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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 e,cess or not under stocks 1

Need for Inventory Management

In this competitive business world each and every business organi"ation need inventory management system for determining what to order, when to order, where and how much to order so that purchasing and storing costs are the lowest possible without affecting production and sales. Thus, inventory management control

incorporates the determination of the optimum si"e of the inventory-how much to be order and when after taking into consideration the minimum inventory cost.The over all inventory management includes design and inventory control organi"ation with proper accountability establishing procedure for inventory handling disposal of scrap, simplification, standardi"ation and codification of inventories, determining the si"e of inventory holdings, maintaining record points and safety stocks, economic order !uantity, $.# analysis and /$012 analysis and finally framing an I3/23T4*5 +$31$0.

Objective of the Study

The main ob7ective of the pro7ect work is to study and analy"e and preparation I3/23T4*5 +$3$82+23T in Tecumseh India products private 0td.,

The objectives are

To analy"e performance of inventory management at Tecumseh India product ltd.

To study impact of inventory on financial performance.

To evaluate the operational efficiency of Tecumseh India 9roduct ltd.

Scope of the study %e have introduced inventory management as an e,tremely 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. 2,tend 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 e,penditure on high inventories, etc. also by reducing the unnecessary tying up of capital in e,cess 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.

Research Methodology To attain the ob7ectives of study of the inventory management of Tecumseh India 9roducts 9rivate 0td., 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 e,ecutives and other concerned people of Tecumseh India 9roducts 9rivate 0imited. 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

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 0td and its annual reports.

The report will not provide e,act .udgetary 'ystem status and position in Tecumseh India products private 0td@ 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.

Revie! of literature Mc "oney #$%%&) Inventory management is one of the success stories of recent years and it is changing rapidly in response to international competition and new technology. This paper e,amines some of these developments. Inventory is a ma7or investment in most companies. It strongly influences the internal fle,ibility of a company, e.g. by allowing production levels to change easily and by providing good delivery performance to customers. 5et inventory ties up working capital and space and it can suffer from obsolescence, deterioration and shrinkage. The approach is also very effective in supermarket retailing and, at its best, provides very high stock turn and high profits to the company at the same time as providing good service and fresh items to customers at low cost. Rosenblatt #$%''( 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 0acey (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. C

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 E

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 ne,t to plant and e!uipment. Inventory control includes scheduling, the re!uirements, purchasing, receiving and inspecting, maintaining stock records and stock control.

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. 10

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, 11

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 fi,ed 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 16

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 ma,imi"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, 1:

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. 2,cessive inventoriesB It will lead to firm losses due to e,cessive 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 Ieeping 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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It includes cost of storing one unit of raw materials by the firm. This cost may be for the storage of materials. 0ike rent of spaces occupied by stock, stock for security, cost of infrastructure, cost of insurance, and cost of pilferage, warehousing costs, handling cost etc. ,ost of financing

This cost includes the cost of funds invested in the inventories .It includes the re!uired rate of return on the investments in inventory in addition to storage cost etc. The #arrying cost include therefore both real cost and opportunity cost associated with the funds invested in the inventories. ,ost of ordering

The cost of ordering includes the cost of ac!uisitions of inventories. It is the cost of preparation and e,ecution of an order including cost of paper work and #ommunicating with the supplier. The total ordering cost is inversely proportion to annual inventory of firm. The ordering cost may have a fi,ed component, which is not affected by the order si"eB and a variable component, which changes with the order si"e. Total 4rdering #ost < (3o. of orders) , (cost per order). ,ost of stoc+ out

It is also called as &idden cost. The stock out is the situation when the firm is not having units of an item in stores but there is a demand for that Item either for the customers or the production department .The stock out refers to "ero level inventory .'o there is a cost of stock out in the sense that the firm face a situation of lost sales or back orders .The stock outs are !uite often e,pensive. 2ven the good will of firm also be effected due to customers dissatisfaction and may lose business in case of finished goods, where as in raw materials or work in process can cause the production process 1?

to stop and it is e,pensive 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) 0ID4 (last in first out) 'pecific price .ase stock price &ID4 (highest in first out) Derived from cost prices 'imple average price %eighted average price 1C

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. 1nder 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 appro,imations 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. 1E

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 1A

decentrali"ation might be feasible on a very limited place. .ut where as + K + 0td., 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#1+'2& means L#*41#&I38 9$3T&2*M derived from the chief of 'hawnee tribe (1C?E1E13), 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, e,panding 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. 0awson engine and power products. The addition of these two companies made Tecumseh as an important presence in the e,panding 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 1'. The compressors sell in four ma7or segmentsB . The company sells compressors to original e!uipment manufacturers and cool products distributors in the 1nited '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, 0ocked *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 &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

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Tecumseh 9roducts #ompany is renowned for bringing an e,tra 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 e,panded 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 3orth $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 0ife '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 63

refrigeration. .ut our e,pertise 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, 3arsapur road. $t the &yderabad plant, they manufacture compressors for air conditioning from 1600.T1 to ? lakhGs .T1 (.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 6:

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, 08, .lue-'tar, 8odre7, /ideocon, Dodders 0loyd, &itachi etc. T9I90 &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. T9I90 &yderabad has a total of E63 employees. In 1AAC T2#1+'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 9.T 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 'taff 4fficers *'4 :06 1E5 15? :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(e,panding) 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 .T1 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 T9I90 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.&$/ *4T$*5 9*4;2#T is under 6?

