Final Report

Bharat Heavy Electricals Limited, Bangalore
EXECUTIVE SUMMARY
The project study was mainly aimed at having a proper understanding of the
Organization structure and Inventory Management in Bharat Heavy Electricals Limited.
An effort was also made to have in-depth knowledge of the inventory management
system in the organization. It involves a careful analysis of various data spread over a
span of five years. This was collected through a number of companys related documents
like Annual Reports, websites etc
BHEL is one of the Premiers Public Sector Enterprise in the country. 63.06% of shares
are held by president of India, BHEL is one of the few profit making public sector
companies. BHEL-EDN was formed in the year 1976, mainly established a strong base
in the areas of power and control electronics to supplement the company pioneering
efforts in power generation and transmission equipment manufacturing.
BHEL caters to core sectors of the Indian Economy viz., Power Generation,
Transmission Industry, Transportation, Renewable Energy etc. The wide network of
BHELS 15 manufacturing division, 4 power sector regional centers, 8 service centers,
15 regional office and a large number of project sites spread all over India and abroad
enables the company to promptly service its customers and provide them with suitable
products, systems and service effectively and at competitive prices.
PROJECT PROFLE:
PROBLEM STATEMENT:
A STUDY ON INVENTORY MANAGEMENT AT BHARAT HEAVY ELECTICALS
LIMITED (ELECTRONIC DIVISION EDN) BANGALORE.
OBJECTIVES OF THE STUDY:
To study the Organization Structure in BHEL
KOUSALI INSTITUTE OF MANAGEMENT STUDIES, KUD Page 1

To study the inventory management in BHEL.

To study the methods of valuation of inventory in BHEL.
To study the inventory techniques adopted in BHEL.
To identify problems related with inventory management and to find out proper
strategies in increasing the sales.
THE BASIC PURPOSE OF STUDY:
The basic purpose of the project is to enable the student to be exposed to the working of
any organization and managers, to relate the concept learned by the student to the
working of the organization, to understand the practical aspect of working of
organization and to know the different ratios of the company.
SCOPE:
The scope of the project is to Analysis of the various ratios of the company.
Summarizing the conclusion and findings and also by indicating the corrective measure
where necessary. As per the calculation of Inventory management of BHEL -EDN. On
the basis of different ratios given us that presently company is not performing well in
managing inventory.
FINDINGS:
The company maintaining proper organization structure, In inventory Techniques the

company is using only ABC analysis.
In Inventory Valuation like FIFO, LIFO, Weighted Average Method, Simple Average
Method, Standard Price Method and Current Price Method. The company using
Weighted Average Method because its producing large size electronic goods and the
products are produced on the basis of customer requirement so products are not same.
In this project we have considered percentage change in inventories, percentage change

in sales value, inventory turnover ratio, inventory conversion period. Inventory to
working capital, work in process inventory turnover ratio.
Here we get to know that the company Inventory, Inventory Turnover ratio and inventory
conversation period decrease in the last two years.
SUGGESTION:

The company should adopt proper strategy in increasing the sales therefore overall
promotion strategy has to be taken care.
The firm decreased its working capital inventory ratio. This may be remedied by
decrease sales so it suggested that the firm should make efficient usage of resources.
CONCLUSION:
The study of Inventory Management of the company was very useful to understand the
management system, overall performance and effectiveness of the firm, and also the
efficiency utilization of its assets. On the basis of different ratios given us that presently
company is performing well.
The study of the company was very useful to understand the management system,
organization structure and process of production. There was a good support of all the
staff of the company. I offer my best wishes for the same and hope my work will be of
some use for the company.
INDUSTRY PROFILE:
ELECTRICAL AND ELECTRONIC INDUSTRY OVER VIEW:

The worldwide electrical and electronic and computers industry is the most flourishing
and extremely diversified sector consisting of manufacturers, suppliers, dealers, retailers,
electrical engineers, electricians, electronic equipment manufacturers and trade unions.
This sector has been growing at a rapid pace with the invention of innovative
technologies and an ever-increasing customer inclination towards electronic goods and
services.
ELECTRONIC EQUIPMENTS
Key Segments of Electrical and Electronics Industry

The global electrical and electronics sector is highly fragmented, comprising of various
auxiliary sectors namely electronic components, computer and office equipment,
telecommunications, consumer appliances and industrial electronics.
Electronic Components Industry:
Comprises of various establishments engaged in designing, manufacturing, marketing,

supporting, selling and distributing of broad range of electronic components such as
bolts, clamps, fasteners, rivets, lighting, semiconductor, integrated circuits,
microprocessors, cables and wires, switches, sensors, keyboards, sockets, timing devices,
laser modules, solar devices, test and inspection equipment, scientific and technical
instruments etc. USA, Japan, Europe, China, Taiwan, and Hong Kong are the leading
markets of electronic components in the world. Semiconductor sector is the largest and
highly profitable sector. The global semiconductor industry is worth $248 billion, of
which China accounts for $ 63 billion. China, United States and Japan are the largest
semiconductor producing countries in the world.
Computer and Office Equipment Industry
Consists of various establishments engrossed in manufacturing and supplying of assorted

range of computer hardware, peripherals, software and office automation equipment.
Presently, United States, Japan and Europe occupies leading positions in manufacturing
of computer and office equipment. The United States computer and office equipment
industry constitute of more than 10,000companies with collective annual revenue of US
$180 billion.
Telecommunications Industry:
IT can be divided into two main sub sectors i.e. equipment and communication services.
The United States of America is considered to be the leading market in the world for
communications equipment, which contributed around $1,488.2 billion in 2013.
Telephony and terminals equipment is one of the dominant sectors of this industry with a
market share of almost 80%. China, Taiwan, United Kingdom, South Korea and Belgium
are the top exporters of telecommunications equipment in the world. Another important
sub sector of telecommunications industry is communication services, which earned
revenue of 55.6% last year.

Consumer Electronics Industry:
Constitutes of units involved in designing, manufacturing, marketing and distribution

of household appliances, audio, video and gaming products. Some of the consumer
electronics products are televisions, speakers, video recorders, CD players, radios,
cameras, wireless devices, kitchen appliances etc. This industry is experiencing an
astounding and phenomenal growth over the past few years.
Industrial Electronics Industry:
Is made up of various establishments committed to designing, developing, manufacturing

and selling of broad range of electronic components and systems used in equipment and
automated processes serving in an industrial environment.
Major Production and Export Centres;
The worldwide electrical and electronics industry is experiencing phenomenal and

remarkable changes these days. The worldwide electronics industry is distinguished by
fast technological advances and has grown rapidly than most other industries over the
past 30 years. In Asia Pacific region, Japan, Korea China, Taiwan, India and Singapore
are the principal manufacturing hubs for electrical and electronics products. China is
becoming the manufacturing region of electronic products on the globe. The key
electronics manufacturing destinations are Guangdong province, South Jiangsu,
Shanghai and eastern part of Zhejiang.
In United States of America, New York, Atlanta, Colorado, Detroit, Florida, New
England, San Diego, San Francisco, and Texas are the major industrial hubs of
electronics industry.
Presently, the electronic products manufacturing is expanding on an unprecedented scale

in Asian region and deflating in the Americas and Europe. In year 2002, Asia occupied
41% of total electronics market share, which has now risen to 56% in 2007.
INDIAN VIEW OF ELECTRONICS AND ELECTRICAL EQUIPMENT INDUSTRY:
Electric equipment industry contributes over 2% of GDP which is projected to increase

to about 12% in 2015 according to a study by Frost & Sullivan. During the period,

consumption of electrical equipment is estimated to increase from over USD 28 billion

now to USD 363 billion. It is also expected that during 2010-2015, the Indian equipment
manufacturing will grow at 5.5 times the growth rate of global electronic equipment
production.
The electrical equipment and accessories industry, with its highly diversified content,
may be broadly segmented into;
(i) Generation equipment

(ii) Transmission equipment
(iii) Distribution equipment
The equipments and accessories under these segments include motors, turbines,
generators, switchgears, transformers, circuit breakers, induction motors, power
capacitors, meters, transmission towers. Besides these, the spectrum covers a whole
range of power cables including XLPE and AAC and ACSR conductors and electrical
consumer products like fans, electric lamps, exhausts and domestic appliances and
accessories. Inverters, genets, U.P. also fall under its domain. The electrical industry has
been showing signs of recovery after poor performance in the recent years. The domestic
electrical industry, which includes equipment for generation, transmission, distribution
and use of power in industrial units, constitutes a major part of the electrical products.
Major players in electrical equipment segment are ABB, BHEL, BHEL Power Solutions,
Havels India, Kirloskar Electric, Crompton Greaves and Suzlon Energy.

