LOCOSHED, KAZIPET
Submitted to
in
Partial fulfilment for the award of degree of
M. REKHA
10C31E0030
Under the guidance of
MR. RAJ KUMAR
[i]
K. Sharath Babu
Balaji Institute of
Technology & Science
Laknepally, Narsampet,
Warangal 506 331.
CERTIFICATE
This
is
to
certify
that
the
project
report
entitled
[ii]
Balaji Institute of
Technology & Science
B. RAJ KUMAR
MFA, M.Com, MBA, M.Phil., (Ph.D)
Assistant Professor
Department of Management Sciences
Laknepally, Narsampet,
Warangal 506 331.
Tel: 08718-232641, 230556
Fax: 08718-230521
bits_nspt@rediffmail.com
CERTIFICATE
This
is
to
certify
that
the
project
report
entitled
Supervisor
[iii]
DECLARATION
Place: Warangal
Date:
M REKHA
H.T.No 10C31E0030
[iv]
ACKNOWLEDGEMENT
M REKHA
[v]
ABSTRACT
Every enterprise needs inventory for smooth running of its activities. It serves
as a link between production and distribution process. There is generally a time lag
between the recognition of a need and its fulfilment. The greater the time lag, the
higher the requirements for inventory. It also provides a cushion for future price
fluctuations.
This study helps a lot to various departments to take steps to control the
inventory process.
[vi]
TAB L E O F C O N T E N T S
Certificates........................................................................................................i-iii
Student Declaration.................................................................................................iv
Acknowledgement....................................................................................................v
Abstract.....................................................................................................................vi
List of Tables................................................................................................ ix
List of Figures..............................................................................................x
1.0 Introduction........................................................................................................1-6
1.1. Inventory...............................................................................................2
1.2. Need and Importance of the Study............................................................... 3
1.3. Objectives of the Study................................................................................. 3
1.4. Scope.....................................................................................4
1.5. Research Methodology and Database.......................................................... 5
1.6. Limitations of the Study............................................................................... 6
1.7. Chapterisation............................................................................................... 6
2.0 Organisational Profile.................................................................................... 7-29
2.1. Indian Railways at a Glance......................................................................... 8
2.2. South Central Railways................................................................................ 9
2.3. Profile of Electric Loco Shed Kazipet.......................................................... 11
2.4. Development of Railways in India............................................................... 14
2.5. Train Management System........................................................................... 18
2.6. Classification of Locomotives...................................................................... 20
[vii]
[viii]
L I S T O F TAB L E S
TAB L E
PAG E N O
1. Table 1
14
2. Table 2
14
3. Table 3
19
4. Table 4
25
5. Table 5
46
6. Table 6
51
7. Table 7
51
8. Table 8
53
9. Table 9
54
10. Table 10
60
[ix]
LIST OF FIGURES
FIGURE
PAG E N O
1. Figure 1
12
2. Figure 2
12
3. Figure 3
13
4. Figure 4
59
5. Figure 5
64
[x]
[xi]
CHAPTER - I
INTRODUCTION
[1]
1.0 INTRODUCTION
1.1 INVENTORY
Inventory constitutes the most significant part of current assets of large
majority of companies in India. On an average, inventories are approximately 60% of
current assets in public limited companies in India. Inventory serves as a link between
production and distribution process. As firms maintain large size inventories, a
considerable amount of funds is required to be committed to them. A firm neglecting
the management of inventories will be jeopardizing it in long run profitability and
may fail ultimately. In environments where an organization suffers from poor cash
flow or lacks strong control over electronic information transfer among all
departments and all significant suppliers, lead times, and quality of materials received,
inventory plays important roles.
Inventory management has important financial implications. Inventory
financing can be either a line of credit or short-term loan made to a company so it can
purchase the inputs to make the product, or purchase the product itself for resale. The
financial manager has the responsibility to ensure that inventories are properly
monitored and controlled. He has to emphasize the financial point of view and
initiate programmers with the participation and involvement of others for effective
management of inventories. It is possible for companies to reduce their inventories to
a considerable degree by using simple inventory planning and technique which carries
a favourable impact on companys profitability.
Inventory therefore, is categorized into 3 categories:
1. Raw materials
2. Work-in-progress
3. Finished goods
[2]
[3]
To find out the continuous supply of raw materials which facilitate for
uninterrupted production.
To learn the effectiveness of inventory management in the overall financial
management of Electric Loco Shed, Kazipet.
1.3 SCOPE:
There are two fundamental questions that must be answered in order to
manage the inventory of any physical item when to order and how much to order.
When to order is determined by average and variation in demand and replenishment.
How much to order is determined by the order quantity. Inventory control is the
process of monitoring inventory status. Although the concept is simple, the process of
getting the right balance can be quite a complex and time consuming task without the
right technology.
In the present study an attempt has been made to learn the actual
implementation of Inventory management techniques in general and other aspects
such as the scope of inventory management and the effectiveness of inventory
management in particular.