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 .$00$.8$*& 90$3TB $t Daridabad, in 3orthern 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 3ational &ighway. +r. '. /ipin 'ondhi, managing director, heads Tecumseh India and employs about 6500 people. Tecumseh India is a 100 subsidiary of Tecumseh product company

1'$ 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 0imited. The company ac!uired the compressor business from %4I0 by taking over the

plant and e!uipment of the compressors division at Daridabad and the entire facilities of .allabgarh e,cluding the plastic division of %4I0. 6C

The ac!uisition was funded by e!uity, but since take over, the company

supplies to %4I0 its re!uirements of the compressor. The company recorded a turnover of *s. 10 #rores since taken over till 31 st

Hecember 1AAC since purchased by %4I0 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 e,pansion 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 +0$, TI2

Products Homestic *efrigeration (330-1600 .T1 per hr) and #ommercial *efrigeration (C00-3000 .T1 per hr). ,ompressors manufactured at "allabgarh7 6E

TI2 models +0$ models +0$ #*$ 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 e,pertise 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 02$3. 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. 6A

8ey "usiness /ctivates 'et the world industry standard of e,cellence for customer satisfaction achieve

total !uality. 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#1+'2& is manifested in the code of conduct of T9I90 listed belowB *espect and mutual trust Integrity and fairness in all matters Team work 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.

Tipple 9uality Policy #ommitted to total customer satisfaction by meeting their needs, e,pectations

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.

30

#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*232 green and co-friendly cooperation 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. 3on conformance reporting audits 4pen audits> communication meetings

31

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 1pdating safety rules and procedures #ontinuous improvement through safety audits and risk assessment audits

The 2mployees and all others share Dollow safety rules 1se 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. 0ack of innovative and competitive product. 1ncompetitive cost structure. Inade!uate employee involvement. 36

1nresponsive customer service. Ineffective resources allocation.

Strategies and Process at Tipple %ork place improvement #reativity club I*$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 T9I90 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. P 1/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 33

0et us review the 5-' 0et us improve if we have any bad practices. 0et us have a new practice in which we have more comfortable atmosphere and we manufacture a better !uality product.

90/ IT; IMPRO21M1NT M1/S0R1S 5our companyGs at &yderabad and .allabgarh plant are I'4 A001 (version 6000) certification. 5our company is constantly meeting the !uality re!uirement of Homestic and International customers.

1N2IRONM1NT/ R1SO0,R1S

PROT1,TION < ,ONS1R2/TION O- N/T0R/

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 1sage of He-minerali"ed water in place of +unicipal> .ore water in the process.

3:

I +2#4 .1004%' components cleaning e!uipment have been introduced in 241 for effective cleaning of components to minimi"e water and chemicals. 2,port 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. 098 yard renovation to accommodate 5 ton 098 bullet to cater pretreatment plant re!uirements. ,ertifications I'4 A001-6000 /2*'I43B $s T2#1+'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 e,ample I'4-2+' 1:000, health and safety 4verview of A001B6000 'cope $pplication normative reference Terms and definitions 35

Iey definitions in new standards #oncept of continual improvements

1nder 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 e,posure 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 3?

easy for the organi"ations to produce !uality products. ,ompetitor /nalysis In India, T9I90 has four main #ompetitors i.e., Iirloskar, /oltaGs, .lue 'tar and #arrier $ir #onditioners 0td. T9I90 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 Iirloskar #opeland. The other manufacturers i.e., #arrier $ir #onditioners 0td, /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. Iirloskar is 51B:A 7oint ventures between Iirloskar .rother and 1' based #opeland #orporation, a global competitor of T9I0, 1'$. 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 Iarad and $titl of Iirloskar .rother limited from 1 st $pril 1AA3. Iirloskar .rother limited stated its production of hermetic compressor way back in 1AA?, at Iirloskar wadi. It was then with a technical collaboration with T9# 1'$, which had no yet entered India. Introduction

Material ,ontrol 3C

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 e,ercising effective control over element of cost of the three elements of costs, i.e., material cost, wage cost and e,penses, direct material cost is the largest single item of e,penditure 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

3E

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 e,cessive investment in material stockM +aterial control involves the control of the three important functions. They areB 1. 6. 3. 9rocurement or 9urchase #ontrol 'torage or 'tock or Inventory #ontrol and Issue or 1sage 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 e,cessive 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 ma,imum 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 3A

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, fi,ation 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 :0

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 1530 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

:1

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

:6

S6 No

Title

"asic

Main use

$.#($lways .etter #ontrol)

/alue of conception

To control raw material, components and %ork Qin 9rogress inventories in the normal course of business.