RESEARCH METHODOLGY:
Sources of data collection:-
Data collection is one of the most important aspects of research. The data or information
is through sources identically i.e. by primary sources and secondary sources of data.
Primary data:-
Primary data are those which are collected a fresh and for first time. Primary data
for study is collected through personally meeting the respondents.
Secondary data:-
The secondary sources include companys website, books, journals, insurance
magazines, articles on internet etc.
Limitations of the study:

Limited period of time to conduct the research.

The study majorly based on secondary data.
The respondents might not have disclosed their views fairly.
The Study restricted to five years of inventory data.
The collection of data for the analysis is restricted to BHEL-EDN only at
Bangalore.
COMPANY PROFILE
Name of the organization : Bharat Heavy Electricals Limited
Key people : B.P.Rao(Chairman and MD)
Type of organization : Public Limited

: State owned enterprise
Type of Establishment : 1964
Head quarters : New Delhi, India
Area served : Worldwide
Industry : Electrical equipments
Employees : 47,525 (March 2014)
Location : Bharat Heavy Electricals Limited

Electronics Division
Mysore Road, Bangalore-560026 , INDIA.

Email & website : c&pr@bheledn.co.in

www.bhel.com
www.bheledn.com
Phone : 080-26989091
Fax : 080-26989226/2698921
BHARAT HEAVY ELECTRICALS LIMITED:
Bharat Heavy Electricals Limited is one of the oldest and largest state-owned
engineering and manufacturing enterprise in India in the energy-related and
infrastructure sector which includes Power, Railways, Transmission and Distribution, Oil
and Gas sectors and many more. It is the 12 th largest power equipment manufacturer in
the world. BHEL was established more than 50 years ago, ushering in the indigenous
Heavy Electricals Equipment industry in India. The company has been earning profits
continuously since 1971-72 and paying dividends since 1976-77. 74percent of the total
power generated in India is produced by equipment manufactured by BHEL. It is one of
Indias nine largest Public Sector Undertakings or PSUs, known as the Navratnas or the
nine jewels.
BHEL caters to the core sectors of the Indian Economy, viz. Power, Transmission,
Industry, Transportation, Renewable Energy, Oil &Gas and Defence. The wide network
of BHELs 15 Manufacturing Divisions, Four Power Sector Regional Centres, Eight
Service Centres, Fifteen Regional Offices, One Subsidiary and over Hundred customers
and provide them with suitable products, systems and services efficiently and at
competitive prices. The high level of quality and reliability of its products is due to the
emphasis on design, engineering and manufacturing to international standards by
acquiring and adapting some of the best technologies from leading companies in the
world, together with technologies developed in its own R&D centres. BHEL has
acquired certification to Quality Management Systems(ISO 9001), Environment
Management Systems (ISO 14001) and Occupational Health & Safety Management

Systems(OHSAS 18001) and it is also well on its journey to words Total Quality
Management. BHEL has installed equipment for over 1,00,000 MW of power generation
for utilities, Captive and Industrial users. Supplied over 2,25,000 MVA transformer
capacity and other equipment operating in Transmission and distribution network up to
400 kV. Supplied over 25000 Motors with drive Control System to Power project,
petrochemicals, Refineries, Steel, Aluminium, and Fertilizer, Cement plants etc. &
supplied one million Valves to Power Plants and other Industries.
BHEL ELECTRONICS DIVISION (BANGALORE):
The Electronics Division (EDN) of BHEL was formed in 1976, mainly to establish a
strong base in the areas of power and industrial electronics and supplement the
companys pioneering efforts in power generation, transmission, industry and
transportation sectors. Making a modest beginning in 1976, the unit has registered
continuous and impressive growth, which is amply reflected in the fact that a large
number of power plants in country today, are equipped with products and systems made
by BHEL-EDN.As reported by the ARC Survey for the year 2005, BHEL is holding over
65 percent of the market share of DCS suppliers to Power Industry in India (including
hardware, software and services) In recognition of its commitment to the quality systems
and procedures, the unit has been certified for ISO 9001 since July 1993.To fulfill its role
of responsible corporate citizen, BHEL has framed a Corporate Environment
Management Policy .The Electronics division has become the first Electronics industry
in Bangalore to get ISO 14001.And above mentioned in the awards and recognitions.
We are engaged in the design, engineering, manufacture, construction, testing,

commissioning and servicing of a wide range of products and services for the core
sectors of the economy, viz. Power, Transmission, Industry, Transportation(Railway),
Renewable Energy, Oil & Gas and Defense. We have 15 manufacturing divisions, two
repair units, four regional offices, eight service centers and 15 regional centers and
currently operate at more than 150 project sites across India and abroad. We place strong
emphasis on innovation and creative development of new technologies. Our research and
development (R&D) efforts are aimed not only at improving the performance and
efficiency of our existing products, but also at using state-of-the-art technologies and

processes to develop new products. This enables us to have a strong customer

orientation, to be sensitive to their needs and respond quickly to the changes in the
market.
Most of our manufacturing units and other entities have been accredited to Quality
Management Systems (ISO 9001:2008), Environmental Management Systems (ISO
14001:2004) and Occupational Health & Safety Management Systems (OHSAS
18001:2007).
We have a share of 59% in Indias total installed generating capacity contributing 69%
(approx.) to the total power generated from utility sets (excluding non-conventional
capacity) as of March 31, 2012.
We have been exporting our power and industry segment products and services for over
40 years. BHEL's global references are spread across 75 countries. The cumulative
overseas installed capacity of BHEL manufactured power plant exceeds 9,000
MW across 21 countries including Malaysia, Omen, Iraq, the UAE, Bhutan, Egypt and
New Zealand. Our physical exports range from turnkey projects to after sales services.
Our greatest strength is our highly skilled and committed workforce of 49,390
employees. Every employee is given an equal opportunity to develop himself/herself and
grow in his/her career. Continuous training and retraining, career planning, a positive
work culture and participative style of management - all these have engendered
development of a committed and motivated workforce setting new benchmarks in terms
of productivity, quality and responsiveness.
Main Manufacturing Facilities:
Bhopal (Madhya Pradesh)

Bharat Heavy Electricals Limited, Ranipur, Haridwar (Uttarakhand)
Bharat Heavy Electricals Limited, Hyderabad(Andra Pradesh)
Jhansi (Uttar Pradesh)
High Pressure Boiler Plant and Seamless Steel Tube Plant(Tamil Nadu)

Boiler Auxiliaries Plant(Tamil Nadu)
Electronics Division and Electro Porcelain Division, Bangalore(Karnataka)
Jagdishpur (Uttar Pradesh)
Rudrapur (Uttarakhand)
Industrial Valves Plant(Punjab)
Bharat Heavy Plates and Vessels Limited(Vizag)
ACHIEVEMENTS AND RECOGNITIONS OF BHEL:
It is the 7th largest Power Equipment manufacturer in the world.

In 2013, BHEL won ICAI National Award for Excellence in Cost Management
for eighth consecutive year.
BHEL received two awards in CII-ITC sustainability Awards in 2012 from the
President of India.
In the year 2011,it was ranked ninth most innovative company in the world by
US magazine Forbes.
The company won the Prestigious Golden Peacock Award for Occupational
Health & Safety 2011 for significant achievements in the field of Health &
Safety.
It is also placed at 4th place in Forbes Asias Fabulous 50 list of 2010.

PRODUCTS MANUFACTURED IN BHEL:
1. Boiler(Steam Generator)
2. Gas Generator
3. Hydro Generator
4. Steam turbine
5. Gas turbine
6. Hydro turbine
7. Transformer
8. Switchgear
9. Oil field equipments OFE
10. Boiler drum
11. Water wall panel
12. Wind mill
13. Valves
14. Electro-static Precipitators.