Financial management projections are valid on cutting down production costs.
When inventory is seriously tracked down, the company will have a lot of scope for
development and they can prepare themselves for higher responsibilities.
A thorough analysis of the inventory will help the management to know the
short comings, if any. It also helps the company to learn whether the financial position
and capacity.
[4]
Primary data is collected from the original source of information. The primary
data will be collected through personal interviews with various stores
managers, office records in Electric Loco shed.
Data related to the organization history is collected from the historical record
of organizations and Indian railway website.
Information related to the inventory management, its terms, its techniques and
methods is collected from reference books, articles and Google search.
[5]
Introduction
2. Chapter 2:
Organisation Profile
3. Chapter 3:
4. Chapter 4:
5. Chapter 5:
Summary
[6]
CHAPTER-II
ORGANISATIONAL PROFILE
[7]
[8]
[9]
[10]
million tons & stupendous improvement in earnings from Rs.58.00 crores to Rs.21,
380 crores.
Pioneered the concept of 24 coach express trains with a view to meet the
increase in demands of passenger traffic.
First lift provided to the foot over bridge (FOB) is at Tirupathi and it is
successfully working to the passengers.
INTRODUCTION:
Electrical Loco Shed, ELS KZJ is homing the working horse(WAG-7) of
[11]
MEMU rakes in the shed during night time. Apart from this Shed staffs are attending
online break downs in the section KI-BPQ, KZJ-BN.
1.1.4
ORGANIZATION STRUCTURE
1) GAZZETTED ORGANISATION:
Figure 1
2) ORGANIZATION STRUCTURE:
Figure 2
[12]
management is more effective and is learnt that the industrial relation are excellent
having no strike calls.
1.1.5
AIM
Trouble free maintains of loco, which can achieve zero failure with optimum
of expenditure and utilization of man power. This clearly indicates job satisfaction and
place satisfaction for employees.
1.1.6
IMPORTANT EVENTS:
1.1.7
[13]
Table 1
Date
Loco
Holding
1.1.8
82
87
10.12.08
23.12.09
15.11.10
09.08.11
18.07.12
109
111
111
113
113
99
S. No.
Type of Schedule
Periodicity
IA
60 days
4 hours
IB
120 days
4 hours
IC-1
180 days
12 hours
IC-2
360 days
16 hours
AOH
18 months
07 days
IOH
54 months
10 days
MEMU attentions
Daily
8 hours
Daily
[14]
not endeavoured consolidated efforts to render quality service to the passengers. Later
it was centralised and undertook by central government.
1.1.9
IN THE WEST:
On 16th April, 1853 the first railway on Indian sub-continent ran over a stretch of 21
miles from Bombay to Thane. The idea of a railway to connect Bombay with Thane,
Kalyan and with the Thal and Bhore Ghats incline first occurred to Mr. George Clark,
the Chief Engineer of the Bombay Government, during a visit to Bhandup in
1843.The first Indian train steamed off from Bombay (Bori Bunder) to Thane on 16th.
April 1853, at 3:30 P.M. "amidst the loud applause of a vast multitude and to the
salute of 21 guns." The train consisting of 14 carriages was hauled by three
locomotives named Sultan, Sindh and Sahib with 400 VVIPs. The formal
inauguration ceremony was performed on 16th April 1853, when 14 railway carriages
carrying about 400 guests left Bori Bunder at 3.35 PM.
1.1.10 IN THE EAST:
The Survey from Calcutta to Delhi was carried out by Mr. Stephenson during
1845-46. The construction of railway line from Howrah to Raniganj was sanctioned
only after 3 years. But by the end of 1853 61 kms of line was ready up to Pandooah.
Two historical incidents denied EIR, the first position in history of railways in India...
The Locomotive Engine and the carriages for both the trains of Bombay and Howrah
were despatched from England almost at the same time, but the ship carrying the loco
for E.I.R. (HMS Goodwin) was misdirected to Australia and the other carrying the
carriages for Howrah sank at Sandheads. Otherwise Howrah would have had the
legacy of running the first train in India. The Locomotive Engine and the carriages for
both the trains of Bombay and Howrah were despatched from England almost at the
[15]
same time, but the ship carrying the loco for E.I.R. (HMS Goodwin) was misdirected
to Australia and carriages for Howrah sank at Sandheads. The other problem faced
was that the line was aligned through Chandernagore (Chandannagar) which was a
French territory at that time. The settlement of this dispute with French rulers of
Chandernagore also took considerable time. The Locomotive reached Calcutta via
Australia and a trial run was made on 28th. June 1854. The coaches for the first train
were however manufactured by two Calcutta based companies Steward & Company
and Seton & Company. Otherwise Howrah would have had the legacy of running the
first train in India.
The first passenger train steamed out of Howrah station destined for Hooghly,
a distance of 24 miles, on 15th August, 1854. Thus the first section of the East Indian
Railway was opened to public traffic, inaugurating the beginning of railway transport
on the Eastern side of the sub-continent.