&+0(&igh, +edium, 0ow)

1nit price of the material

+ainly to control purchases.

/2H(/ital, 2ssential, Hesirable)

#ritically of the To determine the stocking levels of component #onsumption pattern of the component 0ead time analysis and purchasing strategies. To control obsolescence spare parts

D'3(Dast moving, 'low moving, on - moving)

'H2('carce, difficult, 2asy 9roblems faced to obtain) 840D (8overnment in 9rocurement.

4rdinary, 0ocal, Doreign 'ources) '4'('easonal, 4ff'easonal)

'ource of the material

9rocurement strategies.

3ature of suppliers

9rocurement> holding strategies for seasonal items like agricultural products. To review the inventories and their uses at scheduled intervals.

N5R

/alue of items in storage.

Data /nalysis

:3

Total Inventory Table B 1 Inventories=;ear >??)@?% >??%@$? >?$?@$$ (*s. In lakhGs) >?$$@$>

*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
'ourceB company annual reports

>&AB&5'

>&)BC)&

>5CB>A5

>5)BA>)

.raph7 $ ::

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

:5

*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 0akhGs(

5ears

*aw +aterial

600E-0A

A556?

600A-10

A?E00

6010-11

AE16:

6011-16
'ourceB #ompany $nnual *eport

AA5CA

.raph@> :?

Interpretation7 *aw materials consumption was at *s.A556? lakhGs during the financial year 600E-0A. This was increased considerably in the ne,t 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

:C

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 5ears %ork-in-progress #In lakhGs)

600E-0A

:?3C?

600A-10

:C16:

6010-11

:A613

6011-16
'ourceB $ccording to #ompany $nnual *eport

50615

8raphB 3 :E

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

:A

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@& 5ears Dinished goods

#In 0akhGs(

600E-0A

:613:

600A-10

:16:5

6010-11

:135?

6011-16
'ourceB #ompany $nnual *eport

:65EA

50

.raph@&

Interpretation7 Dinished goods were valued at :613: lakhGs in the year 600E-0A. It was decreased in the ne,t financial year 600E-0A to :16:5 lakhGs. It was shot up more than in the year 601011 to *s :135? lakhGs. It was increased in the ne,t year 6011-16 to *s.:65EA lakhGs.

Stores < Spares

51

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 ;ears Stores < Spares

#In 0akhGs(

600E-0A

?6:61

600A-10

?3615

6010-11

?:5C6

6011-16
'ourceB #ompany $nnual *eport

??6:5

56

.raph@5

Interpretation7 'tores and spares were valued at *s.?6:61 lakhGs in the financial year 600E-0A. It was increased to *s.?3615 lakhGs in during the year 600A-10. In the financial year 6010-11 is value was 7umped to *s.?:5C6 lakhGs. It was shocking year the stores and spares value to *s.??6:5 lakhGs in during the year 6011-16.

Inventory Turnover Ratio

53

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 0akhGs( Inventory Turnover Ratio

;ears

,ost of .oods Sold

/verage Stoc+

600E-0A 600A-10 6010-11 6011-16

:C0:06 :E65?0 :50610 5165:6

66300 1A650 63A00 6:560

61.0A 65.0C 1E.E: 60.A0

'ourceB $ccording to company annual reports

.raph@A

5:

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 ne,t 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

55

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

5?

.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 600A10. 4verall it was showing fluctuation during the period of the study.

5C

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<--------------------=100 #urrent $ssets Table@) (In 0akhGs)

;ear

Inventory

,urrent /ssets

Ratio

600E-0A

6:?:5C

33??5C

C3

600A-10

6:E3E:

356:5A

C0

6010-11

6536?5

3?516E

?A

6011-16

65E?6E

3E5E1:

?C

'ourceB #ompany $nnual *eport

5E

.raph@)

Interpretation7 9ercentage of inventory turnover current assets was C3 dropped to C0 in the year 600E-0A. It was 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 ne,t 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 .