AREA OF OPERATION:
1. Power generation:
Power sector booked orders worth Rs 41,982 cores for supply and installation of
16,489 MW of main equipment as well as service and supply of spares.
2. Industry sector:
Here, BHEL secured record orders worth Rs 14366 cores in capital power, rail
transport, power transmission, oil, gas and other industrial segments.
3. Transportation:
Transporting Electricals and traction motors from Indian railways besides Diesel
shunting Locomotive (2 nos1400 HP) order from UPRUNIL for parichha TPP,
UP.
4. Transmission system and products:
It includes power transformers, instrument transformers, Dry type transforms,
shut reactors, vacuum and SF switchgear, gas insulated Switchgear, ceramic
insulators etc..
5. Renewable energy:
Manufacturing and supplying solar photo-voltaic(SPV) systems for both
domestic and industrial application and wind electric generators all over India.
6. Oil and gas:
BHEL supplies Gas Turbine Control Systems for all ratings (Frame sizes) of
Heavy duty gas turbines, which are only license of GE, USA for manufacturing
of Mark-IV Control systems and the license for Mark-V and Mark-VI control
systems.
7. International business:
It has already supplied and commissioned above 200 sets of DCS for thermal,
combined cycle and hydro sets all over the country and overseas. MCS Inc.,
USA, former systems division of Leeds and Northup, USA, former systems
division of Leeds and Northup, USA, is an internationally reputed technology
leader in both power as well as industrial process control systems with 70 years
rich experience in the field.
8. Technology up gradation, R & D:

To meet the customers expectation the company has upgraded its products to
contemporary level through continuous in-house efforts as well as through

acquisitions of new technologies from leading engineering organization of the

world.
9. HRD Institute:
In the year 2009-10, total number of employees exposed to different types of
training during the year is 44307 giving an 18.98 training man days per
employees.
10. Health, Safety and environmental policy:
BHEL is committed to being an environment friendly company in all its
activities, products and services and to provide safe and healthy working
environment to all employees as an integral part of business performance
through:
Compliance with applicable Legislation and Regulations.
Continual improvement in the occupational Health, Safety and
Environmental Management Systems Performance.
OWNERSHIP PATTERN:
The Ministry of Heavy Industry, Government of India.
BHEL-END SHARE HOLDING
As the result of part disinvestment of BHEL shares by
(i) The government of India,

(ii) A number of foreign and Indian financial institution,
(iii) BHEL Employees,
(iv)The public.

The BHEL shares are listed on all principal stock exchange of the country and are being
traded at high volumes at the Bombay Stock Exchange (BSE). The share prices have
shown a very encouraging trend in the recent past.
SHARE HOLDING PATTERN
Shareholders (as on 31-December-2014) Shareholding

Central Government of India and State governments 63.06%
Foreign Institutional Investors (FII) 15.95%
Insurance companies 10.52%
Banks, Financial Institutions and Mutual Funds 06.80%
Individual shareholders 02.33%
Others 1.34%
Total 100.00%
VALUES, VISION, MISSION & POLICY

COMPANY VALUES
Company Values are as follows:
GOVERNANCE: We are stewards of our shareholders investments and we take

that responsibility very seriously. We are accountable and responsible for
delivering superior results that make a difference in the lives of the people we
touch.
RESPECT: We value the unique contribution of each individual .We believe in
the respect for human dignity and we respect the need to preserve the
environment around us.
EXCELLENCE: We are committed to deliver and demonstrate excellence in
whatever we do.
LOYALTY: We are loyal to our customers, to our company and to each other.

INTEGRITY: We work with highest ethical standards and demonstrate a behavior

that is honest, decent and fair. We are dedicated to the highest levels of personal
and institutional integrity.
COMMITMENT: We set high performance standards for ourselves as individuals
and our teams .We honor our commitments in a timely manner.
INNOVATION :We constantly support development of newer technologies
,products ,improved processes, better services and management practices.
TEAMWORK: We work together as a team to provide best solutions and services
to our customers. Though quality relationships with all stake holders we deliver
value to our customers.
COMPANY VISION
A World-Class Engineering Enterprise Committed to Enhancing Stakeholder Value.
COMPANY MISSION
To be an Indian Multinational Engineering Enterprise providing Total Business Solutions
through Quality Products, Systems and Services in the fields of Energy, Industry,
Transportation, Infrastructure and other potential areas .
POLICY
Global Recognition in the form of ISO 9001, ISO 14001, OHSAS 18001 and ISMS
Certificates, speak volumes of Navaratna PSUs incessant effort, to create a better
world.

ORGANISATION STUDY
The design of the organization structure is critical task of the management of an

organization. It is the skeleton of the whole organization. The organization structure
refers to relatively more durable organizational arrangements and relations.
Organization structures perform four major functions:

It reduces internal uncertainty arising out of variable unpredictable, random
human behavior within the organization through control mechanisms.
It reduces external uncertainty through forecasting, research and planning in
the organization.
It undertakes a wide variety of activities through devices such as division of
labor, Departmentalization, Specialization and Delegation of authority.
It enables the organization to keep its activities coordinated and to have focus
in midst of diversity in the pursuit of its objectives.
The staffs are educated, skilled and led by professionals at the line manager, middle
and top level executives. Artisans have direct exposure to on the job operations and
supervisions are trained in various operational areas and rotation made to ensure
overall development.

The Managers and top level executives have professional expertise in one or more
functional areas. Many have had experience of working in different units of BHEL
which has enhanced their vision. Dedicated staffs from top to bottom below have a
good aspect in BHEL-EPD. Staff and its applications:
Training and development is a continuous process at BHEL
BHEL has hired the qualified technicians to carry out the project at cheaper
rate.
EMPLOYEE CLASS
1. EXECUTIVES
E1- OFFICERS/ENGINEERS
E2- SENIOR OFFICERS/ENGINEERS
E3- DEPUTY MANAGER
E4-MANAGER
E5-SENIOR MANAGER
E6- DEPUTY GENERAL MANAGER (DGM)
2. SUPERVISOR
3. ARTISANS
4. SUPPORATIVE TECHNICAL STAFF
5. UNSKILLED WORKERS
6. SEMI-SKILLED WORKERS
7. CLERICAL AND OFFICE STAFF

DEPARTMENTAL STUDY:
1. MARKETING DEPARTMENT

MARKETING PROCESS: Marketing department of BHEL is divided as corporate

marketing division and separate marketing division for each unit. The corporate
marketing are responsible to get the project from the customer. Once the projects are
given to BHEL, the project is spilt and handover to respective unit marketing
departments. The main function of unit marketing department is to form a pricing
strategy that competitive and profitable. Once the marketing department gets the order It
hand over the order to the project management and commercial control department. The
marketing department acts as then input for the project management and commercial
department and gives full details about the project regarding product and place. The
projects are obtained by the marketing department by the open tenders, MOU agreements
between India and other nations by the strategic alliance. BHEL never go for promotion
since it is one of the market leaders in the power sector.
2. PRODUCTION DEPARTMENT
Production is not the application of tools to materials, but logic to work

The production department manufactures the control equipment for the power plant
equipments. The production department is facilitated with automated CNC machines.

The department is divided into production planning control, control equipments

fabrication, main assembly, system testing. Production planning control department
receives the design documents from the engineering department. The production line has
tree assembly line namely shell assembly, mechanical assembly, wiring assembly. Power
control board subassembly manufactures the power control boards for the control
equipments at world class standards. Production line the raw board is faded at one end
the finished module is received one end. Total time consumed to produce is 3minutes.
QUALITY CONTROL DEPARTMENT:
Quality is not an accident; it is the result of intelligent effort. There must be the will to
produce a superior product
The main functions of quality service department to do inspection on the

receiving goods from them customer and check the finished goods from the production
line to meet the quality commitment. The quality service department is divided according
to its functions as quality assurance inward control, meter and capacitors, control
equipments and high voltage electric controls, general quality. The quality service
department has obtained international certificates of ISO9000:2000, OHSAS
18001:1999, andISO14001: 2004. It maintains separate component labs for mechanical,
electrical, electronics, chemical and instrumental products.

3. FINANCE DEPARTMENT
Finance department plays a very important role in the existence and progress of the
organization. Finance department of BHEL is divided as corporate finance division and
separate finance division for each unit. It makes centralized balance sheet by computing
all business transaction of individual unit and groups. The company maintains costing,
sales, indirect tax management, purchase finance, indigenous bills, foreign purchase,
settling works and service bills, personal finance and salary, maintaining books and
budget. Foreign purchase section looks after the letter of credit and checks the terms and
condition of purchase department.

MATERIAL MANAGEMENT DEPARTMENT:

Material management department in BHEL EDN is responsible for all the material
movements in inside and outside the company stores. The department is divided as
material planning and control, purchase and stores. The function of the material planning
and control is rise a purchase indent after receiving direction from the project
management and commercials department. The purchase indent consists of the details of
the materials to be purchased and other details about the materials required. The purchase
function display the request for quotation in the website and timeline of two weeks is
given to submit the quotation.

