36 97.82
'wing #heck /alve
($$C5) 84 0.1 0.18 98
+iscellaneous 1.1 1.98 100
Total 55.53
'ourceB #ompany annual reports
.raph7 $?
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Interpretation7
In the year 600A-10 the items of 1 K 6 show that $ items which is more than CA.?5
which was given in the graph, but in the same at the net analysis part show that more
than A6.:: and reaming show to # analysis part of this study.
/", /nalysis of year >?$?@$$
Table7 $$ #Rs7 la+h:s(
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Material 9uantity 2alue ,umulative 2alue
$lloy 'teel (+T) 2,920 34 63.78 63.79
&ard Dacing +aterial
(+T) 55 7.1 13.32 77.11
8uide #astings (noFs) 7425312 5 9.38 86.49
8ate /alve 3500 1.5 2.81 89.3
olt DH (+60=50) 198,200 1.1 2.06 91.36
Tapping 'crew 10=13 520125 1 1.87 93.23
'wing #heck /alve
($$C5) 84 0.9 1.68 94.91
+anifold /alve ($$C3) 910 0.8 1.50 96.41
T ut %idth 3? for +30 231546 0.7 1.31 97.72
+iscellaneous 1.2 2.25 100.00
Total 53.3
'ourceB #ompany annual reports
.raph7 $>
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Interpretation7
In the year 6011-16 the items of 1 K 6 show that $ items which is more than CC.11
which was given in the graph, but in the same at the net analysis part show that more
than A0.:3 and reaming show to # analysis part of this study.
-indings
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4n the personnel interaction with the financial department as well as with the primary
and secondary dataGs the following are the conditions and suggestions arrived. They
areB
1. 4ne can interpret from Inventory Turnover *atio that company performance was
high in the year 600A-10. It was fluctuating all over the period. Inventory
maintenance was not properly organi"ed.
6. Inventory #onversion 9eriod indicates that its operating efficiency was not
constantly improved over the period of the study. It was improved initially and
degraded in last half part of the study time frame. 4ver inventory may be route
cause for this condition.
3. *aw material turn over ratio shows that raw material inventory was not properly
organi"ed. 4rgani"ation has been purchasing larger batches of raw material in
order to avail discounts offered by the seller without considering the forecast or
proper estimation of demand.
:. $ccording to the $# $nalysis, the organi"ation must keep an eye on $ Q items
which constitute more than E? percent of the total purchase of material.
5. - Items also make a considerable part of total billing also taken care by the
management.
Suggestions
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1. In order to improve Inventory Turnover ratio, at first an end-to-end view in
addressing inventory needs to be looked at. 'upply chains need to be optimi"ed,
production processes should have to be efficient as well, so that the suppliers
become able to produce and deliver materials in a timely, low cost fashion that
allows the company to minimi"e their inventory and cost of materials.
6. #ollaborative relationships with customers can allow them to make their demand for
products more predictable thereby allowing to minimi"e finished product inventory
without failing to meet their needs for volume and timeliness.
3. Hiscount-driven sales may generate a boost in sales. 'uch discounts can erode the
companyGs profit margins but will boost revenue and rate of inventory turnover.
&owever, before it can be done, the gross margins reported by the business needs to
be analy"ed carefully. If gross margins decrease as a percentage of sales in spite of
an increase in inventory turnover, they should not apply this policy.
:. 2tra care will be necessary in the determination of minimum, maimum, re-order
level and safety stock.
5. The organi"ation need only tight control over top 30 per cent of the inventory items,
i.e. $lloy 'teel, &ard Dacing +aterial and 8uide #astings in order to achieve tight
control over inventories.
?. In case of SItem #G, simple control will be sufficient as they constitute over half
percent of total annual consumption.
"ibliography
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"oo+s7
1 9eter. '. *ose K 'ylvia #. &udgins, Lank +anagement K Dinancial 'ervicesM,
Tata +c 8rew &ill, 6010, Ce, ew Helhi.
6 ;ames '. Trieschmann *obert 2, L*isk +anagement K InsuranceM, 2ngage
earning, 6005, 16e, ew Helhi.
3 +ark. '. Horfman, LIntroduction to *isk +anagement K InsuranceM, L9rentice-
&all India 9./.T, .t.d, 600C, Ee, ew Helhi.
: 8ordon and atara7an, LDinancial 'ervices K +arkets, &9&, 600A, Ce, ew
Helhi.
5 +eir ohn, LDinancial 'ervicesM, Tata +c 8rew &ill, 6010, 5e, ew Helhi.
*ebsites7
1
Name of the *ebsites
www.tecumesh.com
6 www.google.com