From 15th August 1854, the company ran regular services, morning and
evening, between Howrah and Hugli with stops at Bally, Srerampore and
Chandannagar. The fare ranged from Rs.3 by first class to 7 annas by third class. The
main booking office was on the Calcutta bank, at the Armenian Ghat, and the fare
covered the ferry to the station. At the Howrah end, the station consisted of a tin shed
and a single line flanked by narrow platforms, somewhat to the south of the present
station building constructed between 1901 and 1906.
1.1.11 IN THE SOUTH:
In the South the first line was opened on 1st July, 1856 by the Madras Railway
Company. It ran between Veyasarpandy and Walajah Road (Arcot), a distance of 63
[16]
miles. The first line was opened on 1st July, 1856 by the Madras Railway Company. It
ran between Veyasarpandy and Walajah Road (Arcot), a distance of 63 miles.
1.1.12 IN THE NORTH:
In the North a length of 119 miles of line was laid from Allahabad to Kanpur
on 3rd March 1859. The first section from Hathras Road to Mathura Cantonment was
opened to traffic on 19th October, 1875.
1.1.13 THE FIRST LOCOMOTIVE BUILT IN INDIA:
The F-734 built in 1895 by the Ajmer workshop of the Rajputana Malwa
Railway. Earlier some locomotives were assembled using spares supplied with fully
assembled locomotives which were imported. This locomotive with outside
connecting and side rods was used on Rajputana Malwa & Bombay Baroda & Central
India Railway systems.
These were the small beginnings which is due course developed into a
network of railway lines all over the country. By 1880 the Indian Railway system had
a route mileage of about 9000 miles.
The railway construction in India took an abrupt boom and a large number of
companies started working. These companies had only one thing in their mind. To
earn enough money. They had no co-ordination in their working and time tables. The
British government was seriously thinking about this. Sir Thomas Robertson who was
appointed by His Majesty as Special Commissioner to report on future management
of railways submitted his report in 1903. As a result of his efforts the Railway Board
assumed office in 1905. Railway mileage now at about 24,750 miles in India, of
which 14,000 miles are BG, and most of the rest MG (with only a few hundred miles
of 2' and 2'6" gauge lines). Regrouping was first conceived in 1904, but materialised
after World War.
[17]
[18]
alphanumeric characters, e.g., 'AR') is assigned (and entered manually into the TMS
system) when the rake leaves the car shed, and also noted at the end of the day when
the rake is stabled. Each EMU also gets a 1 to 4 digit trip number (e.g., '173') for each
trip it makes while it is in service during the day. The trip number directly
corresponds to each run of the EMU in the timetable. As the train passes various
signals and other locations with TMS transponders, the rake unit number is picked up
from the transmitting antenna on the driving cab; this is correlated with the train
number and then the trip number by the TMS computers and the appropriate status
updates are made for the train's position and movement at the TMS units used by
station staff or section / traction controllers, and also for updating the PA systems at
various passenger stations.
1.1.16 TOTAL TRACK LENGTH/GAUGE-WISE ROUTE KMS :
Table 3
Year
Electrified
Total
Electrified
Total
Electrified
Total
1950-51
388
53,596
937
59,315
1,253
77,609
1960-61
748
56,247
1,752
63,602
2,259
83,706
1970-71
3,706
59,790
7,447
71,669
9,586
98,546
1980-81
5,345
61,240
10,474
75,860
13,448
104,480
1990-91
9,968
62,367
18,954
78,607
23,305
108,858
1998-99
13,765
62,809
25,773
81,512
34,110
108,413
1999-00
14,261
62,759
26,809
81,252
35,120
107,969
2000-01
14,856
63,028
27,937
81,865
36,950
108,706
2001-02
15,994
63,140
29,567
82,354
39,030
109,227
2002-03
16,272
63,122
29,974
82,492
39,358
109,221
[19]
At each station, based on the train schedules, a platform and siding occupancy
chart is drawn up. This provides, for each day of the week, an indication of which
platforms and sidings are occupied by which trains at what times. Introducing a new
train at a station (originating, or passing through) involves finding an appropriate slot
in this chart.
The overall scheduling, traffic planning, and operational aspects of a division
are under the control of the Chief Operations Manager of a division who is ultimately
responsible for the performance of the division in terms of punctuality, efficiency, etc.