HUMAN RESOURCE DEPARTMENT:
Human resource development group is involved in the activities like administration and
monitoring the needs of the employees, providing strategic support to other departments
and conduct many training programs. HR mission is to promote and include a value
based culture utilizing the fullest potential of human resource for achieving the BHEL
mission. HRD conducts numerous training programs like training development
programs, apprentice training, students training organization and industrial visits. HRD
looks after the needs of the personnels and maintains a record in the each individual.
HRD also looks after the public relations and corporate social responsibility.
The inputs provided on training the workforces, maturing their talents involving them in
various group activities, exposing them to outside industrial work, motivating them in

each and every possible way has helped EPD Work force have the highest level of
Morale acknowledge throughout the BHEL corporation. Any one or combinations of the
following methods are being adopted for the evaluation:
Entry/Exit level tests
Post training feedback from controlling officers after 8 week of training
Time bound action plan by participants on the job evaluation
Videography/ Photography before and after the program
Mock Demonstration
Types of Training Program
EXECUTIVES
Common Induction Training Program

Yong Managers Program
General Management Program
On the Job Training
Cadre Change Induction Training Program
SUPERVISOR & WORKMEN
Multi-skill Training
Cadre Change Induction Training Program
Skills and its application:
High quality knowledgeable employees at BHEL ensure continuous focused

operations, seeking best service to customer.
BHEL has dedicated and experienced staffs that is competitive in nature

SWOT ANALYSIS

STRENGTH
1. BHEL-EDN aims at achieving and sustaining Product Excellence in friendly

Manner.
2. BHEL-EDN has never cut corners in establishing comprehensive world-class
Facilities for its entire range products.
3. The fabrication shop is equipped with CNC machines for quicker and faster
Transformation of sheet metals into cabinets for assembly.
4. ISO 9001 Certification conferred by bureau varies quality information i.e.
BVQI(UK) on EDN has strengthened BHEL in the national and international
market.
5. Large Manpower, BHEL has around 48000 employees working which form its
Main asset, which constitutes of Senior, Experience, Qualified Engineers,
Technicians and Managerial Personnel.
6. Brand Image. For a period of times BHEL has grown to a Greater extent and the
Image of the company has steadily gone up.
7. Effective Participative Management, BHEL has an effective participative
management, where employees are given necessary platforms, so that lower level
employees can given their suggestion and opinion regarding management.
Decision making, System Creation and Business Strategies.
8. Excellent Human Resource Practices
Map (moving ahead with performance)- an effective performance system.
Effective Collective Bargaining- Joint Committee, Cordial Industrial
Relationship.
Qualities of World-class enterprise Keeping pace with emerging
technologies, newer concepts, customer focus.

WEAKNESS
1. BHEL-EDN fails in the having effective advertisement strategy.

2. It believes in waiting for customers instead of marketing itself and thus the
Customers are less in number.
3. BHEL is a public sector company. The efficiency and the commitment of the
Workers are not checked effectively, because of which the workers can take
Undue advantage.
4. As there are no fresh recruitments since 1985, there is no chance for the new
Talent, new ideas and new blood flowing into the organization.
5. High Job Security Poor accountability, Lack of Seriousness, no fear of action
among a cross section of employees.
6. Interference of Government Rural and Regulations regarding operations,
policies, etc
7. Union Problem Too many groups bargaining with the Management.
OPPORTUNITIES
1. BHEL can cater to the customers looking for EPC/Turnkey capability.

2. BHEL can make use of international financing
3. BHEL has scope to develop as an O&M and trouble-shooting service provider.
4. BHEL can develop as a total system supplier for MRTS(Mass Rapid Transport
System) and inland water transportation projects.
5. Exploring new avenues for Power generation, water scarcity and non-
Conventional energy sources.
6. Producing or generating power through sea waves.
7. Can consider gas as a source.

THREATS
1. Collaborators are increasingly restricting export territories under license

agreement in order to protect their market in territories outside India, particularly
where it has built up references and strengths.
2. Since most of the projects in the industry are being contemplated on BOOT
(Build, Own, Operate and Transfer) basis, various issues viz., business model of
the project, revenue collection, operation and maintenance etc., would need to be
suitably addressed to gain entry in the business.
3. BHEL wellbeing is dependent on the industrial wealth of the country and power
sector any disruption in the reform process of the power sector is likely to
negatively impact its performance.
4. BHEL earning fluctuates sharply from quarter and this may spell over from one
Fiscal to another, given its typical nature of business.
5. Economic reforms give rise to competition.

THEORETICAL ASPECT OF STUDY:

INVENTORY MANAGEMENT:
INTRODUCTION:
The third major current asset is inventory. The term inventory refers to the stockpile of
the products a firm is offering for sale and the components that make up the product. In
other words, inventory is composed of assets that will be sold in future in the normal
course of business operations. The assets which firms store as inventory in anticipation
of needs are:
1. Raw materials
2. Work-in-process(semi-finished goods) and
3. Finished goods.
The raw material inventory contains items are purchased by the firm from others and are
converted into finished goods through the manufacturing (production) process. They are
an important input of the final product.
Inventory, as a current asset, differ from other current assets because only financial
managers are not involved. Rather, all the functional area finance, marketing,
productions and purchasing are involved. The views concerning the appropriate level of
inventory would differ among the different functional areas.
MEANING OF INVENTORY
Inventory is an idle stock of physical goods that contain economic value and are held in
various forms by an organization in its custody awaiting packaging, processing,
transformation use or sale in a future point of time.
The term Inventory refers to the stock of raw materials, spare parts and finished products
held by a business firms. It is aggregate quantity of material resources and goods that are
idle at a given point of the time. The resources involved in materials may be of any type:
for exam men, materials, machines, machines, money, when the resources involved in
materials or goods in any stage of completion, inventory refer as stock. Hence inventory
refers to the stock that a business firms keeps to meet in feature requirement of
production and sales.
INVENTORY MANAGEMENT:

Inventory management may be defined as systematic location, storage and recording of

goods in such a way that desired degree of service can be made to the operating steps at
minimum ultimate cost.
Effective Inventory management is all about knowing what is on hand, where it is in use
and how much finished product results.
NEEDS OF HOLDING INVENTORY
To act as a buffer between different operations

To allow for mismatches between supply and demand rates
To allow for demands that is larger then expected
To allow for deliveries that are delayed or too small
To avoid delays in passing products to customers
IMPORTANCE OF INVENTORY
Inventory constitutes the largest component of current assets in many organizations.

Poor management of inventories therefore may result in business failures. A stock out
creates an unpleasant situation for the organization in case of a manufacturing
organization (in stock out ability to supply an item from inventory) could, in extreme
cases, brings production process to half; conversely, if a firm carries excessive
inventories the added carrying cost may represent the difference between profit and loss.
Efficient inventory control therefore, can significantly contribute to the overall profit
position of the organization
REASONS FOR MANAGEMENT OF INVENTORY
TIME: The Time lags present in the supply chain, from suppliers to user at every
stage, requires that you maintain certain amount of inventory to use in this
LEAD TIME.
UNCERTANITY: Inventories are maintained as buffers to meet uncertainties in
the demand, supply and movements of goods.
ECONOMICS OF SCALE: Ideal condition of one unit at a time at a place
where user needs it, when he needs it principle tends to incur lots of costs in
term of logistics. So , that work is not disrupted for want to inventory
OBJECTIVES OF INVENTORY MANAGEMENT

The main objective of inventory management is operational and financial. The

operational objective is that the materials and spare parts should be available in sufficient
quantity. So, that work is not disrupted for want to inventory. The financial objective
means that investment in inventories should not remain idle and minimum working
capital should be looked in it.
The following are the objectives of inventory management are:
To have stocks in hand to fulfill the stock requirements.

To ensure effective utilization of storage capacity or space,
To ensure effective control over purchases, storage and usage of materials.
To meet a high percentage of demand of demand without creating excess stock
levels.
To facilitate purchasing economies.
To understand the purchase procedure.
To avoid both over stocking and under stocking of inventory.
To eliminate duplicating and replenishing stocks.
To avoid blocking of capital in inventory.
BENEFITS OF HOLDING INVENTORY
It enables the firm to undertake continuous production and reduce the setup
costs associated with the state of production.
It enables the firm to avoid losses arising on account of losing the customers
for non-supply of goods in time.
It enables the firm to reduce variables costs associated with planning small
orders frequently.
It enables the firm to derive the advantages of bulk buying such as
competitive price, higher rates of discount, benefit of lower prices against
anticipated or announced price raise avoidance of unexpected shortages etc.
TYPES OF INVENTORIES
1. ANTICIPATION INVENTORIES
Such inventories carried to meet predicable changes in demand. In case of
seasonal variations in the availability of some raw materials it is convenient and
also economical to build up stocks was consumption pattern may be reasonably
uniform and predict.
2. FLUCTUATION INVENTORY

Demand fluctuates overtime and it is not possible to predict it accurately.

