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

    56

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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

    5:

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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

    ?0

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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 $?

    ?6

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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

    ?A

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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