2.6 CLASSIFICATION OF LOCOMOTIVES:
Locos, except for older steam ones, have classification codes that identify
them. This code is of the form '[gauge][power][load][series][subtype][suffix]'
In this the first item, '[gauge]', is a single letter identifying the gauge the loco runs on:
W = Broad Gauge
Y = Meter Gauge
Z = Narrow Gauge (2' 6")
N = Narrow Gauge (2')
The second item, '[power]', is one or two letters identifying the power source:
D = Diesel
C = DC traction
A = AC traction
CA = Dual-power AC/DC traction
B = Battery electric(rare)
[20]
The third item, '[load]', is a single letter identifying the kind of load the loco is
normally used for:
M = Mixed Traffic
P = Passenger
G = Goods
S = Shunting
L = Light Duty (Light Passenger?) (no longer in use)
U = Multiple Unit (EMU / DEMU)
R = Railcar (see below)
[21]
[22]
sections because it was realized that the heavy traffic to and from Bombay would be
suitable for electric haulage.
India took the plunge from DC to AC electric traction in the mid-1950s, as
mentioned above. Since French developments led the field, the AC locomotives
supplied at first (from SNCF) followed that country's practice, whether built in India
or France. These were the eight-wheeled WAM-1 locomotives that are still in
operation in some places.
The first train to be hauled by an electric locomotive from Delhi Jn. was the
Assam Mail.
Bombay-Delhi (WR) route was fully electrified by Dec. 1987. The CR route
was fully electrified by June 1990, when the Bhusaval - Itarsi section was electrified.
The 2 * 25kV AC system (see below) began to be put in place in the 1990s; the first
regular service using this system was between Bina and Katni (CR) on January 16,
1995. This was later extended to Bishrampur.
[12/04] With the BG conversion between Tambaram and Madras Beach complete, the
only electrified MG line on IR is the Tambaram - Villupuram stretch. However, no
train uses electric traction (the YAM 1 locomotives used to service this section have
been dismantled). Madras Beach - Tambaram was originally on 1.5kV DC
electrification but was converted around 1968 to the 25kV AC system.
After a period of about 25 years of aggressive electrification, now [12/04] IR
has most of the busy routes of its network electrified (although not all), and this has
resulted in about 65% of the traffic being hauled by electric traction. Recently [12/04],
therefore, IR has decided to slow down the pace of electrification -- about 2600km of
routes are scheduled to be electrified in the next 10 years, compared to 5100km in the
past 10 years. The focus will be on consolidating electric traction for the busiest
[23]
sections; some of the sections that will be converted to electric traction in the next few
years are Pune-Guntakal, Bina-Kota, and many 'B' sections of NR.
2.9 RAILWAY ZONES:
1.1.19 THE NINE OLDER RAILWAY ZONES ARE:
Northern Railway (NR)
North Eastern Railway (NER)
Northeast Frontier Railway (NFR, sometimes NEFR)
Western Railway (WR)
Southern Railway (SR)
South Central Railway (SCR)
South Eastern Railway (SER)
Eastern Railway (ER)
Central Railway (CR)
1.1.20 THE SEVEN NEW ZONES ARE:
South Western Railway (SWR)
North Western Railway (NWR)
West Central Railway (WCR)
North Central Railway (NCR)
South East Central Railway (SECR)
East Coast Railway (ECoR)
East Central Railway (ECR)
1.1.21 DEEMED ZONES:
[24]
Total Kms.
BG Kms.
MG Kms.
NG Kms.
Northern
11040
8920
2020
100
Western
10295
4600, 150
BG/NG
4455
890
South Central
7217
5955
1215
47
South Eastern
7420
6135
1280
40?
Southern
7040
4630
2125, 155
BG/MG
130
Central
7265
6240
1025
North Eastern
5143
2300
2820
23
Eastern
4320
4185
135
North East
Frontier
3820
1370
2230, 131
BG/MG
80, 8 MG/NG
2.10
RAILWAY GUAGES:
[25]
[26]
project started). The last MG line to be built in India was probably the Himmatnagar Udaipur line.
1.1.25 NARROW GAUGE - 2'6" (762MM)
This gauge was adopted in various parts of the British Empire. There were
(still are) considerable networks of these, for example in Gujarat around Vadodara
(mostly from the old Baroda State Railway) and in MP (centred around Gondia on the
S.E.R.). (Gondia-Jabalpur Satpura NG railway lines were closed in 2003 and
converted to BG.) The most well-known line is probably the KalkaShimla route. The
rationale for the narrower gauges was economy in building the lines they could be
laid much faster than broad gauge lines and in more difficult terrain. It was envisioned
that narrow gauge lines would act as feeder lines to the broad gauge and meter gauge
lines, but many became important railway routes in their own right.
[27]
This has been used in a few places in India. The Calcutta tram lines are
probably the most well-known and probably the only surviving example. Heavy rail
in this gauge was used during the construction of the Madras Harbour (3 standard
gauge locos were procured by the Madras Port Trust). Standard gauge was also used
for the original construction of the Bombay Docks (but this system, put in place in
1909, lasted only until 1954). Standard gauge was insisted upon by the contractors for
the Bombay Docks project (Messrs. Price, Willis, and Co.), for the transportation of
material from Elephanta Island and to the new dock works and basin dam. Eight
standard gauge locos were procured for this, four used in Bombay City and four on
Elephanta Island. Wagons included old North London Railway wagons
2.11
RAILWAY MUSEUMS:
[28]
[29]
CHAPTER III
THEORETICAL FRAMEWORK
OF
INVENTORY MANAGEMENT
[30]
[31]
[32]
To make sure that the materials are available for use in production and
produce services, as and when required.