Business firms maintain reserve stocks to meet unexpected demand and thereby
to avoid is a time gap between union and use of certain products. The goods
produced in one season in stock for sale and used throughout the year. When the
availability of raw materials is seasonal, bulk stocks are purchased for throughout
the year.
3. LOT SIZE INVENTORY
In order to keep costs of buying receipts, inspection, transport and handling

charges low quantity are bought for immediate need. It is a common practice to
buy some raw materials in large quantities in order to avail quantity of discounts.
4. MOVEMENT OR TRANSIT INVENTORIES
Raw material and finished goods one place to another some amount of inventory
is always in transit longer the transportation period, greater is the amount of
transport and inventories.
5. PRODUCTION INVENTORIES
Raw material and other supplies parts and components, which enter into the
product during the production process and generally from the part of production.
6. IN PROCESS INVENTORIES
Semi-finished work in process and partly finished products formed at various s

tages of production.
7. M.R.O. INVENTORIES
Maintenance repairs and operating supplies, which are consumed during the
production process and generally, do not from part of the product itself.
(e.g.: oils and lubricants, machinery and plants etc.)
8. FINISHED GOODS INVENTORIES

Completed finished products are ready for sale.
PROBLEMS WITH HOLDING INVENTORY
o Storage costs
o Interest is tie up therefore, a loss on capital
o Obsolete stock
o Less money is available for the business
o Price fall on held items
COST OF HOLDING INVENTORY
One operating objective of inventory management is to minimize cost. Excluding the

cost of merchandise, the costs associated with inventory fall into two basic categories:
i. Ordering or Acquisition or Set-up costs, and

ii. Carrying costs.
These costs are an important element of the optimum level of inventory decision.
Ordering costs: This category of costs is associated with the acquisition or ordering of
inventory. Firms have to place orders with suppliers to replenish inventory of raw
materials. The expenses involved are referred to as ordering costs. Ordering cost is the
fixed cost of placing and receiving an inventory order. Apart from placing orders outside,
the various production departments have to acquire materials from the stores. Any
expenditure involved here is also a part of the ordering cost. Included in the ordering
costs are costs involved in
i. Preparing a purchase order or requisition form and

ii. Receiving, inspecting and recording the goods received to ensure both quantity
and quality
Carrying costs: The second broad category of costs associated with inventory is the
carrying costs, they are involved in maintaining or carrying inventory. The cost of
holding inventory may be divided into two categories:
i. Those that arise due to the storing of inventory. The main components of this
category of carrying costs
ii. Storage cost that is tax, depreciation, insurance, maintenance of the building,
utilities and janitorial service
iii. Insurance of inventory against fire and theft

iv. Deterioration in inventory because of pilferage, fire, technical obsolescence, style

obsolescence and price decline
v. Serving costs such as labor for handling inventory, clerical and accounting costs.
vi. The operating cost of funds. This consist of expenses in raising funds
(interest on capital) to finance the acquisition of inventory. If funds were not
locked up in inventory, they would have earned a return. This is the opportunity
cost of funds or the financial cost component of the cost.
TECHIQUES OF INVENTORY CONTROL
Determination and maintenance of optimum inventory level, helps to maximize owners

wealth. Inventory management problems can be handled by sophisticated/refined
mathematical techniques. The major problem areas of inventory management are
The classification problem to determine the type of control required.
The order quantity problem.
The order point problem.
Determination of safety stocks. But these are more suitable area of production
and operations management and out of the scope of this book. Financial manager

need to be familiar with these techniques because inventory management

involves financial costs. Use of particular technique depends on the convenience
of the company. Whatever the techniques may used by the firm the ultimate
objective of inventory control program me is to provide maximum customer
service at a minimum cost. In the following some of the inventory control
techniques have been discussed
TECHNIQUES
ABC Analysis
Economic Order Quantity (EOQ)
Stock Level minimum, maximum, reorder level, recorded quantity
TWO-BIN SYSTEM
VED Classification
HML Classification
FSN Classification
Just In Time
SED Classification
ABC System
The first step in the inventory control process is classification of different type of
inventories to determine the type and degree of control of required for each. The ABC
system is widely-use classification technique to identify various items of inventory for
purpose of inventory control. This 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 a more rigorous control on items that are
i. The most costly, and/or

ii. The slowest-turning, while items are less expensive should be given less control
effort.
A B C System is an inventory management technique that divides inventory into

three categories of descending importance based on the rupee investment each.
ABC Analysis divides on hand inventory into three classifications on the basis of annual
consumption value
A Items: Very tight control, complete and accurate records, frequent review

A: 70% value, 10% items

B Items: Less tightly controlled, goods recorded, regular review
B: 20% Value, 20% items
C Items: Simplest controls possible, minimal records, large inventories, periodic
review and recorder
C: 10% Value, 70% item
IMPORTANCE
o Ensures control on high value items

o Saves time and cost monitoring
o Reduces total investment in inventory
o Facilitates faster decision making
o Better utilization of resources
o Better physical control of stock
Advantages of ABC Classification
o This kind of categories of inventory helps one manage the entire volume and
assign relative priority to the right category. For example A class items are the
high value items. Hence one is able to monitor the inventory of this category
closely to ensure the inventory level is maintained at optimum levels for any
excess inventory can have huge adverse impact in terms of overall value.
o A Category items: Helps one identify these stocks as high value items and ensure
tight control in terms of process control, physical security as well as audit
frequency.
o It helps the manager and inventory planners to maintain accurate records and
draw managements attention to the issue on hand to facilitate instant decision-
making.
o B Category items: These can be given second priority with lesser frequency of
review and less tightly controls with adequate documentation, audit controls in
place.
o C Category items: Can be managed with basic and simple records. Inventory
quantities can be larger with very few periodic reviews.
Disadvantages of ABC Classification
o Inventory Classification does not reflect the frequency of movement of SKU and
hence can mislead controllers.

o B & C Categories can often get neglected and pile in huge stocks or susceptible
to loss, pilferage, slackness in record control etc.
On the basis of the cost involved, the various inventory items are, according to this
system, categorized into three classes: A, B and C. The items included in group A involve
the largest investment. Therefore, inventory control should be the most rigorous and
intensive and group consists of items of inventory which involves relatively small
investment although the number of items is fairly large. It deserves less attention than A
but more than C. It can be controlled by employing less sophisticated techniques. The
task of Inventory management is to properly classify all the inventory items into one of
these three groups/categories. The typical breakdown of inventory items is as shown
below
Inventory Breakdown between Number of items and inventory value
Group Number of items Inventory Value(%)

(%)
A 15 70
B 30 20
C 55 10
Total 100 100
Economic Order Quantity(EOQ) Model
After various inventory items are classified on the basis of the ABC analysis, the
management becomes aware of the type of control that would be appropriate for each of
the three categories of the inventory items. While purchasing raw materials or finished
goods, the questions to be addressed are: how much inventory should be bought in one
lot under one order on each replacement? Should the quantity to be purchased be larger
or small? Or, should the requirement of materials during period of time (say six months or one

year) be acquired in one lot or should it be acquired in installments or in several lots? Such
inventory problems are called order quantity problems.
Economic Order Quantity (EOQ) Model is the inventory management technique for
determining optimum order quantity which is the one that minimized the total of its order
and carrying costs, it balances fixed ordering costs against variable ordering costs.
The determination of the appropriate quantity to be purchased in each lot to replenish

stock as a solution to the order to the order quantity problem necessitates resolution of
conflicting goals. Buying in large quantities implies a higher average inventory level
which will assure i) smooth production/ sale operations, and ii) lower ordering or set up
costs. But it will involve higher carrying costs of inventory by reducing the average
inventory level but the ordering costs would increase as there is a likelihood of
interruption in the operations due to stock-outs. A firm should place neither too large nor
too small orders. On the basis of a tradeoff between benefits derived from the
availability of inventory and the cost of carrying that level of inventory, the appropriate
or optimum or optimum level of the order to be placed should be determined. The
optimum level of inventory is popularly referred to as the Economic Order Quantity
(EOQ).
The records pint may be defined as the level of inventory when fresh order should be
placed with the suppliers for procuring additional inventory equal to the economic order
quantity. It is based on the following assumption:
i. constant daily usage of inventory, and

ii. Fixed lead time. In other words, the formula assumes conditions of certainty.
The recorder point= (Lead time in days) * (Average daily usage of inventory)
The term lead time refers to the normally taken in receiving the delivery after placing
orders with the suppliers. It covers the time-space from the point when a decision to
place the order for the procurement of inventory is made to the actual receipt of the
inventory by the firms. The lead time may also be called as the procurement time of
inventory. The average usage means the quantity of inventory consumed daily.
Time may also be called as the procurement time of inventory. The average usage means
the quantity to inventory consumed daily.