5A

/", /nalysis of year >??)@?% Table7 % /", /nalysis Material $lloy 'teel (+T) &ard Dacing +aterial (+T) 8uide #astings noFs Tapping 'crew .10=13 T 3ut %idth 3? for +30 .olt DH3 (+60=50) 8ate /alve 'wing #heck /alve ($$C5) +anifold /alve ($$C3) +iscellaneous Total
'ourceB #ompany annual reports

#Rs7la+h:s( >??)@?% 9uantity 6,E00 :1 C630161 5105:0 60:?00 1E0,600 6A00 A0 E30 2alue :E 5.63 :.5 0.A 0.5C 0.:A 0.3E 0.0A 0.0E 0.0A ?0.33 D CA.5? E.?? C.:5 1.:A 0.A: 0.E1 0.?6 0.1: 0.13 0.1: ,umulative 2alue D CA.5? EE.66 A5.?C AC.1? AE.1 AE.A1 AA.?C AA.E1 AA.A: 100

8raphB A ?0

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. 3e,t two items categori"ed as .items holds appro,imately 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 >??%@$?

?1

Table7 $? /", /nalysis Material $lloy 'teel (+T) &ard Dacing +aterial (+T) 8uide #astings noFs Tapping 'crew .10=13 8ate /alve +anifold /alve ($$C3) T 3ut %idth 3? for +30 .olt DH3 (+60=50) 'wing #heck /alve ($$C5) +iscellaneous Total
'ourceB #ompany annual reports

#Rs7 la+h:s( >??%@$? 9uantity


2,720 48 7241525 500593 3000 900 218500 182,356 84

2alue D
37 7.23 5.1 1.8 1.2 0.9 0.9 0.2 0.1 1.1 55.53 66.63 13.01 9.18 3.24 2.16 1.62 1.62 0.36 0.18 1.98

,umulative 2alue D
66.63 79.64 88.82 92.06 94.22 95.84 97.46 97.82 98 100

.raph7 $?

?6

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 ne,t . analysis part show that more than A6.:: and reaming show to # analysis part of this study.

/", /nalysis of year >?$?@$$ Table7 $$ ?3 #Rs7 la+h:s(

/", /nalysis Material $lloy 'teel (+T) &ard Dacing +aterial (+T) 8uide #astings noFs 8ate /alve 'wing #heck /alve ($$C5) Tapping 'crew .10=13 T 3ut %idth 3? for +30 +anifold /alve ($$C3) .olt DH3 (+60=50) +iscellaneous
Total 'ourceB #ompany annual reports

>?$?@$$ 9uantity
2,950

2alue D
32 61.39

,umulative 2alue D

61.4

50

8.12

15.57 76.97

7325612

5.3

10.16 87.13

3200

1.1

2.11 89.24

80

1.91 91.15

510483 220554 890 195,324

0.9 0.9 0.9 0.8 1.1 52.12

1.72 92.87 1.72 1.72 1.53 2.11 94.59 96.31 97.84 100.00

.raph7 $$

?:

Interpretation7 In the year 6010-11 the items of 1 K 6 show that $ items which is more than C?.AE which was given in the graph, but in the same at the ne,t . analysis part show that more than A0.:1 and reaming show to # analysis part of this study.

/", /nalysis of year >?$$@$> Table7 $> #Rs6in la+h:s(

/", /nalysis ?5

>?$$@$>

Material $lloy 'teel (+T) &ard (+T) Dacing +aterial

9uantity

2alue D

,umulative 2alue D

2,920

34

63.78

63.79

55 7425312 3500 198,200

7.1 5 1.5 1.1

13.32 9.38 2.81 2.06

77.11 86.49 89.3 91.36

8uide #astings (noFs) 8ate /alve .olt DH3 (+60=50) Tapping 'crew .10=13 'wing ($$C5) #heck /alve

520125

1.87

93.23

84

0.9

1.68

94.91

+anifold /alve ($$C3) T 3ut %idth 3? for +30 +iscellaneous


Total 'ourceB #ompany annual reports

910 231546

0.8 0.7

1.50 1.31

96.41 97.72

1.2

2.25

100.00

53.3

.raph7 $>

??

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 ne,t . analysis part show that more than A0.:3 and reaming show to # analysis part of this study.

-indings

?C

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

?E

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. :. 2,tra care will be necessary in the determination of minimum, ma,imum, 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, L.ank +anagement K Dinancial 'ervicesM, Tata +c 8rew &ill, 6010, Ce, 3ew Helhi. 6 ;ames '. Trieschmann *obert 2, L*isk +anagement K InsuranceM, 2ngage 0earning, 6005, 16e, 3ew Helhi. 3 +ark. '. Horfman, LIntroduction to *isk +anagement K InsuranceM, L9rentice&all India 9./.T, 0.t.d, 600C, Ee, 3ew Helhi. : 8ordon and 3atara7an, LDinancial 'ervices K +arkets, &9&, 600A, Ce, 3ew Helhi. 5 +eir Iohn, LDinancial 'ervicesM, Tata +c 8rew &ill, 6010, 5e, 3ew Helhi.

*ebsites7 Name of the *ebsites www.tecumesh.com 1 6 www.google.com

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