To ascertain that finished goods are available for delivery to customers to fulfil
orders.
To maintain a large sized inventory for efficient and smooth production and
sales operation.
To place an order at the right time with the right quality at the right price with
right quality.
[33]
operating costs and provide better understanding. We are your source for inventory
management information, inventory management software and tools.
A complete Inventory Management Control system contains the following
components:
[34]
[35]
[36]
Finished product:
This is product ready for current customer sales. It can also be used to buffer
[37]
manufacturing company can make up a supply of toys during the year for predictably
higher sales during the holiday season. It includes completed products waiting to be
sold, e.g., bar stools, bread, cookies.
iii.
Work-in-process (WIP):
Items are considered to be WIP during the time raw material is being
converted into partial product, subassemblies, and finished product. WIP should be
kept to a minimum. WIP occurs from such things as work delays, long movement
times between operations, and queuing bottlenecks.
b. Functional Categories:
i.
Consumables:
Light bulbs, hand towels, computer and photocopying paper, brochures, tape,
envelopes, cleaning materials, lubricants, fertilizer, paint, dunnage, and so on are used
in many operations. These are treated like raw materials.
ii.
machine or device of some type is being used (in the market) and will need service
and repair in the future, it will never be obsolete. S&R Items should not be treated like
finished goods for purposes of forecasting the quantity level of your normal stock.
Quantity levels of S&R Items will be based on considerations such as preventive
maintenance schedules, predicted failure rates, and dates of various items of
equipment. For example, if an organization replaced its fluorescent tubes on an as
needed, on-failure basis, it would need a larger supply of these lights on hand at all
times. However, if the same company relamped all of its ballasts once per year, it
would buy a large quantity of tubes at one time and only keep a small supply on hand
[38]
on an ongoing basis. Since S&R Items are never obsolete or dead until the
equipment or device they are to be used for is no longer in service, these items should
not be included in calculating dead stock levels.
iii.
Buffer/safety inventory:
This type of inventory can serve various purposes, such as: compensating
for demand and supply uncertainties. holding it to decouple and separate different
parts of your operation so that they can function independently from one another.
iv.
Anticipation Stock:
This is inventory produced in anticipation of an upcoming season such as
Transit Inventory:
This is inventory en route from one place to another. It could be argued that
product moving within a facility is transit inventory; however, the common meaning
of the concept concerns items moving within the distribution channel toward you and
also outside of your facility or en route from your facility to the customer.
3.9 VALUATION OF INVENTORY
Most inventories fit into raw materials, work-in-process and finished goods,
yet the amount of each category varies greatly depending on the specifics of industry
and business. The types of inventory found in distribution environments are
fundamentally different from those found in manufacturing environments.
Distribution businesses tend to carry mostly finished goods for resale while
[39]
manufacturing companies tend to have less finished goods and more raw materials
and work in progress. Given these differences, it is natural that the accounting choices
vary between distribution and manufacturing settings.
In order to assign a cost value to inventory, you must make some assumptions
about the inventory on hand. Under the general income tax laws, a company can only
make these assumptions once per fiscal year. Tax treatment is often an organizations
chief concern regarding inventory valuation.
Generally there are number of methods accepted to determining the cost of
inventories at close of the accounting period. The selection of a suitable method
assumes significance in view of the fact that it has a direct bearing on the cost of
goods sold and consequently on profit.
There are five common inventory valuation methods:
1. First-in, First-out (FIFO)
This method of inventory valuation assumes that the first goods purchased are
the first to be used or sold regardless of the actual timing of their use or sale. This
method is most closely tied to actual physical flow of goods in inventory.
2. Last-in, First-out (LIFO)
This method of inventory valuation assumes that the most recently
purchased/acquired goods are the first to be used or sold regardless of the actual
timing of their use or sale. Since items you have just bought often cost more than
those purchased in the past, this method best matches current costs with current
revenues. The cost of goods sold and the value of closing inventory can be determined
only after the final lot of the year has been received. This is because of the assumption
[40]
underlying the valuation of inventory. As the name LIFO suggests, the use of
inventory is valued on the basis of the inverse sequence of receipts.
3. Average Cost Method
This method of inventory valuation identifies the value of inventory and cost
of goods sold by calculating an average unit cost for all goods available for sale
during a given period of time. This valuation method assumes that ending inventory
consists of all goods available for sale. Each purchase is added to inventory and an
average cost determined. Materials are charged into cost of sales at this average until
another lot is received, when anew average unit inventory cost is calculated.