It can be described as the basis how much to buy modes. It is shortened to EOQ and
widely know inventory model. It dates to 1915. The purpose of using EOQ model is to
find that particular quantity of order which minimum total inventory costs. EOQ is the
technique, which solves the problem of the materials, manages. EOQ is the order size at
which the total cost, comprising ordering cost and plus carrying cost is the least. EOQ
will be fixed at a level where the total of ordering cost will be the minimum.
EOQ Formula= 2 AO/C
Where A= Annual consumption to units, O= Ordering cost per unit
C= Carrying cost per unit per annum.
Safety Stock
The effect of increased and/or slower delivery would be a shortage of inventory. That is,
the firm would face a stock-out situation. This, in turn, as explained in detail below,
would disrupt the production schedule and alienate the customers. The firm would,
therefore, be well-advised to keep a sufficient safety margin by having additional
inventory to guard stock-out situation. Such stocks are called safety stocks. It can be
defined as the minimum additional inventory to serve as a safety margin or buffer or
cushion to meet an unanticipated increase in usage resulting from an unusually high
demand and or an uncontrollable late receipt of incoming inventory.
Average stock level
= Maximum level + Minimum level
TWO-BIN SYSTEM
It is mainly adapted to control o group inventories. In the two bins system stock of each
item is separated into two bins. One bin contains stock; just enough to last from the date
of placing a new order unit it is received in inventory. The other bin contains a certain
quantity of stock that will be sufficient to satisfy probable demands during the period of
replenishment stock first issued from the First bin, when the First bin is empty an order

of replenishment is made and the stock in the Second bin is utilized unit the ordered
material is received.
VED Classification
According to this classification inventories are grouped based on the effect on production
and inventories are grouped into three, they are Vital, Essential and Desirable
inventories. It is specially used for classification of spare parts. If a part vital, in
production, then it is classified as V, if it is essential, then it is assigned E and if it is
not so essential, desirable that is given D. V category item are stocked high and
category D items are maintained at minimum level.
HML Classification
Here the materials are classified on the unit value and not the annual usage value. The
inventory is classified into three categories such as High, Medium, and Low, as it is
adopted in selective inventory control technique. The inventory items should be listed in
the descending order of unit value and it is up to the management to fix limits for three
categories. The classification is useful for keeping control over consumption at
departmental levels, for deciding the frequency of physical verification, and for
controlling purchases.
FSN Classification
Hence inventory is classified based on the movement of inventory from stores. FSN
stands for Fast moving, Slow moving, and Non moving. This technique particularly
useful for avoiding obsolescence of inventory. For determination of whether a particular
inventory is fast moving or not, the date of receipt or the last date of the issue, whichever
is later, is taken, which have lapsed since the last transaction. The items are usually
grouped in periods of 12 months. Active moving items need to be reviewed regularly and
surplus items, which have to be examined further. Non-moving items may be examined
further and their disposal can be considered.
SED Classification

This SED Classification is made based on the availability of inventory. It is very much
useful in the cases of scarcity of supply of inventories. Here S refers to scarce
inventory item, generally imported and those, which are in short supply category. D
refers difficult inventory item that are available indigenously but are difficult to
procure. E refers to items, which are easy to acquire and which are available in the local
markets.
Just In Time (JIT)
Popularly known in its acronym JIT. It may be applied for either raw materials purchased
or producing finished goods. From raw materials purchase it means, that no inventories
are held at any stage of production and exact requirement is bought in each and every
successive stage of production and the exact requirement is bought in each and every
successive stage of production of the right time. From production of goods view JIT
means goods are produced only when the order are received, there by no storage of
finished goods, and can avoid costs of carrying finished goods. JIT is also known as
Zero Inventory Production System (ZIPS), Zero Inventories (ZIN), Materials as
Needed (MAN), or Neck of Time (NOT).
NEW ACCOUNTING NORMS FOR INVENTORY VALUATION
The standard permits only two methods; First-In-Fist-Out (FIFO) and Weighted average
cost. The controversial method of Last-In-First-Out (LIFO) is now not permitted. The
LIFO method reasoned that in days of high inflation, inventory prices are rising and
therefore it would be inappropriate to change the lower cost of earlier purchases.
INVENTORY VALUATION
1. First In First Out Method (FIFO):

Here the earliest acquired stock is assumed to be used first. The stock which is
bought first is issued first. In other words the principle is that the materials are
issued in order and the price of their original purchase.
This method is claimed to be accurate for the reason that the materials are
charged into production at actual cost in the order of receipt. The closing
inventories are valued at the most recent prices. If the closing inventory balance
includes materials at several different prices, the problem of considerable clerical
work is involved.

This method assumes that the order in which materials are received in the stores
is the order in which materials are issued from the stores.
The advantage of this method is:
The pricing of materials is perhaps consistent with the practice of issuing
oldest material first in many manufacturing organization.
The value of materials in stock is fairly close to current cost.
The disadvantage of this method is:
Issue of materials at different prices complicated stores accounting.

In a period of rising prices, the charge to production is low. This
tends to inflate reported profile, increase tax burden and push up
dividends as a consequence the firm is sapped financially.
2. Last In First Out Method(LIFO)
This method is the opposite of the FIFO method. It assumes that the material
which is acquired last is issued first. Hence material issues are priced on the basis
of the cost of the recent purchases.
o The cost of production reflects the current cost of material better.

o In a period of rising prices, reported profits are depressed, dividends are
kept low and working capital is conserved.
The disadvantage of this method is:
o The issue of material at different prices complicates stores account.

o Pricing of materials is not consistent with the commonly followed
practice of issuing the oldest material first.
3. Weighted Average Cost Method
Under this method issues are priced at the weighted average cost of materials in
stock (the weights are being proportional to quantities).
It leads to smooth out price fluctuations.

It provides a fairly acceptable figure for stock value.
The limitation of this method may be tough involved in calculating the weighted
average cost each time a new delivery is obtained.

The BHEL-EDN use this method while valuate the inventory. This method is
suitable for this company because the company produces large size goods and the
goods are produce on the basis of customer requirement and products are not same
so they use this method.
4. Standard price(cost) method:

Under this method a standard price is pre-determined when materials are
purchased the stock account is debited with the standard price. The difference
between the actual price and standard price is carried to a variance account.
Material issued is charges as per the standard price.
The advantage of this method are:
All material is issues priced identically, the possibility of jobs using the same
material being charged with different costs, a problem with the FIFO or LIFO
method does not exist.
Stock accounting is fairly amplified. There is no need for specific price
attributable to specific issue of materials.
The disadvantage of this method are:
Determining the standard price may be somewhat difficult, particularly when

prices tend to increase somewhat unpredictable are characters by wide
fluctuation.
The issue of how variance should be heated may be difficult.
5. Current Price Method
According to this method issued are priced at their replacement or realizable
price at the time to issue.
It discloses the efficiency of buying.

Tenders based on production costs which reflect current prices may be more
realistic.

Determination of replacement price may sometimes be difficult.

Comparison of job cost becomes difficult when similar jobs are charged for
the same material at different prices.
Since this method is not based on cost, confusion may arise.
6. Simple Average Method:

Under this method, material issues are valued at average price. It is calculated by
dividing the total price of the materials in the stock, from which the material to be
priced could draw by the number of prices used in that total. The issue price
determined as follows:
Issue Price = Unit prices of materials in stock
Number of purchases
This method works well there is little variation in the purchase prices. The simple
average is Particularly useful in the following circumstances.
It is easy to calculate the prices at which the issues are to be made.

A particular purchase at a higher or lower rate does not disturb the
prices to a great extent because the particular difference in the price is
averaged out.
Simplicity is the greatest advantage of this method.
Material cost does not represent actual cost price.