Average Cost = Total Cost of Goods Total Quantity of Goods
Available for Sale Available for Sale
4. Specific Cost Method (also Actual Cost Method)
This method of inventory valuation assumes that the organization can track the
actual cost of an item into, through, and out of the facility. That ability allows you to
charge the actual cost of a given item to production or sales. Specific costing is
generally used only by companies with sophisticated computer systems or reserved
for high-value items such as artwork or custom-made items. The materials used are
priced at their actual cost which involves identification of each lot purchased. It is the
simplest but also the most time-consuming method of determining cost of material
used is computed by multiplying the quantity used by the specific price each material.
5. Standard Cost Method
This method of inventory valuation is often used by manufacturing companies
to give all of their departments a uniform value for an item throughout a given year.
This method is a best guess approach based on known costs and expenses such as
[41]
historical costs and any anticipated changes coming up in the foreseeable future. It is
not used to calculate actual net profit or for income tax purposes. Rather, it is a
working tool more than a formal accounting approach. It is based on a standard price
for a specified period. A standard price is fixed for each class of materials in advance
after proper investigation. The different between actual price and standard price is
transferred to purchase price variance which reveals to what extent actual costs are
different from standard material cost.
[42]
Reorder Point
ABC Analysis
Safety Stock
[43]
The former cost may be referred as the cost of acquiring will the later as the cost
of holding Inventory.
FORMULA:
ASSUMPTIONS:
The EOQ model is a technique to determine the economic order quantity,
illustrated by us, is based on three respective assumptions, namely
1.
The firm knows with certainty the annual usage of a particular item inventory.
2.
The rate wish the firm uses inventory is steady over time.
3.
The orders placed to replenish inventory stocks are received at exactly the
point in time when inventories reach Zero.
APPROACHES OF EOQ:
The EOQ model can be illustrated
[44]
purchase its inventory. For instance it can by its entire requirements in one single lot
at the beginning of the inventory planning period.
The Reorder point is stated in terms of the level of inventory at which on order
should be placed for replenishing the current stock of inventory. In other words,
reorder point may be defined as that level of inventory when a fresh order should be
placed with the suppliers for procuring additional inventory to the economic order
quantity.
[45]
The reorder point = lead time in days X Average daily usage of inventory.
Here lead time refers to the time normally taken in receiving the delivery of
inventory after placing orders with the suppliers.
The technique is based on the assumption that a firm should not exercise the
same degree of control on all items of inventory. It should rather keep more rigorous
control on items that are,
1. Most costly and
2. Slowest-turning
1.1.32 ABC ANALYSIS
An ABC analysis is ranking mechanism whereby our attention can be focused on
study of product inventory levels. It is also means Always Better Control, inventory
control should be preceded by a value analysis. A very effective as well as economical
inventory level should be based on ABC analysis.
In a process industry, number of moving spares will be very less compared to
in terms, which are not being consumed. The spares which are having nulled
consumption in financial year as called D class item. ABC analysis classification is
done among the items, which are having consumption value greater that zero, for easy
segregation. RAIL WAY ELECTRIC LOCO SHED has classified ABC as following.
Table 5
[46]
CLASS ITEMS
ANNUAL USAGE
REMARK
Above 22 lakhs
C1
C2
Less than 25
The spares, which are having nil consumption in a financial year are called D
class item in a power for the next year we shall to divert more attention towards
inventory value then consumption value , so major attention is required for higher
inventory values i.e., A class and for B class.
[47]
XYZ ANALYSIS:
This is based on the value of inventory stored. If the value is high special
efforts should be made to reduce them. This exercise can be done once a year. Items
classified as X denotes high inventory value.
Items classified as Y&Z denote medium and low inventory values
respectively. RAILWAY LOCO SHED has classified XYZ norms.
X= Inventory value more than Rs.5, 00,000
Y= Inventory value more than Rs.1, 00,000 to less than Rs.5, 00,000
Z= Inventory value more than zero and less Rs.1, 00,000
W= Inventory value zero
VED ANALYSIS:
This type of analysis is applicable mostly in the case of spare parts. The
peculiarity about spare parts is that they do not follow a predictable demand pattern as
in the case of raw materials.
V = Vital
E = Essential items
D = Desirable items
FSN ANALYSIS:
This analysis takes in to account the pattern of issued from stores. The 3 letters stands
for Fast-moving, Slow-moving, Non-moving. This analysis comes in very hand we
desire to control obsolescence.
[48]
In the example given above the recorder level was computed presuming that
there is no uncertainty regarding the usage as well as the lead time. In actual practice,
it is almost impossible to correctly predict both of them. The actual usage as well as
the lead time may be different from the normal usage or the normal lead time. The
level of safety stock can be calculated by applying the following formula
[49]
1.1.
CHAPTER-IV
DATA ANALYSIS AND INTERPRETATION
[50]
[51]
Table 6
CATEGORY
ITEMS
VALUE
NNR
HDG
54
6.15 CRORE
05
01
132
2.19 CRORE
07
C1
232
0.91 CRORE
32
02
C2
128
0.07 CRORE
20
02
TOTAL
546
9.36 CRORE
CLOSED
387
5.12 CRORES
44
20
A CATEGORY
22
B CATEGORY
85
C CATEGORY
280
NIL
STOCK VERIFICATION:
Table 7
CATEGORY
STOCK
VALUE OF
INVENTORY
10%
70%
70%
20%
[52]
20%
10%
[53]
157
2.49 CRORES
11
36
A CATEGORY
31
B CATEGORY
47
C CATEGORY
79
NIL
STOCK VERIFICATION:
Table 8
NUMBER OF
NUMBER OF
ITEMS
ITEMS UNIFIED
31
6 months
47
1 year
79
2 year
CATEGORY
PERIOD
[54]
category C and NIL items. This ward belongs to the mechanical items ward like
cable, batteries and filters etc., this ward average annual consumption is 2.49
crores.
In this ward also major proportion of inventory items are category C
items.
4.4 BIN CARD
CATEGORY A
Price list no: 79010805
15,600\-
EAC: 7529
Description:
WARD: 02
UNITS: 22
13(nos)
2436
Mode of purchase:
supplier KVIC
Table 9
MONTH
RECEIPTS
ISSUES
BALANCE
OPENING BALANCE
3000
JANUARY 2007
400
550
FEBRUARY 2007
200
250
500
[55]
MARCH 2007
300
200
APRIL 2007
1000
300
900
MAY 2007
1500
400
2000
JUNE 2007
250
1850
JULY 2007
150
1700
AUGUST 2007
300
1400
SEPTEMBER 2007
500
350
1550
OCTOBER 2007
100
1450
NOVEMBER 2007
350
1150
DECEMBER 2007
350
800
3500
JANUARY 2008
200
3300
FEBRUARY 2008
140
3160
MARCH 2008
160
3000
APRIL 2008
231
2769
MAY 2008
348
2421
[56]
JUNE 2008
253
2168
JULY 2008
520
1648
AUGUST 2008
353
270
1731
SEPTEMBER 2008
2000
441
3290
OCTOBER 2008
471
2819
NOVEMBER 2008
315
2504
DECEMBER 2008
400
2104
400
2104
400
2104
JANUARY 2009
54
505
1653
FEBRUARY 2009
403
1250
MARCH 2009
463
787
APRIL 2009
3322
1015
3094
MAY 2009
1000
550
3544
JUNE 2009
441
3103
JULY 2009
492
2611
AUGUST 2009
450
2196
[57]
SEPTEMBER 2009
483
1713
OCTOBER 2009
482
1231
NOVEMBER 2009
3000
400
3831
DECEMBER 2009
521
3310
521
3310
521
3310
JANUARY 2010
440
2870
FEBRUARY 2010
810
2060
MARCH 2010
710
1350
APRIL 2010
550
800
MAY 2010
537
470
867
JUNE 2010
3889
610
4146
JULY 2010
600
3546
AUGUST 2010
450
3096
SEPTEMBER 2010
650
2446
OCTOBER 2010
540
1906
NOVEMBER 2010
800
1106
[58]
DECEMBER 2010
544
420
1230
544
420
1230
544
420
1230
JANUARY 2011
525
610
1145
FEBRUARY 2011
560
585
MARCH 2011
540
45
APRIL 2011
200
124
121
MAY 2011
JUNE 2011
JULY 2011
525
646
AUGUST 2011
600
46
SEPTEMBER 2011
738
680
104
OCTOBER 2011
47
57
NOVEMBER 2011
537
224
370
DECEMBER 2011
259
111
[59]
Figure 4
INTERPRETATION
When we compare with these three years information the following
points were find out those are.
1. In 2008 receipt was 2353 units issues 3749 units the surplus item are
1396 units with last year balance.
2. In 2009 receipt was 7376 units issues 6170 units the surplus item are
1206 units with last year balance.
3. In 2010 receipt was 4970 units issues 7050 units the surplus item are
2080 units with last year balance.
4. In 2011 receipt was 2525 units issues 3644 units the surplus item are
1119 units with last year balance.