When prices fluctuate considerably, this method will give very
incorrect result.
This method does not give regard to quantities of material held at each
price.
ANALYSIS AND INTERPRETATION

1. Size of Inventory
Size of Inventory indicates the efficiency of firm in terms of profitability. It
should not be too high or too low. It existence has to be according to sales
forecast.
S.No Year Inventory

(Rs in Lakhs)
1 2010-11 26352.16
2 2011-12 30281.74
3 2012-13 37893.73
4 2013-14 41074.27
5 2014-15 35545.22
Chart 1 : Inventory in BHEL
Interpretation:
The above table shows that the Inventory in BHEL is increased every year from 2010 to
2013 but in the year 2014 it decreases around 15%.
2. Position of inventory in percentage

Inventory or stock refers to the goods and materials that a business holds for the
ultimate purpose of resale.
Position of inventory in percentage = Base year * 100
Current year
(It should be less then 100)

S.No Year Inventory Previous Difference Position of inventory

Inventory in percentage
(Rs in Lakhs) (Rs in Lakhs)
1 2010-11 26352.16 7837.02 18515.14 29.74
2 2011-12 30281.74 26352.16 3929.58 87.02
3 2012-13 37893.73 30281.74 7611.99 79.91
4 2013-14 41074.27 37893.73 3180.54 92.26
5 2014-15 35545.22 41074.27 -5529.1 -15.55
Chart 2: Position of inventory in percentage

Interpretation:
Here this graph shows that the inventory of this company is increased in the year 2010-
11 to 2011-12 but next year it decreased around 7% and again increased 12% and then it
is decreased around 108% so here we get to know that the company not maintaining
any system for inventory management or the company maintain inventory on the basis of
customer order and their requirement. On the basis of marketing department they didnt
get any new order in the year 2014-15 so company not store the products.
3. Inventory Turnover Ratio
Inventory turnover indicates the efficiency of the firm in producing and selling its
product. It indicates the number of times the stock is turned/sold over during the
year. It is calculated by dividing the cost of goods sold by the average inventory.
The average inventory is the average of opening and closing balances of
inventory.
Formula:
Inventory turnover ratio = cost of goods sold
Average inventory
Cost of goods sold = Sales Gross profit
Average inventory = Opening stock + closing stock
2
Year Cost of goods Average inventory Inventory

sold turnover Ratio
2010-11 136351.85 25803.465 5.28

2011-12 185104.57 26486.53 6.99

2012-13 212128.92 32257.315 6.58

2013-14 154313.34 41477.785 3.72
2014-15 137286.7 38309.745 3.58
Chart 3: Inventory Turnover Ratio
Interpretation
It indicates the efficiency of inventory management turnover directly affects the

profitability of the firm, it measures the number of times, on average. The inventory is
sold and replaced during the fiscal year. It measures the companys efficiency in turning
its inventory into sales. Its purpose is to measure the liquidity of the inventory. A low
inventory turnover ratio is signal of inefficiency, since inventory usually has a rate of
return of zero. It also implies either poor sales or excess inventory. A high inventory
turnover ratio implies either strong or ineffective buying.
We can understand that the inventory turnover of the company is fluctuating. The
company is having 2010-11:5.28, 2011-12: 6.99, 2012-2013: 6.58, 2013-14: 3.72 and
2014-15: 3.58 stock turnover ratio. In the year 2011-12 inventory turnover is high when
compared to other four years. After 2011-12 company inventory turnover is decreased
every year, This shows that the firms performance is not better in selling its product.
4. Inventory conversion period:

The inventory conversion period represent the number of days in year by inventory
turnover. It measures the company inventory period is high or low.
Formula:

Inventory conversion period = No. of days in year

Inventory turnover
No. of days in year is - 365 days
Calculation table:
Year No. of days in Inventory Period (in days)

S.No year turnover
1 2010-11 365 5.28 69
2 2011-12 365 6.99 52
3 2012-13 365 6.58 55
4 2013-14 365 3.72 98
5 2014-15 365 3.58 103
Chart 4: Inventory conversion period
Interpretation:
We get to know, the number of days the company is taking to convert raw material into
finished product. In last five years, the company is taking shorter period for conversion.
The company has taken in 2010-11: 68 days, 2011-12: 51 days, 2012-13: 55 days, 2013-
14: 97days, 2014-15: 101days. It indicates that the company has not improved its
conversion period yearly. The year 2011-12 is better when compared to other four years.
It indicates the slower conversion of inventory and the slow sale of goods.
5. Inventory to working capital

Working capital is a financial metric which represents operating liquidity

available to a business, organization or other entity. Working capital is the amount
of funds used in current operation of business, working capital need to be in
cash, and it can be in form of asset that can be converted into cash within one
year.
In order to ascertain that there is no overstocking, the ratio of inventory to
working capital should be calculated. Working capital is the excess of current
assets over current liabilities. Increase in volume of sales requires increase in size
of inventory, but from a sound financial point of view, inventory should not
exceed amount of working capital.
Inventory to working capital = Inventory * 100
Working capital
Working capital= Current assets Current Liability
Year Inventory Working capital Inventory to

working capital
2010-11 26352.16 6357.37 4.14
2011-12 30281.74 26070.36 1.16
2012-13 37893.73 68167.9 0.55
2013-14 41074.27 75575.72 0.54
2014-15 35545.22 65623.83 0.54
Chart 5: Inventory to working capital

Interpretation: The working capital turnover ratio measures the efficiency with which
the working capital is being used by the firm. A high ratio indicates efficient utilization
of working capital and a low ratio indicates inefficient utilization of working capital. But
a very high working capital turnover ratio may also mean lack of sufficient working
capital which is not good situation.
The working capital to inventory is decreasing in nature. In the year 2010-11: 4.14, 2011-
12:1.16, 2012-13:0.55, 2013-14:0.54 and 2014-15:0.54 it is high then it decreases yearly.
It means the sales of the company is decreased in nature and It indicates the inefficient
utilization of working capital.
6. Inventory to Current Asset Ratio

Inventory to current asset ratio indicates between the inventory and current assets.
It shows the percentage of inventory to current assets, which helps the organization
in deciding the current assets policy which also affects the liquidity position of the
organization.
Current asset turnover ratio = Inventory *100
Current asset
Year Inventory Current Assets Inventory to Current

asset ratio
2010-11 26352.16 117545.75 22.42
2011-12 30281.74 117351.34 25.80
2012-13 37893.73 154202.46 24.57

2013-14 41074.27 163905.15 25.06

2014-15 35545.22 147669.39 24.07
Chart 6: Current asset turnover ratio
Interpretation:
Inventory to current asset ratio shown that the efficiency of the firm, if the firm have the
less inventory current asset ratio is good sign for the company because inventory is not
quick current asset. This is, Inventory is not a quickly convertible asset into cash, so that
company is able to meet day today requirements, this ratio indicates in percentage. It
tells that how much how much inventory is involved in the current asset.
The company Inventory to current asset ratio is fluctuating in nature, in the year 2010-
11:22.42%, 2011-12:25.80%, 2012-13:24.57%, 2013-14:25.06%, and 2014-15:24.07%
here company is having average 1/4th current asset to inventory, they have blocked more
money in inventory, it is not good sign of company performance.
7. Volume of Sales and Percentage Change in Sales

The better the management of assets, the larger amount of sales, a proper balance
between sales and inventory generally reflects that inventory managed well.
Position sales in percentage = Base year * 100
Current year
S.No Year Sales (Rs in Previous Sales Difference Percentage

Lakhs) (Rs in Lakhs)

1 2010-11 136351.85 114281.37 22070.48 83.81

2 2011-12 185104.57 136351.85 48752.72 73.66
3 2012-13 212128.92 185104.57 27024.35 87.26
4 2013-14 154313.34 212128.92 -57815.6 -37.46
5 2014-15 137286.7 154313.34 -17026.6 -12.4
Chart 7: Volume of Sales and Percentage Change in Sales
Interpretation: This graph shows that the company how much sale its products, its
computed in percentage change in sales. In the year 2012 it is very high then in the year
2013 and 2014 it is decreased. Here we compare the inventory and sales of the company.
2010-11 inventory is 29.74% and sales is 83.81%, 2011-12 inventory is 87.02% and sales
is 73.66%, 2012-13 inventory is 79.91% and sales is 87.26%, 2013-14 inventory is
92.26% and sales is -37.46%, 2014-15 inventory is -15.55% and sales is -12.4%, here we
get to know that in the year 2011 and 2012 inventory and sales is not much differ but in
the year 2010, 2013 and 2014 very difference in sales and inventory, some time
inventory high some time sales high.
8. Work in Process Inventory Turnover Ratio

Some firms maintain Work in Process to create stock when goods are
manufactured is anticipated for future demand. However in normal course of
business work in process inventory should not be high.