[60]
BIN CARD
CATEGORY B
Price list no: 43310011
Description: dry cells
EAC: 2000\-
WARD: 02
Unit: 01
RECEIPTS
ISSUES
BALANCE
JANUARY 2007
300
300
FEBRUARY 2007
135
145
MARCH 2007
1000
155
1010
APRIL 2007
308
704
MAY 2007
205
497
JUNE 2007
145
352
JULY 2007
101
251
AUGUST 2007
500
205
546
[61]
SEPTEMBER 2007
220
326
OCTOBER 2007
210
116
NOVEMBER 2007
1000
264
852
DECEMBER 2007
418
434
418
434
418
434
JANUARY 2008
1000
1434
1344
FEBRUARY 2008
228
1116
MARCH 2008
270
846
APRIL 2008
253
596
MAY 2008
220
376
JUNE 2008
203
273
JULY 2008
100
273
50
AUGUST 2008
50
90
10
SEPTEMBER 2008
55
55
10
OCTOBER 2008
40
40
10
NOVEMBER 2008
305
300
15
DECEMBER 2008
1000
413
602
CLOSING
BALANCE 2007
OPENING
BALANCE 2008
[62]
CLOSING
1000
413
602
1000
413
602
JANUARY 2009
500
445
657
FEBRUARY 2009
445
212
MARCH 2009
600
475
337
APRIL 2009
900
475
762
MAY 2009
455
307
JUNE 2009
385
3922
JULY 2009
460
3462
AUGUST 2009
420
3042
SEPTEMBER 2009
382
2660
OCTOBER 2009
9600
403
11857
NOVEMBER 2009
443
11414
DECEMBER 2009
356
11058
356
11058
356
11058
JANUARY 2010
508
10550
FEBRUARY 2010
738
9812
BALANCE 2008
OPENING
BALANCE 2009
CLOSING
BALANCE 2009
OPENING
BALANCE 2010
[63]
MARCH 2010
500
8782
APRIL 2010
530
7882
MAY 2010
900
7512
JUNE 2010
370
7122
JULY 2010
390
11549
AUGUST 2010
4687
260
11059
SEPTEMBER 2010
490
10839
OCTOBER 2010
220
10359
NOVEMBER 2010
480
10359
DECEMBER 2010
320
10039
10039
10039
JANUARY 2011
1570
8469
FEBRUARY 2011
220
8249
MARCH 2011
470
7779
APRIL 2011
270
7509
MAY 2011
600
6909
JUNE 2011
520
6389
CLOSING
BALANCE 2010
OPENING
BALANCE 2011
[64]
JULY 2011
145
6244
AUGUST 2011
200
6044
SEPTEMBER 2011
400
5644
OCTOBER 2011
90
5554
NOVEMBER 2011
5554
DECEMBER 2011
300
240
5614
Figure 5
INTERPRETATION
This item is category A it is a vital item in the organization its maximum
level is 21000 and minimum level is 27 units.
[65]
[66]
CHAPTER-V
SUMMARY
FINDINGS AND CONCLUSIONS
BIBLIOGRAPHY
[67]
5.0 SUMMARY
5.1 FINDINGS AND CONCLUSIONS
In the light of the above discussion the following findings and conclusions are
made:
This chapter deals with presentation of the summary of the work done. It also presents
certain suggestions for improving the efficiency of an organization.
In order to evaluate the performance of an inventory, the inventory
management technique is the measure available, to take a decision for efficient
utilization of inventory. The theory of application of cost accounting techniques plays
a very important role. The organization, Electric loco shed Kazipet of South Central
Railway is chosen for applying inventory control techniques to control the wastage
of inventory and overcome the ordering and issuing problems.
Understanding the specific procedure of the inventory issues and orders.
Therefore this chapter deals with presenting a total financial picture of railway.
The practical application of inventory management techniques for taking
decision whether to concentrate existing procedure or implement the new methods.
The maximum level of holding is estimated as 3 months for A category, 6
months for B category and 12 months for C category respectively.
The organization structure of the department of Electric loco shed, Kazipet depicts the
executive responsible and sections operating in the department.
The stores department is divided into wings rolling stock and work shop
facilities Rolling stock which comprise of loco motives, coaches and wagons. Work
shop facilities for the maintenance of track.
[68]
Electric loco shed is adopting periodic stock verification method for the
verification of stock. It is adopting book average price and purchasing rate for
evaluating the issue of materials.
Electric loco shed following ABC analysis as a part of their inventory control
techniques. It has been classified into three categories they are A category items. In
this category all repetitive items are generally controlled by applying the ABC
analysis.
Electric loco shed Kazipet has been using ABC analysis coupled with VED
analysis for control and remaining items whose values is less than 3 lakhs is
included in category C.
[69]
1.2.
BIBLIOGRAPHY
Chandra, Prasanna., (2008). Financial Management, New Delhi: Tata McGraw Hill.
Company Profile, (2012), Indian Railways Database, Electric Railway Loco Shed,
Kazipet.
Cooper Donald, Pamela Shindler., (2010), Business Research Methods (11th edition),
New York: McGraw-Hill.
Frequently Asked Questions, 2012, Indian Railways Fans Association Website.
[Online]. Available at: http://www.irfca.org. [Accessed 15 June 2012]
Jain, Khan, (2008), Cost Accounting, New Delhi: Tata McGraw Hill.
Maheswari, S.N., (2002), Financial Management: Principles and Practice (7th
edition), New Delhi: Sultan Chand Publishers.
Muller, Max., (2003), Essentials of Inventory Management Broadway, New York:
AMACOM.
Pandey, I.M.,(2009), Financial Management (9th Edition), New Delhi: Vikas
Publishing House.
[70]