Work in Process Inventory Turnover Ratio = Cost of Goods sold

Average work in Process
Year Cost of Goods sold Average Work in Work in Process

(Rs in Lakhs) Process Inventory Turnover
Ratio
2010-11 136351.85 67.67

2015.035
2011-12 185104.57 69.68
2656.475
2012-13 212128.92 98.14
2161.405
2013-14 154313.34 82.01
1881.71
2014-15 137286.7 63.82
2151.295
Chart 8: Work in Process Inventory Turnover Ratio
Interpretation:
The work in process inventory depends on the length of production cycle and current
level of operation. The longer the production cycle greater will be the work in progress.

Work in process is 67.75% in the year 2010-11, 2011-12: 69.68%, 2012-13: 98.14%,
2013-14:82.01% and 2014-15: 63.82%, 2010 to 2012 its increased again 2013 and 2014
its decreased. It shows that customers can get the goods when work in process inventory
turnover is high. In the year 2013 the performance of the company improved it is good
indication from production point of view.
FINDINGS:
In this project I have considered percentage change in inventories, percentage change in

sales value, inventory turnover ratio, inventory conversion period. inventory to working
capital, work in process inventory turnover ratio.
The following findings
The company maintaining proper organization structure, In inventory Techniques

the company is using only ABC analysis.
The inventory in BHEL-EDN is increased in the year 2010 to 2013, but in the
year 2014 its decreased. It shows that company purchase raw materials produce
goods and sell the products directly to customers not store the goods.
Percentage changes in inventories are decreased in the year 2014. It shows that
the company not storing its goods. It reduces the storage cost.
Inventory turnover ratio of the company is decreased from year 2011 to 2014. It
shows that the company performance is not better in selling its product.
The inventory conversion period means how many days the company takes to
conversion of material to finished product. Here the firm taking more time
compare to previous years.

Here working capital inventory ratio decreased it shows that inefficient utilization
of working capital.
Investment of inventory in current assets is almost same in all five years. It shows
that the company maintaining same strategy in current asset inventory ratio.
The sales of the company is fluctuating first 3 years after its decreased means the
company sales is decreased compare to previous years.
Work in process inventory turnover ratio is not fixed and its decreasing in the year
2013 and 2014 it show that company performance is not good.
In Inventory Valuation like FIFO, LIFO, Weighted Average Method, Simple Average
Method, Standard Price Method and Current Price Method. The company using
Weighted Average Method because its producing large size electronic goods and the
products are produced on the basis of customer requirement so products are not
same.
SUGGESTIONS
The company should adopt proper strategy in increasing the sales therefore overall
promotion strategy has to be taken care.
The management must think over new policy to generate income by sufficient utilization
of existing assets.
The firm decreased its working capital inventory ratio. This may be remedied by
decrease sales so it suggested that the firm should make efficient usage of resources.
BHEL may look into the possibility for bringing changes in working culture to complete
its competitors for improving productivity.
The company is using only ABC Analysis so the company should adopt other techniques
it suitable to the firm.

CONCLUSION
Life is search for satisfaction and achieving excellence, it is necessary to find out what
makes any manufacturing unit to be successful in market.
Our study conducted on BHEL EDN Bangalore has explored, various factors lying
behind the success of the company in manufacturing industry. The company is basically
into produce electronic goods have been able to achieve high turnover, and make quick
delivery within very short period of time.
Study on this manufacturing unit has given good knowledge on documentation, logistic
activities, and also reasons. The organization structure has been well designed & a good
flow of communication between the employee & their respective heads. Interpretation
and analysis helps in all the way for the company to make any kind of changes or
improvement in production department, purchase department, store department etc.
because interpretation and analysis gives a clear picture of working of an organization.
The study of Inventory Management of the company was very useful to understand the
management system, overall performance and effectiveness of the firm, and also the
efficiency utilization of its assets. On the basis of different ratios given us that presently
company is performing well.
The study of the company was very useful to understand the management system,
organization structure and process of production. There was a good support of all the
staff of the company. I offer my best wishes for the same and hope my work will be of
some use for the company.

BIBLIOGRAPHY:
1. Financial Management M.Y.Khan and P.K.Jain 5th edition. TmcGraw hill Indian
ltd.
2. Operation Management Prof. K. Aswathappa, Sridhar Bhatt, Himalaya

Publications.
WEBSITES
c&pr@bheledn.co.in
www.bhel.com
www.bheledn.com
Journals and brochures of the BHEL
Annual Report of BHEL

Final Report

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Bharat Heavy Electricals Limited, Bangalore

To study the Organization Structure in BHEL

KOUSALI INSTITUTE OF MANAGEMENT STUDIES, KUD Page 1

To study the inventory management in BHEL.

THE BASIC PURPOSE OF STUDY:

The company maintaining proper organization structure, In inventory Techniques the

In this project we have considered percentage change in inventories, percentage change

KOUSALI INSTITUTE OF MANAGEMENT STUDIES, KUD Page 2

ELECTRICAL AND ELECTRONIC INDUSTRY OVER VIEW:

KOUSALI INSTITUTE OF MANAGEMENT STUDIES, KUD Page 3

Electronic Components Industry:

Comprises of various establishments engaged in designing, manufacturing, marketing,

Computer and Office Equipment Industry

Consists of various establishments engrossed in manufacturing and supplying of assorted

KOUSALI INSTITUTE OF MANAGEMENT STUDIES, KUD Page 4

Consumer Electronics Industry:

Constitutes of units involved in designing, manufacturing, marketing and distribution

Industrial Electronics Industry:

Is made up of various establishments committed to designing, developing, manufacturing

The worldwide electrical and electronics industry is experiencing phenomenal and

Presently, the electronic products manufacturing is expanding on an unprecedented scale

INDIAN VIEW OF ELECTRONICS AND ELECTRICAL EQUIPMENT INDUSTRY:

Electric equipment industry contributes over 2% of GDP which is projected to increase

KOUSALI INSTITUTE OF MANAGEMENT STUDIES, KUD Page 5

consumption of electrical equipment is estimated to increase from over USD 28 billion

(i) Generation equipment

(iii) Distribution equipment

KOUSALI INSTITUTE OF MANAGEMENT STUDIES, KUD Page 6

Sources of data collection:-

Limitations of the study:

KOUSALI INSTITUTE OF MANAGEMENT STUDIES, KUD Page 7

Limited period of time to conduct the research.

Name of the organization : Bharat Heavy Electricals Limited

Key people : B.P.Rao(Chairman and MD)

Type of organization : Public Limited

Type of Establishment : 1964

Head quarters : New Delhi, India

Area served : Worldwide

Industry : Electrical equipments

Employees : 47,525 (March 2014)

Location : Bharat Heavy Electricals Limited

KOUSALI INSTITUTE OF MANAGEMENT STUDIES, KUD Page 8

Email & website : c&pr@bheledn.co.in

BHARAT HEAVY ELECTRICALS LIMITED:

KOUSALI INSTITUTE OF MANAGEMENT STUDIES, KUD Page 9

BHEL ELECTRONICS DIVISION (BANGALORE):

We are engaged in the design, engineering, manufacture, construction, testing,

KOUSALI INSTITUTE OF MANAGEMENT STUDIES, KUD Page 10

processes to develop new products. This enables us to have a strong customer

Main Manufacturing Facilities:

Bhopal (Madhya Pradesh)

Bharat Heavy Electricals Limited, Hyderabad(Andra Pradesh)

Jhansi (Uttar Pradesh)

KOUSALI INSTITUTE OF MANAGEMENT STUDIES, KUD Page 11

Boiler Auxiliaries Plant(Tamil Nadu)

Electronics Division and Electro Porcelain Division, Bangalore(Karnataka)

Jagdishpur (Uttar Pradesh)

Industrial Valves Plant(Punjab)

Bharat Heavy Plates and Vessels Limited(Vizag)

ACHIEVEMENTS AND RECOGNITIONS OF BHEL:

It is the 7th largest Power Equipment manufacturer in the world.

KOUSALI INSTITUTE OF MANAGEMENT STUDIES, KUD Page 12

PRODUCTS MANUFACTURED IN BHEL: